Until six days before Lehman Brothers collapsed five years ago, the ratings agency Standard & Poor’s maintained the firm’s investment-grade rating of “A.” Moody’s waited even longer, downgrading Lehman one business day before it collapsed. How could reputable ratings agencies – and investment banks – misjudge things so badly? Regulators, bankers, and ratings agencies bear much of the blame for the crisis. But the near-meltdown was not so much a failure of capitalism as it was a failure of contemporary economic models’ understanding of the role and functioning of financial markets – and, more broadly, instability – in capitalist economies. Yet the mainstream of the economics profession insists that such mechanistic models retain validity.
Much to the amazement of doom-and-gloomers, everything's been fixed and as a result, everything's great. The list is impressive: China: fixed. Japan: fixed. Europe: fixed. U.S. healthcare: fixed. Africa: fixed. Mideast: well, not fixed, but no worse than a month ago, and that qualifies as fixed. Doom and gloomers have been wrong, just like Paul Krugman said. The solution to every problem is at hand: create more money and credit, in ever larger sums, until a tsunami of cash washes away all difficulties. Let's scroll through a brief summary of everything that's been fixed.
History is very clear: societies that organize themselves around a tiny elite who thinks they should control the entire system suffer a 100% failure rate, without exception. Today’s system shares similar fundamentals to nearly every other case of failed empire. And it’s foolish to think that this time will be any different.
[Summer|Winter]: watch out.
- OBAMA TO USE ADMINISTRATIVE AUTHORITY TO FIGHT CLIMATE CHANGE
- OBAMA TO INVEST IN TECHNOLOGY TO MAKE FOSSIL FUELS CLEANER
- OBAMA CLIMATE PLAN IS NOT A WAR ON COAL, MONIZ SAYS
We have no idea what any of that means or what administrative authority Obama has to unilaterally declare war on, well, climate. But if Obama is taking on the unprecedented Arctic heat cold and is about to usher in centrally-planned weather, we would be nervous if we were Syria. Very nervous.
One of the most published academics on gold in the world is Dr Brian Lucey of Trinity College Dublin (TCD) and he and another academic who has frequently covered the gold market, Dr Constantin Gurdgiev have just this week had an excellent research paper on gold published.
They have researched the gold market, along with Dr Cetin Ciner of the University of North Carolina and their paper, ‘Hedges and safe havens: An examination of stocks, bonds, gold, oil and exchange rates’ finds that gold is a hedge against US dollar and British pound risk due to “its monetary asset role.”
No one can predict accurately at what point slower growth will start producing political turmoil on a scale that’s unprecedented in the China that Deng made, what the magic number is, or even whether there’s an iron connection between economic and political crises. Yet the increase in capital flight from China and soaring applications for American and European residential visas by well-heeled Chinese suggest that the elite is hedging its bets. Some may be overstating things, but the rebalancing camp is too sanguine.This much is certain: China’s leaders are in uncharted waters, and because of the diminishing utility of the established formula for rapid growth their maps may be of questionable value.
Today’s bizarre confluence of negative real interest rates, money printing, eurozone sovereign default, aberrant asset prices, high unemployment, political polarization, growing distrust… none of it was supposed to happen. It is the unintended consequence of past crisis-fighting campaigns, like a troupe of comedy firemen leaving behind them a bigger fire than the one they came to extinguish. What will be the unintended consequences of today’s firefighting? We shudder to think.
This morning’s news that the China leadership has launched a “mini-stimulus” package might confirm what we’ve long feared – China’s economic situation is more perilous than we thought. It looks like a comparatively modest supply-side package of tax cuts, export boosts and railway stimulus, designed to “arouse the energy of the market” according the State Council. But it could be the first of many new programs according to analysts. The state is clearly concerned. That it has been forced to act should be a wake up and smell the coffee moment for markets – the implications of China slowdown could be this year’s game changer in markets.
Without doubt, Iceland was the canary in the coalmine for the sovereign debt crisis that is unfolding across the world right now. Today, Iceland is held up as the model of recovery. 'Famous' economists like Paul Krugman praise the government for rapidly rebuilding the economy without having to resort to austerity. This morning’s headline from The Telegraph newspaper sums it up: “Iceland has taken its medicine and is off the critical list”. It turns out, most of these claims are dead wrong. Despite being so widely reported by the mainstream financial media, Iceland is not a story of model economic recovery. It’s a story of how to fool people. And for now, it’s working.
Decades ago, John Maynard Keynes famously wrote in his book The General Theory: "If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines. . . and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again. . . there need be no more unemployment." To Keynes, all that mattered was that people were employed doing something, anything. The quality of employment didn’t matter. Clearly this line of reasoning worked out well for the Soviets. So considering that the ‘quality’ of jobs doesn’t matter in this Keynesian worldview, though, we’ve come up with a simple idea.
Whether or not you believe PMs will serve as the ultimate store of wealth as the global fiat monetary system collapses should have absolutely no bearing on making the intelligent decision to remove your financial assets from under the domain and inevitable confiscation of global bankers and their State-run tyrannies. Independence Day is a fine day to start the process of taking back our freedoms from the tyrants that rule over us.
Supply and demand matters. We need only look to an average schoolyard for proof. Central bankers should take heed.
The Way-Back Machine strikes again...
Imagine a football coach who hasn’t caught onto the game’s complexities and continues to run the same play - call it a fullback dive - over and over. When we read calls for more monetary stimulus, we feel as though we're listening to that coach’s brethren in the economist community. These economists argue that the Fed should simply ramp the money supply higher and higher for as long as some economic statistic - GDP is a popular one - remains below a targeted outcome. Dive, dive, dive, punt and repeat. There’s an important difference between football and economics, though. One-dimensional approaches are quickly exposed in football, whereas economies don’t yield clear and timely verdicts on whether policies are effective. There are far too many moving parts to prove cause and effect in a way that everyone can understand and agree. Therefore, bad economic policies persist for a long time before they’re finally found out, and this may be the best way to describe the last 100 years or so of America’s economic history.
Someone once wrote that criticizing economist and New York Times columnist Paul Krugman and his "vulgar Keynesianism" is the internet’s favorite pastime. All along, the Princeton prof has stayed true to the cause of aggressive government action to forestall the downtrodden economy. Large fiscal expenditures, aggressive monetary stimulus, increased legal privileges for organized labor, and boosting the degree of state pillaging – Krugman is the caricature of a tyrannical apologizer who will defend the cause of rampant statism at any cost. But now, it appears Krugman has gone overboard with his progressive moaning. Instead of getting bogged down in the economic imbecility that frequents Krugman’s twice-weekly diatribes; there is a fallacy more fundamental in this latest theorizing. What Krugman is embracing in his latest attack on historical cases has much more to do with the man’s epistemological bent and approach toward economics.