Tag Archive for: falling interest

Heat Death of the Economic Universe, Report 5 Nov 2017

Physicists say that the universe is expanding. However, they hotly debate (OK, pun intended as a foreshadowing device) if the rate of expansion is sufficient to overcome gravity—called escape velocity. It may seem like an arcane topic, but the consequences are dire either way. If the rate of expansion is too low, then it will […]

Falling Discount, Gold and Silver Get Powelled, Report 29 Oct 2017

Warren Buffet famously proposed the analogy of a machine that produces one dollar per year in perpetuity. He asks how much would you pay for this machine? Clearly it is worth something more than $1.00. And it’s equally clear that it’s not worth $1,000. The value is somewhere in between. But where? This leads to […]

Falling Interest, Gold and Silver Report 22 Oct 2017

Last week, we discussed the marginal productivity of debt. This is how much each newly-borrowed dollar adds to GDP. And ever since the interest rate began its falling trend in 1981, marginal productivity of debt has tightly correlated with interest. The lower the interest rate, the less productive additional borrowing has in fact become. Let’s […]

Falling Productivity of Debt, Gold and Silver Report 15 Oct 2017

Last week, we discussed the ongoing fall of dividend, and especially earnings, yields. This Report is not a stock letter, and we make no stock market predictions. We talk about this phenomenon to make a different point. The discount rate has fallen to a very low level indeed. Discount in stocks is how you assess […]

Falling Interest Causes Falling Wages

Interest rates have been falling for over three decades. Conventional economics has two things to say about this. One, inflation expectations are falling. Monetarists believe that the interest rate is set based on bond traders’ predictions of future price increases. Two, if employment and GDP are weak, then the central bank should increase the money […]

100% of Mainstream Interest Rate Theory is Wrong

An interesting article on MarketWatch today caught my attention. The subhead is the money quote, “Back in April every economist in a survey thought yields would rise. Guess what they did next.” Every? The article refers to 67 economists polled by Bloomberg, all of whom would seem to believe in the quantity theory of money. […]

Why is the Gold Standard Urgent?

After President Nixon’s gold default in 1971, many people have advocated a return to the gold standard. One argument has been repeated: consumer prices are rising. While this is true, it wasn’t compelling in the 1970’s and it certainly doesn’t fire people up today. Rising prices—what most people think of as inflation—is a dead-end, politically. […]

Oscillation, Feedback, and Resonance

I just saw this fascinating video of a bunch of metronomes that begin ticking out of sync with one another, but slowly line up until they all beat in unison. I really love the title slide where it says “NONLINEAR DYNAMICAL SYSTEMS”, how apropos! Watch the video, the outcome is counterintuitive. The metronomes show some principles […]

Swapping Equity for Debt

When I was working out at the gym a few weeks ago, TJ Rodgers was on the Mad Money show on CNBC (I recall this being Friday January 25, but I cannot find video of this show on the Internet). For those who haven’t seen the show, the host, Jim Cramer, affects a loud and […]

Falling Interest Rates Destroy Capital

I have written other pieces on the topic of fractional reserve banking here and here duration mismatch, which is when someone borrows short-term money to lend long-term and how falling interest rates actually encourages duration mismatch (http://keithweiner.posterous.com/falling-interest-rates-and-duration-mismatch). Falling interest rates are a feature of our current monetary regime, so central that any look at a […]