Gold Is Not Lower Because Of A Higher Dollar [View article]
Spot on, Mr Kesarios.
The dollar is no longer linked to gold and gold is an asset. Nothing more. A nice one to have, but nothing more. There is no reason why one should influence the other despite dollar debasement which does occur, intentionally, but not for the QE reasons folks fear. Rather, gradual debasement is part of the way our currency works. Gold at $35/oz going to $1,900/oz is not hyperinflation of the dollar, rather more of a bubble in gold.
Dominic had it right above, invest in returns because the dollar is not designed to offer one, per se. It's a medium of exchange, not a store of value. Spend or invest it before it debases further. That spending and investment pumps the economy.
Inflation Will Not Take Off Until This Happens [View article]
Jason, I read your comment and will re-read it. So, I do appreciate your depth on the subject and effort to share it. But, one question constantly whispered in the back of my skull was, "what ever happened to walking into a bank and getting a loan?" Does it really require all those moving parts? Pump in a few reserves in the corner bank and blam-o! Loan created.
Inflation Will Not Take Off Until This Happens [View article]
Jason, insightful comment. Why is the spigot running in reverse? No demand for loan funds or fewer safe assets to mediate them? No home loans despite Fed backstopping...because? The TBTF banks cannot mediate the funds? Or won't?
Because less broad money is chasing goods, prices and wages don't rise. Well, prices might tend higher as producer prices have a harder time finding a buyer. In general some argue credit mediation in the free banking system is not inflationary, in fact, they argue it's an inflation buffer. Never understood how making funds available to someone else to spend is not inflationary.
That wages are lower should be no surprise, it is integrated into the great moderation capitalistic model: lower pay (competitive, maybe?) coupled with higher volumes of less skilled work available mean, in aggregate, wages lag. When they lag, so does the American dream and he ability to service debt. We live beyond our means as a result,the system enables it.
Mr. Chandler, when the idea cropped up, it was interesting. The argument even seemed plausible. However, your writing concerning the capital controls are sensible and do seem to dispel the fear of (or relief having) a second currency trading at a discount.
"I just hate the manipulation of the equity markets..." Seems someone has to manipulate them. Might as well be someone who can remain solvent longer than we can remain rational. :)
Europe Still Dominates (Market Anxiety) [View article]
It seems the Cypriot banking system had to be fixed and someone had to do it. Creditors took it on the chin and the state (taxpayer) is on the hook for the remaining euro 10bn as additional sovereign debt to be serviced at interest. Really, the "bad bank" solution seems to allow for a quick turn around not entirely unlike Iceland.
Large depositors who got nailed will be itching to get their remaining cash out ASAP, surely. There still may be a slow motion bank run. Spain might be next to employ this template. In that case it will be less of a surprise.
Pondering your earlier comment about German leadership, I am not sure they can dress the zone members in lederhosen and expect capital flows to correct themselves. It might be difficult to compete against BMWs trading olive oil, unless BMW moves production to your neighborhood.
Krugman: Cyprus Should Leave The Euro [View article]
True. Cyprus, or any other net importing peripheral state, would be better off using a sovereign currency. Maybe all of them should leave the monetary union and rejoin the EU, like Britain who is imposing domestic austerity on itself because the EMU is in distress.
It might be more attractive to be in the zone if it actually contained some form of unified banking union. Not that it would have saved uninsured creditors, but it would have kept an already beleaguered member state from having to bow before the Troika and beg for a few euros - to borrow some of it's money supply back, at interest of course. And after having done so, risk higher borrowing costs as debt climbs and austere GDP falls.
Its one thing to bail in creditors, it's quite another to be on the hook for the significantly larger balance remaining - adding that to what you already owe from a broken transfer mechanism or less competitive wages.
Ya, everyone should leave the euro until they get the damn thing fixed. And I hope soon, my positions benefit from a functioning euro. Its not just Bernanke that is dipping into my pocket.
Why Is Everyone So Shocked With Cyprus? [View article]
Mr Keslaros, another great article. Mid 2012 when Cyprus first appeared on the radar it seemed to be another domino. Then it became quiet until the recent bombshell announcement of dipping into insured deposits. Everyone took notice. The final deal is a little more straight forward in that credit risk, including uninsured deposits, is being wiped out. That's how it should be, well, without a central bank backstop similar to the US Fed or some form of hedge.
The ECB can influence liquidity, but the sovereign seems on the hook for solvency. As such, the Cypriot bail in will run up the sovereign debt levels. At some point, debt becomes difficult to even service, default risk rises, and borrowing costs can rise. Is Cyprus in a position to receive OMT support? When the banks reopen, there will be a lot of angry deposit holders who will want their remaining money out of Cyprus. In any case, Cyprus will probably be given a raw deal which includes reforms, wage concessions, austerity, and lederhosen. So, they, too, will queue for the deflationary spiral and potential default.
Anyway, this might be the template in Spain? Latest I heard, the Spanish government was or still is balking at additional sovereign debt and wants direct ESM support for it's banks. ESM money is taxpayer cash. If the ESM or Troika balk at Spain's ideas of recapitalizing it's banks, uninsured deposits will be at risk. This time, it won't be such a surprise.
It seems the biggest challenge for the euro currency is not so much Cypriot banks nor any other mini crisis within the crisis, rather the deflationary spiral in the periphery and the increasing inability to service existing debt. And the very difficult time the periphery will have restarting their economies.
Well, yea, maybe that's my point. I guess an expanding money supply helps, as long as it's not inflating beyond our ability to grow into it. Even if it takes fiscal policy.
But the money supply does not come from the Fed, only reserves do. Money is created in the banking system according to the demand for credit at a given rate. You're correct, though, it could triple without much effect.
Gold Is Not Lower Because Of A Higher Dollar [View article]
The dollar is no longer linked to gold and gold is an asset. Nothing more. A nice one to have, but nothing more. There is no reason why one should influence the other despite dollar debasement which does occur, intentionally, but not for the QE reasons folks fear. Rather, gradual debasement is part of the way our currency works. Gold at $35/oz going to $1,900/oz is not hyperinflation of the dollar, rather more of a bubble in gold.
Dominic had it right above, invest in returns because the dollar is not designed to offer one, per se. It's a medium of exchange, not a store of value. Spend or invest it before it debases further. That spending and investment pumps the economy.
It Can Happen Here: The Confiscation Scheme Planned For U.S. And U.K. Depositors [View article]
It Can Happen Here: The Confiscation Scheme Planned For U.S. And U.K. Depositors [View article]
Inflation Will Not Take Off Until This Happens [View article]
Inflation Will Not Take Off Until This Happens [View article]
Because less broad money is chasing goods, prices and wages don't rise. Well, prices might tend higher as producer prices have a harder time finding a buyer. In general some argue credit mediation in the free banking system is not inflationary, in fact, they argue it's an inflation buffer. Never understood how making funds available to someone else to spend is not inflationary.
That wages are lower should be no surprise, it is integrated into the great moderation capitalistic model: lower pay (competitive, maybe?) coupled with higher volumes of less skilled work available mean, in aggregate, wages lag. When they lag, so does the American dream and he ability to service debt. We live beyond our means as a result,the system enables it.
1 Euro Or 2? [View article]
Monetary Experts Highlight Financial Mechanism [View article]
Bailing In [View article]
Europe Still Dominates (Market Anxiety) [View article]
Large depositors who got nailed will be itching to get their remaining cash out ASAP, surely. There still may be a slow motion bank run. Spain might be next to employ this template. In that case it will be less of a surprise.
Pondering your earlier comment about German leadership, I am not sure they can dress the zone members in lederhosen and expect capital flows to correct themselves. It might be difficult to compete against BMWs trading olive oil, unless BMW moves production to your neighborhood.
Krugman: Cyprus Should Leave The Euro [View article]
It might be more attractive to be in the zone if it actually contained some form of unified banking union. Not that it would have saved uninsured creditors, but it would have kept an already beleaguered member state from having to bow before the Troika and beg for a few euros - to borrow some of it's money supply back, at interest of course. And after having done so, risk higher borrowing costs as debt climbs and austere GDP falls.
Its one thing to bail in creditors, it's quite another to be on the hook for the significantly larger balance remaining - adding that to what you already owe from a broken transfer mechanism or less competitive wages.
Ya, everyone should leave the euro until they get the damn thing fixed. And I hope soon, my positions benefit from a functioning euro. Its not just Bernanke that is dipping into my pocket.
Why Is Everyone So Shocked With Cyprus? [View article]
The ECB can influence liquidity, but the sovereign seems on the hook for solvency. As such, the Cypriot bail in will run up the sovereign debt levels. At some point, debt becomes difficult to even service, default risk rises, and borrowing costs can rise. Is Cyprus in a position to receive OMT support? When the banks reopen, there will be a lot of angry deposit holders who will want their remaining money out of Cyprus. In any case, Cyprus will probably be given a raw deal which includes reforms, wage concessions, austerity, and lederhosen. So, they, too, will queue for the deflationary spiral and potential default.
Anyway, this might be the template in Spain? Latest I heard, the Spanish government was or still is balking at additional sovereign debt and wants direct ESM support for it's banks. ESM money is taxpayer cash. If the ESM or Troika balk at Spain's ideas of recapitalizing it's banks, uninsured deposits will be at risk. This time, it won't be such a surprise.
It seems the biggest challenge for the euro currency is not so much Cypriot banks nor any other mini crisis within the crisis, rather the deflationary spiral in the periphery and the increasing inability to service existing debt. And the very difficult time the periphery will have restarting their economies.
Where Is Europe Going? Is This The German Plan? [View article]
Bailing In [View article]
Bailing In [View article]
The Fed Is Not 'Printing Money' [View article]