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  • Why The Price Of Gold Is Falling  [View article]
    I'm not so sure about #4, why would the issuer of the world's reserve currency necessarily have to run a deficit? The US is enabled to run deficits due to our treasuries being in demand, but that doesn't mean we have to run deficits.
    What do you think about Japan. Soon the INTEREST on their debt will be greater than their revenue, especially if yields go up. The BOJ is stuck, they can't stop buying up debt and printing or else the yields will raise and cause the Japanese Treasury to go insolvent. This is where the US is headed.
    In Chartalism, people seem willing to still purchase govt backed debt even with guaranteed losses, it's unbelievable to me. It's the liquidity preference. The question is, at the margin, when does this liquidity preference end?
    Mar 1, 2013. 11:12 PM | 5 Likes Like |Link to Comment
  • Incomes Fall $505.5 Billion, Expenses Rise - Can You Say Stagflation?  [View article]
    Unintended consequences of the FED's actions are becoming more apparent and more severe. The low rates are hurting savers, money markets, and pension plans. Investors are being pushed into taking higher risks seeking a ROI wherever they can find one. Creative destruction and reallocation of wealth is being suppressed by maintaining the status quo. The Phillips curve only holds true when the economic fundamentals of price discovery are allowed to work. Our economy will start growing again when business regulations, tax laws, unemployment, disability, and entitlement reform takes place in a smart way. Unfortunately, given the retards that are running this country, we're in for decades of stagflation. Japan is our model, we will follow their lead.
    Mar 1, 2013. 11:01 PM | 7 Likes Like |Link to Comment
  • Top Line Sales And Profit Growth Falter As The Dow Approaches All Time Highs  [View article]
    Nice article. I am wondering if you could shed light on just how exactly is the FED backstopping equity prices? This does seem like a conspiracy theory, I'd be interested to hear exactly how the FED is accomplishing this, perhaps the banks are investing their deposits into equities via repo agreements?

    It seems to me that investors don't want to miss out on this bull market in equities and are just rotating out of cash and bonds and into equities. Never mind that the bull market in equities has been engineered by the FED, where else are you going to put your money? I agree though, that investors have their finger on the trigger, ready to pull out of stocks at any time!
    Mar 1, 2013. 10:23 PM | Likes Like |Link to Comment
  • How Obamacare Could Harm Growth In 2014, Part II  [View article]
    I can see that you are very passionate about this topic, and that is good. A solution to the Medicare problem is probably the single best thing we could do to increase our federal govt's efficiency and solvency. Healthcare financing in the US, as it is now, is a disaster. It is an unholy combination of government control and free markets. The reason healthcare is so expensive in the US is from the following:
    1. 3rd party payers divorce the consumer from direct exposure to the cost of care (no price discovery mechanism).
    2. Employer-based insurance benefits are tax-decuctible, causing an arms race in private insurance.
    3. Litigation, some studies put the cost of litigation as high as 33 cents for every dollar (defensive medicine, over-consultation, over-testing).
    4. CMS reimburses for quantity, reimburses procedures more than primary and preventative care.
    The dentists are all starting to fall into the same trap we did in the 1970s, becoming dependent on 3rd party payers. Just wait, dental care (just like student loans) will get bid up and up and up once you remove price discovery from the equation. This is classic, moral hazard, the central planners would do much better allowing the free market to work. I'm happy to use govt money for healthcare for the poor but it needs to be done in a much smarter way. CMS has done a terrible job, and Obamacare will carry the torch in 2014 of doing a horrible job of making economic decisions from 30,000 feet. It just doesn't work.
    Mar 1, 2013. 08:59 PM | 5 Likes Like |Link to Comment
  • How Obamacare Could Harm Growth In 2014, Part II  [View article]
    You are exactly right about the Medicare act of 1965 driving up costs, I wrote a little instablog on that very topic.
    Mar 1, 2013. 12:04 AM | 3 Likes Like |Link to Comment
  • How Obamacare Could Harm Growth In 2014, Part II  [View article]
    I hate to admit it but Paul Ryan was right, We"d be better off with a system of vouchers. Let government money be at least channeled through the constructive forces of the free market. Heaven forbid we give the baby boomers some exposure to the real actual cost of their healthcare!
    Feb 28, 2013. 11:29 PM | 11 Likes Like |Link to Comment
  • How Obamacare Could Harm Growth In 2014, Part II  [View article]
    Under Obamacare the insurance exchanges are highly regulated and have to meet standards of reimbursement as specified by CMS, you won't be able to find a low premium product like that, the Dems will have regulated them into extinction. Also, the insurance companies (exchanges) will all be offering more or less the same product due to the fact they can't discriminate based on health status/pre-existing conditions ect. The exchanges will fire all their actuaries. Why would an insurance company that Can't lawfully assess risk need actuaries. The exchanges are little government redistribution vehicles. Obamacare, is a step in the wrong direction, a horrible idea!
    Feb 28, 2013. 11:26 PM | 9 Likes Like |Link to Comment
  • 4-Year Stock Optimist Turns Negative - 4 Signs Market Is On Thin Ice  [View article]
    Joe, I believe your application of MMT is best used to describe changes in the money supply not production. The economy grows or shrinks in relation to production, the money follows production not vice versa, that is why thevFED finds itself "pushing on a string.". Central banks have increased the supply of money but that doesn't necessarily translate into increased production.
    Feb 28, 2013. 11:10 PM | 3 Likes Like |Link to Comment
  • Silver Shorts Feeling Squeezed?  [View article]
    Yes and gasoline and food will be free for everyone!
    Feb 27, 2013. 12:06 PM | 5 Likes Like |Link to Comment
  • The Bear Who Cried Wolf: Everything Is Fine Until It Isn't  [View article]
    I believe Colin would point to the following phenomenon.
    Where he argues that the deposit-less shadow bank credit contraction void is being filled by FED-backed deposits into the traditional banking system, which has a higher potential for inflation.
    Feb 26, 2013. 10:45 AM | Likes Like |Link to Comment
  • A Dow Record In Sight  [View article]
    Hey, let's just print until the Dow is 100,000 then we'll all be rich!
    Feb 24, 2013. 03:02 PM | 2 Likes Like |Link to Comment
  • Is Japan Prompting A 1930s-Like Currency War?  [View article]
    Ben Gee,
    My concern is that the US economy doesn't become competitive enough to survive in a global free trade environment, that we can't eventually run a trade surplus. In other words, the politicians won't let the cost of wages and capital to fall to equilibrate with that of the rest of the world and will instead "come to the rescue" of big industry by implementing protectionist policies before there can be a rebalancing. With so much trade deficit sovereign debt almost has to rise (unless endogenous productivity starts to raise exponentially, which I don't see happening here with current demographic and political trends).
    Feb 24, 2013. 02:57 PM | Likes Like |Link to Comment
  • The Precise Definition Of Inflation  [View article]
    Under an Austrian paradigm, and with Metalism (as opposed to chartalism), commodity based money, you are exactly right. This is the way the world should work. Unfortunately, we live in Chartalist times and have since 1971. Money is no longer money in the sense that von Mises said it was, "the ultimate commodity of universal demand" (or something close to that). Money is now a token of credit issued by the govt and required to pay taxes, of value only as far as the people believe in it. Money is now used to spur production as opposed to production putting deflationary forces on the money supply and causing "natural" credit expansion in the private banking system.
    With the current paradigm (Chartalism) money and wealth are divorced, accrued interest can be paid off (at least in nominal terms). History tells us how this will end, and I agree with you, it won't be pretty.
    Feb 22, 2013. 06:11 PM | 2 Likes Like |Link to Comment
  • Treasury Shorts, Negative Repo Rates, And The Poor Money Market Funds  [View article]
    Ha ha! Very insightful comment! It just strikes me as so disingenuous, the FOMC members brushing off any concern for possible asset bubble creation (housing, midwest farmland), as if the Primary Dealers wouldn't act in their own self interest! Of course they don't want the FED to take away the punch bowl, they've got a monopoly on all the "high quality collateral." The Money Markets will have to beg or pay up for the Privilege of holding this collateral in exchange for cash! And the TBTF banks, what do they get, invincible balance sheets and another tax-payer guarantee! What a joke!
    Feb 22, 2013. 05:55 PM | 2 Likes Like |Link to Comment
  • Treasury Shorts, Negative Repo Rates, And The Poor Money Market Funds  [View article]
    Colin, enjoyable read as usual, I always appreciate your thoughtful analysis. The banks must be asking themselves, why pledge low risk collateral for more cash to make high risk loans? The money markets must be cursing the FED for obliterating the demand for cash! What a crazy upside-down time we are in!
    Feb 21, 2013. 05:37 PM | Likes Like |Link to Comment