The big news this week comes from the Fed, which announced two things. One, it hiked the Fed Funds rate another 25 basis points. The target is now 1.00 to 1.25%, and there will be further increases this year. Two, the Fed to reduce its balance sheet, its portfolio of bonds. It won’t do this […]
The behavior of the dollar system is nonlinear and counterintuitive. In my reading, I have rarely encountered understanding of even the mechanics, much less the dynamics that drive it. Most debate is stuck on level zero: money printing as panacea vs. imminent hyperinflation. This is a tragedy, because the monetary system is in the final […]
What is the real interest rate? It is the nominal rate minus the inflation rate. This is a problematic idea. Let’s drill deeper into what they mean by inflation. Apples, Oranges and the Consumer Price Index You can’t add apples and oranges, or so the old expression claims. However, economists insist that you can average […]
Zero Hedge published an article on Canadian Bullion Services (CBS) last week. Other sites ran similar articles. The common thread through these articles, and in the user comments section, is that CBS is committing criminal fraud. Or, if not, then it’s a conspiracy by the Canadian government to confiscate gold. Terms like fractional reserve and […]
To listen to the audio version of this article click here. I have to admit that I derive some pleasure in taking on hoary old myths. For example, some economists assert that the interest rate you see on the Treasury bond is not real. You see, it’s only nominal. To calculate the real rate, they […]
I have worked to keep this piece readable, and as brief as possible. My grave diagnosis demands the evidence and reasoning to support it. One cannot explain the collapse of this currency with the conventional view. “They will print money to infinity,” may be popular but it’s not accurate. The coming destruction has nothing to […]
The old joke is, “(with a Russian accent) In America, you correct newspaper, but in Soviet Union, newspaper corrects you.” Switzerland is now experiencing the bond market equivalent. In America, the government pays you to borrow but in Switzerland you pay the government. All Swiss bonds have a negative yield out to 9 years. Negative […]
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. […]
An article caught my eye this week. The Tirumala Tirupati Temple in India has deposited gold at the State Bank of India, and is getting paid interest on their deposit. There is something unique about this. The interest is paid in gold. To understand why no one else is paying interest in gold, let’s first […]
I originally wrote this in September 2013. It is just as relevant now in December. The big news in America is that the rate on the 10-year Treasury bond has risen dramatically from around 1.6% to over 2.9%. This is 130 basis points from a starting point of 160, or an increase of more than […]
