On Economy

     

 

 

Easy Money Becomes Even Easier

Last week the FOMC surprised the markets with a rare inter-meeting rate cut. As the FOMC statement released on the occasion reveals, the decision to cut the  federal funds rate by a hefty 50 basis points was unanimous. The much-lamented “zero bound” is coming closer rather quickly.

 

A happy little money tree… from “The Joy of Printing”

 

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Containment Fail

We want to share a few observations about the growing COVID-19 epidemic, based on what we have seen so far. It has been obvious for a while now that the attempt to contain the spread of the virus has essentially failed. Ever since case numbers started to soar in South Korea, Italy and Iran, it was clear that hopes that the outbreak would remain confined to China were misplaced.

 

Doubleplus-ungood micro-organism COVID-19 looking for cells to infect

 

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Post Hoc Fallacy

On Tuesday, at the precise moment Federal Reserve Chairman Jay Powell commenced delivering his semiannual monetary policy report to the House Financial Services Committee, something unpleasant happened. The Dow Jones Industrial Average (DJIA) didn’t go up. Rather, it went down.

 

The Fed chair and His Magnificence, God Emperor, Field Marshall & Stable Genius, POTUS Donald J. Trump: a complicated relationship. [PT]

 

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A Review of Murray N. Rothbard’s Conceived in Liberty, Vol. 5

Holy Writ

The posthumous release of Murray Rothbard’s fifth volume of his early American history series, Conceived in Liberty, is a cause of celebration not only for those interested in the country’s constitutional period, but also for the present day as the nation is faced with acute social, economic, and political crises.

 

Murray Rothbard, the foremost representative of the “American branch” of the Austrian School of Economics was not only an accomplished economic theorist, but also a great historian and political philosopher, who provided us with highly valuable insights and critical rebuttals of what is considered established and “acceptable” opinion these days. [PT]

 

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Historic Misjudgments in Hindsight

Viewing the past through the lens of history is unfair to the participants.  Missteps are too obvious.  Failures are too abundant.  Vanities are too absurd.  The benefit of hindsight often renders the participants mere imbeciles on parade.

 

The moment Custer realized things were not going exactly as planned. [PT]

 

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Trepidation Nation

This week, while you were busy working, Jamie Dimon, CEO of JP Morgan Chase, took time out from rubbing elbows with fellow movers and shakers at the World Economic Forum in Davos, Switzerland, to share his trepidations:

 

“The only thing I have trepidation about is negative interest rates, QE, and the diversion between stock prices and bond prices and yield and stuff like that…  I think it’s very hard for central banks to forever make up for bad policy elsewhere, that puts them in a trap.  We’re a little bit in that trap today with rates so low around the world.”

 

Jamie Dimon having nightmares in his money bunker [PT]

 

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Involuntary Early Retirement of a Middle Eastern General

The procession of news through the week – namely that chronicling the aftermath of the targeted drone strike and killing of Iranian General Qasem Soleimani – advanced with an agreeable flow.  The reports at the start of the week were that Orange Man Bad had spun up a Middle Eastern mob of whirling dervishes beyond recall. World War III was imminent.

 

The recently expired general, when he was still among the quick – and seemingly in a good mood.  [PT]

Photo via harpy.ir

 

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Fiat Currency Rankings – From Bad to Worse

Today, as we step into the New Year, we reach down to turn over a new leaf.  We want to make a fresh start.  We want to leave 2019’s bugaboos behind. But, alas, lying beneath the fallen leaf, like rotting food waste, is last year’s fake money.  We can’t escape it.  But we refuse to believe in its permanence.

 

This is what “monetary stability in the Fed-administered fiat money regime looks like: in the year the Fed was established it took $3.80 to buy what $100 buy today – provided the government’s CPI data are actually a valid gauge of the dollar’s purchasing power. [PT]

 

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GDP – A Poor Measure of “Growth”

Last week the prices of the metals rose $35 and $0.82. But, then, the price of a basket of the 500 biggest stocks rose 62. The price of a barrel of oil rose $1.63. Even the euro went up a smidgen. One thing that did not go up was bitcoin. Another was the much-hated asset in the longest bull market. We refer to the US Treasury.

 

BofA Merrill Lynch high yield master II option-adjusted spread: on Dec. 23 it tightened to the  lowest level of 2019, fairly close to its post-crisis low established in 2018. This seemingly signals that risk is very small –  in reality, risk is probably extremely high. [PT]

 

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World Class Entertainer in the Cross-Hairs

Christmas is no time to be given the old heave-ho.  This is a time of celebration, redemption, and excess libation.  A time to shop ‘til you drop; the economy depends on it. Don’t get us wrong.  There really is no best time to receive the dreaded pink slip.  But Christmas is the absolute worst.  Has this ever happened to you?

 

The verdict: Orange man bad! [PT]

 

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Addicted to Spending

There are many falsehoods being perpetuated these days when it comes to money, financial markets, and the economy. But when you cut the chaff, three related facts remain: Uncle Sam needs your money. He needs a lot of your money. And he needs it bad!

 

The inescapable logic of tax & spend: empty vault… empty pockets… gimme more! [PT]

 

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Panem et Circenses

The transfer of wealth from workers and savers to governments and big banks continued this week with Swiss-like precision. The process is both mechanical and subtle. Here in the USA the automated elegance of this ongoing operation receives little attention.

 

Give them bread and circuses and they will never revolt… so said Juvenal, reportedly [PT]

 

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