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Once again, the Federal Reserve proves that it’s the last one to know everything that we knew already. Today’s stunning announcement: The Philadelphia Fed admits they (“may have”) made the wealthy wealthier and Main Street poorer.

Oops. Sorry America.

The Philly Fed insists that “redistributing wealth” to the wealthy isn’t the main idea, but just a potential side effect of stimulus that they can’t do much about.

“Monetary policy currently implemented by the Federal Reserve and other major central banks is not intended to benefit one segment of the population at the expense of another by redistributing income and wealth,” …

“However, it is probably impossible to avoid the redistributive consequences of monetary policy”.

We’re shocked. Shocked, we tell you. It turns out that handing out free money, buying worthless assets at face value and allowing a small cabal of private banks the sole right to access your magic free-money window, “may” have given some financial advantages to “one segment of the population”. But that’s just a side effect of saving the “economy”.

Of course, it’s not just the bankers. The 1% also happen to hold vastly more financial assets than the lower 99% — so they may directly benefit from financial asset-inflating monetary policy.

…click on the above link to read the rest of the article…

The Punch Bowl Stays And The Bubble Keeps Inflating

June 10, 2015

The Punch Bowl Stays And The Bubble Keeps Inflating

It is well known that I don’t think much of the ability of government officials to correctly forecast much of anything. Alan Greenspan and Ben Bernanke have made famously clueless predictions with respect to stock and housing bubbles, and rank and file Fed economists have consistently overestimated the strength of the economy ever since their forecasts became public in 2008 (see my previous article on the subject). But there is one former Fed and White House economist who has a slightly better track record…which is really not saying much. Over his public and private career, former Fed Governor and Bush-era White House Chief Economist Larry Lindsey actually got a few things right.

Back in the late 1990s, Lindsey was one of the few Fed governors to warn about a pending stock bubble, and to suggest that forecasts for future growth in corporate earnings were wildly optimistic. He also famously predicted that the cost of the 2003 Iraq invasion would greatly exceed the $50 billion promised by then Secretary of Defense Donald Rumsfeld, a dissent that ultimately cost him his White House position. (But even Lindsey’s $100-$200 billion forecast proved way too conservative – the final price of the invasion and occupation is expected to exceed $2 trillion).

Now Lindsey is speaking out again, and this time he is pointing to what he sees as a painfully obvious problem: That the Fed is creating new bubbles that no one seems willing to confront or even acknowledge. Interviewed by CNBC on June 8th on Squawk Box, Lindsey offered an unusually blunt assessment of the current state of the markets and the economy. To paraphrase:

…click on the above link to read the rest of the article…

Something Smells Fishy

May 30, 2015

SOMETHING SMELLS FISHY

It’s always interesting to see a long term chart that reflects your real life experiences. I bought my first home in 1990. It was a small townhouse and I paid $100k, put 10% down, and obtained a 9.875% mortgage. I was thrilled to get under 10%. Those were different times, when you bought a home as a place to live. We had our first kid in 1993 and started looking for a single family home. We stopped because our townhouse had declined in value to $85k, so I couldn’t afford to sell. In 1995 I convinced my employer to rent my townhouse, as they were already renting multiple townhouses for all the foreigners doing short term assignments in the U.S. We bought a single family home in 1995 with the sole purpose of having a decent place to raise a family that was within 20 minutes of my job.

Considering home prices on an inflation adjusted basis were lower than they were in 1980, I was certainly not looking at it as some sort of investment vehicle. But, as you can see from the chart, nationally prices soared by about 55% between 1995 and 2005. My home supposedly doubled in value over 10 years. I was ecstatic when I was eventually able to sell my townhouse in 2004 for $134k. I felt so smart, until I saw a notice in the paper one year later showing my old townhouse had been sold again for $176k. Who knew there were so many greater fools.

This was utterly ridiculous, as home prices over the last 100 years have gone up at the rate of inflation. Robert Shiller and a few other rational thinking people called it a bubble. They were scorned and ridiculed by the whores at the NAR and the bimbo cheerleaders on CNBC. Something smelled rotten in the state of housing.

…click on the above link to read the rest of the article…

The Central Problem with Central Banks: They Become the Greater Fools/Bag-Holders

May 13, 2015

The Central Problem with Central Banks: They Become the Greater Fools/Bag-Holders

Those who are confident the central banks can print unlimited money may find there are political and financial consequences to such extremes that cannot be foreseen.

The central problem with central banks is their mandate now includes propping up all asset markets globally. Back in the good old days before the Global Financial Meltdown of 2008-09, central bankers reckoned they could control the “animal spirits” released when the risk-on herd destabilized into a chaotic risk-off stampede.

As former Federal Reserve chairman Alan Greenspan noted in his 2014 Foreign Affairsarticle Why I Didn’t See the Crisis Coming, the models used by central banks and private economists alike presumed the demand for risk-on assets would remain robust even in a downturn:

Almost all market participants were aware of the growing risks, but they also knew that a bubble could keep expanding for years. Financial firms thus feared that should they retrench too soon, they would almost surely lose market share, perhaps irretrievably. In July 2007, the chair and CEO of Citigroup, Charles Prince, expressed that fear in a now-famous remark: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”

Financial firms accepted the risk that they would be unable to anticipate the onset of a crisis in time to retrench. However, they thought the risk was limited, believing that even if a crisis developed, the seemingly insatiable demand for exotic financial products would dissipate only slowly, allowing them to sell almost all their portfolios without loss.

…click on the above link to read the rest of the article…

CAN CENTRAL BANKS GO BANKRUPT?

April 26, 2015

CAN CENTRAL BANKS GO BANKRUPT?

A TDV subscriber forwarded us an article that said the Federal Reserve was dangerously close to going “bankrupt,” stating, “In direct figures, the Fed has $4.485 trillion in assets, but a whopping $4.428 trillion in liabilities, leaving only $57 billion, or about 1.28%”.

The article stated that, “if the value of the Fed’s assets drops by more than 1.28%, the Fed will be bankrupt.” It went on to paint a conundrum wherein if the government relies on the Fed, and the Fed goes bankrupt, who will bail whom out?

Before we begin to show the trouble with this circular logic let us first preface that central banks are intentionally set-up to be incredibly confusing. Hardly anyone really understands how they work and Alan Greenspan even coined the term “Fed Speak” where he said that he would talk to Congress in plain gibberish because their goal was for no one to really understand what they do. Because, if they really did understand what they do, as Henry Ford said, “there would be a revolution tomorrow”.

Analysts who understand what they do in detail are few and far between and include people like Jim Grant, Robert Murphy and TDV’s Senior Analyst, Ed Bugos.

Murray Rothbard (1926-95), a Misesian successor in the Austrian School, speech writer for many Libertarian presidential candidates, author of many books about the Federal Reserve System (and the evils of fractional reserve banking), and inspiration to Ron Paul, said this in his 1994 book, “The Case Against the Fed,”

…click on the above link to read the rest of the article…

SoT Ep 17 – Bix Weir: Gold, Silver And The End Game

April 26, 2015

SoT Ep 17 – Bix Weir: Gold, Silver And The End Game

When the bond market collapses it will make the stock market crash look like a day at the beach. – Bix Weir, Shadow of Truth

How much gold does China’s Central Bank/Government currently own? How much will they admit to owning when they update their holdings in June? Estimates of China’s gold holdings range anywhere from 4,000 tonnes to 40,000 tonnes. No one knows how much gold they will report, but it is highly probable that the number they do report is a number that they want the mainstream world to believe and there’s probably a lot of thought that has gone into masterminding this disclosure.

Bix connects the genesis of the rigging of the stock market to computer programs written originally by Alan Greenspan using BASIC programs. Greenspan was high school classmates with the co-inventor of BASIC – John Kemeny. This was some fascinating history with which I was not aware, but I have been able to corroborate the information.

So what will the end-game look like as it unfolds? Bix offers an optimistic vision in which the “good guys” are able to push out and eliminate the “bad guys” and the system “reset” we all know is coming will provide the foundation for new beginning and better world.

We think you’ll find this an engaging and interesting conversation we have with Bix. He’s clearly done a lot of research and offers some extremely interesting insights and viewpoints:

…click on the above link to view the video…

Eating The Seed Corn—–The Fed’s Horrid Corruption Of Corporate Finance

April 9, 2015

Eating The Seed Corn—–The Fed’s Horrid Corruption Of Corporate Finance

Central bank financial repression results in the systematic and severe mispricing of financial assets. And that has sweeping consequences far beyond the munificent windfalls it bestows on the thin slice of mankind that frequents the casinos of Wall Street, London, Tokyo and Shanghai.

The fact is, the prices of money, debt, equity, traded commodities and all their derivatives comprise a vast and instantaneous signaling system that cascades through every nook and cranny of the real economy. When these signals are systematically falsified by a few dozen central bankers they cause hundreds of millions ordinary businessmen, workers, investors and entrepreneurs to alter their economic calculus.

And not in a good way. False signals lead to mistakes, excesses, losses and waste. They ultimately reduce economic efficiency and productivity and lower the rate of economic growth and real wealth gains.

Since the Greenspan age of financial repression incepted in the late 1980s, for example, the returns to savings have been obliterated while the rewards for speculation have soared. That’s important because only savings from current production and income generate additional primary capital that can foster future wealth. By contrast, leveraged speculation merely causes existing financial assets to be re-priced and a temporary redistribution of paper wealth from the cautious to the exuberant.

In an honest free market, in fact, there is no excess return to leveraged speculation at all. Natural market makers arbitrage out the spread between the costs of carry and the returns to carried assets such as long-dated futures contracts, term debt and various and sundry forms of equity and other risk assets.

…click on the above link to read the rest of the article…

The Inevitable Failure of Mechanistic Monetary Policy

April 3, 2015

The Inevitable Failure of Mechanistic Monetary Policy

Our current faith in central banks’ ability to “make the economy all better, all the time” is horrendously misplaced.

We are living in the Cargo Cult Era of Central Bankers. The era began in earnest on December 5, 1996, when Federal Reserve chairman Alan Greenspan cautiously wondered aloud if the stock market was exhibiting “irrational exuberance.”

The stock market promptly tanked. In this era, the utterances of central bankers exert more influence over markets than fundamentals.

Documentary film maker Adam Curtis explored the inherent limits of mechanistic monetary models in Episode 3 of his 6-part series, Pandora’s Box (1992).This simplistic faith in the Cargo Cult magic of central banks is based on the absurd notion that two levers–interest rates and buying debt–can control and guide an immensely complex economy. Central bankers are well-versed in arcane incantations such as Operation Twist and aggregate demand, but if we strip away the mumbo-jumbo we find only two levers: interest rates and the purchase of debt.

The wizards of monetary policy make the implicit assumption that monetary policy is the most important factor in an economy’s expansion or contraction. But an economy is far more than interest rates, inflation and the purchase of bonds and other assets.

An economy is also the education or mis-education of the next generation of workers, the creative destruction wrought by technologies, the cultural appetite for risk and what I call the infrastructure of opportunity–the complex mix of attributes that either encourage social mobility or preclude it.

…click on the above link to read the rest of the article…

From Bubble-Blower To Energy Expert, Alan Greenspan Warns “Oil Hasn’t Bottomed Yet”

March 14, 2015

From Bubble-Blower To Energy Expert, Alan Greenspan Warns “Oil Hasn’t Bottomed Yet”

Having recently explained why the stock market is extremely overvalued (in his own words by Fed-driven multiple expansion alone), Alan Greenspan – seemingly brimming over with the need to remedy his years of lies/mistruths with some uncomfortable truthiness – is now taking on the US Dollar (“it is not from a strong US economy but a weak rest of the world”) and oil prices (America has a massive surplus of oil and there may soon be nowhere to store all of it, “we’ll be lucky if we can get $40 for it.”)

Greenspan told Betty Liu that oil hasn’t hit bottom yet:

“We are at the point now where, at the current rate of fill, we’re going to run out of room [at our domestic facility in Cushing, Oklahoma] by next month. And then the question is — where does the crude go? Because everyone’s forecast as to what was going to happen when prices collapsed was a sharp curtailment in shale oil production. That has not happened. The weekly figures, which are produced by the Energy Information Agency through March the 6, show a continued rise in domestic crude production and it has got no place to go, because we can’t legally export the way we would for most products. We can do a little exporting and Canada, but essentially, we’re bottling up a huge amount of crude oil in the United States.”

On the stronger U.S. dollar, Greenspan said:

“A stronger dollar tends to suppress general domestic price level. But the problem here is that we are not quite certain where the problem on the exchange rate comes from, whether it is a strong U.S. economy, which is a questionable issue, or a weak rest of the world, which is a little more credible.“

…click on the above link to read the rest of the article…

Insider Alan Greenspan Warns of Explosive Inflation: “Tinderbox Looking For a Spark”

March 10, 2015

Insider Alan Greenspan Warns of Explosive Inflation: “Tinderbox Looking For a Spark”

Last month it was revealed that former federal reserve Chairman Alan Greenspan, the architect of U.S. monetary policy under four Presidents, is anticipating a significant market event as a result of the trillions of dollars that have been pumped into the system over the last several years. According to Greenspan, something big is coming.

His comments were shared by well known resource analyst Brien Lundin, who joined Greenspan for private discussions at last year’s New Orleans Investment Conference. In his latest interview Lundin further clarifies Greenspan’s private thoughts on current economic and monetary policy and sheds light on the former Fed Chairman’s suggestion that ‘something big is coming.‘

Greenspan made some good points to me… He was concerned about inflation… He was specifically concerned in relation to the outstanding, or excess, reserves which are close to three trillion dollars being held on the Fed balance sheet now… That money is just hanging over the U.S. economy like a big water balloon of liquidity and it’s just searching for a pin.

In fact, Greenspan referred to it as a tinderbox of explosive inflation looking for a spark.

Greenspan believes that in five years gold will be “measurably higher” than current levels because of the excess liquidity that will eventually be released into the open market. Such an event will undoubtedly lead to riots across America as the general public, woefully unprepared for rapidly rising prices when the pin finally pops the dollar bubble, loses access to affordable critical supplies like food, gas and other resources.

The collapse of the dollar, an inevitability suggested by Alan Greenspan, will be a game changer that results in the quadrupling of the cost of living for the average American.

…click on the above link to read the rest of the article…

QE Inventor: It’s EASY to Create a Full-Blown Recovery, But Central Banks Chose to Make Banksters Rich Instead of Helping Main Street

March 6, 2015

QE Inventor: It’s EASY to Create a Full-Blown Recovery, But Central Banks Chose to Make Banksters Rich Instead of Helping Main Street

QE Is a Sham

Richard Werner (economics professor at University of Southampton) is the inventor of quantitative easing (QE).

Werner previously said that QE has failed to help the economy. (Former long-time Fed chair Alan Greenspan agrees. Numerous academic studies confirm this. And see this.)

But Werner is now taking off the gloves …

He said recently:

It’s easy for central banks to take steps which would quickly create “full-blown recovery” for the economy

But the central bankers are instead choosing to act in a way which creates massive profits for the big banks, instead of stabilizing the economy. Werner blames the revolving door between central bankers and private bankers

The central banks have twisted the whole concept of easing … pretending that they’re trying to help the economy, when they’re doing something else entirely

Credit should be extended to the productive economy – businesses which create goods and services – and not to financial speculators or high levels of consumer debt. Extending credit to small businesses former creates prosperity; lending to financial speculators only leads to economic instability and soaring inequality; and when too high a percentage of lending goes to luxury consumer consumption, it’s bad for the economy

Banks create money and credit out of thin air when they make loans (background)

It’s a myth that interest rates drive the level of economic activity. The data shows that rates lag the economy

Indeed, economists also note that QE helps the rich … but hurts the little guy. QE is one of the main causes of inequality (and see this and this). And economists now admit that runaway inequality cripples the economy. So QE indirectly hurts the economy by fueling runaway inequality.

…click on the above link to read the rest of the article…

Federal Reserve Insider Alan Greenspan Warns: There Will Be a “Significant Market Event… Something Big Is Going To Happen”

February 23, 2015

Federal Reserve Insider Alan Greenspan Warns: There Will Be a “Significant Market Event… Something Big Is Going To Happen”

With the Federal Reserve printing trillions upon trillions of dollars to keep the economic system afloat, many investors and financial pundits have surmised that the fundamental economic problems facing the United States during the crash of 2008 have been resolved. Stocks are, after all, at historic highs.

But the insiders know different. And if there’s any single person out there who understands U.S. monetary policy and its long-term effects on domestic and global affairs it’s former Federal Reserve chairman Alan Greenspan. As the head of the world’s most powerful central bank for nearly two decades he’s privy to the insider conversations and government machinations that have brought us to where we are today.

Greenspan recently joined veteran resource analyst Brien Lundin at the New Orleans Investment Conference to share some of his thoughts. According to Lundin, the former Fed chairman made it clear that the central bank is facing a serious problem and one that will have significant ramifications in the future.

We asked him where he thought the gold price will be in five years and he said “measurably higher.”

In private conversation I asked him about the outstanding debts… and that the debt load in the U.S. had gotten so great that there has to be some monetary depreciation. Specially he said that the era of quantitative easing and zero-interest rate policies by the Fed… we really cannot exit this without some significant market event… By that I interpret it being either a stock market crash or a prolonged recession, which would then engender another round of monetary reflation by the Fed.

He thinks something big is going to happen that we can’t get out of this era of money printing without some repercussions – and pretty severe ones – that gold will benefit from.

Watch the full interview:

…click on the above link to read the rest of the article…

Gold & Economic Freedom | Zero Hedge

November 9, 2014

Gold & Economic Freedom | Zero Hedge.

…by Alan Greenspan

Published in Ayn Rand’s “Objectivist” newsletter in 1966, and reprinted in her book, Capitalism: The Unknown Ideal, in 1967.

An almost hysterical antagonism toward the gold standard is one issue which unites statists of all persuasions. They seem to sense — perhaps more clearly and subtly than many consistent defenders of laissez-faire — that gold and economic freedom are inseparable, that the gold standard is an instrument of laissez-faire and that each implies and requires the other.

In order to understand the source of their antagonism, it is necessary first to understand the specific role of gold in a free society.

Money is the common denominator of all economic transactions. It is that commodity which serves as a medium of exchange, is universally acceptable to all participants in an exchange economy as payment for their goods or services, and can, therefore, be used as a standard of market value and as a store of value, i.e., as a means of saving.

The existence of such a commodity is a precondition of a division of labor economy. If men did not have some commodity of objective value which was generally acceptable as money, they would have to resort to primitive barter or be forced to live on self-sufficient farms and forgo the inestimable advantages of specialization. If men had no means to store value, i.e., to save, neither long-range planning nor exchange would be possible.

…click on the above link to read the rest of the article…

Greenspan’s Stunning Admission: “Gold Is Currency; No Fiat Currency, Including the Dollar, Can Match It” | Zero Hedge

November 7, 2014

Greenspan's Stunning Admission: "Gold Is Currency; No Fiat Currency, Including the Dollar, Can Match It" | Zero Hedge.

For some reason, the Council of Foreign Relations, where ex-Fed-Chief Alan Greenspan spoke last week, decided the following discussion should be left out of the official transcript. We can perhaps understand why… as Gillian Tett concludes, “comments like that will be turning you into a rock star amongst the gold bug community.”

Greenspan (Uncut):

…click on link to view video…

TETT: Do you think that gold is currently a good investment?

GREENSPAN: Yes… Remember what we’re looking at. Gold is a currency. It is still, by all evidence, a premier currency. No fiat currency, including the dollar, can macth it.

Which is missing from the official CFR transcript…
…click on the above link to read the rest of the article…

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The Central Problem with Central Banks: They Become the Greater Fools/Bag-Holders Those who are confident the central banks can print unlimited money may find there are political and financial consequences to such extremes that cannot be foreseen.

QE Is a Sham

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The Central Problem with Central Banks: They Become the Greater Fools/Bag-Holders

Those who are confident the central banks can print unlimited money may find there are political and financial consequences to such extremes that cannot be foreseen.