Why “The Fed Can’t Save Us”: The Simple Explanation From Austrian Business Cycle Theory

By Robert P. Murphy of Mises Institute The Fed Can’t Save Us In December, the Fed hiked its target for the federal funds rate, which is the interest rate banks charge each other for overnight loans of reserves. Since 2008 the Fed’s target for the Fed Funds Rate had been a range of 0 percent – 0.25 percent (or what is referred to as zero to 25 “basis points”). But last month they moved that target range up to 0.25 – 0.50 percent. Ending a seven-year period of effectively zero percent interest rates. From our vantage point, we already see carnage in the financial markets, with the worst opening week in US history. This of course lines up neatly with standard Austrian business cycle theory, which says that the central bank can give an appearance of prosperity for a while with cheap credit, but that this only sets the […] Read More

The Definition Of An Unfree Market

Commentary by Guy Haselmann of Scotiabank Unfree A market economy is one based on supply and demand with little or no government control.   Dictionary site ‘Investopedia’ states that “a completely free market is an idealized form of a market economy where buyers and sellers are allowed to transact freely (i.e. buy/sell/trade) based on a mutual agreement on price without state intervention in the form of taxes, subsidies or regulation.”  Toto, I don’t think we are in Kansas anymore. After the 2008 financial crisis, regulatory banking rules (i.e. macroprudential policies) conspired with zero (or negative) interest rates and asset purchases to exterminate the markets’ ability to freely calibrate clearing market prices based on supply and demand factors.   It is impossible for central banks to sustain controlling influence on market sentiment, investor behavior, correlations, and valuations, simply because effectiveness wanes over time.  As time passes, central bank stimulus stretches financial asset […] Read More

“Bernanke & Greenspan Have Destroyed America” Schiff & Maloney Warn “People Don’t Realize What Is Coming”

Ali and Frazier, Laurel and Hardy, Mayweather and Pacquiao, Liesman and Santelli, and now Schiff and Maloney. Peter and Mike join clash of the titan-like to discuss their investment strategies and expose the charts the government doesn’t want you to seeas “people like Bernanke are taken seriously still and the people that did predict [the crisis] are dismissed as lunatics half the time.” The wide-reaching conversation covers everything from gold and stocks to The Fed and The Dollar – Bernanke “took the coward’s way out because all he did was exacerbate the problems to postpone the day of reckoning.” The air is coming out of the bubble, they warn, “Bernanke and Greenspan have absolutely destroyed America. People don’t realize what is coming…” Full interview here: Full transcript below: Mike: I was in Puerto Rico a little while back and Peter Schiff invited me over to his house and we […] Read More

Nomi Prins: The Clintons & Their Banker Friends

In the coming months, however many hours Clinton spends introducing herself to voters in small-town America, she will spend hundreds more raising money in four-star hotels and multimillion-dollar homes around the nation. The question is: “Can Clinton claim to stand for ‘everyday Americans,’ while hauling in huge sums of cash from the very wealthiest of us?” This much cannot be disputed: Clinton’s connections to the financiers and bankers of this country – and this country’s campaigns – run deep. As Nomi Prins questions, who counts more to such a candidate, the person you met over that chicken burrito bowl or the Citigroup partner you met over crudités and caviar? Via TomDispatch.com, The Clintons and Their Banker Friends The Wall Street Connection (1992 to 2016) [This piece has been adapted and updated by Nomi Prins from chapters 18 and 19 of her book All the Presidents’ Bankers: The Hidden Alliances […] Read More

The Truth About The Monetary Stimulus Illusion

Authored by Tadashi Nakamae of Nakamae International Economic Research, Perhaps economic policymakers, including Federal Reserve Chair Janet Yellen and the Bank for International Settlements, should take a closer look at Japan, China, and yes, the United States, when debating the limits of monetary stimulus and the dangerous nature of financial bubbles. The discussion is happening too late to be anything more than an intellectual exercise. Since its inception in 2008, easy monetary policy has created very few positive effects for the real economy—and has created considerable (and in some cases unforeseen) negative effects as well. The BIS warns of financial bubbles. Quantitative easing has already created asset price bubbles in the United States and elsewhere, and an investment bubble (this includes capital expenditure and real estate) in China and other emerging markets. Meanwhile, this policy has failed to have a positive impact on the real economy partly because central […] Read More

The Killing of America’s Creative Class

A review of Scott Timberg’s fascinating new book, ‘Culture Crash.’ Some of my friends became artists, writers, and musicians to rebel against their practical parents. I went into a creative field with encouragement from my folks. It’s not too rare for Millennials to have their bohemian dreams blessed by their parents, because, as progeny of the Boomers, we were mentored by aging rebels who idolized rogue poets, iconoclast cartoonists, and scrappy musicians. The problem, warns Scott Timberg in his new book Culture Crash: The Killing of the Creative Class, is that if parents are basing their advice on how the economy used to support creativity – record deals for musicians, book contracts for writers, staff positions for journalists – then they might be surprised when their YouTube-famous daughter still needs help paying off her student loans. A mix of economic, cultural, and technological changes emanating from a neoliberal agenda, writes […] Read More

Even Mark Zandi Admits It: Auto Loan “Credit Quality Is Eroding Now, And Pretty Quickly”

Just 2 days after President Obama reflected on his glorious ‘save’ of the US auto industry – forgetting to explain how so much of this ‘buying frenzy’ has been predicated on massive low-quality-borrower-based credit extensions – The Wall Street Journal bursts the bubble of ‘contained-ness’. Auto loan delinquency rates are surging to levels not seen since 2008 and stunningly, more than 8.4% of borrowers with weak credit scores who took out loans in the first quarter of 2014 had missed payments by November. As even glass-half-full-status-quo-hugger Mark Zandi is forced to admit, “It’s clear that credit quality is eroding now, and pretty quickly.” As The Wall Street Journal reports, Borrowers who took out auto loans over the past year are missing payments at the highest level since the recession, fueling concerns among regulators, analysts and some in the car industry that practices that helped boost 2014 light-vehicle sales to […] Read More

The American People Are Utterly Clueless About What Is Going To Happen As We Enter 2015

Submitted by Michael Snyder via The Economic Collapse blog, The American people are feeling really good right about now.  For example, Gallup’s economic confidence index has hit the highest level that we have seen since the last recession.  In addition, nearly half of all Americans believe that 2015 will be a better year than 2014 was, and only about 10 percent believe that it will be a worse year.  And a lot of people are generally feeling quite good about the people that have been leading our nation.  According to Gallup, once again this year Hillary Clinton is the most admired woman in America and Barack Obama is the most admired man in America.  I don’t know what that says about our nation, but it can’t be good.  Unfortunately, when things seem to be going well common sense tends to go out the window.  A couple days ago, the […] Read More

The Most Destructive Generation Ever

Submitted by Raul Ilargi Meijer via The Automatic Earth blog, Dorothea Lange Hoe culture in the South. Poor white, North Carolina July 1936 I’m afraid I got to delve into a particularly unpopular topics once again today. Blame it on Bloomberg. They ran a piece on the Silent Generation (people born between 1928-’45), which finds it self in a ‘sweet spot’ but refuses to spend enough. A funny problem: the by far richest group in the US doesn’t spend, while those who would like to spend, for instance to build a home and a family, are too poor to do it. I know I’m not going to make myself popular with what I have to say about this, but then I’m not running for US President, or Miss Universe for that matter. Besides, people should be careful about taking things personal that are not. My point is that the […] Read More