QE will come to the eurozone – and, like elsewhere, it will be a failure

Eurotower In Frankfurt

The data was not really surprising and neither was the response from the commentariat. After a run of weak reports from Germany over recent months, last week’s release of GDP data for the eurozone confirmed that the economy had been flatlining in the second quarter. Predictably, this led to new calls for ECB action. “Europe now needs full-blown QE” diagnosed the leader writer of the Financial Times, and in its main report on page one the paper quoted Richard Barwell, European economist at Royal Bank of Scotland with “It’s … [Read more...]

End of QE? – I don’t buy it.

Ben Bernanke

A new meme is spreading in financial markets: The Fed is about to turn off the monetary spigot. US Printmaster General Ben Bernanke announced that he might start reducing the monthly debt monetization program, called ‘quantitative easing’ (QE), as early as the autumn of 2013, and maybe stop it entirely by the middle of next year. He reassured markets that the Fed would keep the key policy rate (the Fed Funds rate) at near zero all the way into 2015. Still, the end of QE is seen as the beginning of the end of super-easy … [Read more...]

Oxford Hayek Society talk followed by Q and A

Detlev at Oxford Hayek Society

The Oxford Hayek Society invited Detlev to give a talk at Christ Church on 14th May 2013. This was followed by a lively discussion afterwards ... … [Read more...]

Is present monetary policy rational?

dollar notes falling from sky

While the stance of monetary policy around the world has, on any conceivable measure, been extreme, by which I mean unprecedentedly accommodative, the question of whether such a policy is indeed sensible and rationale has not been asked much of late. By rational I simply mean the following: Is this policy likely to deliver what it is supposed to deliver? And if it does fall short of its official aim, then can we at least state with some certainty that whatever it delivers in benefits is not outweighed by its costs? I think … [Read more...]

It’s official: Global economic policy now firmly in the hands of money cranks

BoJ Governor Haruhiko Kuroda

The lesson from the events of 2007-2008 should have been clear: Boosting GDP with loose money – as the Greenspan Fed did repeatedly between 1987 and 2005 and most damagingly between 2001 and 2005 when in order to shorten a minor recession it inflated a massive housing bubble – can only lead to short term booms followed by severe busts. A policy of artificially cheapened credit cannot but cause mispricing of risk, misallocation of capital and a deeply dislocated financial infrastructure, all of which will ultimately conspire … [Read more...]

Debt addiction, USA: How much debt reduction has the crisis caused?

Government bonds

The purpose of this essay is to put the latest crisis in the context of longer-term debt trends in the US and to attempt some predictions in respect to the US economy and financial markets. Statistics are records of past events. Analyzing statistics means interpreting history, and this can only be done on the basis of theory. We must first have some theoretical notions to be able to render past events intelligible. Of course, historic data cannot be in conflict with the theory used, as that would put the validity of the … [Read more...]

Bubble trouble: Is there an end to endless quantitative easing?

Ben Bernanke

The publication, earlier this week, of the Federal Reserve’s Federal Open Market Committee minutes of January 29-30 seemed to have a similar effect on equity markets as a call from room service to a Las Vegas hotel suite, informing the partying high-rollers that the hotel might be running out of Cristal Champagne.  Around the world, stocks sold off, and so did gold. Here is the sentence that caused such consternation: “However, many participants also expressed some concerns about potential costs and risks arising from … [Read more...]

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...]

“But there is no inflation!” – Misconceptions about the debasement of money

Printed money

“But there is no inflation!” - This is a statement I hear quite often, sometimes from people who are, in principle, sympathetic to my arguments, sometimes from people who are less so. In either case, those who state “but there is no inflation” consider it to be a statement of fact and one that they assume must pose a challenge for me. Should the man who argues that we are heading for the collapse of paper money, for some kind of hyperinflationary endgame, not be concerned that all this money printing by central banks around … [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...]