This article examines two inflationary experiences in the past in an attempt to predict the likely outcome of today’s monetary policies. The German hyperinflation of 1923 demonstrated that it took surprisingly little monetary inflation to collapse the purchasing power of the paper mark. This is relevant to the fate of the “whatever it takes” inflationary policies of today’s governments and their central banks. The management of John Law’s Mississippi bubble, when he used paper money to rig the market is precisely what central bank policy is aimed at achieving today. By binding the fate of the currency to that of financial assets, as John Law proved, it is the currency that is destroyed.
By Michael Pento Re-Blogged From Silver Phoenix
The perfect storm of zero percent interest rates that existed concurrently with a debt-disabled economy lured executives at major corporations into a decade-long stock buyback program. The Fed pumped money into the economy thru its various Quantitative Easing programs to force interest rates near zero percent, with the expectation corporations would borrow money at the lowest rates in history and then invest in their businesses in the form of Property Plant and Equipment (capital goods). This in turn would expand productivity and help foster a low-inflation and strong growth environment.
But many corporate executives found a much more enticing path to take in the form of EPS manipulation. That is, they boosted both their companies share price and, consequently, their own compensation, by simply buying back shares of their own stock.
By Peter Schiff – Re-Blogged From Euro Pacific Capital
Currently, some market watchers have begun to openly question whether the bull market in stocks has finally come to an end. They certainly have cause to worry. Valuations are frothy after a record run-up in the last few years. Bond yields across the yield curve are rising sharply, as the Fed Funds Rate breaks into territory not seen since before the market crash of 2008. Much higher costs of capital are already putting pressure on rate-sensitive industries such as housing and autos. The boost to earnings provided by the corporate tax cuts will fade and rising prices resulting from past monetary policy and import tariffs may be expected to slow consumption and take a toll on balance sheets. All this points to possible lackluster performance, with stocks essentially flat so far this year.
By Mark J. Lundeen – Re-Blogged From Gold Eagle
The Dow Jones saw some action this week. Wednesday, the day after the mid-term elections it advanced by 2.13% from its previous day’s closing price, our fourth day of extreme volatility since early October. Everyone was happy about the nice daily gain. But I’m only noting that days of extreme market volatility (Dow Jones 2% days) are in the main bear-market phenomenon, be they negative or positive.
By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com
The unnaturally-tranquil stock markets suddenly plunged over this past week. Volatility skyrocketed out of the blue and shattered years of artificial calm conjured by extreme central-bank distortions. This was a huge shock to the legions of hyper-complacent traders, who are realizing stocks don’t rally forever. With stock selling unleashed again, herd psychology will start shifting back to bearish which will fuel lots more selling.
As a contrarian student of the markets, I watched stocks’ recent mania-blowoff surge in stunned disbelief. On fundamental, technical, and sentimental fronts, the stock markets were as or more extreme than their last major bull-market toppings in March 2000 and October 2007! I outlined all this in an essay on these hyper-risky stock markets on 2017’s final trading day. The ominous writing was on the wall for all willing to see.
By John Rubino – Re-Blogged From Dollar Collapse
Central banks in general and the Fed in particular are struggling to understand a world in which they’ve thrown everything they have at the economy without generating “beneficial” inflation. Their confusion can be traced back to some profoundly false assumptions.
Here’s a good overview of the current debate:
(Reuters) – The Fed needs to mount a clear defense of its 2 percent inflation target and stop raising rates until the pace of price increases strengthens, St. Louis Fed President James Bullard said on Thursday.
– Banco Popular stock crashes most on record – down 63% this year to 34 euro cents
– Spanish bank tells employees – “Don’t panic”
– Risk of Spanish banking crisis as Banco Popular credit curve inverts
– Banco Popular needs to find at least €4 billion more capital – analysts
– Deposits over €100,000 (euro) vulnerable to bail-in
– EU, U.S., UK push for bank ‘bail-ins’ poses risks to depositors
By Adam Hamilton – Re-Blogged From http://www.Gold-Eagle.com
Gold stocks are on fire this year, powering higher in market-dominating performance. This is a massive reversal from their dark fourth quarter, with 6/7ths of those losses already erased. But this strong new upleg still remains young and small by historical standards. Gold stocks’ recent rally is only the vanguard of another major bull-market upleg. This sector’s bullish technicals reveal vast upside potential from here.
The gold miners are a small contrarian stock-market sector that isn’t widely followed. Hearing about how the gold stocks are faring in the mainstream financial media is pretty rare. So this sector generally flies under the radars of the great majority of speculators and investors. That’s rather unfortunate, because the gold stocks have enjoyed some of the greatest gains in all the stock markets in this young century.
The flagship gold-stock index is the NYSE Arca Gold BUGS Index, which trades under the symbol HUI. BUGS stands for Basket of Unhedged Gold Stocks, as major gold miners can’t be included in the HUI unless their gold production is not hedged beyond 1.5 years. Running all the way back to June 1996, and having no management fees like ETFs, the HUI offers the definitive read on gold-stock performance.