Authored by Steve H. Hanke of The Johns Hopkins University.
Since the Great Recession, politicians have obsessed over bashing banks and bankers. According to Pols of all stripes, bankers caused the 2008-09 crash and ensuing slump. To make the world safe from banks, the “all-knowing” have given us Basel III, Dodd-Frank, and a plethora of banking regulations. This has, among other things, provided Bernie Sanders and his ilk with an open field.
After starting out strongly this morning, with DB stock trading just shy of $17/share, European banks have seen some weakness in the past 30 minutes following a report from Reuters, in which sources were cited as saying that there is "firm support for a deposit rate cut within the European Central Bank's Governing Council."
The burgeoning literature contains a great deal of hype, which validates the 95% Rule: 95% of what is written about economics and finance is either wrong or irrelevant.
Bottom line, our conversations with investors suggest yields in the 20 – 25% context could be attractive enough to draw in marginal capital – although several investors noted that is reasonable for triple C risk excluding commodities. In short, we're not there yet.
Central Banks Are the PROBLEM, Not the Solution ... the DISEASE, Not the Cure
Because so much is riding on what so few decide,once the faith in the Central Banks fail, the chances of us getting out of this diminish every second...
"There is excessive debt everywhere and negative interest rates are dangerous... My number one fear? That’s the same as asking me where it will start. When you view the economy as a complex, adaptive system, like many other systems, one of the clear findings from the literature is that the trigger doesn’t matter; it’s the system that’s unstable. And I think our system is unstable... Central Bank models are just wrong"
When the economy collapses, it will collapse down to a lower sustainable level. Much of the world’s infrastructure was built when oil could be extracted for $20 per barrel. That time is long gone. So, it looks like the world will need to collapse back to a level before fossil fuels - perhaps much before fossil fuels.
"The Fed doesn't have a clue!" - We allege that not only because the Fed appears to admit as much, but also because our own analysis leads to no other conclusion. With Fed communication in what we believe is disarray, we expect the market to continue to cascade lower - think what happened in 2000. To understand what's unfolding we need to understand how the Fed is looking at the markets, and how the markets are looking at the Fed.
Economics Professor: Negative Interest Rates Aimed at Driving Small Banks Out of Business and Eliminating CashSubmitted by George Washington on 02/09/2016 17:33 -0500
The REAL Agenda ...
"...investors around the world are realizing that the jig is up... We’re all going to suffer… Central Banks will panic but the market knows this is over and we’re not going to play this game anymore."
How the Chinese central bank derailed the yuan and help Donald Trump rose to power.
As much as economists talk about the independence that the Fed holds from Congress, remittances represent a strong link. In fact, since they enable federal spending they create a form of quasi-fiscal policy for the Fed to use, in addition to its more common monetary policy options. Without Fed remittances, retirees might see their monthly check cut by about 12 percent.
"Speculators (like hunters) sense wounded prey, and already bets are being laid on a riyal devaluation. Although it is possible Saudi Arabia can afford to maintain its oil regime and U.S. dollar peg, this will come will escalating costs, financial and political, and one suspects the Saudi citizenry is not big on sacrifices."
The discipline of gold as Reserves backing currency at a revalued price will restore order to a world that has refused to adopt the necessary discipline until forced to do so in the desperate situation now evolving, where there will be no other alternative but to accept the detested fiscal and financial discipline imposed by gold.