There was a time when “price stability” – that is, money that buys the same amount of stuff every year – was considered a good thing. But as debts began to pile up around the world, it became clear to policymakers that managing that debt required money that got a little less valuable over time, […]
Fed Tightening Is Over: Markets Now Expect Cuts In 2019
People who assumed the Fed, along with the rest of the government, would cave the minute the financial markets got a little choppy turned out to be right. A couple of bad months and the “normalization” of both interest rates and the Fed’s balance sheet have stopped cold. Now the markets expect falling rates and […]
Check Out This Lost Classic “Peter Schiff Was Right” Video
I thought I’d seen all the “Peter Schiff Was Right” videos, but just stumbled onto this 2006 CNBC classic pitting Schiff against a new cast of (in retrospect) clueless antagonists, including a “chief economist” with some quaintly credulous ideas. This was the peak of the subprime mortgage mania, so the Bubblevision talking heads still considered […]
The Cost Of Insurance Is About To Jump
The argument over whether we’re in for global warming or global cooling and whether what’s coming is natural or human-made is fun but totally irrelevant from a financial perspective. The fact is that for whatever reason and in whatever direction, the climate is getting more aggressive. Monster snowstorms and apocalyptic fires are clearly becoming more […]
Why Aren’t Widespread Labor Shortages Translating Into Roaring Wage Inflation?
Google “labor shortage” or “wage hikes” and the result is a picture of an overheating economy. Some examples from August 10: 911 Emergency: Call Centers Can’t Find Workers Why Disneyland’s $15-an-hour labor deal is a win for workers everywhere Colorado small businesses seek help with labor shortage Washington growers struggle with labor shortage Now hiring: […]
Inflation Is Back, Part 9: Two Sentences Say It All
Okay, one more look at wage inflation, followed by a short diatribe on the unfairness of life. As the labor markets get tighter, power is finally shifting from companies to workers. For some reason Iowa is leading the way (the promised two sentences are in bold): Say Hello to Full Employment — Want to know […]
Inflation Is Back, Part 8: Labor Shortage Reaches “Critical” Point
Economist Peter Bookvar recently analyzed the the anecdotal evidence of capacity constraints piling up in recent industry surveys, including the following: “Business is strong in all regions. Materials are tight. Trucking continues to be a major challenge.” (Chemical Products) “Strong economic growth continues to put pressure/strain on capacity, lead time, availability and pricing across a […]
Emerging Market Crisis Spreads To The Core, Central Banks Face Catch-22
One of the things giving “data-driven” central banks wiggle room on their pledge to tighten monetary policy is the fact that there are several definitions of inflation. In the US the thing most people think of as inflation is the consumer price index, or CPI, which is now running comfortably above the Fed’s target. But […]
Inflation Is Back, Part 7: Just Check Out This Chart
Monthly economic readings tend to be full of noise and are therefore unreliable. So it’s best to save the excited assertions for established trends. The US Consumer Price Index appears to have reached that point: As most readers probably know, the CPI is widely believed to understate the true rate of inflation because of statistical […]
Inflation Is Back, Part 6: More People Now Expect Higher Prices
Turning points in a financial system usually occur in discrete phases. At first, new information that contradicts existing preconceptions is dismissed as unimportant. But as more such data accumulates, a growing number of people come to expect the new trend to continue. In economist-speak, “expectations” change, and these become self-fulfilling prophecies, as people start behaving […]
Japan Shows Why — And How — All Fiat Currencies Are Doomed
A couple of decades ago, when the post-war baby boom generation was in its prime earning and tax-paying years, governments had a chance to guarantee the survival of their financial systems. But they blew it. Instead of controlling spending, running surpluses and banking the proceeds against the inevitable retirement of millions of boomers, most chose […]
Is Oil About To Become Front-Page News? “A Glut That Held Prices Down For Years Is Essentially Gone”
Here’s a new indicator for you: It seems that the difference between the price of oil here and abroad is a measure of tightness in the market, with a rising spread indicating higher prices in the future, with all the inflationary pressures that that implies. From today’s Wall Street Journal: Trans-Atlantic Oil-Price Spread Soars as […]
Italy: An Anti-Euro Government Takes Power In the Heart Of The Eurozone
Ah, Italy. My people; fun to be around, a nightmare to govern. And now an existential threat to the European Union, the euro currency, and the global bond markets. After suffering for over a decade under a monetary regime designed by and for efficient economies like Germany, the Italian people have finally said enough, giving […]
Here’s When Everyone Should Have Known That Argentina Would Implode
About a year ago, Argentina – which has inflated away and/or defaulted on its currency every few decades for the past century – issued 100-year government bonds. And the issue was oversubscribed, with yield-crazed developed-world institutions throwing money at the prospect of a lifetime of 7% coupon payments. A contemporaneous media account of the deal: […]
Argentina Joins Venezuela In The Currency Crisis Club
In interviews, whenever I try to make the case that US policies are leading to the kinds of currency disruptions common in developing countries, I say something like, “For a glimpse of America’s future, take a look at Argentina, where they’re eating cats and dogs because of hyperinflation … wait, no, I meant Venezuela.” Mixing […]
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