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Currency

Trumpism = Inflation

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Posted by Bill Bonner - Diary of a Rogue Economist

on Monday, 14 November 2016 15:44

inflationBALTIMORE – “I couldn’t believe it,” said a friend with grandchildren in a private school in the Washington area. “Their school provided grief counseling!”

“Grief counseling?”

“Yes. Apparently, students were so upset by Donald Trump’s victory that the school thought it should provide psychologists to help them get over it.”

The New York Times, too, seemed to need therapy. 

Its weekend edition is full of blaming, scapegoating, and flagellation. Hillary blames FBI Director Comey for her defeat. One columnist says white Americans have become racists. 

Another says women are deplorable, too. They didn’t support Ms. Clinton as they should have. “Behind these angry white men are angry white women,” it points out.

Five days have passed since the election results were announced. Many people are still hysterical. They should calm down and take a closer look.

The System Works

Already, the dots are coming together. What we see is this: The system works! 

That is, the system whose main purpose is to protect the system continues to do so. 

“The Donald” may be getting ready to mount his throne. But the Deep State – America’s “shadow government” – stays in Heaven. 

First, Mr. Trump used his victory announcement to signal that easy credit – upon which the system depends for funding – will get even easier. 

To the easy monetary policy, he will add easy fiscal policy. As much as an additional $1 trillion will be spent on “infrastructure.” On credit, of course.

As one of Mr. Trump’s economic advisers, Anthony Scaramucci, wrote in the Financial Times this weekend:

While easy-money monetary policies have exacerbated the income divide, central bankers handcuffed by political dysfunction have had little choice but to provide extraordinary accommodation… [B]usiness people like Mr. Trump understand you can grow yourself out of excessive debt.

What we think he meant to say was that you can “inflate” your way out of excessive debt by spending more than you can afford – if you can get Congress to go along.

This new spending was just what President Obama asked Congress for and couldn’t get. It was what big-spending economists such as Larry Summers, Paul Krugman, and Joseph Stiglitz had urged. 

It’s what the Financial Times has called for from the get-go. And now the same Republicans who stopped President Obama’s infrastructure spending proposals are expected to come forward and approve Mr. Trump’s program.

Steel! Ships! Concrete! Woohoo!

All Hell Will Break Loose



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Currency

A New Dollar View...

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Posted by Jack Crooks - Currency Currents

on Friday, 11 November 2016 05:09

and talking my book…

Quotable

“For Lasch, that great underlying problem was clear enough: that by the end of the twentieth century, the American left and right had ‘come to share so many of the same underlying convictions, including a belief in the desirability and inevitability of technical and economic development, that the conflict between them, shrill and acrimonious as it is, no longer speaks to the central issues of American politics’ (23). That is, by the end of the twentieth century the dominant figures in American politics had all become uncritical believers in, and proponents of, the idea of progress.

“Lasch suggests that there are two problems with all this elite genuflection at the altar of progress. First, it both demeans and is disconnected from the values of most Americans, who understand that you can’t have everything, who know that everything costs something, who want stable and satisfying lives for their children, and who have been on the losing end of enough programs of ‘improvement’ to be skeptical about the dogma of progress.”

--Susan McWilliams, “On The True and Only Heaven, 25 Years Later,” Modern Age

Commentary & Analysis

A new dollar view and talking my book…

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Below is a chart with Black Swan’s new wave view [aka best guess] on the future path of the US dollar.  This chart shows a very broad wedge pattern and it suggests we could see many weeks, or months, of dollar weakness going forward before the final surge in this bull market rally which began back in March 2008—not coincidentally the same day our illustrious government officials decided to “save” Bear Stearns from meltdown.



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Currency

Marc Faber - Helicopter Money To Come, No Matter Who Wins Election

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Posted by Marc Faber - Gloom Boom & Doom Report

on Tuesday, 08 November 2016 08:21

Faber thinks that near term the market is oversold, and no matter who wins the election it will rally. He now considers that the breakout to the upside of the S&P was a false breakout and thus an extremel negative sign. More in the interview below: 

Unknown



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Currency

How should the real interest rate be measured?

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Posted by Steve Saville - The Speculative Investor

on Friday, 04 November 2016 06:44

Despite the popularity of doing so, subtracting the percentage change in the CPI or some other price index from the current intrest-rates.jpg.size.custom.crop.1086x721nominal interest rate will not result in a realistic or reasonable estimate of the current ‘real’ interest rate.

The method of real interest rate calculation summarised above is wrong in two different ways, each of which is sufficient to render the result invalid. The first and most obvious way it is wrong is that the CPI does not reflect the change in the purchasing power of money. This is not just because it has been re-jigged over the decades as part of an effort to minimise its value, but also because the entire concept of a “general price level” is nonsense. There is no such thing as a general price level because disparate items cannot be averaged. To explain by way of a simple example, averaging the prices of a car, a potato and a visit to the dentist makes no more sense than averaging the goods/services themselves. Clearly, a car, a potato and a visit to the dentist cannot be averaged.

However, even if, for the sake of argument, we assume that the CPI makes sense at a conceptual level and is a satisfactory estimate of the change in the purchasing power of money, we still couldn’t use it to determine the current real interest rate. The reason is that the real rate of return obtained from an interest-producing investment has nothing to do with the historical change in the purchasing power of money and everything to do with the amount by which the purchasing power of money will change in the future. For example, if you buy a 1-year bond today your real return will be determined by how much the purchasing power of money changes over the next 12 months; not by how much it changed over the previous 12 months.

So, when you see a chart showing the nominal interest rate minus the 12-month percentage change in the CPI, what you are looking at is NOT a chart of the real interest rate.

How, then, should the real interest rate be calculated and charted?



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Currency

Intense Political Conflict

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Posted by Bob Hoye - Institutional Advisors

on Friday, 28 October 2016 14:58

clip image0023The world has gone mad. That’s in the financial and political markets.

The media are going on about the passions unleashed by each candidate. In getting hit for the first time with a resounding “No!”, the belligerent Left is in shock. Ordinary Americans getting involved is a very defensive move. Justifiably so. Those who call for less government under traditional constitutional limits are called – and get this – “Nazis”. The following by Tocqueville is elegant:

"Society was cut in two: those who had nothing united in envy; those who had anything united in common terror."

In the financial markets and with seemingly unlimited power, central bankers have been as reckless as the wildest of individual speculators in history. The difference is to compare longevity to ephemeral. In the US, the agent of rigging markets began quietly with the imposition of the Federal Reserve System in 1914. In the last twenty years, the intrusion has come remarkable. And the recent increase in intensity of intrusion is vividly confirming that the theories are not working. The next credit crisis will severely reduce belief in central banking. That would be for those outside the system who have been the innocents. Many central bankers, who have been the instigators of instability will suddenly lose belief in their own powers.

That a central bank bent on intrusion would work is, itself, a speculation.



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