Eric Sprott: "Have We Lost Control Yet?"

by Eric Sprott

Recent comments by the Federal Reserve Chairman Ben Bernanke have shocked the world financial markets. It all started on May 22nd, 2013, at a Testimony to the US Congress Joint Economic Committee, where he first hinted at tapering the Fed’s quantitative easing (QE) program. Then, on Wednesday, June 19th, during the press conference following the FOMC meeting, the Chairman outlined the Fed’s exit strategy from QE.

Since the first allusion to tapering, volatility has been on the rise across the board (stocks, currencies and bonds) (Figure 1A). Moreover, the yield starved, hot money that had flown to emerging markets has been rushing for the exits, triggering significant declines in emerging market (EM) equity and bond markets (Figure 1B). Finally, the prospect of the end of monetary accommodation has triggered rapid and significant decreases (increases) in the price (yield) of longer dated Treasury bonds (also Figure 1B).

FIGURE 1A: VOLATILITY INCREASING
FIGURE 1B: ASSET PRICES DECLINING

End of QE? – I don’t buy it.

by DETLEV SCHLICHTER

A new meme is spreading in financial markets: The Fed is about to turn off the monetary spigot. US Printmaster General Ben Bernanke announced that he might start reducing the monthly debt monetization program, called ‘quantitative easing’ (QE), as early as the autumn of 2013, and maybe stop it entirely by the middle of next year. He reassured markets that the Fed would keep the key policy rate (the Fed Funds rate) at near zero all the way into 2015. Still, the end of QE is seen as the beginning of the end of super-easy policy and potentially the first towards normalization, as if anybody still had any idea of what ‘normal’ was.Fearing that the flow of nourishing mother milk from the Fed could dry up, a resolutely unweaned Wall Street threw a hissy fit and the dummy out of the pram.

Controlling The Implosion Of The Biggest Bond Bubble In History

by testosteronepit.com




In theory, the Fed could continue to print money and buy Treasuries and mortgage-backed securities, or even pure junk, at the current rate of $85 billion a month until the bitter end. But the bitter end would be unpleasant even for those that the Fed represents – and now they’re speaking up publicly.

“Savers have paid a huge price in this recovery,” was how Wells Fargo CEO John Stumpf phrased it on Thursday – a sudden flash of empathy, after nearly five years of Fed policies that pushed interest rates on savings accounts and CDs below inflation, a form of soft confiscation, of which he and his TBTF bank were prime beneficiaries. That interest rates were rising based on Fed Chairman Ben Bernanke’s insinuation of a taper was “a good thing,” he told CNBC. “We need to get back to normal.”

A week earlier, it was Goldman Sachs CEO Lloyd Blankfein: “Eventually interest rates have to normalize,” he said. “It’s not normal to have 2% rates.”

Is Japan Heading for Another Lost Decade?

by Frank Shostak

Recently various commentators have been warning Euro-zone policymakers that they needed to boost stimulus policies in order to avoid a Japanese-style lost decade. To support their case, they point to the years 1991 to 2000. The average growth of real GDP in Japan during that period stood at 1.2 percent versus the average growth of 4.7 percent during 1980 to 1990. In terms of industrial production, the average growth stood at 0.1 percent versus 4.1 percent.

Peak Gold

by PeakResources



We are rapidly approaching the end of cheap resources. The wealth of most Americans could get wiped out during the next decade due to commodity inflation. Focusing on your real purchasing power is critical. As this brief documentary discusses, what is it that makes gold so special? Merely a "tradition" as Bernanke would have us believe, or sound 'money'?

Keiser Report: Narcissists' Rally

In this episode of the Keiser Report, Max Keiser and Stacy Herbert have a look at the narcissists' rally as we drown in central banking their currency wars and their quantitative easing without wealth creation. In the second half, Max talks to Jim Rickards, author of Currency Wars, about why we don't need to worry about a recession - because we're in a depression! They discuss US Federal Chairman, Ben Bernanke's, plan to not Beggar Thy Neighbor, but Enrich They Neighbor by jumping out of the printing plane together with simultaneous devaluations. And, in terms of gold, Keiser and Rickards suggest maybe it's the Chinese manipulating the price of gold . . . and not the US Federal Reserve.

by RussiaToday

Stable Prices, Unstable Markets

by Frank Shostak

 

According to European Central Bank Governing Council member Ewald Nowotny, Federal Reserve Chairman Ben Bernanke sees no risk of inflation in the United States. According to Nowotny, Bernanke had given a “very optimistic” portrayal of the US outlook.
“They see absolutely no danger of an expansion in inflation,” Nowotny said. Bernanke had said US inflation should be 1.3 percent this year.
Fed forecasts put inflation by the end of this year in a range of 1.3 to 1.7 percent. The yearly rate of growth of the consumer price index (CPI) stood at 1.5 percent in March against 2 percent in February and 2.7 percent in March last year.
Also the growth momentum of the core CPI (the CPI less food and energy) has eased in March from the month before. Year-on-year the rate of growth has softened to 1.9 percent from 2 percent in February and 2.3 percent in March last year.

Arizona Becomes 2nd State To Make Gold & Silver Legal Tender

by Tyler Durden

Just under a month ago we raised the prospect of a number of states following Utah (which authorized bullion for currency in 2011) down the path of gold and silver as legal tender. "The legislation is about signaling discontent with monetary policy and about what Ben Bernanke is doing," was how this shift was previously described and as Yahoo reports, the Arizona Senate on Tuesday approved a measure to make gold and silver legal currency in the state, in a response to what backers said was a lack of confidence in the international monetary system. The bill will make gold and silver coins legal tender as of mid-2014 and more than a dozen other states continue to mull the transition. Those against the bill argue somewhat ironically, "anybody who thinks gold or silver is a really safe place to put your money had better think again," anchored on the last two weeks, but as one supporter of the bill added, a "sound and honest money system such as gold and silver" is needed to bring stability.

Should Bernanke Park the Helicopter?

by Frank Shostak

According to Ben Bernanke, pulling back on aggressive policy measures too soon would pose a real risk of damaging a still-fragile recovery.
The Fed chief is of the view that, for the purposes of financial stability, a continuation of the central bank’s aggressive stimulus, conducted through purchases of Treasury and mortgage securities, remains the optimal approach.
In response to the financial crisis and the deep recession of 2007–09, the Fed not only lowered official rates effectively to zero, but also bought more than $2.5 trillion in assets in an effort to keep long-term rates low.

Jim Rogers On Why He Moved To Asia

by hudsonunionsociety.com

The Hudson Union Society www.hudsonunionsociety.com is where today's leaders come to discuss tomorrow's ideas. If you live not to far from New York, please join us in person. 

n 1973, Jim Rogers co-founded the The Quantum Fund. During the following 10 years, the portfolio gained 4200% while the S&P advanced about 47%. The Quantum Fund was one of the first truly international funds. From 1990 to 1992, Rogers traveled around the world world on motorcycle, over 100,000 miles across six continents, which was picked up in the Guinness Book of World Records. Between January 1, 1999 and January 5, 2002, Rogers did another Guinness World Record journey through 116 countries, covering 245,000 kilometers with his wife, Paige Parker, in a custom-made Mercedes. The trip began in Iceland, which was about to celebrate the 1000th anniversary of Leif Eriksson's first trip to America. In December 2007, Rogers sold his mansion in New York City for about 16 million USD and moved to Singapore.

Bernanke's 'Inflation' Record

  

 by Tyler Durden

Addressing a question yesterday, from Senator Bob Corker, on his "being the biggest dove since World War II" and the "degrading effects that he's having on society," Bernanke responded proudly that be believed his "inflation record is the best of any Federal Reserve Chairman in the post-war period." Of course that is by his measure. We suggest, he and few of his transitory colleagues look at the chart below for a sense of just what his 'dovishness' looks like to the rest of the food- and energy-consuming world... or perhaps by 'best' he means 'most'.

CORKER: So I think that, you know, I don't think there's any question that you would be the biggest dove, if you will, since World War II. I think it's something you're rather proud of.... Just wondering if you -- if ya'll talk at all in your meetings about the degrading effect that's having on our society.

BERNANKE: You called me a dove. Well, maybe in some respects I am, but on the other hand, my inflation record is the best of any Federal Reserve Chairman in the post-war period, or at least one of the best, about two percent average inflation.

 The Bernanke Era Inflation...

US Debt - Visualized in physical $100 bills

The final countdown

By Alasdair Macleod

Governments have refused to accept the necessity of a period of economic re-adjustment following the credit-bubble. The bubble burst about five years ago and economic progress has been effectively suspended ever since. The consequences of this refusal to accept reality are at a minimum to make this adjustment unnecessarily drawn out and needlessly painful, without offering a better eventual outcome.
Reduced to its bare bones, the choice has been either to accept that unviable businesses and over-extended banks must go bust, or to ignore the problem and hope it goes away. We are familiar with this dilemma as investors: a business that refuses to adapt to new realities will eventually fail. Before it does, its investors have the chance either to sell their shares and perhaps reinvest their money more profitably, or to refuse to accept an early loss on their investment. Most of us, being human, take the latter course and usually regret it.

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

By Detlev Schlichter

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 so 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 Money Collapse. But, for whatever reason, it is still the case that many in my audience make inferences from similar arguments to my own, and I fear that some of the differences between these positions might get overlooked. These differences are not unimportant, and I think it is worthwhile to highlight and clarify them.
The first point is related to the question what gives money its value? The second point is the question of whether fractional-reserve banking is fraudulent, and should be banned on the basis of property rights.
Let’s first restate the central premise of Paper Money Collapse. The main message is that today’s mainstream views on money are flawed. The most important difference between commodity money, such as a proper gold standard, and ‘paper money’,

Social Security, Ponzi Schemes, and Leprechaun Economics

by Gary North

I want to discuss an article. I may be exaggerating, but I regard this article as the most sophisticated exercise in terminal naiveté that I have ever read. It is an intelligent article with respect to the problems that it lays out. It is dealing with the Ponzi scheme economics of the modern world. Certainly, I am in favor of articles that discuss modern government economic policies as Ponzi schemes. I have been doing this for over 45 years, and I see no reason to stop now, especially since we are 45 years closer to the end of the Ponzi schemes.

Yet at the same time, I am always dismayed to see an article written about the inevitable Ponzi scheme collapse of the modern economic world that begins with some version of this assurance: if we act now, we can solve this. It is not too late. The article begins as follows:

Our Whole Economy Is a Ponzi Scheme !

The Boston Consulting Group (BCG), one of the world’s most prestigious consulting firms, is making waves by stating something that only a few marginal analysts, generally from the Austrian school, are saying : all developed economies have become giant Ponzi schemes (read the essay). The fraud consists in paying interests to the investors with funds provided by newcomers, which can only lead to bankruptcy, as shown by the Madoff affair, last example to date.


In the same way, developed countries have borrowed tomorrow’s riches to finance today’s consumption. According to the Bank for International Settlements (BIS), the total debt of governments, households and companies in the OCDE countries has grown from 160% of GDP in 1980 to 321% in 2010. And most of this debt has been used for financing consumption (bureaucrats’ salaries, household spending) rather than for infrastructure or investment. Most countries being in deficit, a part of their debt goes to... servicing older debt, which is the definition of a Ponzi scheme. On top of that, those countries are guaranteeing « entitlements » (retirement, health care) that are far from being funded.

It’s a mad mad mad mad world

By Detlev Schlichter 

Shinzo Abe, Japan’s new prime minister, has some exciting new ideas about how to make Japan’s economy grow. How about the government borrows a lot of money and spends it on building bridges and roads all over the country?

If that doesn’t sound so new, it is because it isn’t. It is what Japan has been doing for 20 years, and it is the main reason why Japan is now the most heavily indebted nation on the planet – and still not growing a lot. Its debt-to-GDP ratio stands at an eye-watering, world-record 230 percent, which already guarantees that the country’s pensioners-to-be (and Japan has a lot of those) will never be repaid with anything of true value for the government bonds they kept patiently accumulating in their pension funds, and that they optimistically keep calling ‘assets’.

But never mind. The Keynesians agree that this policy was a roaring success, and that this is why the country needs more of it, as, strangely, Japan has still not regained self-sufficient growth after 2 decades of such a policy. Hmmm. Well, in any case, surely the next set of roads and bridges are going to make all the difference. I suggest that this should be called the ‘Krugman-doctrine’, after the outstanding Keynesian thinker, Paul Krugman: even if a few trillion of new government debt and a few trillion of newly-printed paper-money have not revitalized your economy, the next trillion in government deficit-spending and the next trillion in new central-bank money will finally get the economy going. “Just keep the foot on the gas pedal until the economy grows, damn it!”

Japan in 2013

The Japanese government for the last twenty three years has employed the Keynesian tools of deficit spending and more recently the monetarist policies of expanding money supply in an attempt to stop the economy from sliding into recession and to develop some growth. On paper, it has only achieved the former objective; in reality it has emasculated the productive capability of her domestic economy.

Before the speculative bubble of the late-1980s the Japanese economy was driven by savings. Her strong savings flow gave Japanese industry access to a stable low-cost source of real capital with which it was able to produce high-quality goods for export at competitive prices. While there was, in the free market sense, much wrong with Japan this characteristic more than compensated for her economic sins. However, the bubble came along, fuelled by the institutional greed of the Zaibatsu which through their banks sanctioned a spectacular expansion of credit, and as bubbles go this one went pop spectacularly. Since then the government has done everything it can to stop banks folding and industrial malinvestments from being liquidated.

Keynesian Economics vs. Austrian Economics

Keynesian Economics & Monetary Economics vs. Austrian Economics

Featuring Ben Bernanke, Paul Krugman, Peter Schiff, and Ron Paul