Archive for the ‘Interest Rates’ Category

The Treasury Bubble Blows On

The Treasury Bubble Blows On“In the absence of the gold standard, there is no way to protect savings from confiscation through inflation. There is no safe store of value. If there were, the government would have to make its holding illegal, as was done in the case of gold. If everyone decided, for example, to convert all his bank deposits to silver or copper or any other good, and thereafter declined to accept checks as payment for goods, bank deposits would lose their purchasing power and government-created bank credit would be worthless as a claim on goods. The financial policy of the welfare state requires that there be no way for the owners of wealth to protect themselves.” — Alan Greenspan

Before he sold his soul and renounced free market economics, Alan Greenspan was one of my heroes, and the above quote exemplifies why. Read On…

Still, the Dollar is Doomed

the dollar is doomedI get a lot of inquiries about my continued position on the dollar and U.S. debt — mainly because I have so steadfastly and consistently proclaimed that the economy cannot sustain the sort of growth western nations have enjoyed for the last century. And yet stock markets continue to climb, and debt yields remain low. Things seem to be going well, but I maintain that still, the dollar is doomed. My detractors clamor for me to finally and unequivocally admit defeat — to concede that I have been wrong in all my economic prognoses. Read On…

Hedging Against Inflation

Hedging Against InflationInflationary price increases are not coming… they are already here. The Fed wants you to believe that we are still experiencing falling prices, but the Fed also wants to tell you that food (commodities) and energy don’t count. The Fed is lying to you. Let’s have a look at three areas in which you need to start hedging against inflation. Read On…

Japan, the U.S., and Quantitative Easing

Japan, The U.S., and Quantitative Easing“When future historians look back on our way of curing inflation, they’ll probably compare it to bloodletting in the Middle Ages.” – Lee Iacocca

Japan, the U.S., and Quantiative Easing…

For those of you who aren’t familiar with quantitative easing: it is the important-sounding way central banks manage the economy through monetary policy. The most common way is by manipulating the rate at which they loan to other banks; when the economy is running too hot, the central bank will raise the rate at which it loans money — thereby discouraging borrowing and capital investment. Likewise, if the economy is in the tank a central bank can lower the rate at which it lends to other banks, thereby encouraging borrowing and capital investment in the economy. Read On…

Fighting the Recession: An Ill Wind Indeed

Fighting the Recession: An Ill Wind Indeed“[It is an] ill wind which blows no man good.” – William Shakespeare

Fighting the recession: an ill wind indeed!

I don’t know what I did before YouTube. With just a few mouse clicks, I can pull up literally hundreds of interviews, editorials, and broadcasts about anything that suits my fancy. And lately, my fancy consists of interviews with some of the most vocal and compelling philosophical, and financial minds daring to speak out against the atrocious fiscal policies the U.S. is employing to battle this economic crisis. Read On…

The Death of the Dollar

The Death of the Dollar“We have experienced asset bubbles, and we now have an economy that is more highly leveraged than it ever has been in the post-World-War II period. Greenspan has been instrumental in bringing about this high leverage.” – Paul Kasriel

“A dollar saved is a quarter earned.” – John Ciardi

I have been an analyst, a portfolio manager, and a financial writer for more than 18 years, and until early last year my focus was almost exclusively on individual stocks and value investing. In my book Discipline, however — which I completed in 2001 and published in 2007 – I took a more macro stance, predicting an economic collapse resulting in the death of the dollar and a Soviet-style break up of the country. Read On…

Gold is Safer Than Treasuries as a Hedge Against Inflation

Gold is Safer Than Treasuries as Hedge Against Inflation“Truth, like gold, is to be obtained not by its growth, but by washing away from it all that is not gold.”  — Leo Nikolaevich Tolstoy

Any time an asset increases in dollar terms, you have to ask yourself two questions:

1. Is the asset rising alone, relative to the rest of the economy?

2. Or is the asset rising in value along with everything else in the economy?

These two questions have led me to believe that gold is safer than Treasuries as a hedge against inflation. Read On…

We Are Not Experiencing Consumer-driven Deflation

We Are Not Experiencing Consumer-driven Deflation“Inflation is the senility of democracies” – Sylvia Townsend Warner

If you ask the average person to define inflation, you invariably get this response: “Rising prices.” Similarly, the same person would likely define deflation as “falling prices.” But both answers are incorrect; in fact they are gross misrepresentations of the words. And this simple but popular misconception is the root of every single economic problem we face today: we are not experiencing consumer-driven deflation. Read On…

An Artificial Economy

An Artificial Economy“Instead of furthering the inevitable liquidation of the maladjustments brought about by the boom during the last three years, all conceivable means have been used to prevent that readjustment from taking place; and one of these means, which has been repeatedly tried though without success, from the earliest to the most recent stages of depression, has been this deliberate policy of credit expansion. . . . To combat the depression by a forced credit expansion is to attempt to cure the evil by the very means which brought it about; because we are suffering from a misdirection of production, we want to create further misdirection — a procedure that can only lead to a much more severe crisis as soon as the credit expansion comes to an end. . . . It is probably to this experiment, together with the attempts to prevent liquidation once the crisis had come, that we owe the exceptional severity and duration of the depression. We must not forget that, for the last six or eight years, monetary policy all over the world has followed the advice of the stabilizers. It is high time that their influence, which has already done harm enough, should be overthrown.” –Friedrich August von Hayek (1932)

Your government is creating bubbles all around you, in an artificial economy.  Read On…

The Intrinsic Value of Nothing, Part Two

Intrinsic Value of Nothing“There is no such thing as prices outside the market. Prices cannot be constructed synthetically, as it were…

It is ultimately always the subjective value judgments of individuals that determine the formation of prices…”

— Ludwig von Mises, Human Action

“During thousands of years, in all parts of the inhabited earth, innumerable sacrifices have been made to the chimera of just and reasonable prices.” – Ludwig von Mises, The Theory of Money and Credit

In my previous article (Part One of this two-part series), I discussed the fallacy of intrinsic value – especially as it relates to the U.S. dollar, and the shell game the federal government has been playing for the last hundred years or so. In the tornado of debate, castigation, and general mayhem that ensued, some good points emerged – not the least significant of which was the observation that there is a difference between exchange value and use (or utilitarian) value. Read On…

The Intrinsic Value of Nothing, Part One

Intrinsic Value of Nothing“Action is purposive conduct. It is not simply behavior, but behavior begot by judgments of value, aiming at a definite end and guided by ideas concerning the suitability or unsuitability of definite means. . . . It is conscious behavior. It is choosing. It is volition; it is a display of the will.” – Ludwig von Mises

Reach in your wallet, and pull out a dollar bill. Look at it for a moment. Now ask yourself, what is this worth? Next, consider the intrinsic value of nothing — because the idea that anything has “intrinsic value” is a fallacy. Read On…

Outpacing Inflation

Outpacing Inflation“Excess capacity is temporarily suppressing global prices. But I see inflation as the greater future challenge.” – Alan Greenspan, June 25, 2009

“The US economy may witness double-digit inflation in a few years unless the central bank tightens up its monetary policy… Unless we roll in this whole degree of expansion, we will be in trouble… I am not talking 3-5 per cent inflation, I am talking double-digit inflation in the US.” – Alan Greenspan, September 9, 2009

Alan Greenspan was, in his prime, an economist nonpareil. Recently, however, he shocked many of us by submitting to a political machine that needed to find a scapegoat for the recent economic nightmare. Read On…

Short the USA

Short the USA“By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose.” – John Maynard Keynes

I am lucky to have friends. But it’s not merely the number of people I can count among their ranks that makes me lucky — it is the sheer magnitude of their knowledge and experience. And yet at the same time, my friends — in the aggregate — exhibit a remarkably wide array of beliefs and perspectives. I endure a lot of criticism from them for my theories — most notably my belief in the imminent failure of our current economic system, and the fact that (at least financially), I am short the USA. Read On…