Tag Archives: Capital

  • Insider
    Wikimedia (public domain image)

    The 6 Reasons The Next Economic Rescue Will Fail

    Why the current unstable 'recovery' must topple
    by charleshughsmith

    Thursday, January 15, 2015, 3:48 PM

    11

    Executive Summary

    • The 6 Factors
      • Rising inequality
      • Reversion to the mean
      • Cost overages
      • Diminishing returns
      • Misleading measurement
      • Expertise mismatch
    • Why the 'success' of the Federal Reserve and other world central banks is ultimately dooming them to failure

    If you have not yet read Why Our Central Planners Are Breeding Failure available free to all readers, please click here to read it first.

    In Part 1, we examined a variety of reasons why the apparent success of Keynesian monetary and fiscal policy may be transitional and brief rather than permanent.

    Here in Part 2, we delve into the six other dynamics that make success destabilizing.

    Rising Inequality—Perceived and Real

    The highly touted “recovery” has been highly uneven in its distribution. The benefits of rising income and wealth have flowed disproportionately to the top 5%, 1% and even 1/10th of 1%.  Those who didn't make it onto the limited-seating Recovery Bus feel the gap between the prospects and wealth of the top tier and their own wealth and prospects widening. Indeed, psychological studies find that we assess our wealth and social position not by our actual material prosperity, but by the narrowing or widening of the perceived wealth gap with our peers.

    This is precisely the situation in the U.S. and China. Both economies are supposedly expanding smartly, but the gains are concentrated in a relative few hands; the Rising Prosperity Bus has few seats.  The vast majority perceive themselves as being left behind, and that is highly…

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  • Insider
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    Off the Cuff: The Importance Of Global Capital Flows

    More responsible for prices than any other current factor
    by Adam Taggart

    Friday, November 7, 2014, 2:56 AM

    11

    In this week's Off the Cuff podcast, Chris and Brian Pretti discuss:

    • Japan's Halloween Massacre
      • The most glaring sign yet that the central banks are desperate
    • Capital Flows Are King Right Now
      • The reason we have record-high markets despite crummy fundamentals
    • Musical Chairs
      • Every (market) player has fun until the music stops
    • Throwing The Bums Out
      • As our lifestyles contract, we vote out the incumbents
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  • Podcast

    Woody Tasch: Slow Money

    Putting capital to work for local food resilience
    by Adam Taggart

    Sunday, September 21, 2014, 7:31 PM

    11

    The Slow Money movement focuses on deploying capital, locally, to strengthen small food enterprises. Its goal is to improve the quality, dependability and sustainability of our food source, while financially nurturing communities and delivering an attractive return on investment to native investors.

    Woody Tasch is the founder and chairman of Slow Money – in this week's podcast, he and Chris discuss the templates his organization is piloting across over 350 ventures in local food production, processing, distribution and marketing.

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  • Blog
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    The Dollar May Remain Strong For Longer Than We Think

    Why demand for it is higher than other fiat currencies
    by charleshughsmith

    Wednesday, September 17, 2014, 2:50 AM

    4

    I have long been a dollar bull, not for any over-arching reasons based on inflation, deflation, rising geopolitical multi-polarity or any of the other issues that touch on the dollar’s valuation vis-à-vis other currencies. My analysis focuses on a few basics:  the dollar’s status as the global reserve currency, Triffin’s Paradox (a.k.a. Triffin’s Dilemma) and global capital flows into the dollar and dollar-denominated assets such as U.S. Treasury bonds.

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  • Insider
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    Why the Dollar Could Strengthen – A Lot – From Here

    50-100% appreciation possible in the next few years
    by charleshughsmith

    Wednesday, September 17, 2014, 2:50 AM

    27

    Executive Summary

    • The critical role of interest rates and carry trades
    • How capital flows across borders
    • The growth in supply of dollars is slowing
    • The rationale for the dollar strengthening from here by 50-100%

    If you have not yet read Is Part 1: The Dollar May Remain Strong For Longer Than We Think available free to all readers, please click here to read it first.

    In Part 1, we reviewed the key concepts that drive supply/demand (and thus the price/relative value) of the U.S. dollar. In Part 2, we’ll cover the dynamics that could push the value of the USD vis-à-vis other currencies much higher in the years ahead.

    Interest Rates, Bonds and Carry Trades

    To understand the price of any currency—measured in other currencies, gold, oil, etc.—we look at a currency as a special kind of commodity, one that greases transactional trade of goods and services and also serves as a store of value. Like any commodity, its price relative to other commodities is determined by supply and demand.

    If demand is strong and supply is tight, the value will increase. This is the same for dollars, gold, oil, grain, bat guano, etc. The reverse is equally true: if demand slackens and supply balloons, the value will decline.

    To understand the supply and demand for currencies, we need to understand the role of interest rates, sovereign bonds and carry trades.

    The connection between interest rates and demand is self-explanatory: if interest rates paid at home are near-zero, and another nation’s bonds are paying a higher yield, it makes sense to sell (or borrow) one’s own currency and buy a bond denominated in another currency.

    This is the foundation of currency carry trades.  PP.com’s own Davefairtex recently offered an excellent explanation of how carry trades work on the Gold & Silver Group forum:

     I believe that QE causes inflation in other countries by dropping rates to 0% which encourages carry trades, whereby traders borrow USD for extremely low rates here in the US, and then send it overseas to find a yield.  Cheap money in the US causes money to flow elsewhere, where rates are higher.

    Carry Trade For Dummies:

    Step 1) Borrow $1 billion US at LIBOR-1M rate; cost 0.16%.

    Step 2) Trade $1 billion US for 1.075 billion AUD.

    Step 3) Buy 1.075 billion 2-year AUD govt bonds; yield 2.52%

    Step 4) Collect $23 million USD/year for doing no work at all.

    Carry trades work in both directions for the dollar…

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  • Blog
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    Where To From Here?

    An analysis of the good, the bad & the ugly
    by Brian Pretti

    Wednesday, September 3, 2014, 5:02 AM

    29

    The financial markets were certainly correct in dismissing that rather abysmal first quarter 2014 GDP print, no?  After all, the current 4.2% GDP growth snapback revision in Q2 is proof positive Q1 was just a one-off fluke. Right?

    The fact is: for a good five years now, economic pundits have been both hoping for, and then repeatedly disappointed by, the US economy's inability to achieve "escape velocity”.

    So what lies ahead for the US economy? And for the financial markets? Are things going to get better or worse from here?

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  • Podcast

    Lacy Hunt: The World Economy’s Terminal Case of Debt Sclerosis

    In danger of dying from too much debt
    by Adam Taggart

    Sunday, August 24, 2014, 3:54 PM

    34

    Never before has the developed world carried this much debt. Never before have the central banks of those same countries expanded their balance sheets so much. Never before has so much sovereign debt been outright monetized. Never before have major financial institutions been officially designated as “too big to fail” and thereby been granted special license to assume gigantic risks.

    Dr. Lacy Hunt, economist and current executive vice president of Hoisington Investment Management Company, expects the macroeconomic situation to get worse from here:

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  • Insider
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    Off the Cuff: The Fed Is Very, Very Scared

    Confidence in its omnipotence is waning
    by Adam Taggart

    Friday, July 18, 2014, 6:16 PM

    3
    • The Fed's Nightmare
      • Bedlam will ensure if/when the market loses confidence
    • Age of Anomalies
      • Fed-induced market distortions are shaking that confidence
    • Pump & Pray
      • Does the Fed have any better game plan?
    • Central Planning Fault Lines
      • Rifts among allies are increasing the risks
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  • Podcast

    Ethan Roland: The 8 Forms of Capital

    What permaculture can teach us about prosperity
    by Adam Taggart

    Sunday, May 25, 2014, 8:25 PM

    14

    Building on top of last week's foundational discussion of permaculture, this week's podcast explores how the permaculture approach can be applied to creating value — aka, capital — across the full spectrum of our lives.

    Chris sits down with Ethan Roland to discuss the "Eight Forms of Capital" framework he and his partners at Appleseed Permaculture have developed:

     

     

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