Friday, November 15, 2019, 3:30 PM
27
The Federal Reserve is now directly monetizing US federal debt.
Sure, it’s not admitting to this. And it’s using several technical jinks and jives to offer a pretense that things are otherwise.
But it’s not terribly difficult to predict what’s going to happen next: the Federal Reserve will drop the secrecy and start buying US debt openly.
At a time, mind you, when US fiscal deficits are exploding and foreign buyers are heading for the exits.
Aperture51/Shutterstock
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.
Peak Prosperity
Saturday, August 9, 2014, 12:49 AM
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Chapter 8 of the Crash Course is now publicly available and ready for watching below.
As a follow-on to the two previous chapters — one explaining the nature of fiat money, the other showing how money is loaned into existence through our fractional reserve banking system — this week's video details the Fed's near-magical ability to create money out of thin air (literally!).
Kunal Mehta/Shutterstock
Tuesday, January 21, 2014, 7:40 PM
31
If you have not yet read Part I: "Endless Growth" Is the Plan & There's No Plan B available free to all readers, please click here to read it first.
When the Treasury Department estimates that the U.S. has a ~$65 trillion NPV (Net Present Value) shortfall in its main accounts, it's saying that using its assumptions, the U.S. government would need to have $65 trillion – today – in an account, earning a stated rate of interest, in order to be solvent.
Since the U.S. government don't have that have that kind of scratch, it's insolvent.
But the real picture is likely worse. The Fed calculates the NPV shortfall to be closer to $100 trillion. And if you believe Lawrence Kotlikoff's math, the figure is closer to $200 trillion. Either way – $65 trillion, $100 trillion, or $200 trillion – the sum cannot be paid.
So it won't be.
And the real trouble is that all of these numbers make the same implicit assumption: The future will more or less resemble the past. That is, some form of future growth – exponential future growth – of the economy is at the heart of every single calculation.
But we might question that, because somewhere between here and there, economic growth will have to come to an end. Or at least a pronounced deceleration. Why? Quite simply, because the earth is finite.
Now, we might comfort ourselves with the belief that our future date with hard limits is lifetimes away. But when we do, we shortchange ourselves (if we're wrong) and our progeny (if we're right). After all, the time to make an adjustment is when the resources and energy exist to make that change.
And that's now. Or, really, decades ago…
Thursday, August 1, 2013, 5:18 AM
8
This lemming-like belief in the power of the Federal Reserve generates its own psychological force field, of course; the actual power of the Fed is superseded by the belief in its power. We can thus anticipate widespread disbelief at the discovery that the Fed is either irrelevant or an impediment to the non-asset-bubble parts of the economy.
Thursday, May 30, 2013, 3:01 PM
7
In this week's Off the Cuff podcast, Chris and Mish discuss:
Image by EpSos.de, Flickr Creative Commons
Thursday, May 23, 2013, 2:22 PM
8
Tuesday, April 23, 2013, 2:15 AM
13
The diminishing returns of technology are insidious, and they are ever with us. By this I mean the slow erosion of the quality of life, despite the impression that technological wonders only make our lives better.
Tuesday, February 5, 2013, 3:25 PM
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A PeakProsperity.com reader recently lamented:
I have been trying to get my head around the mechanism of QE. Not being an economist or experienced investor I don't really understand a lot of the jargon. The usual simple definition of QE as "thin air money printing" does not satisfy my need for understanding either. Have hunted for a description of QE for dummies that leaves me feeling like I get it, but with no luck. My difficulty is in understanding how thin air money gets into circulation.
So I'm going to do my best to answer this plea in as intuitive and straightforward a manner as I can. I, too, share the need to understand the mechanism of a process in order to feel like I have a grasp of it. And I think it's critically important to understand QE (also known by its full name, "quantitative easing") and what it really represents. Because it is, without a doubt, one of the largest market-shaping forces of our times.
Friday, February 1, 2013, 10:49 PM
52
The stock market blasted higher, with the Dow crossing the 14,000 mark because the jobs report came in well under expectations. In today's world, one follows the other.
In yesterday's world, the one where logic and reason ruled the day, that first sentence would not have been written. Economic weakness would not have been rewarded with a big surge in stocks.
But this all makes perfect sense in today's world, once you tilt your view to the "new normal" and get with the program.
I titled this piece 'running on fumes' because, in one very real sense, that's exactly what this current market is doing. The fumes in this case happen to be thin-air money that the Fed is injecting into the financial markets to the tune of $85 billion per month, or roughly $4 billion per working day.
When an engine finally runs out of gas and turns to fumes, the last act of that engine is to run really hot – to race for a while – before finally quitting.
It doesn't know how to escape the mess it has created
3
It favors the rich as it makes the system dangerously more unstable
11
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