The true significance of the $1 trillion coin

dollar sign sinking in sea

Under President Obama the debt of the United States government has grown by about 50%, and now stands at close to $16 trillion. Every year, the US government spends between $1.2 and $1.5 trillion more than it takes in. Every day that financial markets are open the US government has to borrow an additional $4 billion. The pathetic fiscal cliff ‘compromise’ of last week has proved the most cynical students of the political elite correct in that there is not a snowball’s chance in hell that Washington will ever get this under … [Read more...]

Detlev on the Keiser Report – Boom & Bust Vicious Cycle

Detlev Schlichter on Keiser Report 27 Sept 2012

Excerpt from The Keiser Report (E346) with Max Keiser and Stacy Herbert on which Detlev appeared on September 27th. “Max talks to Detlev Schlichter, author of Paper Money Collapse about quantitative easing to infinity, Central Banking 'devils' and the future for the gold standard.” … [Read more...]

The fallacy of nominal GDP targeting

Book cover Cantillon An Essay of Economic Theory

In a truly remarkable piece for the Financial Times yesterday, Wolfgang Münchau took another swipe at the Euro-sceptic and ECB-critical community in Germany, which he accuses of inflation-paranoia and of simply not getting 'modern central banking'. Well, I know of many qualified commentators - many non-German - who swallow a tad harder when reflecting on the new reality of unlimited and open-ended QE in the US and unlimited bond buying by the ECB. As the central bank bureaucrats declare that they will not stop printing base … [Read more...]

Draghi: ECB to counter ‘unfounded fears’ with unlimited cash

Mario Draghi, ECB president

Yesterday, the ECB pronounced itself the official lender-of-last resort to all Euro-Zone governments. To assure that the state can always borrow at conveniently low rates has been declared an essential component of 'maintaining financial stability' and thus a standard plank of modern central banking. Despite all their professed differences and divergent legal frameworks, all major central banks have now become their respective governments' inexhaustible ATMs. - Coincidence? At the press conference yesterday Draghi declared … [Read more...]

The triumph of politics

Richard Nixon

On August 15, 1971, President Richard Nixon declared that the United States would no longer honour its promise to exchange US dollars held by foreign central banks for gold at a fixed price of $35 an ounce. The innocuous term 'Nixon closed the gold window' that is now widely used to describe this act does not quite convey its significance. (Was something to be stopped from going out or from coming in through the window? Can the window be reopened again?) What Nixon did was cut the last remaining official link between the … [Read more...]

Happy interventionists: The economists’ attack on your property

Brueghel's painting "Paying the tax"

Last week, the Deutsches Institut für Wirtschaftsforschung (DIW), or German Institute for Economic Research, an influential think tank, proposed an ingenious solution to the Euro Zone debt crisis. The German government should issue a Zwangsanleihe, a compulsory bond that every German with savings of EUR250,000 or more should be compelled to underwrite with 10 percent of his or her own money. Such measures could help the German state grab another EUR230 billion in resources from the private sector to support its bailout … [Read more...]

Central banks: Running out of ideas, road

Eurotower In Frankfurt

On page two of today's Wall Street Journal Europe you will find the result of a readers' poll from last Friday: Question: Will the ECB's rate cut help restore confidence in the bloc's economy? Answer: 81 percent of readers say no, 19 percent yes. Last week's round of global monetary easing - another ECB rate cut, another round of debt monetization from the BoE, another rate cut from the People's Printing Press of China - is, of course, more of the same old same old. It has a discernible touch of desperation about it and … [Read more...]

Germany’s economy is only king in the blind valley of the Eurozone

Photo of Angela Merkel

On Tuesday, July 3, London business paper City A.M. ran an editorial I wrote on Germany. The text is below. In the present debate on the Euro crisis, Germany is frequently portrayed as a model of economic strength, a beacon of fiscal prudence and a proponent of structural reform. Her resources seem endless and her government debt an indisputable 'safe-haven'. If only Germany shared her strength and resources more generously, the Euro debt crisis could be solved. But this is an optical illusion. Sooner or later, markets will … [Read more...]

Prozac-craving markets

dollar notes falling from sky

In my view, there is no escaping the fact that things are not getting better. If anything, they are getting worse. Following the large swings in financial markets this past week and reading the commentary in the press, it strikes me that there is still a surprisingly strong belief out there that our fate is in the hands of the policymakers, who presumably still have it in their power to make things better for the economy. How can they do this?  Well, expect nothing new here: Mainly by the time-worn strategy of lowering … [Read more...]