Taper Caper: Conspiracy Theory Last Thursday, prior to the FOMC announcement, I was invited to come sit with another group of friends and traders everyone was sure there would be some type of tapering. That message had been clearly communicated to the markets. When the announcement came, the telephones went off and everyone erupted with various forms of surprise. I fully admit to being speechless. I kept waiting for some kind of explanation, and none came. The more we talked about it and the more I thought about it later, the more convinced I became that this was one of the more ham-handed policy announcements from the Fed in a very long time. Why would you go to the trouble of getting the … [Read more...]
How The Federal Reserve is Making Us Poorer
In today's article Lacy Hunt looks at the Federal Reserve's economic model and a few important questions regarding their policy, including, "How accurate have the FED's previous predictions been?" and "Has the Fed facilitated errant fiscal policies?" and "Is the Fed relying on an outdated understanding of how the macro-economy works?". He also shows how because of (not in spite of) FED actions, "real income of the vast majority of American households fell" and "worsened the income/wealth divide". In other words the FED has made us poorer. ~Tim McMahon, editor The Federal Reserve (FED) By Lacy H. Hunt, Ph.D., Economist In May 22 testimony to the Joint Economic Committee of Congress, … [Read more...]
The Case of the Disappearing Gold
When I was in the 6th grade (many, many years ago) my class took a field trip to New York City and visited the NY FED. The highlight of the trip for me was a ride down the elevator (or more precisely what was at the bottom. The ride took forever with dozens of kids and one security guard in that tight stuffy space. Anticipation built as we went down what seemed like miles into the earth where the vaults rested on Manhattan bedrock. And what was in those vaults? Gold! Lots of gold! Each vault had a name on it but not people's names, countries names. After all in those days people weren't allowed to own gold. For years now there has been a controversy as to whether our (the U.S.) Gold … [Read more...]
The Effects of Tapering Off the FED’s Stimulus Program
Here's an economic irony for you. Less inflation means lower prices for you and I. However, to some who work for the Federal Reserve, that means things are off target and the economy still needs more work. Huh? What? It seems slightly fuzzy, but when you look at the larger macro-economic picture, things slowly start to come into focus. To a certain extent, inflation is actually good for the economy. The slow growth of inflation is one of many variables that is prompting speculation about whether or not the Federal Reserve should start tapering back its quantitative easing (stimulus) of the economy. Recent Inflation Drop Prompts Speculation In the May 2013 release of the April data, the … [Read more...]
What are “Foreign Exchange Reserves”?
Will the U.S. Dollar Be Replaced as the World's Reserve Currency? Foreign Exchange Reserves are foreign money held by International banks for use in international trade and in an effort to diversify their holdings and hedge against the inflation of their own currency. The most common items bought and sold with their foreign exchange reserves are oil and gold. Up until 1944 the asset of choice was gold and it was used as the medium of exchange between countries to settle their debts. But in July 1944, delegates from the 44 Allied nations gathered in Bretton Woods, New Hampshire., and made the U.S. dollar the reserve currency of the world. At that time, the dollar was pegged at $35 per ounce … [Read more...]
In 1929, Deflation Started in Europe Before Overtaking the U.S.
Marcus Aurelius was the last of the "Five Good" Roman emperors and is also considered one of the most important members of the Stoic philosophers. He ruled Rome from 161 to 180 AD. He brilliantly said, "Look back over the past, with its changing empires that rose and fell, and you can foresee the future, too." Today we may be seeing the beginning of the end of the American Empire. As Americans we don't like to think of ourselves as having an empire but according to Daniel Larison, The U.S. treats several key regions of the world as privileged space where it is supposed to have military and political supremacy, and regional challengers to that supremacy are treated as potential … [Read more...]
What You Need to Know About the Federal Reserve System
The Federal Reserve System If you saw the HBO movie “Too Big to Fail,” you may have the notion that the Federal Reserve System, commonly known as The Fed, deals with high level banking issues that have worldwide implications. And you would be right. But The Fed also regulates banking functions that affect individual Americans, ranging from regulating debit card overdraft fees and limiting gift card fees to issuing U.S. Treasury savings bonds. History of the Federal Reserve The Founding Fathers were cautious about establishing a central bank, thinking that it would encourage irresponsible borrowing by the government. As a result, America functioned without a central bank throughout the … [Read more...]
What is Quantitative Easing?
Is Quantitative Easing Money Printing? Quantitative Easing is often referred to as "money printing" or a way for the government to increase the money supply. According to Wikipedia, quantitative easing is different from the typical method whereby governments buy treasury debt to increase the money supply. In QE1 when the market was panicked, and banks didn't want to buy government bonds, the central bank implemented "quantitative easing" by purchasing relatively worthless financial assets (like mortgage backed securities) from banks and giving them new electronically created money. So this is straight forward money printing compared to the more round about traditional method. Thus … [Read more...]
Market Turbulence
Alan Greenspan was appointed Fed chairman by Ronald Reagan in August 1987, he was reappointed by Bush and Clinton, at successive four-year intervals until retiring after a record-setting tenure on January 31, 2006. During that time period he was one of the most powerful men in the world. The stock markets literally hung on his every word. People made it their full time job to try and decipher what cryptic meaning might be obtained from his press releases. At times his words boosted the market as he dealt with issues like the Black Monday stock market crash that occurred shortly after he first became chairman. At other times he tried to talk the market down and he referred to the … [Read more...]
The Long Road to Inflation Perdition
Today David Galland interviews Terry Coxon. Terry has worked hand in hand with the legendary best selling author Harry Browne together they wrote Inflation-Proofing Your Investments published in 1981 . Terry also wrote Keep What You Earn and is an expert in monetary systems and first started writing about inflation during the last major inflationary period of the 1970's. David Galland is editor of The Casey Report. How the Federal Reserve is Locking Up Inflation David Galland: You were involved with Harry Browne during the last great inflation in the U.S. How does the increase in the money supply that kicked off in 2007-2008 compare in terms of scale to what went on leading up to the … [Read more...]
