Liberty Forged

the State has no money of its own, so it has no power of its own. ` Nock

Posts Tagged ‘stock market’

World Reserve Currency – China says yes.

Posted by Jesse on March 23, 2009

Bernanke: Oh no, no, no. No ones talking about a World Reserve Currency. We can print our way out of this mess.

Barack Obama: Geez, ya know. We’d be taking a stronger lead towards achieveing the goals I set forth during the campaign, but all these setbacks….this crisis, you know, we couldn’t have anticipated it.

Ron Paul: We are going to have a dollar crisis. I ran for Congress in the 70’s because Nixon removed the last remnants of the gold standard and I knew that would lead to disaster. We need to have sound money, move towards a new gold standard and abolish the Federal Reserve. (Also see: The Case for  a Genuine Gold Dollar)

Financial Times: China’s central bank on Monday proposed replacing the US dollar as the international reserve currency with a new global system controlled by the International Monetary Fund.

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The [Moral] Case for Gold [Sound Money]

Posted by Jesse on January 9, 2009

What is happening today, but told yesterday

[MP3] Current Economic Conditions [Frank Shostak]

And other goodies….

[MP3] Ron Paul in 1984 @ a Seminar on Money and Government

[Article][MP3] The Economics of a Free Society [Ron Paul]

[Article][MP3] Why the Gov’t Must Stop the Fed’s Massive Pumping [Frank Shostak]

[MP3] Power and Ideology in DC [Jeffrey Tucker]

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The Prospect by Marc Faber

Posted by Jesse on October 23, 2008

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°For a more in-depth perspective I would recommend Frank Shostak, adjunct scholar the Mises Institute and chief economist at MF Global. Recently interviewed by Jefferey Tucker (Sept 30, Oct 13, Oct 22) and Lew Rockwell (Oct 10), his analysis is clear, sound, and priceless. [see: Is the Fed an Inflation Fighter or Creator]

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Jörg Guido Hülsmann, Senior Fellow at the Mises Institute, author of a new publication, The Ethics of Money Production. Interviewed by Lew Rockwell [Aug 4, Aug 11, Sept 28, Oct 8, Oct 12]

______________________UPDATE——-Friday Oct 24——–UPDATE___________________

°Just watched Charlie Rose interview David Smick, well known for his book The World is Curved, and more-so as Founder of The International Economy. This Magazine is “edited for … central bankers, politicians, and members of the financial community including professional investment managers, macroeconomic specialists, and high net-worth global investors.

I’d give it a 2 out of 10. (And keep in mind please, I like Charlie’s show!)

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Also see: °Matthew Beller’s , Inflation, Deflation, Red-flation, Blue-flation, [mp3] that talks about, you guessed it, definitions. More importantly it pinpoints the importance of each in the economy and how each is caused by the various actions within the market.

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Recession is natural folks. Bad policy makes it worse.

Posted by Jesse on January 30, 2008

Economic Outlook: More Darkening Clouds
by Dom Armentano

Every American, from the top Fortune 500 CEO to the youthful fast-food hamburger flipper, owes his standard of living – the highest in the world – to free market capitalism. It’s capitalism – private property and free markets – that provides the information and the incentive that allows each of us to maximize the value of our economic activity. Yet to hear the (mostly) Democratic presidential candidates tell it, free markets are faulty, unfair, and inherently unstable; indeed, government should constantly regulate markets and ride to the rescue whenever recession threatens.

The overall economic ignorance displayed in this year’s political campaign has been staggering. Instead of calling for balanced budgets, sound money, permanent tax reductions, and less regulation, most of the candidates have called for more inflation and more government intervention.

Hillary Clinton, for example, has said that she personally intends to “manage the economy” not understanding, apparently, that the “economy” is simply a metaphor for the billions of individual decisions made every day that no one person could ever “manage.” Recently, all of the Democratic candidates and several of the Republican candidates (and President Bush) have advocated various economic “stimulus” programs (including rebate checks in the mail) not understanding, apparently, that any one-time spending shot (with borrowed money) will fix precisely nothing. (Lower individual and corporate tax rates would be helpful, however.) And finally, several of the candidates want a short-run government moratorium on millions of impending mortgage foreclosures not understanding, apparently, that breaching contractual agreements and postponing the economically inevitable is not necessarily a smart thing.

The most significant area of economic ignorance, of course, is with respect to the Federal Reserve policy. All of the candidates, both Democratic and Republican (excepting Congressman Ron Paul) have applauded the Central Bank’s recent decision to dramatically lower the federal funds target rate to 3.5%; it may even be pushed lower. (The federal funds rate is the rate at which banks lend to other banks). To accomplish this reduction will require massive purchases of government securities by the Federal Reserve Open Market Committee which, in turn, will make mountains of new liquidity available to potential individual and institutional borrowers both here and abroad. .

Now this is a good thing, right? WRONG.

During deep recession with high unemployment and significant idle industrial capacity, some economists (not me) would advocate an aggressive “easy money” policy to jump-start the economy. Be that as it may, that is emphatically NOT the current situation. Additional liquidity from the Federal Reserve now would only serve to prop up tottering malinvestments (mostly in housing and finance) that are themselves the creature of the last Federal Reserve money bubble. Further, additional liquidity will give rise (at the margin) to additional malinvestments that themselves will never be successfully completed due to a dearth of real savings. Were all of the candidates asleep during the “business cycle” lecture in Economics 101?

Further, any new aggressive easy money policy will only further weaken the value of the dollar and eventually lead to more price inflation. In my last op/ed (“Darkening Clouds”) I predicted that the Fed dare not push interest rates much lower since it risked destroying the dollar – the world’s reserve currency – and dollar investments both at home and abroad. Well, I obviously underestimated the recklessness of Federal Reserve Chairman Ben Bernanke and the rest of the gang on the Open Market Committee. To save Wall Street speculators and influential financial institutions (that took absurd risks), the Fed now appears willing to drive the real rate of interest (rates adjusted for inflation) to near zero. Now if that doesn’t deepen and aggravate all of the on-going economic distortions already in place, I don’t know what will.

In conventional terms, the only thing worse than a recession in the U.S. would be world-wide INFLATIONARY recession. Well, the Federal Reserve and the Bush Administration have now set us up for exactly that dismal scenario. As Betty Davis growled in All About Eve: “Fasten your seat belts; it’s going to be a bumpy ride.”

January 30, 2008

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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Who on stage tells it like it is? Ron Paul of course.

Posted by Jesse on January 30, 2008

Economic Outlook 2008: Darkening Clouds

Presidential election years usually are not recessionary but next year will be an exception. Several economic factors are colliding in an almost perfect storm to markedly slow the general economy and the stock market.

The most important signal flashing recession is, of course, the sub-prime mortgage fiasco. After years of monetary inflation on the part of the Federal Reserve, individuals and families with poor credit were suckered into low-down-payment/low-interest adjustable mortgages that simply cannot be maintained or repaid under current conditions. Their incentive is to sell the property quickly before their equity evaporates and/or the financial institution repossesses it. Yet the massive oversupply of homes and condos for sale has pushed prices down at a record clip and made additional foreclosures even more likely. Next year, unfortunately, will be the Year of the Auction.

The financial institutions have also been punished…well sort of. Various institutions including hedge funds that hold these poorly performing debt obligations have been forced (by accounting rules) to “write down” the value of these assets, take huge paper losses in the bargain, and pull in their financial horns. Thus, any near-term recovery in housing must now fight a record supply availability, falling prices, higher insurance costs and restricted credit…a near-term impossibility in my view.

Moreover, the slowdown in residential and commercial construction will send secondary ripple effects throughout the economy. Laid-off construction workers don’t spend money. Construction and home furnishing suppliers sell less output and make fewer investments. Even local governments will be pinched by declining property-tax assessments and fewer developer fees. Things are likely to get worse before they get any better.

The second major factor indicating a near-term recession is the sky-high price of crude oil and refined product. Pushed upward by world-wide speculative Mid-East war fears and increases in demand (especially from China), increasing energy prices act as an inflationary “tax” on domestic production and consumption throughout the market economy. Higher costs of production will lower profits; higher prices will reduce some consumption. The only good news here is that any substantial economic slowdown in 2008 will eventually moderate the price of oil and other commodity prices as well.

The third factor in the current recession scenario – and the real wild card – is the continuing decline in the value of the dollar in international money markets caused by our Iraq blunder and the Federal Reserve–generated oversupply of dollars. Some economists would argue that a devalued dollar is good for U.S. exports, and thus positive for the economy as a whole. I disagree for three reasons.

First, the bulk of crude oil purchases takes place in dollars; a falling dollar translates into still higher crude oil prices. Second, the U. S. dollar is the major reserve currency of the international monetary system and dollar-paying investments (such as U.S. Treasury bills and bonds) are held in massive amounts by foreign banks and governments. Dollar devaluation makes these investments less attractive and any disinvestment in these areas would sharply drive bond prices down and increase interest rates.

The third reason why dollar devaluation makes recession more likely is that it effectively prevents the Federal Reserve from pushing U.S. interest rates much lower. Any additional Fed easing (inflation) would be seen as a signal of even further future dollar devaluation and even higher dollar prices for oil. Unfortunately, we will not be able to “inflate” our way out of this recession this time. We will simply have to take our lumps and let market forces liquidate the bulk of the malinvestments caused by the unprecedented Greenspan money bubble. This liquidation process will not be pretty but it is necessary to restore a sustainable economic recovery in the years ahead.

December 6, 2007

Dom Armentano [send him mail] is Professor Emeritus at the University of Hartford (CT) and the author of Antitrust and Monopoly (Independent Institute, 1998) and Antitrust: The Case for Repeal (Mises Institute, 1999). He has published articles, op/eds and reviews in The New York Times, Wall Street Journal, London Financial Times, Financial Post, Hartford Courant, National Review, Antitrust Bulletin and many other journals.

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