central banks

What Went Up Came Down And Up And Will Come Down Again

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By David Haggith – Re-Blogged From Silver Phoenix

It can’t come as any surprise that the stock market’s lofty balloon ride during the past couple of months fell because of a few words this week. It only rode up on sweet tweets by Trump about trade, which created a thermocline for it to ride. So, of course, the market plummeted this week in the unexpected downdraft of Trump’s out-of-the-blue statement that his trade deal may be a year away … even for phase one.

I don’t know if ignorant traders drive these vain accessions and declensions or just ignorant machines that have no ability to discern truth, so blindly they take all presidential headlines at face value.

Who could be surprised that stocks got off to their worst December start since the beginning of the Great Recession when Trump said a trade deal might best be shelved until after the 2020 elections? It was, however, apparently a fleeting horror to those who had actually believed Trump about a phase-one deal being imminent this month. One could only watch the surprised reactions with amusement, given there was no reason there should have been any surprise at all.

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America’s Trade Policy Will End Up Destroying The Dollar

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By Alasdair Macleod – Re-Blogged From Silver Phoenix

America’s tariffs against China are already showing signs of undermining the global economy and will create a funding crisis for the Federal Government when it leads to foreigners no longer buying US Treasury debt and selling down their existing dollar holdings. A subversive attempt by America to divert global portfolio investment from China by destabilising Hong Kong will force China into a Plan B to fund its infrastructure plans, which could involve actively selling down her dollar reserves and hastening the introduction of a new crypto-based trade settlement currency.

The US budget deficit will then be financed entirely by monetary inflation. Furthermore, the turn of the credit cycle, made more destructive by trade tariffs, is driving the global and US economy into a slump, further accelerating all indebted governments’ dependency on inflationary financing. The end result is America’s trade policies have been instrumental in hastening the end of the dollar as the world’s reserve currency, ultimately leading to its destruction.

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Gold and the Lender of Last Resort

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By GE Christenson – Re-Blogged From The Deviant Investor

Investopedia says, “In the United States, the Federal Reserve acts as the lender of last resort to institutions that do not have any other means of borrowing, and whose failure to obtain credit would dramatically affect the economy.”

The Fed has created $billions in the past ten weeks (more on the way) and fed those billions into troubled banks, hedge funds, foreign banks and others. Lack of Fed transparency forces us to guess which institutions the Fed helped with $billions of nearly free currency units.

The Fed “Party Line:” We don’t disclose the recipients because it might cause a run on that institution. The Fed is important because it protects the economy from massive and destabilizing failures.

This is like announcing that we ignore graft and corruption in congress because telling the truth about our “leaders” could destabilize trust in congress.

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150 Years Of Bank Credit Expansion Is Near Its End

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By Alasdair Macleod – Re-Blogged From GoldMoney

The legal formalisation of the creation of bank credit commenced with England’s 1844 Bank Charter Act. It has led to a regular cycle of expansion and collapse of outstanding bank credit.

Erroneously attributed to business, the origin of the boom and bust cycle is found in bank credit. Monetary policy evolved with attempts to control the cycle with added intervention, leading to the abandonment of sound money. Today, we face infinite monetary inflation as a final solution to 150 years of monetary failures. The coming systemic and monetary collapse will probably mark the end of cycles of bank credit expansion as we know it, and the final collapse of fiat currencies.

This article is based on a speech I gave on Monday to the Ludwig von Mises Institute Europe in Brussels.

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Gold Stocks Now?

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By GE Christenson– Re-Blogged From The Deviant Investor

You know the monetary drill:

  1. Commercial bankers and central bankers create more digital dollars from nothing, inject them into the economy, dollars devalue and prices rise. They issue press releases claiming they are doing a great job.
  2. Commercial and global central bankers are counterfeiting (legally). This benefits the financial and political elite. Don’t expect this nonsense to change.
  3. Prices for stocks, food, consumer goods and gold rise as dollars buy less.
  4. Inflation statistics (official) are “managed” to show minimal inflation. Check out the Chapwood Index.

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The Perversity Of Negative Interest

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By Keith Weiner – Re-Blogged From Gold Eagle

Today, we want to say two things about negative interest rates. The first is really simple. Anyone who believes in a theory of interest that says “the savers demand interest to compensate for inflation” needs to ask if this explains negative interest in Switzerland, Europe, and other countries. If not, then we need a new theory (Keith just presented his theory at the Austrian Economics conference at King Juan Carlos University in Madrid—it is radically different).

Perverse Inventives

Second, negative interest perversely incentivizes some very perverse behaviors.

For example, suppose you could borrow at -1% and just hold the cash. Your asset stays the same, while your liability is going down. You are making a positive return for doing nothing productive! It should be obvious to an 8th grader, though perhaps not a PhD economist, that there is something wrong with this. Grossly, monstrously wrong.

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