By Monty Pelerin, on February 20th, 2010 Great hoopla over the Federal Reserve’s surprise decision to raise the discount rate 0.25 % fills the media and the markets. Pundits discuss earnestly the spice has been added to the tea leaves. Barry Ritholtz lists three possible motivations behind the Fed’s move:
Response to political pressures;
Proof the Economy is improving;
Inevitable ending of extraordinary accommodation.
The relevance of number 1 can be discounted rather quickly. Where could the “political pressure” come from? Other than lip service around election time, Congress never demands fiscal or monetary responsibility. It could refer to “hawks” on the Fed board, but they would not overrule Bernanke on anything substantive, which this move wasn’t. Thus points 2 and 3 appear to be possible motivations.
The rate move was miniscule. Its size precluded it from having any meaningful economic effect. Thus, it must be interpreted as a “signal.” But was it a signal meant to deceive? That is, was the move a “feint?”
The Fed traditionally sends a signal in advance of taking more serious economic measures. The rationale for a warning is to prepare markets for what is coming. It is believed that markets then adapt somewhat in advance of the future, stronger actions. This move was not a signal. As stated by John Williams of Shadowstats.com:
… the Fed has virtually no room to tighten credit in a system where the real (inflation-adjusted) broad money supply is in severe annual contraction, and where general bank lending into the flow of commerce is not adequate to maintain economic growth.
Continue reading The Fed Feints
related_posts();
By Monty Pelerin, on January 29th, 2010 For those who want to understand more about money and inflation, the following piece by Bill Bonner of the Daily Reckoning is good reading.
The Descent of Money
By Bill Bonner
Paris, Fance
Science and technology have produced many wondrous breakthroughs. But there are some things it cannot improve. A kiss from natural lips is still the lover’s choice. Baby formula proved no match for the real thing. Ersatz money is a flop too. That last item is not so much a fact as a prediction.
The first modern competition between gold and paper money ended like the pre-modern ones. Gold won. Herewith, a short summary:
A rogue, John Law, was the protagonist of the story. He killed Beau Wilson in a duel. Then, he went on the lam…first to Scotland…then to Amsterdam…and finally to Paris. Like Alan Greenspan or Ben Bernanke, he made himself useful to people in high places – in this case the Duke d’Orleans, who needed money. Law had a way to get it:
“I have discovered the secret of the philosophers’ stone,” he is said to have remarked, “it is to make gold out of paper.”
Share/Save
related_posts();
By Monty Pelerin, on January 28th, 2010 The strains on the International monetary system are increasing. This system was never sustainable. It replaced a system that had broken down. And that system had replaced another phony international monetary system. How this system collapses is indeterminate. It could be initiated a collapse of the dollar or it could be a collapse within a particular trading zone. Either outcome probably causes the entire international trade/monetary system to freeze.
Here is one of the ways this might start: Funds flee Greece as Germany warns of ‘fatal’ eurozone crisis
Share/Save
related_posts();
By Monty Pelerin, on January 7th, 2010 Here is a good collection of articles from Chris Martenson’s site. These articles show no green shoots, and in no way are consistent with what the government wants you to believe. There is no recovery coming. See recent post about 2010 will be worse.
Take a look at Chris’ site. Be sure to watch “The Crash Course” that he provides online. It will provide a simple and thorough explanation as to why we are here and why getting out the hole is not simple (and I would say, not possible). He also provides good information as to how you might protect yourself and your family in the free “Crash” video.
Daily Digest – January 6
Wednesday, January 6, 2010, 11:01 am, by saxplayer00o1
Contracts down: Is housing headed for double-dip?
Pump prices on pace to top 2009 high by weekend
GMAC Says Lender Will Post $5 Billion Quarterly Loss
Silicon Valley ‘Bloodbath’ Leaves Buildings Empty
Manhattan Apartment Prices Fall as Finance Jobs Lost
Fed may re-enter MBS market later in 2010
TrimTabs suggests government manipulated stocks
Medicaid Long-Term Care Spending Tops $106 Billion
Missouri revenue drops in December, more budget cuts coming
U.S. business bankruptcies rise 38% in 2009
Homelessness and cold weather have shelters at capacity
Unemployment spikes demand for Census jobs
Promise to Trim Deficit Is Growing Harder to Keep
US public pensions ‘facing $2,000bn shortfall’
Over $26 billion borrowed by states for unemployment benefits
U.S. Budget Deficit May Exceed $1 Trillion for Years, Kos Says
read more »
Continue reading Martenson Sees No Recovery
related_posts();
By Monty Pelerin, on January 5th, 2010 “My long view for the US is high inflation which will not show up in the government’s fraudulent statistics, along with a declining standard of living, increasing decay and ultimately leading to chaos, societal and government collapse in the US within a decade or two, maybe sooner.” Craig Harris
The following article will seem extreme to some. The above quote especially will shock many. My view is that this quote is a reasonable estimate of where we are heading. No one can predict the future with precise accuracy. Even if a prediction is correct, estimating the timing is even tougher.
Many, including myself, will argue that the future is not deterministic. Actions and policies can change and alter outcomes. Clearly, that is true. Yet, it is likely that the tipping point for changing policies necessary to avoid Harris’ prediction was past years ago. In that sense, his forecast may be deterministic, i.e., independent of any actions that are subsequently taken.
Future actions can certainly influence the timing, but I believe Harris has covered that possibility with his “within a decade or two, maybe sooner.” My personal guess would be within a decade.
BANKRUPT FASCIST OLIGARCHY WITH A MILITARY MACHINE
Dec 27, 2009
Craig Harris
For a contact email address go to Craig’s website:
http://earthblognews.blogspot.com/
“I would buy every three months some gold and not worry so much about the price because the weight stays the same.”
Continue reading Free Markets Don’t End Like This
related_posts();
|
Friedrich von Hayek
Friedrich von Hayek founded the Mont Pelerin Society.
“Monty Pelerin” is a pseudonym chosen by this blogger to convey general agreement with the philosophy, goals and spirit of the Mont Pelerin Society. No other connection exists between the blogger and the Society.
|
