The Dollar is Central to the Next Crisis

By Alasdair Macleod – Re-Blogged From GoldMoney

Introduction And Summary

It is now possible to pencil in how the next credit crisis is likely to develop. At its centre is an overvalued dollar over-owned by foreigners, puffed up on speculative flows driven by interest rate differentials.  These must be urgently corrected by the European Central Bank and the Bank of Japan if the distortion is to be prevented from becoming much worse.

The problem is compounded because the next crisis is likely to be triggered by this normalisation. It can be expected to commence in the coming months, even by the year-end. When flows into the dollar subside and reverse, bond yields can be expected to rise sharply in all the major currencies. There will also be a number of other unhelpful factors, particularly rising commodity prices, the timing of the Trump stimulus and trade tariffs pushing up price inflation. Coupled with a declining dollar, price inflation and therefore interest rates are bound to rise significantly.

Continue reading

Advertisements

Don’t Count On Yield Curve

By Arkadiusz Sieroń – Re-Blogged From Gold Eagle

Are we going to fall into the trap of a self-fulfilling prophecy? Could investors trigger recession only because they are so worried about inversion of the yield curve? We invite you to read our today’s article about the yield curve and find out whether the popularity of the yield curve as an indicator of recession will bring on the recession that everyone is so afraid of.

In the last edition of the Market Overview, we have discussed whether gold investors should worry about the yield curve. Or should they keep their fingers crossed for its inversion? We concluded that not necessarily, as its predictive power has weakened and it doesn’t say anything about the timing of recession.

Continue reading

Even Mortgage Lenders Are Repeating Their 2006 Mistakes

By John Rubino – Re-Blogged From Dollar Collapse

You’d think the previous decade’s housing bust would still be fresh in the minds of mortgage lenders, if no one else. But apparently not.

One of the drivers of that bubble was the emergence of private label mortgage “originators” who, as the name implies, simply created mortgages and then sold them off to securitizes, who bundled them into the toxic bonds that nearly brought down the global financial system.

The originators weren’t banks in the commonly understood sense. That is, they didn’t build long-term relationships with customers and so didn’t need to care whether a borrower could actually pay back a loan. With zero skin in the game, they were willing to write mortgages for anyone with a paycheck and a heartbeat. And frequently the paycheck was optional.

Continue reading

Why The Fed Denied The Narrow Bank

By Keith Weiner – Re-Blogged From Gold Eagle

It’s not every day that a clear example showing the horrors of central planning comes along—the doublethink, the distortions, and the perverse incentives. It’s not every year that such an example occurs for monetary central planning. One came to the national attention this week.

A company called TNB applied for a Master Account with the Federal Reserve Bank of New York. Their application was denied. They have sued.

Continue reading

Apocalypse, Or Not?

By Alasdair Macleod – Re-Blogged From Silver Phoenix

Members of the American libertarian movement, particularly extremist preppers, are often associated with a belief that a complete breakdown in society is the only outcome from government economic policies and will lead to complete social disintegration. At the centre of their concerns is monetary destruction, with other issues, such as the erosion of personal freedom and the right to bear arms, important but peripheral. They cite history, particularly the hyperinflationary collapses, from Rome to Zimbabwe, and now Venezuela. They draw on Austrian economic theory, which fans their dislike of government and their expectation of total chaos.

Continue reading

A Pound of Cure

By Peter Schiff – Re-Blogged From Euro Pacific Capital

This week, as investors and economists fixate on record highs set by major stock market indices, they have ignored much more significant developments that emerged from the Federal Reserve’s annual meeting in Jackson Hole, Wyoming. Fed Chairman Jerome Powell delivered a speech that somehow was almost universally interpreted as a reiteration of his commitment to continue to raise rates throughout the next few years. “Steady as she goes” was the takeaway from just about any news outlet. But the Chairman’s actual message was essentially the opposite of what the media reported. From my perspective, it provided evidence that President Trump has succeeded in getting Powell’s mind right on the need for the Fed to continue to stimulate the economy, no matter how much evidence emerges that it is already over-stimulated.

Continue reading

“The PetroDollar Matrix”

At the forefront of the media’s attention today is Russia. We’re not really sure why, (well, of course we are) but it seems that Russia has become the new boogeyman. Everything is Russia’s fault. I’ve even heard rumors that the National Weather Service has plans to blame Russia for all the confounded rain in the Northeast and Mid-Atlantic this summer. We know – right away you’re thinking this is going to be about Russia but it’s really not. It’s about what the media isn’t telling you. It’s why (we believe), Trump’s Tweets, Ivanka’s Sweets, Russiagate, the left’s hate, the right’s hate (aka, establishment theatre) are all taking the headlines while a very disturbing trend is left in plain sight. It’s the 800-pound gorilla in the room during any discussion involving economics and geopolitics, but nobody wants to talk about it.

Continue reading