Saturday, July 25, 2009
Thursday, July 23, 2009
Fed Method
The monetary base has been expanded by roughly $1Trillion (more than doubled) since last Spetember. When the inflation comes (and you are seeing it already) how will the Fed pull liquidity out of the system?
Well, in 2008 the Fed devised a scheme whereby they can pay interest on bank deposits held on deposit with them. So when the inflated monetary base starts working it's way into the economy, the Fed can suck it back out by merely increasing the interest rate they pay to bankers for keeping their cash on deposit with the Fed.
What are the implications of this?
1. Does it not still create money in the form of monetized interest payments (albeit at a slower pace)?
2. Will the Fed get in a viscous spiral whereby they chase the market interest rates up?
3. Will the Fed's lucrative rates be made available to slobs like you and me?
Well, in 2008 the Fed devised a scheme whereby they can pay interest on bank deposits held on deposit with them. So when the inflated monetary base starts working it's way into the economy, the Fed can suck it back out by merely increasing the interest rate they pay to bankers for keeping their cash on deposit with the Fed.
What are the implications of this?
1. Does it not still create money in the form of monetized interest payments (albeit at a slower pace)?
2. Will the Fed get in a viscous spiral whereby they chase the market interest rates up?
3. Will the Fed's lucrative rates be made available to slobs like you and me?
Friday, May 29, 2009
Inflation is here!
Gas climbing daily. Gold and silver on a rocket. Dollar tanking. Stock market taking off with no good news. GM still trading above $0.00. Ten year yield steadily climbing as investors balk at US debt. Looks like the fed will have to bail out the Treasury and buy another trillion. Look for more "quantitative easing". Get ready for Weimar.
My gold coins went from $900 to $980.
Looking to buy an inverse bond mutual fund like Proshare's or Rydex.
My gold coins went from $900 to $980.
Looking to buy an inverse bond mutual fund like Proshare's or Rydex.
Monday, March 23, 2009
Response to Senator's Email
Dear Senator Bennett,
The notion that government can put the economy back on track by pumping liquidity in begs the question: where will the money come from?
If it is borrowed then it must a) be paid back with interest extracted from taxes and b)that borrowing will crowd out private sector borrowers.
If it is borrowed from the Fed it is "printed" and the result will eventually be higher consumer prices which act much like a tax.
The only responsible and sustainable method for you clowns in government to put the economy back on track is to dramatically reduce taxes AND spending, deregulate, and drastically cut the number of parasites you employ in government jobs that are a drain on the economy.
Remember, it was regulation, fiscal deficits, and credit expansion by the Fed that caused this mess. Stop trying to cure the illness with the smae things that caused it.
But that would mean relinquishing your power and you will certainly not do that voluntarily.
Read Frederic Bastiat's "What is Seen and What is Not Seen" when you get a chance.
Regards,
Troy Grice
The notion that government can put the economy back on track by pumping liquidity in begs the question: where will the money come from?
If it is borrowed then it must a) be paid back with interest extracted from taxes and b)that borrowing will crowd out private sector borrowers.
If it is borrowed from the Fed it is "printed" and the result will eventually be higher consumer prices which act much like a tax.
The only responsible and sustainable method for you clowns in government to put the economy back on track is to dramatically reduce taxes AND spending, deregulate, and drastically cut the number of parasites you employ in government jobs that are a drain on the economy.
Remember, it was regulation, fiscal deficits, and credit expansion by the Fed that caused this mess. Stop trying to cure the illness with the smae things that caused it.
But that would mean relinquishing your power and you will certainly not do that voluntarily.
Read Frederic Bastiat's "What is Seen and What is Not Seen" when you get a chance.
Regards,
Troy Grice
Monday, March 16, 2009
Sucker's Rally
Don't get in yet! Manufacturing is still plummeting. Earnings are shriveling up. Alt A and commercial real estate crash is coming. All paper currencies are inflating. It is a race to the bottom. DOW ain't bottoming until 2010. (Unless a cup of coffee costs $20, that is). Hahaha!
Friday, February 27, 2009
It's coming
I called for hyperinflation last summer. It didn't pan out. Just as commodity prices were rocketing through the stratosphere, the great deleveraging began. Holders of real estate and stocks sold off and held cash. This is deflationary. I am certain it is temporary.
When the deleveraging ends (DOW at 4500, median home price at 2.5 xs median income) and we are on our 5th or 6th round of bailouts and stimulus, things will begin to creep up.
I'm watching the 10 year Treasury yield. The Treasury is having some trouble selling it's $2.5 trillion shit sandwhich in $33 Billion dollar bites. This means they have to offer it at a discount. When the price of bonds fall, the difference between their purchase and par value increases. This translates into higher yield. When the yield gets above 3%, I am treating it as a signal to buy gold coins (on the downtick).
So what's so bad about high inflation?
Here's how it goes down:
1) Prices, probably commodity and agricultural goods end their see-saw and start reflecting a permanent upward trend.
2) Within6-12 months, commodities double.
3) In the mean time, the economy worsens due to the interventions of the Keynesians.
4) With staggering unemployment 12-15%, there will be HUGE political pressure to end the "price gouging".
5) Government will insitute price controls on gasoline and certain foods.
6) Price controls will eradicate the profits in these industries.
7) There will be shortages. Shortages will lead to civil unrest. Government will blame "hoarding".
8) Businesses will lobby congress to enact wage controls to keep their costs down. Some businesses will get what they want, others (who have no political clout) will be nationalized.
9) A black market will evolve, rendering the price control mechanism meaningless.
10) With its prestige at stake, government will launch an assault on the illegal underground market.
11) We will devolve into a surveillance state. Prison populations will swell. There will be more unrest. More arrests. More unrest. More arrests. etc, etc.
Get ready. It could be a WILD RIDE ahead.
When the deleveraging ends (DOW at 4500, median home price at 2.5 xs median income) and we are on our 5th or 6th round of bailouts and stimulus, things will begin to creep up.
I'm watching the 10 year Treasury yield. The Treasury is having some trouble selling it's $2.5 trillion shit sandwhich in $33 Billion dollar bites. This means they have to offer it at a discount. When the price of bonds fall, the difference between their purchase and par value increases. This translates into higher yield. When the yield gets above 3%, I am treating it as a signal to buy gold coins (on the downtick).
So what's so bad about high inflation?
Here's how it goes down:
1) Prices, probably commodity and agricultural goods end their see-saw and start reflecting a permanent upward trend.
2) Within6-12 months, commodities double.
3) In the mean time, the economy worsens due to the interventions of the Keynesians.
4) With staggering unemployment 12-15%, there will be HUGE political pressure to end the "price gouging".
5) Government will insitute price controls on gasoline and certain foods.
6) Price controls will eradicate the profits in these industries.
7) There will be shortages. Shortages will lead to civil unrest. Government will blame "hoarding".
8) Businesses will lobby congress to enact wage controls to keep their costs down. Some businesses will get what they want, others (who have no political clout) will be nationalized.
9) A black market will evolve, rendering the price control mechanism meaningless.
10) With its prestige at stake, government will launch an assault on the illegal underground market.
11) We will devolve into a surveillance state. Prison populations will swell. There will be more unrest. More arrests. More unrest. More arrests. etc, etc.
Get ready. It could be a WILD RIDE ahead.
Saturday, November 22, 2008
Daily Rant
http://bailoutsleuth.com/
This is Mark Cuban's website. It is designed to track the greatest heist in the history of the world known as the $700 Billion TARP program. This scheme was devised by the Fed (the banker's bank) to extract money from you and I in the form of taxes and higher prices, and redistribute it to thieves on Wall Street and the Chinese who gambled and lost in the Real Estate market.
The total theft now stands at $2.5 Trillion. Is it any surprise that the Feds are now trying to trump up charges on Mr. Cuban for "insider trading"?
It is important to realize that these bailout billions do not come from a benevolent rich uncle. The money comes from you and I. If we spend $50 billion saving the sloppily run, sclerotic GM we can only do so by destroying $50 billion of business in the productive sector. In order to "save" GM by giving them money, government must destroy family practices, farms, and small businesses by robbing income from them.
Government cannot "save" or "produce" or "invest" anything. It can only take wealth from one person and give it to another. When Obama/Pelosi/Reid/McCain/Dodd/Bush/Bernanke/Frank/Paulson tell you they can fix the crisis they are LYING! They are money-changers and thieves- that's all.
These bailouts ARE MAKING IT WORSE! This is exactly what Hoover and FDR did in the 1930s. Bailouts, price controls, public works, unionization, cartels, interest rate cuts all made the Great Depression FAR WORSE than it would have been and now we are doing it all over again.
Don't trust the politicians. They will take EVERYTHING! Guard your 401k. Withdraw it if necessary. Save money- don't spend. Pay down debt. Stay out of the stock market. Things are going to get much worse as earning reports come in in 2009. The country needs savings and investment right now, not consumption. We need higher interest rates, not lower. We need falling prices, not inflation. Yet they keep telling us the opposite. They are wrong. Do not trust the politicians or the ignorant clowns on TV or the Ivy League faux-economists. They are delusional with fantasies of "saving the world" by exerting their power. They will lead you to ruin.
Have a nice day!
Troy
This is Mark Cuban's website. It is designed to track the greatest heist in the history of the world known as the $700 Billion TARP program. This scheme was devised by the Fed (the banker's bank) to extract money from you and I in the form of taxes and higher prices, and redistribute it to thieves on Wall Street and the Chinese who gambled and lost in the Real Estate market.
The total theft now stands at $2.5 Trillion. Is it any surprise that the Feds are now trying to trump up charges on Mr. Cuban for "insider trading"?
It is important to realize that these bailout billions do not come from a benevolent rich uncle. The money comes from you and I. If we spend $50 billion saving the sloppily run, sclerotic GM we can only do so by destroying $50 billion of business in the productive sector. In order to "save" GM by giving them money, government must destroy family practices, farms, and small businesses by robbing income from them.
Government cannot "save" or "produce" or "invest" anything. It can only take wealth from one person and give it to another. When Obama/Pelosi/Reid/McCain/Dodd/Bush/Bernanke/Frank/Paulson tell you they can fix the crisis they are LYING! They are money-changers and thieves- that's all.
These bailouts ARE MAKING IT WORSE! This is exactly what Hoover and FDR did in the 1930s. Bailouts, price controls, public works, unionization, cartels, interest rate cuts all made the Great Depression FAR WORSE than it would have been and now we are doing it all over again.
Don't trust the politicians. They will take EVERYTHING! Guard your 401k. Withdraw it if necessary. Save money- don't spend. Pay down debt. Stay out of the stock market. Things are going to get much worse as earning reports come in in 2009. The country needs savings and investment right now, not consumption. We need higher interest rates, not lower. We need falling prices, not inflation. Yet they keep telling us the opposite. They are wrong. Do not trust the politicians or the ignorant clowns on TV or the Ivy League faux-economists. They are delusional with fantasies of "saving the world" by exerting their power. They will lead you to ruin.
Have a nice day!
Troy
Monday, October 13, 2008
Al Gore Won a Nobel too!
So Paul Krugman won a Nobel prize.
Mr. Krugman subscribes to the Keynesian notion that consumption determines output. He posits that classical and Austrian Economics, which essentially state that capital investment determines output, are flawed in that they cannot explain why there would be unemployment as a result of malinvestment. He argues that it should not matter whether income is spent on consumption goods or capital goods, that a dollar spent is a dollar earned.
Now I'm obviously no Nobel Laureate, but here's my explanation:
1) Consumption goods are created with factors of production. Namely, labor and capital stock (factories, equipment and infrastructure).
2) Creating capital requires foregoing consumption, otherwise known as "saving".
3) Capital depreciates, and therefore must be replaced with an investment of savings.
4) If incomes are diverted from savings to consumption or speculative activities, capital investment will not replace the capital stock and the capital stock will shrink.
5) Shrinking capital stock must, at some point, cause falling output.
6) Falling output must manifest itself in one of two ways: 1) falling real wages or 2) unemployment.
Krugman seems to believe that either a) capital does not depreciate or b) consumption need not equate to output. Are either of these assumptions realistic? I suppose if you relaxe the notion of diminishing marginal returns and infinite inventories.
Is there another explanation?
Mr. Krugman subscribes to the Keynesian notion that consumption determines output. He posits that classical and Austrian Economics, which essentially state that capital investment determines output, are flawed in that they cannot explain why there would be unemployment as a result of malinvestment. He argues that it should not matter whether income is spent on consumption goods or capital goods, that a dollar spent is a dollar earned.
Now I'm obviously no Nobel Laureate, but here's my explanation:
1) Consumption goods are created with factors of production. Namely, labor and capital stock (factories, equipment and infrastructure).
2) Creating capital requires foregoing consumption, otherwise known as "saving".
3) Capital depreciates, and therefore must be replaced with an investment of savings.
4) If incomes are diverted from savings to consumption or speculative activities, capital investment will not replace the capital stock and the capital stock will shrink.
5) Shrinking capital stock must, at some point, cause falling output.
6) Falling output must manifest itself in one of two ways: 1) falling real wages or 2) unemployment.
Krugman seems to believe that either a) capital does not depreciate or b) consumption need not equate to output. Are either of these assumptions realistic? I suppose if you relaxe the notion of diminishing marginal returns and infinite inventories.
Is there another explanation?
Saturday, October 4, 2008
Capitalism is Dead
Congress is a group of criminal thieves. Pelosi, Reid and Boehner, along with Bernanke and Paulson are Sovietizing our financial sector.
We have learned nothing about economics in the last 95 years.
Prices are trying to fall. Bad assets need to be liquidated. Reckless and in competent investors need to be wiped out. A crash is a healing, cathartic process. None of this will be allowed to happen. The cancer will live on, fed and nurtured by "easy money" from the Fed's digital printing press. Instead, real wealth will be siphoned off from the middle class and redistributed by congressional gangsters to their criminal donors on Wall Street. And the sheeple stand by and do nothing.
The lesson of the Great Depression was cronyism and price fixing will not solve the crisis- it only deepens and prolongs it. No serious economist disputes that.
This bailout forestalls the inevitable price correction. It will not stop it It will merely change it's form into something more sinister. Political thievery has now supplanted the honesty of economic Darwinism and the elegance of spontaneous order. Welcome to National Socialism! Where are my jack boots?
In the words of George Carlin, "They won't stop until they take it all!".
We have learned nothing about economics in the last 95 years.
Prices are trying to fall. Bad assets need to be liquidated. Reckless and in competent investors need to be wiped out. A crash is a healing, cathartic process. None of this will be allowed to happen. The cancer will live on, fed and nurtured by "easy money" from the Fed's digital printing press. Instead, real wealth will be siphoned off from the middle class and redistributed by congressional gangsters to their criminal donors on Wall Street. And the sheeple stand by and do nothing.
The lesson of the Great Depression was cronyism and price fixing will not solve the crisis- it only deepens and prolongs it. No serious economist disputes that.
This bailout forestalls the inevitable price correction. It will not stop it It will merely change it's form into something more sinister. Political thievery has now supplanted the honesty of economic Darwinism and the elegance of spontaneous order. Welcome to National Socialism! Where are my jack boots?
In the words of George Carlin, "They won't stop until they take it all!".
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