Eugen Bohm-Bawerk's blog
Why the Fed will change its exit strategy – substantiated
Submitted by Eugen Bohm-Bawerk on 06/01/2015 12:17 -0500If the Fed end its strategy of reinvesting TSY holdings, net supply of treasury paper will be close to a trillion dollar per year, for the next decade, as the gigantic pile of securities on the Fed balance sheet shrinks and interest rate expenses explodes.
Why the Fed will change its exit strategy…again
Submitted by Eugen Bohm-Bawerk on 05/30/2015 12:51 -0500What happens if the Fed actually stop reinvesting TSY holdings after they reach lift-off? Net supply will on the private market will increase accordingly and market volatility will force the FOMC to reassess their fleeting exit strategy...again
On the Impotence of Karlsruhe
Submitted by Eugen Bohm-Bawerk on 11/03/2013 14:02 -0500If there is one single event that could derail the euro experiment it is the German Federal Constitutional Court ruling on the European Stability Mechanism (ESM) and Outright Market Transactions (OMT).
The boom and bust cycle
Submitted by Eugen Bohm-Bawerk on 10/24/2013 08:37 -0500Our hypothesis is simple: if money growth exceeds the GDC metric a deflationary busts will inevitably come. If authorities refuse to accept reality and print more fiat money at the first sign of bust, they may “save the day” but they will “ruin tomorrow”!
Seigniorage – the good old fashioned way!
Submitted by Eugen Bohm-Bawerk on 10/08/2013 04:56 -0500The euro system has many peculiarities as we have shown extensively on our blog. To a large extent the system can be analyzed as a “tragedy of the commons” problem. As is well known in economics, when a shared resource can be exploited in full by individuals with no exclusive property right, the resource will be overexploited.
The euro is a shared resource. Every national central bank can exploit it to the fullest while the cost will be shared by every member state.
The incentive in such a system is obviously rigged to its disfavor and it will eventually break down.
A Complete Guide to European Bail-Out Facilities - Part 2: Target2 and EFSF / ESM
Submitted by Eugen Bohm-Bawerk on 09/05/2013 04:47 -0500Today we present the Target2-system and the fiscal bail-out facilities in our series on European efforts to bail out itself. For new readers, check out part 1 here http://bawerk.net/?p=123
A Complete Guide to European Bail-Out Facilities - Part 1: ECB
Submitted by Eugen Bohm-Bawerk on 09/03/2013 08:20 -0500This is our first out of four series where we look at all the various bail-out schemes concocted by Eurocrats.
Today we look at how the ECB has evolved since 2007. In the next three posts we will look at the Target2 system, various fiscal transfer mechanisms and last, but not least the emergence of a full banking union.
Shale gas – not shale oil – primary long term challenge for Saudis
Submitted by Eugen Bohm-Bawerk on 08/05/2013 04:55 -0500In order to maximize their long-term profit, the Saudi`s will be watching the shale-boom in the US for an optimal oil price. This will prove a challenge for an oil dependent nation as the natural gas price implies a far lower oil price than the political elite is comfortable with.
Japan: From Quagmire To Abenomics To Collapse
Submitted by Eugen Bohm-Bawerk on 07/28/2013 11:34 -0500We take a new look at Japan from the 1980s to today in order to decipher what “Abenomics” might do to this fragile nation. We argue that moving Japan from its current stable, but unsustainable equilibrium, through activist monetary policy risk a run on the sovereign. We present part I and part II here today. We hope you enjoy it.
Why the Federal Reserve will taper in September
Submitted by Eugen Bohm-Bawerk on 07/19/2013 13:25 -0500The multi-bubble machine called the Fed is at it again. This time they managed to create a gigantic bond bubble which will dwarf both the dot-com- and the housing bubble combined.
Austerity and Gross Domestic Production
Submitted by Eugen Bohm-Bawerk on 07/16/2013 13:51 -0500The concept we call gross domestic production (GDP) is highly distortive. It obfuscates intelligent debate in economics as the true underlying force for economic growth, capital accumulation, is seen as detrimental to prosperity
The Importance of Efficient Capital Allocation
Submitted by Eugen Bohm-Bawerk on 07/08/2013 13:58 -0500Why has there been no recovery? Why has the “stimuli” failed so miserably? Why won`t trillions of currency units move the economy into escape velocity? Well, if you have spent the last thirty years consuming your hard earned capital and depleted the pool of real savings there is only one thing to do! Produce more than you consume and save the difference!


