It has become a disconcerting trend that as geopolitical events intensify and keep a majority of people engaged in the latest outbreak of political theatre, the words of central bankers fall on increasingly deaf ears.
During a live interview with Barry Ritholtz for his “Masters In Business” podcast on Monday, Bridgewater Associates CEO – who has been on a seemingly never-ending media tour to promote his new free e-book “A Template For Understanding Big Debt Crises” – once again expounded upon his “1937” markets thesis: That is, his theory that the US economy increasingly resembles the late-cycle dynamic from the 1930s where equity prices topped out as the Federal Reserve tightened monetary policy. Like the 1930s, the global economy is awash and debt, and populist politicians gaining power and influence in the West.
But more interesting than Dalio’s retread of his calls for a recession to begin some time during the next two years, he also repeated a claim he first made back in September, which has been getting more attention since BlackRock CEO Larry Fink said something similar earlier this month: That the US dollar’s days as the dominant global reserve currency are numbered. Continue reading
If you have defective and obsolete models, you will produce incorrect analysis and bad policy every time. There’s no better example of this than the Federal Reserve.
The Fed uses equilibrium models to understand an economy that is not an equilibrium system; it’s a complex dynamic system.
The Fed uses the Phillips curve to understand the relationship between unemployment and inflation when 50 years of data say there is no fixed relationship.
The Fed uses “value at risk” modeling based on normally distributed events when the evidence is clear that the degree distribution of risk events is a power curve, not a normal or bell curve. Continue reading
Even without changes to the current spending policy, the government’s spending is on an unsustainable path. By the time a child born in 2018 reaches retirement age, the United States national debt will be six times the size of the economy according to an analysis released this week. Continue reading
During a speech in which the power went out while he was on live television, Venezuela’s socialist president admitted his economic model has “failed.”
“The production models we’ve tried so far have failed and the responsibility is ours, mine and yours,” President Nicolas Maduro told his ruling PSUV party congress on July 30. Continue reading
The news is being dominated by breathless headlines about the new trade war between the U.S. and China. But this trade war has been brewing for years and came as no surprise to readers of my newsletter, Project Prophesy. In fact, the new trade war is simply a continuation of the currency wars that began in 2010.
I’ve warned for over a year that President Trump’s threats of tariffs should be taken seriously, while most of Wall Street discounted Trump’s talk as mere bluster. Now the trade wars are here as we expected, and they will get much worse before they are resolved.
Currency wars arise in a condition of too much debt and too little growth. Economic powers try to steal growth from their trading partners by devaluing their currencies to promote exports and import inflation. Continue reading
- Returns likely to be lower across all assets in medium term
- Risk scenario sees inflation jump that ushers ‘fast pain’
A prolonged bull market across stocks, bonds and credit has left a measure of average valuation at the highest since 1900, a condition that at some point is going to translate into pain for investors, according to Goldman Sachs Group Inc. Continue reading
A certain Michael Andrew is the former global director of accounting at KPMG. He’s also the present generalissimo of Australia’s Black Economy Taskforce.
The stated mission of this “taskforce” sets it among the angels — to combat terrorism, narcotics, tax dodging.
Cash is of course the coin of these evil realms. Continue reading
Though stock markets in general are meaningless and indicate nothing in terms of the health of the economy they still function as a form of hypnosis, or a kind of Pavlovian mechanism; a tool that central bankers can use to keep a population servile and salivating at the ring of a bell. As I have mentioned in the past, the only two elements of the economy that the average person pays attention to in the slightest are the unemployment rate and the Dow. As long as the first is down and the second is up, they aren’t going to take a second look at the health of our financial system. Continue reading
Germany’s central bank is the Bundesbank. Prior to the commencement of trading of the euro in January 1999, the Bundesbank conducted Germany’s monetary policy. The Bundesbank has a reputation for pursuing general price-level stability above all else. You might say that the Bundesbank has inflation phobia. The reason for this Bundesbank inflation phobia is the remembrance of the hyperinflation Germany experienced between World Wars I and II. Given the US central bank’s recent actions, it would almost seem that the Fed has developed inflation phobia too. Continue reading
Speaking with Bloomberg’s Betty Liu on gold, the geopolitical threat of North Korea and what to expect from the Federal Reserve financial expert Jim Rickards provided what his outlook shows for the months ahead.
The Bloomberg host began by asking Rickards why, with no current inflationary problems seen by most investors, he believed that gold was due for a major boom. The Strategic Intelligence editor started, “The reason in the first half [of the year] about 7.8% against enormous headwinds. The Fed has raised rates in December, March and again in June. [Now] we’re seeing disinflation, a slowing economy, a declining labor force. Everything looks like a recession and yet gold went up almost 8% in that environment. As we go forward, the Fed will always be the last to know.” Continue reading
In an interview with GoldSeek on April 14, outspoken economist Peter Schiff issued a dire warning to investors.
According to Schiff, a new housing bubble, an overvalued stock market, and President Trump‘s proposed stimulus plan will send the U.S. into extreme panic at some point in the near future.
In fact, Schiff thinks these catalysts will combine to cause an “inflationary maelstrom” that will “wipe out entire generations of retirees” who have their nest eggs invested in the market.
Let’s take a look… Continue reading
Trump Avoid Debt Crisis ? “Extremely Unlikely” says Rickards
The upcoming March 15 U.S. debt ceiling deadline is something that is being largely ignored by markets and most media for now. Despite it being just 9 trading days away. This will change in the coming days and is one of the many reasons why we are bullish on gold.
James Rickards writing for the Daily Reckoning today looks at the important ‘next signal to watch’ and explains that Trump and his advisors believe they can avoid a debt crisis through higher than average growth. Continue reading
China would outlast the U.S. in a trade war, which is a “distinct possibility” next year after President-elect Donald Trump takes office, a commentator wrote in the $1 billion Pine River China Fund’s investor letter.
China’s government would be better placed than the U.S. to marshal state resources to cushion the impact on exporters, wrote James Wang, a City University of Hong Kong professor who pens a monthly commentary for the fund. Privately-owned Chinese exporters would be worse hit than state-controlled peers because they have less political clout in Beijing, he said. Continue reading
Take cash away from the citizens and, in theory, they can’t make a run on the banks and spark a full economic collapse.
Take cash away from the citizens and they can’t have full economic control over their own lives.
- Maduro says move to fight smuggling, currency attacks
- 100-bolivar bills must be out of circulation in 72 hours
Venezuela’s government ordered all 100-bolivar bank notes out of circulation within 72 hours, amid a hard cash shortage and the scheduled release this week of bigger bank notes. Continue reading