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Richard Sylla: This Is An Inherently Dangerous Moment In History

Low interest rates are causing distortions & mis-allocations
Monday, August 7, 2017, 1:42 PM

"The rates we’ve had in recent years, including right now, are the lowest in history. The book that I co-authored on the history of interest rates traces back to the code of Hammurabi, Babylonian civilization, Greek and Roman civilization, the Middle Ages, the Renaissance, and early modern history right up to the present. And I can assure our listeners that the rates that they’re experiencing right now are the lowest in human history."

So says Richard Sylla, Professor Emeritus of Economics and the Former Henry Kaufman Professor of the History of Financial Institutions and Markets at New York University's Stern School of Business. He is also co-author of the book A History Of Interest Rates

We invited Professor Sylla onto the podcast after hearing his work favorably referenced by the panel convened at the recent hearing held by the US Congress titled: “The Federal Reserve’s Impact on Main Street, Retirees and Savings.”

Based on his deep study across the scope of millennia of human history, Sylla warns we are at a dangerous moment in time. » Read more

Blog

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Hell To Pay

The final condition for a market crash is falling into place
Friday, September 23, 2016, 4:23 PM

Those familiar with my writing know I put the word “markets” in quotes because we no longer have a financial system where legitimate price discovery is a regular -- or even recognizable -- feature.

It's destined to fail. What more can be said about such a flawed system?

Well, a lot as it turns out. 

And failure to pay attention at this stage of economic and ecological history will prove to be exceptionally painful. » Read more

Blog

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Ready Or Not...

The unsustainable status quo is ending
Thursday, September 25, 2014, 3:00 PM

If risk has been taken from where it belongs and instead shuffled onto central bank balance sheets, or allowed to be hidden by new and accommodating accounting tricks, has it really disappeared? In my world, risk is like energy: it can neither be created nor destroyed, only transformed or transferred. 

If reality no longer has a place at the table -- such as when policy makers act as if the all-too-temporary shale oil bonanza is now a new permanent constant -- then the discussions happening around that table are only accidentally useful, if ever, and always delusional. » Read more

Blog

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I Blame The Central Banks

For the coming bond bubble disaster
Wednesday, August 27, 2014, 7:17 PM

The current bubble in financial assets -- in both equities and bonds of all grades and quality -- raging in every major market across the globe is no accident.

It's a deliberate creation. An intentional result of policy.

Therefore, when it bursts, we shouldn't regard the resulting damage as some freak act of nature or other such outcome outside of our control. To reiterate, the carnage will be the very predictable result of our terribly shortsighted decision-making and defective logic. » Read more

Insider

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Central Bankers Acting Badly

Blowing bubbles blindly
Monday, May 19, 2014, 4:42 PM

One of the enduring mysteries about humans is their often startling ability to fail to learn from experience.

This is especially obvious when people are operating in groups; and never more certain than when we are talking about a bureaucratic, sclerotic institution. » Read more

Insider

How the Market Failure Will Happen

Get out or get short
Thursday, February 28, 2013, 10:34 AM

Executive Summary

  • The central-planning Status Quo will fight to the bitter end in order to keep stock and housing prices elevated
  • HFT algorithms dramatically increase the odds of immediate "air pockets" in stock prices
  • Persistently high gasoline prices are choking economic growth
  • A parade of economic headwinds (weakening GDP growth, higher taxes, the impact of Obamacare, sequester cuts, chronic unemployment) are blowing increasingly stronger
  • Powerful TBTF ("too-big-to-fail') interests are likely supporting the Fed's current efforts to boost asset prices
  • Both near-term and long-term history tell us that the more asset prices are artificially increased, the farther they eventually fall, as intervention hits its point of diminishing returns
  • Why you don't want to be long in this market when that happens

If you have not yet read Part I: Warning: Stocks Likely to Crater from Here, available free to all readers, please click here to read it first.

Hey, Where's My Cheap Gasoline?

Expensive energy is a serious drag on economic growth.  It always has been and always will be, for obvious reasons.

The average person can be forgiven for being confused by the recent spike in gasoline prices. Since early 2012, there has been a concerted effort to tell the tale that the U.S. is producing more oil than it has in a long time and is on track to rival Saudi Arabia.  

Literally hundreds of articles have breathlessly repeated the same information over and over again, like all good marketing programs should.  But here in 2013, gasoline is on track to set price records and possibly make this year the most expensive one in history for gas prices: 

How can this be? What is going on? How do we reconcile all the reports of record-breaking advances in U.S. oil production with these concurrent record-high gasoline prices?

The answer starts with the fact that the U.S. still imports 40% of its daily oil supply and is nowhere near energy independence when it comes to petroleum. This means that the U.S. remains wedded to the world price of oil, which remains quite elevated in price with Brent crude remaining stubbornly elevated between $110 and $120 a barrel over the majority of the past year... » Read more