“Caught between a rock and a hard place” is a colloquialism meant to convey that there are either no options or at least no good options left. That describes quite nicely the position that Janet Yellen has been put into. The US (and world) economy are not growing. Ben Bernanke and his counterparts in other countries pumped like mad to [...]
As we move into the Janet Yellen era at the Federal Reserve, it is useful to learn her views on the Fed, what role is appropriate for it in managing the economy and the current condition of the economy. For an institution that is not a government agency, by law as opposed to reality, it has enormous power and little [...]
These are uncertain and unsustainable times. There is no economic recovery and the Fed seems insistent upon continuing to taper. At a minimum, the Fed seems intent on making you believe that it intends to continue. These signals create serious potential problems for the economy and financial markets. Human beings act based on expectations. If someone issues a bomb threat, [...]
A good portion of reported economic growth over the last several decades can be attributed to a liquidity explosion reflected by enormous increases in debt. The graph of the money supply since the removal of the gold constraint in 1971 looks like that proverbial hockey stick. The US Federal Reserve is the greatest source of this liquidity around the world, [...]
Zerohedge.com showed this chart of US Treasury holdings through November 2013: Over the course of a year, the two major holders of Treasuries not named the Federal Reserve increased their holdings by about $200 Billion. China and Japan purchased about 20% of new US government debt. The Fed purchased 2.5 times what they did. The other entities shown on the [...]
Inflation is the cruelest hoax of all. Ben Bernanke and the Fed argue we need more of it, yet they never provide reasons why. So why do we have inflation and the desire to increase it? The Great Inflationist himself, John Maynard Keynes, explained it rather succinctly: By a continuing process of inflation, government can confiscate, secretly and unobserved, an [...]
What does the recent Fed taper mean? That is the question that pundits are masticating about on noise machines like CNBC. Perspectives differ, but all explanations are colored by the immediate market action. Few expected the Dow to react plus 300 points on the day of the announcement. It did and post-decision reaction has to rationalize this fact. Monday-morning quarterbacking must [...]
The situation with the Federal Reserve (and other central banks around the world) is not very different than what prevailed in the early 1920s and ended in Germany’s horrendous hyperinflation. The notions that “this time is different” or “it can’t happen here” are naive. It is happening here. It just hasn’t metastasized yet. It can and likely will, as it [...]
” … years ago … the Fed was holding a burning match. This remains true today, only it is a bomb with a short fuse. Thirteen years after the overlevered U.S. equity market collapsed, 11 years following Bernanke’s speech, five years after the overlevered housing bubble burst and four years into the necessary onset of global zero interest rate policies [...]
Does the Yellen era improve things?
A very long and relevant talk was given by David Stockman at Harvard. His conclusion is that the problems are political and irreversible, two common themes of this website. Imagine how this bastion of liberalism must have taken his analysis? His talk follows (the emboldening in mine). SUNDOWN IN AMERICA: THE KEYNESIAN STATE-WRECK AHEAD Remarks of David A. Stockman at [...]
There is no way that stimulus can repair the economic problems. What we are looking at is a Fed policy that will never end, at least it will not willingly be ended by the Fed. The world and the US continue to deteriorate. What the Fed is doing now is throwing its version of a hail Mary pass. The game has been lost unless some unknown and unlikely miracle occurs. Economics does not believe in miracles although desperate economists sometimes do.