Money, Credit and the Federal Reserve Banking System Conquer the Crash, Chapter 10 By Robert Prechter How the Federal Reserve Has Encouraged the Growth of Credit Congress authorized the Fed not only to create money for the government but also to “smooth out” the economy by manipulating credit (which also happens to be a re-election tool for incumbents). Politics being what they are, this manipulation has been almost exclusively in the direction of making credit easy to obtain. The Fed used to make more credit available to the banking system by monetizing federal debt, that is, by creating money. Under the structure of our “fractional reserve” system, banks were authorized to employ … [Read more...]
What is the Federal Reserve – Part 2
This is Part II of our three-part series "Robert Prechter Explains The Fed." In part 1 we saw how Central Banks came into being and money went from something tangible and of value like Gold or Silver to paper backed by Gold to paper backed by nothing. You can read Part I in "What is the Federal Reserve - Part 1" -- and come back later this week for Part III. "Let's attempt to define what gives the dollar objective value. As we will see in the next section, the dollar is 'backed' primarily by government bonds, which are promises to pay dollars. So today, the dollar is a promise backed by a promise..." … [Read more...]
What is the Federal Reserve – Part 1
Do you really know What a Dollar is? Or how the FED controls interest rates? What is quantitative easing? Or (QE2)? Or monetary stimulus? For answers, let's turn to someone who has spent a considerable amount of time studying the Fed and its functions: EWI president Robert Prechter. Today we begin a 3-part series that we believe will help you understand the Fed as well as he does. (Excerpted from Prechter's Conquer the Crash and the free Club EWI report, "Understanding the Federal Reserve System.") Here is Part I. … [Read more...]
The Next Major Disaster Developing for Bond Holders
Elliott wave analysis can warn you of trend changes when the rest of the investment public least expects a market reversal. With that in mind, we have created a new report for our free Club EWI members: "The Next Major Disaster Developing for Bond Holders." In this free report, you get some of the latest commentary on fixed-income markets adapted from various Elliott Wave International's publications, including 2010 issues of Robert Prechter's monthly Elliott Wave Theorist and its sister publication, The Elliott Wave Financial Forecast. Enjoy this excerpt -- and for details on how to read this important Club EWI report free, today, look below. … [Read more...]
Deflation or Inflation: Can Helicopter Ben Come to the Rescue?
Why the Fed Cannot Stop Deflation Countless people say that deflation is impossible because the Federal Reserve Bank can just print money to stave off deflation. If the Fed’s main jobs were simply establishing new checking accounts and grinding out banknotes, that’s what it might do. But in terms of volume, that has not been the Fed’s primary function, which for 89 years has been in fact to foster the expansion of credit. Printed fiat currency depends almost entirely upon the whims of the issuer, but credit is another matter entirely. What the Fed does is to set or influence certain very short-term interbank loan rates. It sets the discount rate, which is the Fed’s nominal near-term … [Read more...]
Deflation: The Elephant in the Room
We've had almost a Trillion dollars in "stimulus" and/or "Quantitative Easing" or whatever you want to call it and as of the end of August 2010 we still only have 1.15% annual inflation... Down from 1.24% last month. And the trend has been steadily decreasing for all of 2010. Back in 2009 we had a period of deflation bottoming at -2.10% in July of 2009 and the stimulus kicked the inflation rate from its deflationary moorings all the way up to 2.72% in December of 2009. But as we can see from the chart below the effect didn't last long... and the inflation rate has steadily declined for all of 2010 so far. In the light of all that stimulus, the biggest credit bubble in history is … [Read more...]
Complimentary 90-page Deflation eBook from Robert Prechter Available Now
New Deflation eBook Available Now: Our friends at Elliott Wave International have just released a complimentary 90-page ebook on deflation from Robert Prechter. As deflation fears are back in the news and most likely also on your mind, it's more important than ever to -- at very least -- give the deflationary scenario a serious look. After all, deflation could pose a serious risk to your wealth if it occurs, and no one has explained the potential threats -- and how you can survive them -- better than Prechter. Even if government stimulus and out-of-control spending have you more convinced than ever that inflation is dead ahead, we recommend that you take a look at Prechter's reasonable … [Read more...]
Video: Bond Issuers Aiming Toward Debt Man’s Curve
By Jason Lureman Thu, 09 Sep 2010 They say a picture is worth a thousand words, so a chart as startlingly clear as our Debt Man's Curve must be worth 10,000 words. EWI analyst Jason Farkas first created and wrote about this parabola that displays different risk levels of bonds in late July 2010. Specifically, the chart plots sovereign, municipal and corporate issuers on the same spectrum. The resulting sharp curve up makes it easier to see why we think that bond issuers are flirting with a bad crash the same way the driver does in Jan and Dean's hit song from the 1960s, "Dead Man's Curve." More recently, Jason recorded this 10-minute video to take his Currency and Interest Rate … [Read more...]
What is the Economy Usually Doing When Gold Goes Up?
Traditionally when does Gold rise and when does it fall? What economic indicators predict gold prices? In this article Robert Prechter looks at the economy and Gold Prices. ~ editor By EWI President Robert Prechter ...If gold isn’t going up when the economy is contracting, when is it going up? Table 4 (see chart on p. 24 of this free Club EWI report ~ editor) answers the question: All the huge gains in gold have come while the economy was expanding. This is true of the three most dramatic gold gains of the past century: (1) Congress changed the official price of gold from $20.67 to $35 per ounce in 1934, during an economic expansion. The gain against the dollar was 69 … [Read more...]
Deflation is Everywhere: What it means for you
The mainstream media couldn't predict the biggest bear market in 100 years; how do you expect them to anticipate what will unfold next? Watch this quick video clip from financial analyst and sought-after speaker Steven Hochberg about what triggers a deflation, why you should challenge the consensus view for inflation, and how debt is sucking the life out of the economy. Then access the full 20-minute video, FREE. Watch the full presentation, FREE. Click Here! … [Read more...]
