As Germany loses battle for ECB, QE goes global

Mario Draghi, ECB (photo by IMF/Stephen Jaffe)

What is Super Mario up to? First, he gave an unexpectedly dovish speech at the Jackson Hole conference, rather ungallantly upstaging the host, Ms Yellen, who was widely anticipated to be the most noteworthy speaker at the gathering (talking about the labor market, her favorite subject). Having thus single-handedly and without apparent provocation raised expectations for more “stimulus” at last week’s ECB meeting, he then even exceeded those expectations with another round of rate-cuts and confirmation of QE in form of … [Read more...]

Are central bankers losing control?

money symbols getting sucked into a vortex

The last couple of weeks have been very interesting. Remember that, certain regional differences aside, Japan has, for the past two-plus decades, been the global trendsetter in terms of macroeconomic deterioration and monetary policy. It was the first to have a major housing and banking bubble, the first to see that bubble burst, to respond with years of 1 percent interest rates, then zero rates, then various rounds of quantitative easing. The West has been following Japan each step on the way – usually with a lag of about … [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...]

Contra Richard Koo and the Keynesians: It is not about ‘aggregate demand’ but about real prices

dollar notes falling from sky

I do not want to waste your time and my energy with shooting down misguided Keynesian schemes all the time, schemes that have been refuted long ago and should by now be instantly laughed out of town whenever put forward. But arch-Keynesian Richard Koo’s latest attempt in the commentary section of the Financial Times to justify out-of-control deficit spending in the United States as a smartly designed and necessary policy that will keep ‘aggregate demand’ up and lead to recovery, is making the rounds on the internet. Koo’s … [Read more...]

“When they stop buying bonds, the game is over.”

Floating currency symbols

I took the title for this blog from an interview that James Turk of the GoldMoney Foundation conducted with Eric Sprott, a Canadian fund manager. You can see it here. (I also recommend you have a look at this interview with Doug Casey.) I think the quote is a succinct summation of the role that the bond market, and in particular the market for government bonds, now plays in this crisis. As you know, I would not touch bonds with a barge pole, especially government bonds. After 40 years of unending fiat money expansion, the … [Read more...]

No way out – Why policy advice is futile, and what you should do instead

G7 Finance Ministers, anno 2008

First of all, apologies appear to be in order. Over the past six weeks, my commentary on the Schlichter Files was somewhat sporadic. I spent most of the summer with my family in Italy where I voluntarily removed myself somewhat from the fitful convulsions of the financial system's death-throes. Then, last week I attended the world conference of the International Society for Individual Liberty on the island of Vulcano where I gave a speech on my upcoming book. The conference was a very pleasant affair with many interesting … [Read more...]

Earthquakes, Tsunamis and Sovereign Default

Map of Japan showing epicentre of earthquake

Just a few quick thoughts on the developments over the past six days. For what it's worth. Hope you find it interesting. Japan The tragic events in Japan are going to aggravate Japan's fiscal problems. Even before the earthquake and tsunami, Japan's fiscal position was unsustainable. It just became more unsustainable. There is not one Japan, just as there is not one China or one Germany. What I mean by this is the following: Politicians and economists like to add everything up to one huge aggregate. That makes it … [Read more...]

EMU-crisis: Why the Bank of Japan is buying euro-debt

euro

When I tell people that I wrote a book about the coming collapse of the paper money system they sometimes assume that I wrote about the euro and the risk of its break up. For many, the demise of the euro appears to be the only currency crisis they can imagine. This is obviously a much too narrow perspective. It also means that people underestimate the forces behind the EMU crisis.   But first, my book is about paper money systems in general. It demonstrates that state fiat money systems are always inferior to a … [Read more...]