The “Productivity Of Debt” Myth

By Steve Saville – Re-Blogged From http://www.Silver-Phoenix500.com

Page 4 in Hoisington Investment Management’s latest Quarterly Review and Outlook contains a discussion about the falling productivity of debt problem. According to Hoisington and many other analysts, the problem is encapsulated by the falling trend in the amount of GDP generated by each additional dollar of debt, or, looking from a different angle, by the rising trend in the amount of additional debt required to generate an additional unit of GDP. However, there are some serious flaws in the “Productivity of Debt” concept.

There are three big problems with the whole “it takes X$ of debt to generate Y$ of GDP” concept, the first being that GDP is not a good indicator of the economy’s size or progress.

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Common Sense Monics

By Keith Weiner – Re-Blogged From http://www.Gold-Eagle.com

Support you’re driving a car, and you turn the steering wheel left [s/b right. -Bob]. You will feel the door and pillar of the car push your left shoulder (in a left-drive car). This is an observed fact.

Common Sense Physics

One idea—let’s call it common sense physics—is that a force is pushing you outward into the door. If you picture the center of the circle that the car is making in its turn, there is an apparent radial force on you. The direction of this force is outward. It is called centrifugal force.

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Gold’s Monetary Rehabilitation

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

There is a quiet revolution taking place in the monetary vacuum that’s developing on the back of the erosion of the dollar’s hegemony. It is perhaps too early to call what’s happening to the dollar the beginning of its demise as the world’s reserve currency, but there is certainly a move away from it in Asia. And every time the Americans deploy their control over global trade settlement as a weapon against the regimes they dislike, nations who are neutral observers take note and consider how to protect themselves, “just in case.”

Vide Europe over the Iran issue. And Turkey. These are rifts in NATO. Countries in Africa, and elsewhere are now taking China’s money. And to please the Chinese, Gambia, Burkina Faso, Panama and the Dominican Republic have all recently severed diplomatic relations with Taiwan. Small fry perhaps, but a weathervane showing which way the wind is blowing.

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It’s Not Stagflation, But Inflationary Impoverishment

By Alasdair Macleod – Re-Blogged From http://www.Gold-Eagle.com

It is a matter of personal interest that it was my uncle, Iain Macleod, who invented the term stagflation shortly before he was appointed shadow chancellor in 1965. It is no longer used in its original context. From Hansard (the official record of parliamentary debates) 17 November that year:

We now have the worst of both worlds —not just inflation on the one side or stagnation on the other, but both of them together. We have a sort of “stagflation” situation and history in modern terms is indeed being made.

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Lemonade Stand Economics

By Gary Christenson – Re-Blogged From http://www.Gold-Eagle.com

Summary: Timmy, a precocious ten-year-old opens a lemonade stand and learns about unbacked currencies.

“Dad, I’m excited and ready for business. Mom made me sign an IOU when she gave me sugar and frozen lemonade so I have stuff to sell.” Timmy looked up at his father and smiled in anticipation.

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Monetary Update for the Dollar

By Alasdair Macleod – Re-Blogged From GoldMoney

A dispassionate look at the quantities and flows of fiat dollars tells us much about the current state of the US economy, and therefore prospects for the dollar itself. This is a starting point for understanding the dynamics likely to affect the dollar’s purchasing power after the next credit-induced crisis, which are now beginning to clarify. That is the purpose of this article, which starts by updating the most recent developments in the quantity of fiat money (FMQ), the greatest of all monetary pictures.

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Government Debt Isn’t Actually Debt (??)

By John Rubino – Re-Blogged From Dollar Collapse

The failure of fiat currency and fractional reserve banking to produce a government-managed utopia is generating very few mea culpas, but lots of rationalizations.

Strangest of all these rationalizations might be the notion that government debt is not really a liability, but an asset. Where personal and business loans are bad if taken to excess, government borrowing is not just good on any scale, but necessary to a healthy economy. Here’s an excerpt from a particularly assertive version of this argument:

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