You Can't Buy Prosperity

by Bill Bonner

Gold rose $24 per ounce Thursday. The Dow fell 12 points.
The smart money is using this dip to buy gold.
Why?
Because the world's major stock markets... currencies... and economies all depend on reckless measures by central banks. In the short run, the central banks can make things appear safe and stable.
How?
By making lending money at ultra-low rates the norm. It's hard for major players to go broke; they can just refinance.
But in the long run, those same policies can lead to instability, bubbles... and disaster.
Too bad, but you can't buy prosperity. You can't print prosperity. You can't borrow prosperity. You can't ZIRP, QE or OMF ("overt monetary financing," a phrase that is bound to become current soon) prosperity, either. Prosperity comes from hard work, saving and discipline.
That is, it comes from responsible policies, not reckless ones.

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.

Abenomics is nothing new

by FinancialTimesVideos




When shown the magnificent run-up in Japanese equities over the past six months and asked why he is skeptical about the likely success of Abenomics, Mizuho's chief economist simply explains, "because I am not suffering from amnesia," as the rest of the market appears to be. He goes in this brief interview with the FT to explain there is nothing new here. We already saw massive fiscal expenditure in the 1990s (which failed to gain any real economic traction) and as far as quantitative easing, Ueno reminds his interviewer, we saw major QE between 2001 and 2006 (that failed), Furthermore, the so-called growth strategy, "every Japanese cabinet has undertaken such doctrines without any success." The discussion then switches from the dashing of hopes to the risks of the policy. Five minutes well spent this weekend to remind your momentum-driven recency-biased anchored view of the world that there is nothing new under the sun and moar is not always better...

It’s official: Global economic policy now firmly in the hands of money cranks

by DETLEV SCHLICHTER

The lesson from the events of 2007-2008 should have been clear: Boosting GDP with loose money – as the Greenspan Fed did repeatedly between 1987 and 2005 and most damagingly between 2001 and 2005 when in order to shorten a minor recession it inflated a massive housing bubble – can only lead to short term booms followed by severe busts. A policy of artificially cheapened credit cannot but cause mispricing of risk, misallocation of capital and a deeply dislocated financial infrastructure, all of which will ultimately conspire to bring the fake boom to a screeching halt. The ‘good times’ of the cheap money expansion, largely characterized by windfall profits for the financial industry and the faux prosperity of propped-up financial assets and real estate (largely to be enjoyed by the ‘1 percent’), necessarily end in an almighty hangover.

The crisis that commenced in 2007 was therefore a massive opportunity: An opportunity to allow the market to liquidate the accumulated dislocations and to bring the economy back into balance; an opportunity to reflect on the inherent instability that central bank activism and manipulation of interest rates must generate; an opportunity to cut off a bloated financial industry from the subsidy of cheap money;