Purchasing Power

Bernanke Blew It Big-Time: He Should Have Raised Rates Three Years Ago

It is now painfully obvious that Ben Bernanke blew it big-time by not raising rates three years ago when the economy and markets enjoyed tailwinds. The former Federal Reserve chairperson, who has claimed the mantle of savior of the global economy, foolishly kept rates at zero until tailwinds turned to headwinds, at which point he handed Janet Yellen the unenviable task of raising rates as the headwinds are strengthening.

American Worker Productivity Drops (Again)

For the second quarter in a row, US worker productivity fell in Q1 (down 0.6% QoQ). Outside of 2015's weather-driven debacle, this is the weakest two quarter tumble in productivity since Q4 2012. Unit labor costs rose 4.5% QoQ in Q1 (revised up from 4.1%) as output actually fell 0.6% (implying a 3.9% rise in compensation). This is the 3rd quarterly drop in output in a row.

The Structure Of Collapse: 2016-2019

Leaders face a no-win dilemma: any change of course will crash the system, but maintaining the current course will also crash the system.

How The "Rest" Of America Lives: Wanting For Work, Buried In Debt

The flyover zones of America are wanting for work and buried in debt. That’s the legacy of three decades of Washington/Wall Street Bubble Finance. The latter has exported jobs, crushed the purchasing power of main street wages and showered the bicoastal elites with the windfalls of financialization. In short, Wall Street loves financial repression because it inflates financial asset values and fuels debt-funded gambling in the casinos. But it’s the opposite of what’s needed in flyover America.

Forget Big Brother, Facebook Is Watching (And Listening) To Everything You Do

The debate over Internet privacy and the responsibility social media companies should carry in protecting user privacy never ceases to spark controversy — among both users and tech insiders. But while Facebook, one of the most popular social media networks, struggles with accusations of news suppression and even fraud, a new report on the network’s microphone settings is reigniting past fears of surveillance that were never fully addressed.

Losing Ground In Flyover America, Part 3

The Fed’s crusade to pump-up inflation toward its 2.00% target by hammering-down interest rates to the so-called zero bound is economically lethal. The former destroys the purchasing power of main street wages while the latter strip mines capital from business and channels it into Wall Street financial engineering and the inflation of stock prices.

Losing Ground In Flyover America, Part 2

There has never been a more destructive central banking policy than the Fed’s current maniacal quest to stimulate more inflation and more debt. That’s what is killing real wages and economic vitality in flyover America - even as it showers prodigious windfalls of unearned wealth on Wall Street and the bicoastal elites who draft on the nation’s vastly inflated finances. Indeed, Fed policy has had a double whammy effect on the flyover zone economy. It drove inflation up when down was needed; and its strip-mined capital from American business when increased capital investment was of the essence.

The Choice For Venezuela Is Stark: Print Money & Fail Or Establish Sound Money

If the state/central bank attempts to create capital by printing or borrowing money into existence, private capital will flee because the writing is on the wall: the currency and economy are doomed. You can create currency out of thin air, but you can't create sound money out of thin air or real capital out of thin air. If the state/central bank surrenders the money-printing press, and accepts the limitations of a currency it can't print into hyper-inflation, then private capital will enter the economy because it can trust that the currency can't be devalued by politicos or the central bank.

Keynes Must Die

The errors of Keynes have empowered sociopathic political classes all over the world and deprived the world of the economic progress we would otherwise have enjoyed. No amount of stimulus ever seems to be quite enough. And when the stimulus fails, the blinkered Keynesian establishment can only think to double down, never to question the policy itself. The Keynesians are pretending they have everything under control, but we know that’s a fantasy. Simply put, "Keynes must die so the economy may live."

The Eurozone Is The Greatest Danger

Financial and economic prospects for the Eurozone have many similarities to the 1972-75 period in the UK, which this writer remembers vividly.  This time, the prospects facing the Eurozone potentially could be worse. The obvious difference is the far higher levels of debt, which will never allow the ECB to run interest rates up sufficiently to kill price inflation. More likely, positive rates of only one or two per cent would be enough to destabilise the Eurozone’s financial system. Let us hope that these dangers are exaggerated, and the final outcome will not be systemically destabilising, not just for Europe, but globally as well. A wise man, faced with the unknown, believes nothing, expects the worst, and takes precautions.