Rising rates would hurt bonds and equities but would support gold. This was clearly seen in the 1970s when rising interest rates corresponded with rising gold prices. Gold becomes vulnerable towards the end of an interest rate tightening cycle when there are positive real interest rates and savers earn something on their deposits.
This essay is not intended to address a crisis that may be occurring on the border at this time. We make no comment on that. Nor does it discuss the issues around war, such as how to deal with citizens of enemy nations. This essay is not a policy proposal, it does not set out, for example, when an immigrant can become a citizen and attain the vote or what to do to immigrants who commit crimes. It has but one purpose: to enumerate and respond to the common arguments used in favor of an impenetrable and guarded border fence to shut down immigration.
The Federal Reserve’s prevailing view of the world seems to be that a) QE lowers interest rates, b) lower interest rates stimulate jobs and economic activity, c) the only risk from QE will be at the point when unemployment is low enough to trigger inflation, and d) the Fed can safely encourage years of yield-seeking speculation – of the same sort that produced the worst economic collapse since the Depression – on the belief that this time is different. From the foregoing discussion, it should be clear that this chain of cause and effect is a very mixed bag of fact and fiction.
Argentina’s economic minister, Axel Kicillof, has become famous for his assertion that it is possible to centrally manage the economy now because we have spreadsheets such as Microsoft Excel. This assertion comes from the mistaken view that the cost of production determines final prices, and it reveals a profound misunderstanding of the market process. This issue, however, is not new. The first half of the twentieth century witnessed the debate over economic calculation under socialism. Apparently, Argentine officials have much to learn from this old debate. The problem is not whether or not we have powerful spreadsheets at our disposal; the problem is the impossibility of successfully creating a centrally-planned market. Just ask Maduro...
There is an ongoing belief that the current financial market trends will continue to head only higher. This is a dangerous concept that is only seen near peaks of cyclical bull market cycles.The problem for most investors is that by they time they recognize the change in the underlying dynamics, it will be too late to be proactive. This is where the real damage occurs as emotionally driven, reactive, behaviors dominate logical investment processes.
If you’re a girl and you’re old and you’re grey and you’re the size of a hobbit, who’s going to get angry at you? If your predecessor had all the qualities anyone could look for in a garden gnome, and his predecessor was known mainly as a forward drooling incoherent oracle, how bad could it get? Think they select Fed heads them on purpose for how well they would fit into the Shire? Janet Yellen has a serious problem: the story no longer fits.
Americans must realize an important fact: There is no power over us but that which we give away. The original intent of our republic is that the people ARE the government — not a select few elitists handpicked by corporate bankers. Politicians are supposed to be our employees, not a ruling class that sits above the populace. The current growing conflict between the citizenry and the government is igniting exactly because our government does not represent the common man anymore. The government is not “by the people, for the people.” It is a separate entity, representing corrupt and hostile parties. It cannot be changed from within.
Libertarians tend to agree with each other on most things. We all favor less government regulation, lower taxes, less involvement in international conflicts, and more personal freedom. There are a few areas, however, in which the movement remains sharply divided. One of these areas involves the nature of money. The two schools of thought are essentially the “gold standard” crowd versus the “competing currencies” crowd.
While the Federal Reserve presents itself as free to do whatever it pleases whenever it pleases, the reality is the Fed's own policies are constraining its choices. The Fed is being forced to end its bond-buying, cutting off the "free money for financiers" that has sustained a frothy stock market.
There are a lot of market participants so far from reality due mainly to an incompetently dovish Fed led by Yellen that the amount of re-pricing is just off the charts...
With all eyes and ears firmly focused Janet Yellen's opening oratory this morning (due at 10ET), the contents of the rest of the conference appear to have been forgotten (and yet in the past have been among the most crucial to comprehend central banks' actions after the fact - forward guidance and QE for 2). As Bloomberg BusinessWeek reports, robots don’t steal jobs, the U.S. labor market is less flexible than it was, and workers haven’t suffered unprecedented periods out of work (and rehiring odds are the same as always), are among the conclusions of key papers being presented at the symposium, along with (unsurprisingly) findings that policymakers would benefit from a better understanding of labor market dynamics. The following is a brief review of their contents...
Communist China. Nazi Germany. Cambodia. Guatemala. Uganda. The list goes on and on. Pacification of the citizens is almost always a prerequisite to totalitarianism. There have been a lot of attempts to disarm, or at least partially disarm, people in the US throughout history as well. Each time there’s a major shooting somewhere, the chant to ban firearms grows louder. But the latest proposal is especially telling. H.R. 5344 is a bill currently going through Congress that would ban the purchase of body armor.
Anytime there are negative or even close to negative real rates for bonds that is a sign that central banks need to change policy.
The Fed likes to claim that its policies are aimed at helping Main Street. Ben Bernanke began this argument when he was still Fed Chairman. Janet Yellen has since taken it a step further claiming that she comes from an “intellectual tradition” that it is important to use “public policy” to “make the world a better place.”