Post Tagged with: "money"
The two-step process of saving
Recipients of government spending can hold receipts in the form of a bank deposit, can withdraw cash, or can use the deposit to spend on goods, services, or assets. In the first case, no further portfolio effects occur. In the second case, bank reserves and deposit liabilities are reduced by the same amount. In the third case, the deposits shift to the sellers (of goods, services or assets). Only cash withdrawals or repayment of loans can reduce the quantity of bank deposits—otherwise only the names of the account holders change. These processes can affect prices—of goods, services, and most importantly of assets
What They Are Doing?
The quantity of debt grows as the quality recedes. The problem of bad loans is no longer just the pre-2008 mortgages, CDOs, and LBOs. Debt issued after the bust is defaulting, such as Greek sovereign bonds, issued in June 2010. Some securities are born to part investors from their money, but it’s remarkable the extent and variety of such instruments issued in 2011. The world choked on similar bonds and derivatives only three years ago, many of which are still held at false prices on financial institutions’ books
Is it Over Yet?
It was telling that, just as the ECRI and other notable research outfits decided to push the recession button on the US economy, the data flow became notably more positive. This could be a sign of the times, that the cycle is just too volatile for even capable analysts to call or it could simply be a blip in otherwise fundamental economic weakness that is here to stay for now. I have been working with and building economic models for a while and all I can say is that they are seldom 100% right and the margin of error is always there when analysts make calls. The key is your ability to make calls which are transparent and add value for decision makers when they are made
Why is the Fed lending dollars unsecured to the ECB… again
It remains my position that Congress should not allow the Fed to lend unsecured to foreign central banks without specific Congressional approval. But the Fed does currently have that authority and they are again using it to keep $ LIBOR from rising. And that lending must be in unlimited quantities to insure $ LIBOR is capped at the Fed’s target rate
Commodity Money Coins: Metalism versus Nominalism, Part Two
This week we examine coinage from Roman times to the present in Western society
The Gold Standard and Fiat Currency: Metalism vs. Nominalism, Part One
“Taxes drive money”—these “money things” are accepted because there are taxes “backing them up”, not because they have embodied gold. As promised, this week I will begin try to dispel the view that coins used to be commodity monies
Change We Can Believe In
We repeat: the “debt problem” is a currency problem and the currency must and will collapse. The global monetary system exists at the pleasure of the Fed, which legally exists at the pleasure of Congress, which as we have learned only has the political will to control the Fed at the pleasure of the Fed’s shareholder banks. It is the Fed and nothing else that determines the solvency of Treasury. Analogously, it is the Fed that ensures the ultimate solvency of the fractionally-reserved banking system – the system that shorts dollars via perceived “lending” today and covers those dollars once devalued as the Fed creates them tomorrow. Ultimately, Congress, the Fed and Wall Street will have to answer to the masses that buy milk and pay and staff its military.
Ben Bernanke and J.P. Morgan on Gold
On July 13, 2011 Chairman Bernanke explained: “The reason people hold gold is protection against tail risk, really, really, bad outcomes. To the extent that the last few years have made people more worried about the potential of a major crisis, then they hold gold as a protection.”
After careful consideration, I remain bearish
The S&P has gone from 2 standard deviations below the 20-day moving average on the 16th June to 2 standard deviations above it now, something it did prior to the 87 crash when it rallied 6.4% in the week prior to the crash. It has been doing this more and more frequently recently although not of the scale of swing we have just seen. Our economists have already said that a single payroll figure is not sufficient to cause QE3 to which I agree. Commodity prices are telling us that further Asian stimulus is not going to happen unless offset by demand destruction elsewhere in the world. The risks are clearly mounting up
The Carry Trade and Fed Swap Lines
The Fed is stuck at permanent zero and that means the carry trade is on. If we did have another panic, those swap lines would be handy because the Fed would again become the global lender of last resort
The Harrison Plan for Greece
Evangelos Venizelos is dispatched to consider how to prevent the government from sacking tens of thousands of workers in order to prevent the Greek from defaulting on its debt. He suggests that California’s previous IOU issuance is a model for Greece. But he goes one step further in emphasising that the IOUs can be used to expunge a tax liability to the Greek government and by adding a redemption in 5 years at a 40% premium to the present spot price for gold, which represents a 7% annual return
Gundlach on another crisis: “How much currency do you have?”
Forget about gold for the time being. Investors need to own cash – currency, simply as a hedge against the risk of another derivatives mess down the line