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Hyperinflation History May Provide Valuable Lessons for Fed’s “Target”
From Birch Gold Group
Hyperinflation History May Provide Valuable Lessons for Fed’s “Target”
In April of 1980 inflation peaked at a staggering 14.76%. That same year, the Fed triggered a rise in interest rates to near 20% around the same time, employing the controversial “Volcker Rule.”
Paul Solman explained in a 2009 PBS Newshour:
If by “interest rates” you mean the rate set by the Fed — the Fed funds rate — it rose to TWENTY PERCENT in 1980. But no, it was not inaction but just the opposite: a deliberate rise in rates triggered by inflation.
And as you can see in the chart below, the 1980s also represented the 3rd highest average inflation percentage in a decade since 1913:
So inflation rose dramatically, and the Fed employed a dramatic strategy, hiking rates through the roof.
But as you look at the same chart, it’s also clear three other decades had severe inflationary periods as well. Each time that happens in the U.S. the dollar loses buying power quickly as prices for food, energy, and fuel go through the roof.
Serious hyperinflation can happen relatively quickly. Venezuela is a recent example, where it only took about 5 yearsfor the local bolivar to lose 90% of its value. Inflation soared to a ridiculous 1.37 million percent.
We also have historic examples of severe hyperinflation. From 1921-1923 the Weimar Republic of Germany suffered massive inflation. Sovereign Man highlighted, “a single egg at the market would cost millions of marks” during this economic upheaval.
Oddly enough, Germany’s hyperinflation came not too long after a decision to print money became standard policy. (Sound familiar?)
Zimbabwe also had a period of massive war-based hyperinflation in 2008-09 after printing money and devaluing its currency.
These hyperinflation horror stories beg the question, will the Fed’s “target” of 2-3% inflation per year be effective?
…click on the above link to read the rest of the article…
Former SEC Director Admits The Truth: The Market Is Rigged
Former SEC Director Admits The Truth: The Market Is Rigged
For more than a decade, John Ramsay kept his mouth shut about how rigged the US equity market was.
As SEC Director of Trading & Markets, Ramsay tells Bloomberg her “had red tape over his mouth,” but now he is “uncorked.”
“I’ve been able to find my voice on these issues in a way I couldn’t have done when I was in the government, because you’re always limited by internal politics and not wanting to get too far out in front of the agency,” he said. “I feel like I’ve been a little bit uncorked.”
Having joined Brad Katayama’s IEX Group (infamous for the Flash Boys’ exposure), Ramsay is calling out the “convoluted” and “illogical” pricing rules of major stock exchanges and compared the $25 trillion U.S. stock market’s structure to the Death Star of “Star Wars.”
It will be hard for current regulators to shrug off Ramsay’s comments,
“He’s a guy who accomplished a lot and doesn’t have anything to prove,” said James Burns, who worked with Ramsay at the SEC and is now a partner at the law firm Willkie Farr & Gallagher LLP.Ramsay helped the SEC hammer out the post-crisis Volcker Rule, which bans government-insured banks from gambling with depositors’ money. The rule has an exemption — it allows banks to continue “making markets,” or standing ready to buy or sell stocks and bonds from customers. Financial regulators initially clashed over that exemption, with banking agencies fretting that the language would open loopholes for Wall Street to exploit.
Ramsay helped ease the tension with clear language and humor, bank regulators said. Ramsay was the voice at the table “making us understand how market making is done, and what kind of parameters are around it,” said Scott Alvarez, the Federal Reserve’s general counsel.
And so when he uncorks a nasty reality check on the market, perhaps it is time to listen…
…click on the above link to read the rest of the article…
Will they Hang Bankers Again on Wall Street? | Armstrong Economics
Will they Hang Bankers Again on Wall Street? | Armstrong Economics.
What took place in Washington over the past two weeks with the repeal of Dodd Frank and then the effective repeal of the Volcker Rule sounds strikingly familiar to at least three previous periods in American History that led to total disaster. There were of course the Northern “carpetbaggers”, whom many in the South viewed as opportunists looking to exploit and profit from the region’s misfortunes following the Civil War.The “carpetbaggers” would play a central role in shaping new southern governments during Reconstruction period who were joined by Southerners who saw economic gain in joining the Northerners in the exploitation of the South. There were called “scalawags”.
Then there were the Silver Democrats who were bought and paid for by the mining industry. William Jennings Bryan’s red-hot emotional speech at the 1896 Democratic Convention will forever live on in history. The shenanigans of the Democrats and Republicans who tried to overvalue silver led to the near bankruptcy of the nation and made JP Morgan famous thanks to the Panic of 1896 when he had to arrange a gold loan to save the country.
Then there was what people called the First Gilded Age more than a century ago, when senators and representatives were owned by Wall Street and big business. This culminated in the 1929 Crash.
What did all three of these period have in common with the last two weeks? Then, as now, those who footed the bill for political campaigns were richly rewarded with favorable laws. This is standard operating procedure in Washington and why we are in such desperate need of political reform.
