Economic History

     

 

 

Introductory Remarks

As we have often pointed out in these pages, to our mind the euro area crisis is not a currency crisis. It is primarily a debt crisis; a crisis of the bloated European welfare states and the fractionally reserved and way overextended   banking systems they harbor. Due to the supra-national status of the central bank it is no longer possible for member nations to simply 'paper over' their economic policy mistakes and so their errors have been revealed for all to see. Instead of being able to surreptitiously impoverish the citizenry by means of inflation and devaluation, the political classes have been forced to face facts.

In this sense, the euro is a great success: it has so far averted an inner-European outbreak of 'beggar-thy neighbor' devaluations. The usual robbing of savers had to be at least partially shelved.

It is entirely mistaken to argue that the monetary union can only work if a so-called 'fiscal union' is established. It is true that the monetary union will work better if its members were to adhere to the rules of the fiscal  pacts they have signed – be it the Maastricht treaty or the latest iteration of the 'fiscal compact'.

Read the rest of this entry »

     

 

 

Sucking Up to Power

You know, you would think that after the exquisitely ill-timed Bob Woodward screed 'The Maestro', which feted Alan Greenscam as an infallible central planner who had showered us with unending prosperity just as the bubble his policies had created was about to collapse would have taught journalists a lesson.

Hailing the successes of central planners and bureaucrats is a tricky business – as noted above, the timing quite often turns out to be problematic.

There is a good reason for that: these paeans are only written when it is finally deemed 'safe' to do so. This is usually when a prevailing trend in financial asset prices has become so extended, entrenched and seemingly unstoppable,  that even aunt Imogen and her blind dog in the sticks know about it.

In other words, these screeds are good markers of the social mood and can usually be brought into context with the stock market's recent performance streak. 

Read the rest of this entry »

     

 

 

Shooting At the Wrong Target

We were quite surprised, to say the least, when a friend pointed us to a recent article at Marketwatch, entitled „Grantham wonders if Marx was right after all“, sub-titled „Capitalism will gladly sell the rope used to hang itself“, which is a reference to one of Lenin's often quoted bon-mots (which went along the more active line of: 'The capitalists will sell us the rope which we will hang them with').

The article also contains a link to the letter to investors (pdf) in which Grantham is engaging in all the aforementioned wondering. Ominously it is called the 'Longest Letter Ever'.

Al Lewis, the author of the Marketwatch article, leads off by pointing out the differences between the recent letter Warren Buffett sent to Berkshire Hathaway shareholders and Grantham's more pessimistic missive.

Read the rest of this entry »

     

 

 

Paul Krugman on Keynes

As a friend of ours remarked when sending us the link to Paul Krugman's December 29 editorial, 'he's trying to get in the last word for the year'. The editorial is entitled 'Keynes Was Right' and it is at least somewhat reassuring that it appeared on the NYT's 'opinion pages', because that is all it amounts to – an opinion.

Read the rest of this entry »

     

 

 

A Historical Mistake

There once was a time when the science of economics – based on sound reasoning –  concluded that economic liberalism was the best way to achieve lasting and growing prosperity. Classical economists may have been stumped by the theory of value, a problem satisfactorily solved by Carl Menger in the 1870's,  but on the whole, their teachings were conducive to the adoption of free market capitalism. This ushered in an age of unprecedented capital accumulation and prosperity.

Read the rest of this entry »

     

 


Marshall Auerback on the ECB

Hedge fund manager Marshall Auerback has come up with a plan of what the ECB should do in order to resolve the euro area debt crisis. The outline of this plan was posted at Naked Capitalism as 'The ECB vs. Germany'.

Auerback begins by recounting that Germany's central bankers are isolated at the ECB. Their desire to keep monetary policy strictly outside of the realm of fiscal policy has led them to oppose the interventions in government bond markets, and since they were outvoted at the ECB, two of them (Axel Weber and Jürgen Stark) ultimately resigned because they didn't want to be associated with the policy.

Read the rest of this entry »

     

 

 

Germany's Institutional Memory

We have often argued that Germany was a likely stumbling block for inflationary initiatives by the ECB in order to rescue wobbly sovereign debtors, a view that was confirmed by the serial resignations of Axel Weber (who stepped down as chief of the Bundesbank) and Jürgen Stark (who resigned from the ECB). Both men, it should be recalled, stepped down over disagreements with the ECB's bond buying program, in spite of the fact that this program has been fully sterilized.

Read the rest of this entry »

     

 

 

Charles 'Gutenberg' Evans

If Charles Evans (president of the Chicago Fed) were Fed chairman, we'd probably be halfway on the road to the abolition of the dollar and its replacement with the new 'territorial Mandat'. This is without a doubt the man who could deliver a Havenstein moment in the shortest time possible. There are several notable 'doves' at the Federal Reserve (Evans' colleague at the Boston Fed, Eric Rosengren is also well known for his dovish views for instance), but Evans is without a doubt the one intellectually most strongly invested in the idea that the central planning by the Fed – which in the final analysis most of the time amounts to little more than suppressing the interest rate below its natural rate and printing lots of money, either by passive accommodation or active monetization – can somehow 'save' the economy.

Read the rest of this entry »

     

 

 

Nouriel Roubini,  Re-Animator

We're not sure if there actually ever was a plot for Nouriel Roubini to lose. In case you haven't noticed yet, he's a fairly typical Keynesian establishment figure. In spite of having been one of the few mainstream economists who correctly predicted that the housing bubble would end in tears, he is otherwise never straying very far from the officially accepted economic orthodoxy. As an aside, that was not really a particularly difficult prediction to make. However,  the vast bulk of mainstream economists didn't make it, so it is a bit like the story about the egg of Columbusbecause so few mainstream economists saw the trouble coming that should have been obvious to anyone with eyes, ears and an abacus (ten fingers would have done in a pinch), Dr. Roubini's timely pre-2008 calamity pronouncements of doom have become his rightful claim to fame.

Read the rest of this entry »

     

 

 

The Growth of Leviathan

We didn't want to overdo it in the title to this piece. The world's regulatory democracies are not totalitarian states by a long shot. The fact that we can post this article with relatively little fear of being molested for it certainly proves that contention. Alas, it would be a grave mistake to confuse life in a modern-day regulatory democracy with 'freedom'. It is anything but and it evidently becomes less so by the day. And yet, we must also acknowledge that globally, there is trend toward more, rather than less freedom if one views developments over a sufficiently large time frame. Certainly there are frequent ups and downs in this trend, and given the limited human life span any particular setback may not be viewed as being much different from a permanent regression. Alas, as we recently told someone: 'don't forget that only 150 years ago, there were still serfs in Russia'.

Read the rest of this entry »

     

 

 

Chief Hooligan Shows Up

The Russian press just reported that Russia's prime minister and former president Vladimir Putin has a rather low opinion of the policies of  the Federal Reserve and the people running it. Reports RIA Novosti:


„Russian Prime Minister Vladimir Putin accused the US of hooliganism on Monday over the US government's efforts to ease its financial problems by injecting hundreds of billions of dollars into the economy.

"Thank God, or unfortunately, we do not print a reserve currency but what are they doing? They are behaving like hooligans, switching on the printing press and tossing them around the whole world, forgetting their main obligations," Putin told a meeting of economic experts at the Russian Academy of Sciences.“

Read the rest of this entry »

A recent poll suggests that public support for the free market has markedly declined all over the world. The question is though, what do people consider the \'free market\' to be? Most associate the modern-day state-capitalistic system with the term free market, but obviously that is not what it is. Meanwhile, the political establishment and the mainstream media have pawned off the crisis as an alleged \'market failure\' - even a superficial examination of this claim should reveal it as nonsense, but many people apparently believe it to be true. Ironically, Germany is the country where support for the free market is currently deemed the highest. Color us suitable baffled by this revelation. In France, disdain for the market is by now a well-worn tradition. Alas, no French refugees from evil capitalism have as of yet shown up at the border of Stalinist North Korea, so maybe they\'re not really serious about it. However, the French government - nominally \'conservative\' - attempted to introduce price controls for agricultural commodities earlier this year. It had to be lectured by Brazil and Argentina on the merits of such interventions, which inter alia brought down the Roman Empire\'s economy. We would term the French plan the \'Road to Famine\'. Oil market manipulators get \'caught\' - really? Apparently two oil futures traders managed to do what OPEC - a cartel controllig 40% of global oil output - has failed to achieve in many decades - namely manipulate the biggest commoditiy market in the world. The accused traders are rather perplexed by the suit. They bought and sold oil, which is what everybody in the oil market does. So what? According to the CFTC, the bureaucrats have detected that their actions were \'economically irrational\'. It would be laugh-out-loud funny if it didn\'t represnt a serious assault on economic freedom. Contrary to the story the witch-hunting political class is trying to sell, countless studies confirm what we already know from economic theory: the activities of speculators are beneficial. Without them, there would not be a market economy. Read the rest of this entry »

Most read in the last 20 days:

  • As the Madness Turns
      A Growing Gap The first quarter of 2019 is over and done.  But before we say good riddance.  Some reflection is in order.  To this we offer two discrete metrics.  Gross domestic product and government debt.   US nominal GDP vs total federal debt (in millions of USD) – government debt has exceeded  total economic output for the first time in Q4 2012 and since then its relative growth trajectory has increased – and it seems the gap is set to widen further....
  • Bitcoin Jumps as Ordered -  Precious Metals Supply and Demand
      Digital Asset Rush The only part of our April Fools article yesterday that was not said with tongue firmly planted in cheek was the gold and silver price action (though framed it in the common dollar-centric parlance, being April Fools):   “Gold went down $21, while silver dropped about 1/3 of a dollar. Not quite a heavy metal brick in free fall, but close enough.”   Bitcoin, hourly – a sudden yen for BTC breaks out among the punters. [PT]   It also...
  • A Trip Down Memory Lane – 1928-1929 vs. 2018-2019
      Boom Times Compared It has become abundantly clear by now that the late 2018 swoon was not yet the beginning of the end of the stock market bubble – at least not right away. While money supply growth continues to decelerate, the technical underpinnings of the rally from the late December low were actually quite strong – in particular, new highs in the cumulative NYSE A/D line indicate that it was broad-based.   Cumulative NYSE A/D line vs. SPX – normally the A/D line...
  • Debt Growth and Capital Consumption - Precious Metals Supply and Demand
      A Worrisome Trend If you read gold analysis much, you will come across two ideas. One, inflation so-called (rising consumer prices) is not only running much higher than the official statistic, but is about to really start skyrocketing. Two, buy gold because gold will hedge it. That is, the price of gold will go up as fast, or faster, than the price of gold.   CPI monthly since 1914, annualized rate of change. In recent years CPI was relatively tame despite a vast increase in the...
  • Unsolicited Advice to Fed Chair Powell
      Unsolicited Advice to Fed Chair Powell American businesses over the past decade have taken a most unsettling turn.  According to research from the Securities Industry and Financial Markets Association, as of November 2018, non-financial corporate debt has grown to more than $9.1 trillion [ed note: this number refers to securitized debt and business loans, other corporate liabilities would add an additional $11 trillion for a total of $20.5 trillion].   US non-financial corporate...
  • Long Term Stock Market Sentiment Remains as Lopsided as Ever 
      Investors are Oblivious to the Market's Downside Potential This is a brief update on a number of sentiment/positioning indicators we have frequently discussed in these pages in the past. In this missive our focus is exclusively on indicators that are of medium to long-term relevance to prospective stock market returns. Such indicators are not really useful for the purpose of market timing -  instead they are telling us something about the likely duration and severity of the bust that...
  • The Effect of Earnings Season on Seasonal Price Patterns
      Earnings Lottery Shareholders are are probably asking themselves every quarter how the earnings of companies in their portfolios will turn out. Whether they will beat or miss analyst expectations often seems akin to a lottery.   The beatings will continue until morale improves... [PT]   However, what is not akin to a lottery are the seasonal trends of corporate earnings and stock prices. Thus breweries will usually report stronger quarterly earnings after the...
  • The Liquidity Drought Gets Worse
      Money Supply Growth Continues to Falter Ostensibly the stock market has rallied because the Fed promised to maintain an easy monetary policy. To be sure, interest rate hikes have been put on hold for the time being and the balance sheet contraction (a.k.a.“quantitative tightening”) will be terminated much earlier than originally envisaged. And yet, the year-on-year growth rate of the true broad money supply keeps declining noticeably.   The year-on-year growth rates of...
  • The Gold-Silver Ratio Continues to Rise - Precious Metals Supply and Demand
      Is Silver Hard of Hearing? The price of gold inched down, but the price of silver footed down (if we may be permitted a little humor that may not make sense to metric system people). For the gold-silver ratio to be this high, it means one of two things. It could be that speculators are avoiding the monetary metals and metal stackers are depressed. Or that something is going on in the economy, to drive demand for the metals in different directions.   As a rule the gold silver...
  • What Were They Thinking?
      Learning From Other People's Mistakes is Cheaper One benefit of hindsight is that it imparts a cheap superiority over the past blunders of others.  We certainly make more mistakes than we’d care to admit.  Why not look down our nose and acquire some lessons learned from the mistakes of others?   Bitcoin, weekly. The late 2017 peak is completely obvious in hindsight... [PT]   A simple record of the collective delusions from the past can be quickly garnered from...

Support Acting Man

Item Guides

Austrian Theory and Investment

j9TJzzN

The Review Insider

Archive

Dog Blow

350x200

THE GOLD CARTEL: Government Intervention on Gold, the Mega Bubble in Paper and What This Means for Your Future

Realtime Charts

 

Gold in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Gold in EUR:

[Most Recent Quotes from www.kitco.com]

 


 

Silver in USD:

[Most Recent Quotes from www.kitco.com]

 


 

Platinum in USD:

[Most Recent Quotes from www.kitco.com]

 


 

USD - Index:

[Most Recent USD from www.kitco.com]

 

Mish Talk

 
Buy Silver Now!
 
Buy Gold Now!