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...]

By abandoning the gold standard we embraced monetary central planning, chaos

Ben Bernanke

With this essay I will try to reconcile two apparently conflicting perceptions of the key problems with our present monetary system. I will start by characterizing these two positions first: As readers of this website and my book know, it is my conviction that the central problem with the present system is the high degree of elasticity of the money supply. A system of constant fiat money expansion, of ongoing injections of new money into the economy via financial markets - sometimes slow, sometimes fast - must … [Read more...]

What gives money value, and is fractional-reserve banking fraud?

Falling 100-dollar bills

I thought I should address a couple of points that I consider to be misconceptions and that frequently come up in discussions with the audience or other speakers when I present my views on the fundamental problems with fiat money. I am not always in a position to correct these misconceptions right then. They are often woven into questions on other points and I have to leave them uncommented as not to disrupt the flow of the debate. My book is, I believe, quite clear on these points, so I could simply refer people to Paper … [Read more...]

Financial markets still don’t get it

Picture of shares

 Apologies if the title of this Schlichter-file sounds somewhat arrogant but after the events of the past three weeks I may perhaps be forgiven for feeling a bit emboldened in my views. Of course, this is often the point at which the pendulum swings in the other direction and developments take a slightly different turn, if only for a short time. After all, big trends almost never go from A to B in a straight line. So let's stay modest and nimble. But there can be no denying that the events of that past two to three weeks … [Read more...]

Gold is not in a bubble; paper money is collapsing

Tulip as in Tulip Mania

The widely-read Lex column in today's Financial Times ran an article on gold ETFs (exchange-traded funds) that regurgitates a couple of assumptions on gold that are popular in the mainstream media and financial market circles. They are: 1) gold must be in a bubble and 2) this bubble must soon pop. As Lex put it: "Predicting the top of the gold bubble is foolhardy. It is safer to predict that the bubble's popping will be especially nasty." In order for gold to be in a bubble I would suggest that two conditions have to be … [Read more...]

Billionaire Defender of the Statist Quo

Buffett & Obama

Psychologists should have no problem explaining our tendency to readily attribute success in investing or trading to skill and not luck. This tendency is rather pronounced and one of the reasons behind the now frequently decried 'bonus culture' in the finance industry. I remember many instances where one or two good years in the markets were enough to elevate a young trader in the eyes of his bosses, his peers and most certainly himself to the status of certified market genius whom the firm had to stop from defecting to the … [Read more...]