Permanently Skewed
TRUMP HOTEL, New York – Trump’s rambling army – professionals, amateurs, camp followers, and profiteers – is marching south, down the I-95 corridor. There, on the banks of the Potomac, it will fight its next big battle.
Lieutenants in Trump’s army: Bannon, Flynn & Sessions
Photo credit: Drew Angerer / AFP
A Strong First Half of the Year, Followed by Another Retreat
In early 2016 gold had a big bull run. The precious metal rose close to 25% this year, pushed higher in a summer rally that peaked on July 10th. Gold experienced a bumpy ride over the remainder of the summer though, as investors became increasingly concerned about a potential rate hike by the Federal Reserve. Uncertainty returned to gold market and has intensified further since then.
Initially, gold rallied sharply in 2016, but then retreated again in the second half as concerns over Fed rate hikes and the impact of Mr. Trump’s election victory have pushed bond yields and the US dollar up in the short term.
The Trump Trade
After 35 years of waiting… so many false signals… so often deceived… so often disappointed… bond bears gathered on rooftops as though awaiting the Second Coming. Many times, investors have said to themselves, “This is it! This is the end of the Great Bull Market in Bonds!”
The long bond’s long cycle – red rectangles indicate when the post 1980 bull market was held to be “over” or “over for sure” or “100% over”, etc. We have repeatedly seen bear percentages close to or even exceeding 90% in the Barron’s “smart money” poll over the years. There can be no doubt that Donald Trump’s election has boosted inflation expectations in the short term – but will the momentum persist? – click to enlarge.
A Major Crisis
Last week Jayant Bhandari related the story of the overnight ban of certain banknotes in India under cover of “stamping out corruption” (see Gold Price Skyrockets In India after Currency Ban Part 1 and Part 2 for the details).
Banned 500 rupee banknotes
The Quality of Money
“The problem with central banks is that they increase the quantity of money in the same way that the problem with piping sewage into a swimming pool increases the quantity of water.”
The doubleplus-ungood FRN.
Stumped by the Bust
In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs.
What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide a tenable and sound explanation for the business cycle phenomenon. Such an explanation does exist though.
Photo credit: Carl de Souza / AFP / Getty images
Gross Regulatory Overburden
Corporate life in America these days is fraught with tedium. First the MBAs imposed their silly six sigma processes and reduced workers to mere widgets. Then the regulators went through and squashed out any fun that remained.
Gone are the days when shrewd eccentrics could get rich using techno-babble to hawk the Turbo Encabulator. Alas, there are rules and regulations stymieing all creativity. In fact, as a matter of law, such restrictions are shoved in the workers’ face each morning as they fill up their morning cup of coffee.
Bud Haggert presents the ground-breaking Turbo Encabulator! This thing has practically everything. Unilateral phase detractors! Automatically synchronized cardinal grammeters! Need farescent skor motion? No problem! Now you can finally do it in conjunction with a drawn reciprocation dingle arm to reduce soinasodial repleneration!
Illusory Riches, Obvious Impoverishment
I address this essay to two groups. One group is those among the liberty movement, who believe that there’s nothing wrong with inequality. These are often Objectivists, who unknowingly defend a regime that artificially suppresses working people.
And suddenly, you feel much lighter…
A Monumental Work
In November of 1876, one hundred and forty years ago, Johannes Brahms’ monumental First Symphony was first heard, performed in Karlsruhe, Germany. The much anticipated work – which took Brahms over 20 years to complete – has become part of the canon of Western music. Ironically, the premiere of The Ring by Brahms’ supposed rival and fellow musical genius, Richard Wagner, was performed for the first time in the same year.
Brahms’ Symphony No. 1, in a 1981 performance by the Vienna Philharmonics Orchestra conducted by Leonard Bernstein.
Chaos in the Wake of the Ban
Here is a link to Part 1, about what happened in the first two days after India’s government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision. What follows is the crux of what has happened over the subsequent four days.
India’s prime minister Nahendra Modi, author of the recent overnight currency ban
Photo credit: indiatimes.com
Mini-Panic Over Inflation After Trump’s Election Victory
We have witnessed truly astonishing short term market conniptions following the Donald Trump’s election victory. In this post we want to focus on one aspect that seems to be exercising people quite a bit at present, namely the recent surge in inflation expectations reflected in the markets. Will we have to get those WIN buttons out again?
A 1970s “whip inflation now” button. The only thing that was actually needed to “whip inflation” was for the Federal Reserve to stop printing money in ever greater quantities (or to stop supporting rapid money creation by the commercial banking system). It started doing so about 2 years before Mr. Paul Volcker took the helm – true money supply growth began to slow down considerably. Volcker then exacerbated this slowdown and briefly even pushed broad true money supply growth into negative territory. By that time, the decline in price inflation had already gotten underway and the public’s inflationary psychology soon underwent a sea change – right on the eve of one of the strongest increases in manufacturing productivity in modern history.
Depravity and Degeneration
BALTIMORE – Finally, it’s over. We were both delighted and appalled by the news. A smile spread over our face… and our steps lightened… as we looked ahead to four years without Hillary Clinton’s know-it-all mug in the news.
Praise be! This mug will be largely missing from the airwaves and the intertubes in coming years. And your caption scribbler PT won’t have to look for a fall-out shelter! We thank the Lord and the American public for this not inconsiderable favor.
Most read in the last 20 days:
Gold Price Skyrockets in India after Currency Ban
India's Government Makes Banknotes Worthless by Decree Overnight As I write this in the morning of 9th November 2016, there are huge lines forming outside gold shops in India — and gold traded heavily until late into the night yesterday. Depending on who you ask, the retail price of gold has gone up between 15% and 20% within the last 10 hours. Gold quotes in India - gold traded for as much as Rs 49,000 per 10 grams or US$ 2,294 per ounce At some places, it...
Gold Price Skyrockets in India after Currency Ban – Part II
Chaos in the Wake of the Ban Here is a link to Part 1, about what happened in the first two days after India's government made Rs 500 (~$7.50) and Rs 1,000 (~$15) banknotes illegal. They can now only be converted to Rs 100 (~$1.50) or lower denomination notes, at bank branches or post offices. Banks were closed the first day after the decision. What follows is the crux of what has happened over the subsequent four days. India's prime minister Nahendra Modi, author of the...
Pope Francis is at it Again
A Case of Bad Timing As if there are not enough sufficient reasons for right thinking individuals to want a Donald Trump Presidency, one of the biggest is that it would be a direct and quite necessary rebuke and humiliation of the purported head of the Catholic Church, Pope Francis. Stone-thrower in the glass house: Pope Francis Bergoglio has once again injected his neo-Marxist self into areas where he has no right to interfere. Of course, this has never...
The Fed’s “Hothouse” Is in Danger
$8 Trillion Transfer RHINEBECK, New York – It is a beautiful autumnal day here in upstate New York. The trees are red, brown, and yellow. Squirrels hop across the lawn, collecting their nuts. Unseasonably warm the last few days, rain showers are moving in from across the Hudson, driven by a chilly wind. The effective federal funds rate, or: the Fed sends savers a message... - click to enlarge. But today, we talk about money. After all, that’s our beat here at...
Trumped
US Citizens Giving the Finger to Globalist Statist Elites – Big Time Back in late August we posted something about Mr. Trump's chances probably being a lot better than was generally assumed (see: US Presidential Election – How Reliable are the Polls?). You know what the say about a headline that ends in a question mark; most often, the answer to the question is “No”. And so it was in this case – the polls were not reliable. Yeah baby! He was actually serious with...
Will Trump Do What Reagan Couldn’t?
Depravity and Degeneration BALTIMORE – Finally, it’s over. We were both delighted and appalled by the news. A smile spread over our face... and our steps lightened... as we looked ahead to four years without Hillary Clinton’s know-it-all mug in the news. Praise be! This mug will be largely missing from the airwaves and the intertubes in coming years. And your caption scribbler PT won't have to look for a fall-out shelter! We thank the Lord and the American public for...
Assange vs. Clinton
An Important Reminder Julian Assange, who was once considered a darling of the Left - as long as his organization's leaks primarily embarrassed the Bush administration over its insane Iraq war that is – has in the meantime advanced to the status of walking, talking assassination target for Hillary Clinton's drones. He should probably be extra careful if she becomes president, because nothing and no-one will be able to hold her back anymore. In the cross-hairs: Julian...
Inflation Expectations Rise Sharply
Mini-Panic Over Inflation After Trump's Election Victory We have witnessed truly astonishing short term market conniptions following the Donald Trump's election victory. In this post we want to focus on one aspect that seems to be exercising people quite a bit at present, namely the recent surge in inflation expectations reflected in the markets. Will we have to get those WIN buttons out again? A 1970s “whip inflation now” button. The only thing that was actually needed...
Stock Market Volatility, Gold and the Election
Pre-Election Market Movers - Mr. Comey and the Trio Infernal Before this Monday, the S&P 500 Index went down nine days in a row. While this was almost unprecedented (or in any case, a very rare event) the decline was quite small overall. The timing of the pullback and the subsequent strong rebound on Monday suggests that Mr. Comey's letters to Congress regarding the FBI investigation into official emails by Hillary Clinton - which have found their way unto a computer owned by Anthony...
Is there a Savings Glut?
Can Saving Possibly “Undermine Economic Growth”? In his speech at the New York Federal Reserve of New York on October 5, 2016, the Federal Reserve Vice Chairman Stanley Fischer has suggested that a visible decline in the natural interest rate in the US could be on account of the world glut of saving. Stanley Fischer points out where the imaginary savings glut he believes to have spotted is hiding. Photo credit: Jim Watson / APA / AFP According to...
President Obama’s Alternate Universe
Making Flimflam Float RHINEBECK, New York – Poor Mr. Obama. In an apologia in The Economist, the president reveals that he has learned nothing during his time in the White House. More importantly, he has forgotten nothing... At the time this ad appeared it was just a threat... then he actually went ahead and did it, dispensing advice to his successor. In case readers are not familiar with it, the Economist is essentially a socialist rag, advocating government...
There Are Two Types of Credit — One of Them Leads to Booms and Busts
Stumped by the Bust In the slump of a cycle, businesses that were thriving begin to experience difficulties or go under. They do so not because of firm-specific entrepreneurial errors but rather in tandem with whole sectors of the economy. People who were wealthy yesterday have become poor today. Factories that were busy yesterday are shut down today, and workers are out of jobs. What has caused the bust? The modern-day economic orthodoxy continues to be unable to provide...
Austrian Theory and Investment
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