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...]
The Long Road to Recovery
By David Galland, Managing Editor, The Casey Report Last week the government released the latest unemployment data. Bloomberg, always ready to roll up their sleeves to help its friends in government (get reelected), was running a headline that “Companies in U.S. Added 67,000 Jobs in August.” While I haven’t had time to go through the minutiae of the report, I find myself scratching my head at Mr. Market’s rather positive reaction to the report, given the bullet points: Manufacturing payrolls declined by 27,000. Employment at service-providers fell by 54,000. Retailers cut 4,900 workers. State and local governments gave walking papers to 10,000 people. The federal government … [Read more...]
The Smoking Ruin Solution
By David Galland, Managing Director, Casey Research Just last week, it was reported that the turnout for the Democratic primary was the lowest in 80 years. While the Republicans are clearly energized by their concerns about the direction the Democrats are taking the country in, the Democrats themselves seem to have decided to forgo the voting process, perhaps in favor of a refreshing nap. No question about it, the president is in the hot seat. While I am sure that back in 2008 Barack Obama was one happy camper about having taken the presidential prize, today one has to wonder if that victory has led him to certain bitter regrets. His problem, the problem bedeviling the government … [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...]
Worldwide Economic Recovery Slowing
By Tim McMahon, editor The effects of the Trillion Dollar economic stimulus are wearing off and the "recovery" is looking pale and thin. So it may be time to crank up the printing presses again... According the OECD’s latest Interim Economic Assessment, the world economic recovery may be slowing faster than previously anticipated. Growth in the the seven largest developed countries of France, Germany, Italy, Japan, United Kingdom, United States and Canada is expected to be around 1½ per cent on an annualized basis in the second half of 2010 down from the OECD’s previous estimate of around 1¾ per cent in May. … [Read more...]
The Effects of Fiscal Stimulus are Wearing Thin
The following is an excerpt from Casey's Daily Dispatch... an ezine with thought provoking commentary that I thought you might find interesting. ~ Tim McMahon, Editor Words from the Wise By David Galland, I would like to share just a few snippets I think you’ll benefit from, starting with the latest posting from Ambrose Evans-Pritchard, which you can read in full here. Here’s an excerpt: Today’s release on manufacturing activity by the Richmond Fed is pretty ghastly, as you would expect given that the effects of fiscal stimulus are now wearing off at accelerating pace – before the happy handover to the private sector is safely consummated – and given that the structural … [Read more...]
The Bear Market and Depression: How Close to the Bottom?
By Elliott Wave International While many people spend time yearning for the financial markets to turn back up, a rare few have looked back in time to compare historical markets with the current situation -- and then delivered a clear-eyed view of the future informed by knowledge of the past. One who has is Robert Prechter. When he thinks about markets and wave patterns, he goes back to the 1700s, the 1800s, and -- most tellingly for our time now -- the early 1900s when the Great Depression weighed down the United States in the late 1920s and early 1930s. With this large wash of history in mind, he is able to explain why he thinks we have a long way to go to get to the bottom of this bear … [Read more...]
Global Inflation and Double-Dip Recession Prospects
By Martin Hutchinson, Contributing Editor, Money Morning Last week's stock-market meltdown was a worldwide affair, and was touched off by trader fears of a global "double-dip" recession. However, the truth is that the odds of a recessionary reprise are high in just a few countries - primarily those that have experienced excessive fiscal and monetary "stimulus," or that have real inflation problems. The rest of the world is recovering just fine. … [Read more...]
20 Questions with Robert Prechter: Long Decline Ahead
Long Decline Ahead July 2, 2010 By Elliott Wave International The following article is an excerpt from Elliott Wave International’s free report, 20 Questions With Deflationist Robert Prechter. It has been adapted from Prechter’s June 19 appearance on Jim Puplava’s Financial Sense Newshour. Jim Puplava: I want to come back to government spending, but first I want to move onto the stock market. In your last two Elliott Wave Theorist issues, you laid out a scenario that would put the Dow and S&P, which in your opinion may have peaked on April 26, as the top from here. You feel that this top is the biggest top formation of all time, a multi-century top and we could head straight down … [Read more...]
There’s No Quick and Easy Fix for This Economy
By Adam Hewison, President INO.com Regardless of what others might say, there is no quick fix for the economy. To illustrate this point, a friend of mine recently sent me a chart which I would like to share with you. This charts shows that we may be going into a prolonged period of no growth overall in the stock market. The NASDAQ peaked at 5,132.52 on March 10th, 2000. The NASDAQ market is in many ways more important than the DOW, and should be considered more of a leading indicator. If that is truly the case, then we have been in a bear market for the last eight years. … [Read more...]