Finding A 48% Yield Amid The Ruins

In a previous analysis we examined how to create a 21% yield, as the incidental byproduct of the Fed’s plans for the cyclical containment of recession.

In this analysis, we will deepen that examination and visually illustrate the financial mathematics that would create a potential 48% yield from what the Federal Reserve plans to do in the event of another recession.

This analysis is part of a series of related analyses, an overview of the rest of the series is linked here.

Step One: Turning Zero Percent Interest Rates Into A 21% Yield

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Pension Fund Problem Just Got Much Worse

By Bloomberg – Re-Blogged From Newsmax

The 14 percent drop in the S&P 500 Index last quarter has big implications for state and local pension funds, which probably saw the value of their assets fall by about 7 percent. Investors with the benefit of a long-term horizon have the ability to ignore market dips, and pension funds are among the longest-term investors, but their problems are not long-term and further short-term declines could precipitate a crisis.

The table below shows pension fund assets and liabilities as compiled by Pew Charitable Trusts. There is a large and growing gap, but that’s not the primary problem. Although the value of those assets is known with reasonable accuracy, the liability figure is based on assumptions about the future. The actuarial and political assumptions are uncertain, but it is the investment assumptions – plans assume an average discount rate of 7 percent – that are the most problematic.

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Liquidity Preference Rising

By Keith Weiner – Re-Blogged From Gold Eagle

Picture a scene in one of those action moves. Two guys are fighting for control over the steering wheel. The car is going 75mph, the road is narrow, and there is a drop over a cliff on one side. And there are lots of sharp curves.

Central Planning

This is a pretty good picture of the action at our central banks. Desperate men are fighting for who gets control of the monetary steering wheel, and for which rules to use to determine when to turn left and when to turn right. One side wants central planning with discretion and the other wants central planning with rules. Among the latter, a debate now rages whether to use inflation, GDP, or another measure.

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Will Inflation Burst The Everything Bubble?

By Graham Summers – Re-Blogged From http://www.Silver-Phoenix500.com

The economic data is now beginning to reveal what the bond market has been screaming for weeks: namely that INFLATION. HAS. ARRIVED.

In the last 24 hours we’ve seen:

Core inflation rose 2.2% year over year for the month of February.

Media one-year inflation expectations rose to 2.83% from 2.71%

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Inflation Is Not Under Control

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

Let’s continue on our topic of capital consumption. It’s an important area of study, as our system of central bank socialism imposes many incentives to consume and destroy capital. As capital is the leverage that increases the productivity of human effort, it is vital that we understand what’s happening. We do not work harder today, than they worked 200 years ago, or in the ancient world. Yet we produce so much more, that obesity is a disease more of the poor than the rich. Destruction of capital will cause us to produce less, and that will mean reverting to a lower quality of life.

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It’s Not Just Deutsche Bank. The Entire Financial Sector Is Sick

By John Rubino – Re-Blogged From http://www.DollarCollapse.com

These are great times for financial assets — and by implication for finance companies that make and sell them, right?

Alas, no! Just the opposite. Each part of the FIRE (Finance, Insurance, Real Estate) economy is imploding as “modern” finance hits the wall.

Interest rates, for instance, have fallen for three decades…

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REAL Yield Purchasing Power

cropped-bob-shapiro.jpg   By Bob Shapiro

I read an article by Keith Weiner, which highlighted the evil that is interest rate suppression – sometimes called financial repression. He points out that, after a lifetime of saving, a senior earning near zero interest return on his money would be forced to liquidate his savings to live.

He’s absolutely right, but he gives a false impression when he starts comparing today’s “Yield Purchasing Power” with the experience from 1979. Keith dismisses the importance of rising prices as he concentrates on yield, but it’s the REAL yield which matters.

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