The document discusses trends in the global economy and financial markets from an Austrian economic perspective. It argues that unsustainable government spending and monetary policies will lead to inflation and future crises. Charts show rising government spending compared to median income, projections of future oil supply and demand, and the growing purchasing power of emerging economies. The author believes investors should focus on capital preservation in this uncertain environment.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
"Show me the incentive and I'll show you the outcome" – Veripath Farmland Funds Q4 Investor Letter: Investing in a World of Financial Repression, Negative Real Rates, Valuation “Challenges” and Inflationary Forces.
Do G7 governments have an incentive to attempt to keep inflation higher for longer and real rates lower for longer? Negative real rates across a broad spectrum of credit assets are a graphic sign that we inhabit a world of financial repression orchestrated by central banks at the formal/informal behest of sovereign borrowers. In a normally functioning market, lenders do not provide capital to borrowers for negative yields – i.e., they do not pay for the privilege of lending. It goes without saying we are not in a normally functioning market.
To
help senior executives weather this economic storm, the Economist Intelligence Unit has updated its
answers to some of the questions most frequently asked by clients, following the publication of the
four previous editions of Global crisis monitor. In answering each question, we outline our current
forecast, explain our thinking, and highlight any key risks or alternative scenarios.
The global financial crisis of 2007-2009 and subsequent Great Recession constituted the worst shocks to the United States economy in generations. Books have been and will be written about the housing bubble and bust, the financial panic that followed, the economic devastation that resulted, and the steps that various arms of the U.S. and foreign governments took to prevent the Great Depression 2.0. But the story can also be told graphically, as these charts aim to do.
What comes quickly into focus is that as the crisis intensified, so did the government’s response. Although the seeds of the harrowing events of 2007-2009 were sown over decades, and the U.S. government was initially slow to act, the combined efforts of the Federal Reserve, Treasury Department, and other agencies were ultimately forceful, flexible, and effective. Federal regulators greatly expanded their crisis management toolkit as the damage unfolded, moving from traditional and domestic measures to actions that were innovative and sometimes even international in reach. As panic spread, so too did their efforts broaden to quell it. In the end, the government was able to stabilize the system, re-start key financial markets, and limit the extent of the harm to the economy.
No collection of charts, even as extensive as this, can convey all the complexities and details of the crisis and the government’s interventions. But these figures capture the essential features of one of the worst episodes in American economic history and the ultimately successful, even if politically unpopular, government response.
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
"Show me the incentive and I'll show you the outcome" – Veripath Farmland Funds Q4 Investor Letter: Investing in a World of Financial Repression, Negative Real Rates, Valuation “Challenges” and Inflationary Forces.
Do G7 governments have an incentive to attempt to keep inflation higher for longer and real rates lower for longer? Negative real rates across a broad spectrum of credit assets are a graphic sign that we inhabit a world of financial repression orchestrated by central banks at the formal/informal behest of sovereign borrowers. In a normally functioning market, lenders do not provide capital to borrowers for negative yields – i.e., they do not pay for the privilege of lending. It goes without saying we are not in a normally functioning market.
To
help senior executives weather this economic storm, the Economist Intelligence Unit has updated its
answers to some of the questions most frequently asked by clients, following the publication of the
four previous editions of Global crisis monitor. In answering each question, we outline our current
forecast, explain our thinking, and highlight any key risks or alternative scenarios.
The global financial crisis of 2007-2009 and subsequent Great Recession constituted the worst shocks to the United States economy in generations. Books have been and will be written about the housing bubble and bust, the financial panic that followed, the economic devastation that resulted, and the steps that various arms of the U.S. and foreign governments took to prevent the Great Depression 2.0. But the story can also be told graphically, as these charts aim to do.
What comes quickly into focus is that as the crisis intensified, so did the government’s response. Although the seeds of the harrowing events of 2007-2009 were sown over decades, and the U.S. government was initially slow to act, the combined efforts of the Federal Reserve, Treasury Department, and other agencies were ultimately forceful, flexible, and effective. Federal regulators greatly expanded their crisis management toolkit as the damage unfolded, moving from traditional and domestic measures to actions that were innovative and sometimes even international in reach. As panic spread, so too did their efforts broaden to quell it. In the end, the government was able to stabilize the system, re-start key financial markets, and limit the extent of the harm to the economy.
No collection of charts, even as extensive as this, can convey all the complexities and details of the crisis and the government’s interventions. But these figures capture the essential features of one of the worst episodes in American economic history and the ultimately successful, even if politically unpopular, government response.
MTBiz is for you if you are looking for contemporary information on business, economy and especially on banking industry of Bangladesh. You would also find periodical information on Global Economy and Commodity Markets.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Charting the Financial Crisis: A Narrative eBookShavondaBrandon
The global financial crisis of 2007-2009 and subsequent Great Recession constituted the worst shocks to the United States economy in generations. Books have been and will be written about the housing bubble and bust, the financial panic that followed, the economic devastation that resulted, and the steps that various arms of the U.S. and foreign governments took to prevent the Great Depression 2.0. But the story can also be told graphically, as these charts aim to do.
What comes quickly into focus is that as the crisis intensified, so did the government’s response. Although the seeds of the harrowing events of 2007-2009 were sown over decades, and the U.S. government was initially slow to act, the combined efforts of the Federal Reserve, Treasury Department, and other agencies were ultimately forceful, flexible, and effective. Federal regulators greatly expanded their crisis management toolkit as the damage unfolded, moving from traditional and domestic measures to actions that were innovative and sometimes even international in reach. As panic spread, so too did their efforts broaden to quell it. In the end, the government was able to stabilize the system, re-start key financial markets, and limit the extent of the harm to the economy.
No collection of charts, even as extensive as this, can convey all the complexities and details of the crisis and the government’s interventions. But these figures capture the essential features of one of the worst episodes in American economic history and the ultimately successful, even if politically unpopular, government response.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with almost $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios. Agcapita publishes a monthly agriculture briefing.
Since the downgrade of the US does not come as a surprise to adherents of the Austrian School of Economics let's discuss something else. Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Monetary policy is an important public policy, but it is not the only one to stabilize our economy and reduce its business cycles. The leading central bank, the Federal Reserve of the U.S., has introduced, after the 2008 global financial crisis, new instruments and unusual facilities to implement its new innovative monetary policy. The financial world and mostly the social scientists watch as the Federal Open Market Committee (FOMC) decides on a target interest rate in the federal funds market for the next period. The framework that the FOMC uses to implement monetary policy has changed over the last twelve years and continues to evolve today. Here, we try to evaluate the new instruments and their “effectiveness”. Before the 2008 financial crisis, policymakers used one set of traditional instruments (tools) to achieve the target rate. However, several policy interventions, introduced soon after the crisis, drastically altered the landscape of the federal funds market and the traditional economic theory. This new and uncertain environment, with enormous reserves and even interest on reserves, necessitated a new set of instruments by the Fed for its monetary policy implementation. Lately, after seven years of zero interest rate, the FOMC began in December 2015 to increase the target rate and then, went back again to a lower one, but many questions arise. How did they evaluate the effectiveness of these new instruments? Is the current federal funds rate the appropriate one for our economic wellbeing? How efficient was so far this ZIR monetary policy after the latest global financial crisis? Why the Fed put all these burdens of its ‘innovated” new monetary policy to the poor taxpayers (bail out) and to the risk-averse depositors (bail in)? Is it possible for the Fed’s policy to prevent the future financial crises? The federal funds rate was very low and affected negatively the financial markets (bubbles were growing), the real rates of interest (it is negative for twelve years), and the deposit rates (they are closed to zero for twelve years). The redistribution of wealth of depositors and taxpayers continues, which means the true economic welfare is falling and a new global recession was in preparation, if the current unfair easy money policy will persist, ignoring the necessity of a prevention of financial crises. Then, it came as an unexpected plague the coronavirus pandemic, following with a new but, the worse in economic history global crisis (chaos).
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Charting the Financial Crisis: A Narrative eBookShavondaBrandon
The global financial crisis of 2007-2009 and subsequent Great Recession constituted the worst shocks to the United States economy in generations. Books have been and will be written about the housing bubble and bust, the financial panic that followed, the economic devastation that resulted, and the steps that various arms of the U.S. and foreign governments took to prevent the Great Depression 2.0. But the story can also be told graphically, as these charts aim to do.
What comes quickly into focus is that as the crisis intensified, so did the government’s response. Although the seeds of the harrowing events of 2007-2009 were sown over decades, and the U.S. government was initially slow to act, the combined efforts of the Federal Reserve, Treasury Department, and other agencies were ultimately forceful, flexible, and effective. Federal regulators greatly expanded their crisis management toolkit as the damage unfolded, moving from traditional and domestic measures to actions that were innovative and sometimes even international in reach. As panic spread, so too did their efforts broaden to quell it. In the end, the government was able to stabilize the system, re-start key financial markets, and limit the extent of the harm to the economy.
No collection of charts, even as extensive as this, can convey all the complexities and details of the crisis and the government’s interventions. But these figures capture the essential features of one of the worst episodes in American economic history and the ultimately successful, even if politically unpopular, government response.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with almost $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios. Agcapita publishes a monthly agriculture briefing.
Since the downgrade of the US does not come as a surprise to adherents of the Austrian School of Economics let's discuss something else. Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Monetary policy is an important public policy, but it is not the only one to stabilize our economy and reduce its business cycles. The leading central bank, the Federal Reserve of the U.S., has introduced, after the 2008 global financial crisis, new instruments and unusual facilities to implement its new innovative monetary policy. The financial world and mostly the social scientists watch as the Federal Open Market Committee (FOMC) decides on a target interest rate in the federal funds market for the next period. The framework that the FOMC uses to implement monetary policy has changed over the last twelve years and continues to evolve today. Here, we try to evaluate the new instruments and their “effectiveness”. Before the 2008 financial crisis, policymakers used one set of traditional instruments (tools) to achieve the target rate. However, several policy interventions, introduced soon after the crisis, drastically altered the landscape of the federal funds market and the traditional economic theory. This new and uncertain environment, with enormous reserves and even interest on reserves, necessitated a new set of instruments by the Fed for its monetary policy implementation. Lately, after seven years of zero interest rate, the FOMC began in December 2015 to increase the target rate and then, went back again to a lower one, but many questions arise. How did they evaluate the effectiveness of these new instruments? Is the current federal funds rate the appropriate one for our economic wellbeing? How efficient was so far this ZIR monetary policy after the latest global financial crisis? Why the Fed put all these burdens of its ‘innovated” new monetary policy to the poor taxpayers (bail out) and to the risk-averse depositors (bail in)? Is it possible for the Fed’s policy to prevent the future financial crises? The federal funds rate was very low and affected negatively the financial markets (bubbles were growing), the real rates of interest (it is negative for twelve years), and the deposit rates (they are closed to zero for twelve years). The redistribution of wealth of depositors and taxpayers continues, which means the true economic welfare is falling and a new global recession was in preparation, if the current unfair easy money policy will persist, ignoring the necessity of a prevention of financial crises. Then, it came as an unexpected plague the coronavirus pandemic, following with a new but, the worse in economic history global crisis (chaos).
Real Estate Road Warrior - Mobile Technology for REALTORS on the GoShannon W. King
Real Estate Road Warrior by Shannon W. King is an unique perspective on how to run your business from the palm of your hand utilizing mobile apps and cloud computing. You no longer need a physical office. You'll get insight into creative marketing ideas and ways to increase your business.
Agcapita February 2011 Update - Two ways to be fooledPetrocapita
As Kierkegaard elegantly pointed out, "There are two ways to be fooled: One is to believe what isn't so; the other is to refuse to believe what is so." The problem of being fooled "by believing what isn't so" appears to be endemic in mainstream economic circles. Increasingly, we see the panic of central bankers and politicians in the thrall of the mistaken belief that the mere act of printing money can conjure wealth and sustainable growth into existence that this nostrum has stopped working. Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Agcapita May 2011 - Robbing Peter to Pay PaulPetrocapita
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Petrocapita Oct 2009 Energy & Macro BriefingPetrocapita
Petrocapita is an energy investment trust and is the second in a family of hard asset funds co-founded by the investment team. We believe that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil production directly to their portfolios. Petrocapita provides investors 10.25% interest and 10% profit participation.
Petrocapita Feb 2010 Energy & Macro BriefingPetrocapita
Petrocapita is an energy investment trust and is the second in a family of hard asset funds co-founded by the investment team. We believe that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil production directly to their portfolios. Petrocapita provides investors 10.25% interest and 10% profit participation.
Petrocapita Jan 2010 Energy & Macro BriefingPetrocapita
Petrocapita is an energy investment trust and is the second in a family of hard asset funds co-founded by the investment team. We believe that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil production directly to their portfolios. Petrocapita provides investors 10.25% interest and 10% profit participation.
Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
Western governments are hopelessly addicted to deficit financing while refusing to address looming funding issues - with apologies to the embarrassingly foolish Angela Merkel, politicians can no more successfully “battle” the markets than you and I can successfully “battle” gravity. Petrocapita is an investment trust built around the premise that demand for energy will continue to move prices higher over the long-term. Petrocapita was created to allow investors to add professionally managed oil & gas assets directly to their portfolios.
Base on the article answer 1 Explain F A Hayeks theory of.pdfadvanibagco
Base on the article answer:
1. Explain F A Hayek's theory of the "Business Cycle".
PLEASE WRITE A MINIMUM OF SIX LINES FOR EACH ANSWER.
The article:
In March 2007 then-Treasury secretary Henry Paulson told Americans that the global economy
was as strong as Ive seen it in my business career. Our financial institutions are strong, he added
in March 2008. Our investment banks are strong. Our banks are strong. Theyre going to be strong
for many, many years. Federal Reserve chairman Ben Bernanke said in May 2007, We do not
expect significant spillovers from the subprime market to the rest of the economy or to the financial
system. In August 2008, Paulson and Bernanke assured the country that other than perhaps $25
billion in bailout money for Fannie and Freddie, the fundamentals of the economy were sound.
Then, all of a sudden, things were so bad that without a $700 billion congressional appropriation,
the whole thing would collapse. In the wake of this change of heart on the part of our leaders,
Americans found themselves bombarded with a predictable and relentless refrain: the free market
economy has failed. The alleged remedies were equally predictable: more regulation, more
government intervention, more spending, more money creation, and more debt. To add insult to
injury, the very people who had been responsible for the policies that created the mess were
posing as the wise public servants who would show us the way out. And following a now-familiar
pattern, government failure would not only be blamed on anyone and everyone but the
government itself, but it would also be used to justify additional grants of government power. The
truth of the matter is that intervention in the market, rather than the market economy itself, was the
driving factor behind the bust. F.A. Hayek won the Nobel Prize for his work showing how the
central banks intervention into the economy gives rise to the boom-bust cycle, making us feel
prosperous until we suffer the inevitable crash. Most Americans know nothing about Hayeks
theory (known as the Austrian theory of the business cycle), and are therefore easy prey for the
quacks who blame the market for problems caused by the manipulation of money and credit. The
artificial booms the Fed provokes, wrote economist Henry Hazlitt decades ago, must end in a
crisis and a slump, andworse than the slump itself may be the public delusion that the slump has
been caused, not by the previous inflation, but by the inherent defects of capitalism. Although my
recently released book, Meltdown explains the process in more detail, an abbreviated version of
Austrian business cycle theory might run as follows: Government-established central banks can
artificially lower interest rates by increasing the supply of money (and thus the funds banks have
available to lend) through the banking system. This is supposed to stimulate the economy. What it
actually does is mislead investors into embarking on an investment boom that the artificially lo.
Agcapita is Canada's only RRSP and TFSA eligible farmland fund and is part of a family of funds with over $100 million in assets under management. Agcapita believes farmland is a safe investment, that supply is shrinking and that unprecedented demand for "food, feed and fuel" will continue to move crop prices higher over the long-term. Agcapita created the Farmland Investment Partnership to allow investors to add professionally managed farmland to their portfolios.
Base on the article answer 2 According to Austrian schoo.pdfadvanibagco
Base on the article, answer:
2. According to Austrian school, what should be our guiding policy for economic crisis mentioned
in the article?
3. What kind of economic policy is our government pursuing to deal with this crisis? What would
the author of this article recommend?
PLEASE WRITE A MINIMUM OF SIX LINES FOR EACH ANSWER.
The article:
In March 2007 then-Treasury secretary Henry Paulson told Americans that the global economy
was as strong as Ive seen it in my business career. Our financial institutions are strong, he added
in March 2008. Our investment banks are strong. Our banks are strong. Theyre going to be strong
for many, many years. Federal Reserve chairman Ben Bernanke said in May 2007, We do not
expect significant spillovers from the subprime market to the rest of the economy or to the financial
system. In August 2008, Paulson and Bernanke assured the country that other than perhaps $25
billion in bailout money for Fannie and Freddie, the fundamentals of the economy were sound.
Then, all of a sudden, things were so bad that without a $700 billion congressional appropriation,
the whole thing would collapse. In the wake of this change of heart on the part of our leaders,
Americans found themselves bombarded with a predictable and relentless refrain: the free market
economy has failed. The alleged remedies were equally predictable: more regulation, more
government intervention, more spending, more money creation, and more debt. To add insult to
injury, the very people who had been responsible for the policies that created the mess were
posing as the wise public servants who would show us the way out. And following a now-familiar
pattern, government failure would not only be blamed on anyone and everyone but the
government itself, but it would also be used to justify additional grants of government power. The
truth of the matter is that intervention in the market, rather than the market economy itself, was the
driving factor behind the bust. F.A. Hayek won the Nobel Prize for his work showing how the
central banks intervention into the economy gives rise to the boom-bust cycle, making us feel
prosperous until we suffer the inevitable crash. Most Americans know nothing about Hayeks
theory (known as the Austrian theory of the business cycle), and are therefore easy prey for the
quacks who blame the market for problems caused by the manipulation of money and credit. The
artificial booms the Fed provokes, wrote economist Henry Hazlitt decades ago, must end in a
crisis and a slump, andworse than the slump itself may be the public delusion that the slump has
been caused, not by the previous inflation, but by the inherent defects of capitalism. Although my
recently released book, Meltdown explains the process in more detail, an abbreviated version of
Austrian business cycle theory might run as follows: Government-established central banks can
artificially lower interest rates by increasing the supply of money (and thus the funds banks have
a.
For a class assignment on the 2007-08 economic crisis. We focused on the idea of a "Shifting Economic Position" as the major reason for the crisis (as per assignment) - Leave a comment if you download, please!
The Hitchhiker's Guide to Yellen's Speech
We spent all week waiting anxiously to see what Our Glorious Leader would say only to get a confused mash-up of central bank water-cooler conversation.
If you want to know what she really said - and, more importantly, didn't say - you might like to read this translation.
A P R I L 2 0 , 2 0 2 0 A Universal Basic Income is Ess.docxaryan532920
A P R I L 2 0 , 2 0 2 0
A Universal Basic Income is Essential
and Will Work
by E L L E N B R O W N
FacebookTwitterRedditEmail
Photograph Source: Generation Grundeinkommen – CC BY 2.0
According to an April 6 article on CNBC.com, Spain is slated to become the
first country in Europe to introduce a universal basic income (UBI) on a long-
term basis. Spain’s Minister for Economic Affairs has announced plans to roll
out a UBI “as soon as possible,” with the goal of providing a nationwide
basic wage that supports citizens “forever.” Guy Standing, a research
professor at the University of London, told CNBC that there was no prospect
of a global economic revival without a universal basic income. “It’s almost a
no-brainer,” he said. “We are going to have some sort of basic income system
sooner or later ….”
“Where will the government find the money?” is no longer a valid objection
to providing an economic safety net for the people. The government can find
the money in the same place it just found more than $5 trillion for Wall Street
and Corporate America: the central bank can print it. In an April 9 post
commenting on the $1.77 trillion handed to Wall Street under the CARES
Act, Wolf Richter observed, “If the Fed had sent that $1.77 Trillion to the 130
million households in the US, each household would have received $13,600.
But no, this was helicopter money exclusively for Wall Street and for asset
holders.”
“Helicopter money” – money simply issued by the central bank and injected
into the economy – could be used in many ways, including building
infrastructure, capitalizing a national infrastructure and development bank,
providing free state university tuition, or funding Medicare, social security, or
a universal basic income. In the current crisis, in which a government-
mandated shutdown has left households more vulnerable than at any time
since the Great Depression, a UBI seems the most direct and efficient way to
get money to everyone who needs it. But critics argue that it will just trigger
inflation and collapse the dollar. As gold proponent Mike Maloney
complained on an April 16 podcast:
Typing extra digits into computers does not make us wealthy. If this insane
theory of printing money for almost everyone on a permanent basis takes
hold, the value of the dollars in your purse or pocketbook will … just
continue to erode …. I just want someone to explain to me how this is going
to work.
Having done quite a bit of study on that, I thought I would take on the
challenge. Here is how and why a central bank-financed UBI can work
without eroding the dollar.
In a Debt-Based System, the Consumer Economy Is Chronically Short of
Money.
First, some basics of modern money. We do not have a fixed and stable
money system. We have a credit system, in which money is created and
destroyed by banks every day. Money is created as a deposit when the bank
makes a loan and is extinguished when the loan i.
4. Petrocapita Update (continued)
“The U.S. governmenT mUST make
adjUSTmenTS in iTS Spending.” Chart 1: Months of shadow
hoMe supply
In the spirit of delicious irony, Kansas City Federal
Reserve Bank President Thomas Hoenig said recently
“The U.S. government must make adjustments in METRO AREA NUMBER OF MONTHS
its spending and tax programs,” (emphasis mine). “It Phoenix 15
is that simple. If pre-emptive corrective action is not Las Vegas 18
taken regarding the fiscal outlook, then the United
Miami 24
States risks precipitating its own next crisis”. This
coming from the same Fed that increased the base Orlando 27
money supply over 150% in the last 24 months. Stockton, CA 27
Click to read Hoenig’s speech.
U.S. Average: 10 months
“if iT were poSSible To Take inTereST Source: John Burns Real Estate Consulting
raTeS inTo negaTive TerriTory, i woUld be
voTing for ThaT.”
San Francisco Federal Reserve President Janet Yellen payments. Based on the average sales rate over the
has been nominated by Obama to be Vice Chair past decade this “shadow inventory” is enough to last
of the Fed’s Board of Governors. Yellen, who has about 10 months.
consistently downplayed the dangers of inflation, is
now able to vote on the interest rate-setting Open When this inventory is released prices will drop even
Markets Committee. In support of her view that the further and magnify the already large losses on
Fed’s role is to create full employment, Yellen recently mortgages and RMBS being suffered by the banking
said, “If it were possible to take interest rates into sector.
negative territory, I would be voting for that.”
Commercial Mortgage Backed Securities (“CMBS”):
why the us finanCial seCtor is still not The other large asset sitting on bank balance sheets
healthy – More bailouts to follow? is commercial real estate loans. Its clear from the
CMBS market that all is not well in the commercial
Residential Mortgage Backed Securities (“RMBS”) real estate lending world.
- A recent study estimates that 5 million houses
and condominiums on which mortgages are now – At the end of January, a record 10% of CMBS
delinquent will go through foreclosure or related by balance ($72.3 billion of the $723 billion of
procedures that put them on the market over the outstanding CMBS loans in the U.S.) were in the
next few years – the majority of the estimated 7.7 hands of special servicers, up from 9.43% on
million households currently behind on their mortgage Dec. 31, 2009.
3
5. Petrocapita Update (continued)
– The special-servicing rate is now six times higher
Chart 2: total us federal
than the year-end 2008 level of 1.62%.
spending v Median inCoMe
– The 60-day delinquency rate has increased to
6%. 250 %
$2.79 trillion
+221%
More commercial loans are certain to become non- 200
performing over time, as overleveraged borrowers are In 1970 Total federal spending
Total federal spending
150
unable to refinance at maturity. In addition, the pace was $870 billion, and median
household income was $38,851
of maturing CMBS loans will accelerate over the next 100
$41.355
few years. According to the Congressional Oversight +32%
Panel (COP) recent report on the state of the US 50
Median household income
commercial real estate market:
0
1970 1975 1980 1985 1990 1995 2000 2005
– Between 2010 and 2014, about $1.4 trillion Source: Heritage Foundation based on US Census Bureau and
in commercial real estate loans will reach the OMB, 2008 inflation adjusted dollars
end of their terms. Nearly half are at present –
underwater! – that is, the borrower owes more
than the underlying property is currently worth.
– Commercial property values have fallen more than to default or inflate away its obligations. What is
40 percent since the beginning of 2007. happening to Greece, Ireland, UK and Spain is a
– Increased vacancy rates, which now range microcosm of the decisions that rapidly expanding
from eight percent for multifamily housing to 18 governments the world-over may be faced with in a
percent for office buildings, and falling rents, few years.
which have declined 40 percent for office space
and 33 percent for retail space, have exerted
peak oil
a powerful downward pressure on the value of
commercial properties. Chart 3 is drawn from the WEO-2008 report that
shows that “oil from fields currently producing” is
how MuCh is too MuCh? projected to enter a significant decline in production.
The production shortfall is made up primarily by
US Federal government spending has grown 7 times “oil fields yet to be developed”, “oil fields yet to be
faster than real (inflation-adjusted) median found”, and “natural gas liquefaction”. However, the
household income over the last 40 years. low rate of oil field discovery since the early 1960’s
begs the question of how this gap will be filled.
Government spending cannot outstrip private sector
income indefinitely unless the government plans
4
6. Petrocapita Update (continued)
Chart 3: iea 2030 oil foreCast Chart 4: ConsuMer spending – us vs.
eMerging eConoMies
mb/d
120 n Emerging Markets’ Consumption n U.S. Consumption
100
35%
80
60
40
25%
20
0
1990 2000 2010 2020 2030
1990 1995 2000 2005 2010
n Natural gas liquids n Crude oil - fields yet to be found
n Non-conventional oil n Crude oil - fields yet to be developed Source: JP Morgan Chase
n Crude oil - additional EOR n Crude oil - currently producing fields
Source: IEA
Chart 5: global ppp gdp in 2008
eMerging eConoMy deCoupling revisited
Other Dev
Russia
Emerging-market consumers recently outspent 3%
India 3%
American consumers for the first time in modern
5% Other EM
history. For example, January auto-sales compared to
26%
a year earlier were up:
China
12%
– 50% in India
– 33% in Malaysia
– 6% in the US Brazil
3%
The source of this domestic strength – high growth
Japan
rates and high domestic savings rates that provide 6%
a large pool of productive capital. The emerging
economies are now larger in total purchasing
Dev Europe
power adjusted GDP terms than the developed 21%
world. Inevitably this will mean that their growth is US
increasingly dependent on trade amongst themselves 21%
rather than with the developed world. Source: Everest Capital
5
7. Petrocapita Update (continued)
aig – oh dear, oh dear, oh dear ben bernanke the seCond CoMing of
rudolf von havenstein?
American International Group, Inc. (“AIG”), the
insurer that has absorbed approximately $180bn Dylan Grice of Societe Generale has done a review
in taxpayer funds, recently reported its results for of the Weimar Republic inflation in his latest `Popular
the fourth quarter and full-year 2009. AIG reported Delusions’ note. Prussian central banker Rudolf von
a net loss attributable to common shareholders of Havenstein monetized Germany’s debt during and
$8.9 billion for the fourth quarter of 2009, or $65.51 following the First World War, eventually leading to
per diluted common share, compared to a net loss massive bouts of hyperinflation.
of $61.7 billion or $458.99 per diluted share in the
fourth quarter of 2008. Fourth quarter 2009 adjusted Apparently economic thought at the time held that
net loss was $7.2 billion, compared to an adjusted increasing money supply had nothing to do with the
net loss of $38.5 billion in the fourth quarter of rate of inflation. Instead, Germans were told the high
2008. However, from section 1A, Risk Factors, of rates of inflation were caused by the war reparations
the company’s 10-K filing the narrative takes a turn Germany had to pay. More from the note:
for the worse indeed: “AIG has been significantly
and adversely affected by the market turmoil in late “One might think that the big difference is that today
2008 and early 2009, and, despite the recovery we have a greater expertise. Surely we understand
in the markets in mid and late 2009, is subject to what happens when deficits are financed with printed
significant risks, as discussed below. Many of these
risks are interrelated and occur under similar business
and economic conditions, and the occurrence of Chart 6: weiMar gerMany Cpi
certain of them may in turn cause the emergence, or
exacerbate the effect, of others. Such a combination 100,000,000,000
could materially increase the severity of the impact 10,000,000,000
16,579,999% inflation
1,000,000,000
on AIG. As a result, should certain of these risks 100,000,000
emerge, AIG may need additional support from 10,000,000
the U.S. government. Without additional support 1,000,000
5,300% inflation
from the U.S. government, in the future there 100,000
60% inflation
could exist substantial doubt about AIG’s ability 10,000
1,000
to continue as a going concern.” (Emphasis mine) 100
10
1
01/21 04/21 07/21 10/21 01/22 04/22 07/22 10/22 01/23 04/23 07/23 10/23
Source: SG Cross Asset Research
6
8. Petrocapita Update (continued)
money, and that it is only backward and corrupt austrian definition of Money supply
states that don’t know any better, like Bolivia and
Zimbabwe? But just a few years ago didn’t we think The True Money Supply (TMS) was formulated by
that it was only backward and corrupt states that Murray Rothbard and represents the amount of
suffered banking crises too? money in the economy that is available for immediate
use in exchange. It has been referred to in the past
And anyway, how could Von Havenstein not have as the Austrian Money Supply, the Rothbard Money
known that the continued and escalating printing Supply and the True Money Supply. The benefits of
of money to fund government deficits would TMS over conventional measures calculated by the
cause inflation? The United States experience of Federal Reserve are that it counts only immediately
unrestrained money printing during the Civil War had available money for exchange and does not double
been well documented, as had the hyperinflation of count. In any event the True Money Supply continues
revolutionary France in the late 18th century. Isn’t it to grow rapidly.
possible that, like today, he was overconfident in his
ability to control his creation and in the economic
theory which told him such control was possible?
Certainly, in an article in the New York Times on
the eve of the First World War, again from Liaquat Chart 7: true Money supply
Ahamed’s book, there seems to have been evidence
billions of dollars
of the general optimism that there would be no
“unlimited issue of paper money and its steady 6,282
depreciation … since monetary science is better
5,282
understood at the present time than in those days.”
4,282
The fact is we do understand the economics of
inflation. Despite what economists everywhere say 3,282
about being in “uncharted territory” with QE, we know
2,282
that if you keep monetizing deficits eventually you
get inflation, and we know that once you’re on that 1,282
path it can be extremely difficult to get off it. But we
knew that then. The real problem is that inflation is an 282
inherently political variable and that concern over debt
1959
1964
1969
1974
1979
1984
1989
1994
1999
2004
2009
sustainability and unfunded welfare obligations leaves
us more dependent on politicians than we have been Source: Ludvig von Mises Institute
in many decades.”
7
9. Petrocapita Update (continued)
us inflation is 10% not 3%
Chart 8: Cpi vs sgs alternative
Despite the rosy public assertions to the contrary,
Year-to-Year Change %
inflation is not running at subdued levels in the US.
If you calculate the US CPI using the pre-1980s 15
methodology you can see from the Shadowstats CPI-U SGS Alternate CPI
data below that inflation is approaching levels not 10
seen since the 1970s when the US last lost control of
monetary policy.
5
0
-5
1980 1982 1984 1986 1988 1990 1992 1994 1996 1998 2000 2002 2004 2006 2008 2010
Source: Shadowstats.com
8
10. disClaiMer:
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