Not only did the Fed vote to keep interest rates stable yesterday, it did so overwhelmingly — with just as many members apparently favoring lower rates as higher. Now all the people who bought the “rate normalization” promise/threat are backtracking. From today’s Bloomberg: Expecting a Fed Rate Increase by Halloween? Maybe Reconsider Federal Reserve Chair […]
The US Has Already Tightened — Which Explains A Lot
Next week we’ll find out if the longest-ever will-they-or-won’t-they drama involving a virtually insignificant quarter-point interest rate change will amount to anything. But either way, US monetary policy is already a lot tighter than it was a year ago. The Fed’s balance sheet, for instance, is a measure of how much new currency it is […]
Here’s The Argument That Wins In 2016
Vox is a fairly new website with a mission to not just report the news but explain it. A typical article will lead with a lot of background, bringing readers up to speed on what the subject is and why it matters before moving on to current events. All things considered, this is a great […]
The Fed Talks And The Market Tanks. That’s Different
Normally there’s a distinct pattern to the impact of Federal Reserve statements on the financial markets. The tone of equities trading in particular starts to improve as the moment of the announcement approaches; the words turn out to be blandly positive, full of promises of easy money and upbeat forecasts; and share prices soar for […]
Can You Imagine The Fed Raising Rates In This World?
$1.4 trillion of Chinese stocks have stopped trading. Greece is finally imploding. The US trade deficit is widening on falling exports.Copper just fell back to 2009 levels. And safe-haven capital flows are revving up again, with Swiss 10-year bonds once again trading with negative yields. Yet somehow a majority of economists and money managers continue […]
Mediocre Is The New Perfect
Three things happened this morning: The Labor Department reported a big jump in employment; the financial markets responded like kids on Christmas morning; and — with a few hours lag — level-headed analysts deconstructed the jobs report and found it to be mediocre at best. To take just a few of the high (or low) […]
Lessons of History, Part 1: Not a Mention of Money
I’m listening to the audio version of George, Nicholas and Wilhelm: Three Royal Cousins and the Road to World War I, written by Miranda Carter and brilliantly narrated by Rosalyn Landor. It’s the story of some almost supernaturally dysfunctional governments blundering into a war that seems more rather than less crazy with the passage of […]
What Comes After Paper Money, Part 1: Fiat’s Obvious Failure
Business Insider just posted a Deutsche Bank chart that illustrates the difference between life under the Classical Gold Standard and today’s “modern” forms of money. It’s for the UK only but is a pretty good representation of the world in general: For the first four hundred years depicted here, money was gold and silver — […]
Wow, They Really Are Tapering
In the sound-money community there is universal skepticism about the Fed’s plan to stop monetizing the world’s debt. Hardly anyone thinks they’ll go through with it and absolutely no one thinks they’ll succeed if they do. But the Fed is acting like it’s serious. Take a look at the monetary base, which is the amount […]
US Now Importing the World’s Deflation
With US QE about to end, the rest of the world faced the prospect of another “taper tantrum” financial crisis, one that this time around could suck the major economies into a deflationary vortex. So it should come as no surprise that the end of QE was countered with a series of offsetting treats for […]
Europe’s Turn Again
Europe has been pretty quiet lately. But apparently that was an illusion. The Eurozone’s slide down the slippery slope continues, but because the current stage involves colorless bureaucrats debating the terms of debt swaps rather than street riots and air strikes, it has been overshadowed by the chaos in the Middle East. That’s about to […]
Fed Critics Go Mainstream
It’s suddenly fashionable in the mainstream media not just to criticize the Federal Reserve but to question its reason for existing. Watch Bloomberg’s clearly sympathetic take on the ascendancy of Congressman Ron Paul, whose most recent book is End the Fed: And here’s an excerpt from a Wall Street Journal editorial by Cato Institute senior […]
Competitive Devaluation, Stage One: Friends Bickering
This is what the early stage of a currency war looks like: Japan’s Leader Bemoans Impact of U.S. Economic Policy TOKYO—Prime Minister Naoto Kan joined the growing chorus of world leaders complaining about the side effects of American economic policy, tying the Japanese yen’s strength to Washington’s aggressive stimulus efforts—and implying that the U.S. should […]
Will Bailing Out the States Tank the Dollar?
Back in 2006 Meredith Whitney was an obscure Wall Street analyst who bit the hand that fed her by declaring housing a bubble and the big banks a disaster. This took guts, both because analysts who dis their research universe tend to lose access and/or their job, and because the overwhelming consensus, from Alan Greenspan […]
QE Questions
It’s been a while since US monetary policy was run with anything approaching a long-term strategy. For the past decade especially the goal has been to get through the week without a global financial collapse. So it’s probably asking too much to expect the Fed to have thought through the implications of another round of […]