Purchasing Power

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.

Trumped! Washington's Fiscal Hypocrisy Is Too Rich For Words

You have to love it when one of Donald Trump’s wild pitches sends the beltway hypocrites into high dudgeon. But his rumination about negotiating a discount on the Federal debt was priceless. No sooner did the 'unschooled' Trump mention out loud what is already the official policy of the US government than a beltway chorus of fiscal house wreckers commenced screaming like banshees about the sanctity of Uncle Sam’s credit promises.

The Endgame

There is a growing fear in financial and monetary circles that there is something deeply wrong with the global economy. Publicly, officials and practitioners alike have become confused by policy failures, and privately, occasionally even downright pessimistic, at a loss to see a statist solution. It is hardly exaggerating to say there is a growing feeling of impending doom. In short, growing evidence of price inflation and stagnant production can be expected to materially increase the risk of a global banking and currency meltdown. The best escape-route is ownership of anything other than purely financial assets and fiat currency deposits. No wonder the price of gold, which is the soundest of moneys, appears to have entered a new bull market.

Ludwig von Mises' Top 9 Quotes On Gold

"The classical or orthodox gold standard alone is a truly effective check on the power of the government to inflate the currency. Without such a check all other constitutional safeguards can be rendered vain."

Satyajit Das Is "Astonished Investors Haven't Raised Pitchforks At Policy-Makers"

"They’re going to have to stop people from taking out cash... I would argue that it’s not going to be able to be dealt with, and it creates enormous social and political pressures… What we’re going to see is a period of financial repression, which is very, very dangerous... I honestly don’t know how it’s going to end. In the 1920s and 1930 when similar pressures built up, it didn’t actually have a very good ending."

The Erosion Of The Middle Class Continues

Economic inequality and the absolute destruction of the middle class is something that we've covered for many years (recently here), and being that central bank policies only exacerbate the issue, readers of Zero Hedge are undoubtedly well acquainted with topic. As usual, it took a while, but it does appear as though the mainstream media is finally catching up... While there are some families that have moved into the upper-income bracket, the fact remains that overall, middle-income households are lower in 203 of the 229 U.S. metropolitan areas studied, and there is no bias, the change has affected everyone.

The Coming War Of Central Banks

History has shifted, and we're leaving the era of central bank convergence and entering the era of central bank divergence, i.e. open conflict.

Trumped! Why It Happened And What Comes Next, Part 3 - The Jobs Deal

Donald Trump’s patented phrase “we aren’t winning anymore” lies beneath the tidal wave of anti-establishment sentiment propelling his campaign and, to some considerable degree, that of Bernie Sanders, too. What’s winning is Washington, Wall Street and the bicoastal elites. But most of America’s vast flyover zone has been left behind. Thus, the bottom 90% of families have no more real net worth today than they had 30 years ago and earn lower real household incomes and wages than they did 25 years ago. Needless to say, the lack of good jobs lies at the bottom of the wealth and income drought on main street, and this week’s April jobs report provided still another reminder.

Trump Says If Economy Crashes "Can Make A Deal", "Will Renegotiate Debt"

Calling himself 'the king of debt' in his business dealings, Donald Trump warned correctly this morning that the national debt would be troublesome if the cost of borrowing increases, asking rhetorically, "we're paying a very low interest rate. What happens if that interest rate goes up 2, 3, 4 points? ...We don't have a country." The U.S. should "renegotiate longer-term debt," he added rather shockingly to the CNBC anchors, and with the recent surge in US Treasury default risk (now at 3-month highs), it appears the market is growing more nervous also.

US Worker Productivity Slumps At Worst Rate In 23 Years

Despite a very modest beat of expectations US worker productivity fell for the 2nd quarter in a row (down 1.0% vs 1.3% QoQ), the two-quarter-average output per hour isdown 1.4% - the worst slump since 1993. Unit labor costs rose by a better than expected 4.1% (helped by a downwardly revised 2.7% rise in Q4), the highest since Q4 2014.

ECB Blames You For Negative Interest Rates

Revolutions, of course, can take many forms. There are social revolutions, political revolutions... and even financial revolutions. Now that interest rates are negative in many parts of the world, the financial system has become an incredibly destructive force. Negative rates adversely impact the livelihoods of just about everyone, from the average guy on the street all the way to the banks themselves... and a few key players have reached their breaking points and are starting to engage in acts of defiance.

America's Plunging Worker Productivity Explained (In 1 Depressing Chart)

The US became an unsustainable service sector based economy from the 1970s onward when service sector employment diverged from manufacturing without a corresponding boost in productivity. Even Alan Greenspan has warned that America is "in trouble basically because productivity is dead in the water..." There are numerous reasons for this plunge in worker-productivity, from perverted inventives not to work to unintended consequences of monetary policy enabling zombies, but perhaps the most critical driver is exposed in the following dismal chart...