These fake rallies will end in tears

New York Stock Exchange 1963 (Photo: Wikimedia; US News and World Report; Library of Congress)

Investors and speculators face some profound challenges today: How to deal with politicized markets, continuously “guided” by central bankers and regulators? To what extent do prices reflect support from policy, in particular super-easy monetary policy, and to what extent other, ‘fundamental’ factors? And how is all this market manipulation going to play out in the long run? It is obvious that most markets would not be trading where they are trading today were it not for the longstanding combination of ultra-low policy … [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...]

It’s a mad mad mad mad world

"Pioneer of guidance" Mark Carney

Shinzo Abe, Japan’s new prime minister, has some exciting new ideas about how to make Japan’s economy grow. How about the government borrows a lot of money and spends it on building bridges and roads all over the country? If that doesn’t sound so new, it is because it isn’t. It is what Japan has been doing for 20 years, and it is the main reason why Japan is now the most heavily indebted nation on the planet – and still not growing a lot. Its debt-to-GDP ratio stands at an eye-watering, world-record 230 percent, which … [Read more...]

Some personal thoughts on surviving the monetary meltdown

1 kilo gold bar

Let us start by looking at the economy from 10,000 feet above: After 40 years of boozing on easy money and feasting on fantastical asset price inflations, the global monetary system is approaching catharsis, its arteries clogged and instant cardiac arrest a persistent threat. Most financial assets are expensive, and many appear to be little more than securitized promises with low probability of ever delivering payment in full. Around the globe, from Japan to the US, a policy of never-ending monetary stimulus consisting of … [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...]

U.S. Republicans introduce gold standard debate – mainstream media go mental

1 kilo gold bar

I am not holding my breath over the Republicans' plans for another gold commission to investigate the possibility of returning the USA to a gold standard in the case of the Romney-Ryan ticket winning. Of course, I like the Classical Gold Standard, which existed from about 1880 to 1914, and I am convinced it was a humongous mistake to do away with it, a mistake that was further compounded by the abandonment of its weak successor, Bretton Woods, in 1971. And you know what I think of our present unconstrained fiat money … [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...]

Is gold in a bubble?

gold

To answer this question is not straightforward. As the gold-sceptics keep reminding us, gold pays no coupon and no dividend, it does not offer a running yield, so traditional measures of 'fair value' do not apply. But gold is money, and just as the paper ticket in your wallet does not pay interest, neither does gold. Gold is a monetary asset that has functioned as a medium of exchange and a store of value for thousands of years, around the world and in almost all societies and cultures. Many modern economists believe that … [Read more...]

Why gold is my favourite asset

1 kilo gold bar

I hate to give personal investment advice. So please do me a favour and do not treat the following as investment advice. I am expressing my personal opinion here. I do so with honesty and conviction, without a personal agenda - I am not trying to sell you anything - but with some good arguments, hopefully. However, it is still an opinion. Nobody knows what the future will bring. I don't know what will happen to the gold price in the next week, the next month or for the rest of this year. I don't even know what 2013 will … [Read more...]

The deflation delusion

Dollar note on a hook

Years ago a friend of mine in New York told me about his massively overweight neighbour who took to wearing a black t-shirt with "I beat anorexia" printed on it. I think that is how our central bankers look at the wonderful job they are doing. Since the last link to gold was severed in August 1971, the dollar has lost 82 percent of its purchasing power and the global economy is more geared than ever and now in the death throes of a four-decade leveraging bonanza but our central bankers proudly tell us, hey, at least we beat … [Read more...]