Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
James, I reread your article and you're absolutely right. It is way too difficult to understand. Perhaps you are too brilliant for me to comprehend, but it just seems to me that you are applying accounting tautologies to the concept of creation/destruction of money, which is not how it works. "First, it is a fact that there is more "cash on the sidelines" around the world than ever before," -Wrong, credit contraction has decreased the amount of liquidity available for investment despite central banks increasing M0. Thus, we see tepid CPI despite massive growth in M0.
"at any given point in time, the aggregate quantity of cash, stocks and bonds held in all portfolios must remain equal no matter how many stocks and or bonds are bought or sold." -Again, this is absolutely wrong. Cash can increase or decrease via the money multiplier effect (positive or negative) as depositors create more accounts or pay down loans. Stock and bond value increases in anticipation of increased production and/or earnings, when your equity or bond value increases you can create additional deposits of cash at your bank if desired. If the premise of your article was correct, there could be no net money or wealth creation possible without money printing from the central bank (increase in M0). Of course this is not the case.
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
"Money can be created directly by the Fed via open market operations or via credit creation in the private banking system"
That's my point. Despite whatever the Fed does via OMC to influence the base, M0, Huge amounts of money can be created or destroyed by depositors in the private and shadow banking system allowing for more cash to invest.
Your article would be true if the money supply always remained static but it fluctuates greatly. Stella and Singh have a good paper that attributes low CPI to contraction of M3 despite expansion of M0. http://bit.ly/1076RHX
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
James, how do you factor in the money multiplier? M0 and M3 can differ greatly based on sentiment and deposit/loan creation. Huge stores of speculative wealth can evaporate (or explode) without a concomitant decline elsewhere.
A Portfolio For The Next Market Crash [View article]
Putster, It happens like this. Our idiotic Federal legislators pass a hair-brained law with millions of unintended consequences, the bankers take advantage of the law and unfairly profit, then when the bubble busts we, the US taxpayer, are left with the bill. It reminds me of watching Gary Gensler testify about the dangers of Fannie and Freddie on Capital hill back in March of 2000. The idiots in the Clinton admin looked at him with blank stares on their faces when they heard words like "moral hazard" and "price discovery". The market WILL crash again because it is being fed by our central bank (no pun intended) and promoted by politicians that have little idea of the consequences of their policies.
fishfryer, You are exactly right. Japan is the perfect example of what the US will look like in just a few years. If a central bank never allows creative destruction and asset reallocation by allowing the deflationary side of the Austrian business cycle to run its course, then you will have stagflation. Also, total Japanese government revenue will soon be exceeded by the interest on servicing their debt (currently above 50%). I am confounded by the doggedly persistent bond buying of the Japanese, something that is not likely to happen in the US as investors have a more independent attitude. It will be very interesting, I think when Japan has a currency crisis it will spread like wildfire to the EU and US via CB liquidity swaps. In other words, if any of the ships sink, we'll all go down together!
Is A Big Correction For Gold And Silver In The Offing? [View article]
Strong recovery = money multiplier effect and increased velocity of money = inflation. Stagflation = inflation (see the second half of the word Stagflation) Deflation = CBs won't let it happen.
So it comes down to this question, will CBs allow their sovereign currencies to depreciate or not. The answer is pretty obvious.
Will The Price Of Gold And Silver Keep Falling? [View article]
RS, I think you and the Guardian believe the same thing but over different timeframes. For instance if sequestration is allowed to happen this would lead to a contraction in the economy due to less govt spending = deflation and US dollar to raise in relative value. BUt your point is well take, the Fed won't let this happen, they will try to print their way out of the deflation so in the long term you are right- to tighten fiscal policy would eventually, by following loose monetary policy, cause inflation.
Will The Price Of Gold And Silver Keep Falling? [View article]
Good point Guardian. I agree, many investors are waiting for the sequestration picture to fully crystalize before jumping back into PMs. The closer you look (Currency devaluation, Euro crisis, sequestration, etc.) the harder it is to see the forrest for the trees, which is that currencies are headed down and commodities are headed up over the long term, as the author described so well.
The ECB Worries About Competition From Bitcoins [View article]
Very interesting. It would be great for the people to take control of the currency again! The free market always finds a way!
People should not be dependent on the government to spend fiat currency notes into existence, rather the government should be dependent on gathering what it can of it's citizens production by consent through legitimate taxation.
Market Rally: Why You Should Be Worried [View article]
Allstreets, Read about Metalism vs Chartalism. The founders knew what they were doing (article 1 section 8). Also, too much stimulus in a contracting economy (as opposed to allowing graduated deflation) causes malinvestment and suppresses creative destruction. The price signals and price discovery mechanisms for good vs bad capital good vs bad investment become distorted. Federal debt spending also robs the people's productive capacity either now (taxes) or in the future (inflation). Unfortunately we live in fiat times and all currencies are being over-printed, so we have to print to keep up or we'll be unable to export.
No Margin For Error: Margin Debt, Quantitative Easing, And Future S&P 500 Returns [View article]
The Fed purchased, I believe 61% of US treasuries in 2011 and less in 2012. Was the decline in 2012 because the Primary Dealers are holding treasuries on their balance sheets in excess for reserve requirements + the ability to leverage for repo? Thanks for the article.
Inflationary Targets Will Fail - World Stuck In Deflationary Super-Cycle [View article]
"ultimately we will still be in a contraction phase because the contraction pressures are greater than the central banks can devalue the currencies over the long haul."
Don't underestimate a central bank's ability to print. Core CPI is only rising 2% yoy despite massive QE and negative real interest rates due to the 2 trillion dollar credit contraction in shadow banks (Singh & Stella 2012). We will have more printing; and stagflation until the central banks cause hyperinflation.
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
I reread your article and you're absolutely right. It is way too difficult to understand. Perhaps you are too brilliant for me to comprehend, but it just seems to me that you are applying accounting tautologies to the concept of creation/destruction of money, which is not how it works.
"First, it is a fact that there is more "cash on the sidelines" around the world than ever before,"
-Wrong, credit contraction has decreased the amount of liquidity available for investment despite central banks increasing M0. Thus, we see tepid CPI despite massive growth in M0.
"at any given point in time, the aggregate quantity of cash, stocks and bonds held in all portfolios must remain equal no matter how many stocks and or bonds are bought or sold."
-Again, this is absolutely wrong. Cash can increase or decrease via the money multiplier effect (positive or negative) as depositors create more accounts or pay down loans. Stock and bond value increases in anticipation of increased production and/or earnings, when your equity or bond value increases you can create additional deposits of cash at your bank if desired.
If the premise of your article was correct, there could be no net money or wealth creation possible without money printing from the central bank (increase in M0). Of course this is not the case.
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
That's my point. Despite whatever the Fed does via OMC to influence the base, M0, Huge amounts of money can be created or destroyed by depositors in the private and shadow banking system allowing for more cash to invest.
Your article would be true if the money supply always remained static but it fluctuates greatly. Stella and Singh have a good paper that attributes low CPI to contraction of M3 despite expansion of M0. http://bit.ly/1076RHX
Cash Hoards On The Sidelines And The Great Rotation: Old Myths Meet A New Reality [View article]
A Portfolio For The Next Market Crash [View article]
It happens like this. Our idiotic Federal legislators pass a hair-brained law with millions of unintended consequences, the bankers take advantage of the law and unfairly profit, then when the bubble busts we, the US taxpayer, are left with the bill.
It reminds me of watching Gary Gensler testify about the dangers of Fannie and Freddie on Capital hill back in March of 2000. The idiots in the Clinton admin looked at him with blank stares on their faces when they heard words like "moral hazard" and "price discovery".
The market WILL crash again because it is being fed by our central bank (no pun intended) and promoted by politicians that have little idea of the consequences of their policies.
G20 Sparks Gold's Ugly Sell-Off [View article]
You are exactly right. Japan is the perfect example of what the US will look like in just a few years. If a central bank never allows creative destruction and asset reallocation by allowing the deflationary side of the Austrian business cycle to run its course, then you will have stagflation.
Also, total Japanese government revenue will soon be exceeded by the interest on servicing their debt (currently above 50%). I am confounded by the doggedly persistent bond buying of the Japanese, something that is not likely to happen in the US as investors have a more independent attitude. It will be very interesting, I think when Japan has a currency crisis it will spread like wildfire to the EU and US via CB liquidity swaps. In other words, if any of the ships sink, we'll all go down together!
Is A Big Correction For Gold And Silver In The Offing? [View article]
Stagflation = inflation (see the second half of the word Stagflation)
Deflation = CBs won't let it happen.
So it comes down to this question, will CBs allow their sovereign currencies to depreciate or not. The answer is pretty obvious.
Will The Price Of Gold And Silver Keep Falling? [View article]
Will The Price Of Gold And Silver Keep Falling? [View article]
We Are All Contrarians Now [View article]
The ECB Worries About Competition From Bitcoins [View article]
People should not be dependent on the government to spend fiat currency notes into existence, rather the government should be dependent on gathering what it can of it's citizens production by consent through legitimate taxation.
Politically Favored Hospital Stocks [View article]
Politically Favored Hospital Stocks [View article]
Market Rally: Why You Should Be Worried [View article]
Read about Metalism vs Chartalism. The founders knew what they were doing (article 1 section 8). Also, too much stimulus in a contracting economy (as opposed to allowing graduated deflation) causes malinvestment and suppresses creative destruction. The price signals and price discovery mechanisms for good vs bad capital good vs bad investment become distorted. Federal debt spending also robs the people's productive capacity either now (taxes) or in the future (inflation). Unfortunately we live in fiat times and all currencies are being over-printed, so we have to print to keep up or we'll be unable to export.
No Margin For Error: Margin Debt, Quantitative Easing, And Future S&P 500 Returns [View article]
Inflationary Targets Will Fail - World Stuck In Deflationary Super-Cycle [View article]
Don't underestimate a central bank's ability to print. Core CPI is only rising 2% yoy despite massive QE and negative real interest rates due to the 2 trillion dollar credit contraction in shadow banks (Singh & Stella 2012). We will have more printing; and stagflation until the central banks cause hyperinflation.