Have nothing to do with the [evil] things that people do, things that belong to the darkness. Instead, bring them out to the light... [For] when all things are brought out into the light, then their true nature is clearly revealed...

-Ephesians 5:11-13

Tag Archives: Inflation

Foreign Affairs: Give Away Free Money!

This article first appeared at the McAlvany Intelligence Advisor on Friday, August 29, 2014:

Foreign Affairs

Foreign Affairs

What happens when a college professor meets up with a graduate student from Oxford University, intending to solve the world’s economic problems? What happens when they consider that the previous attempts to revive the economy have failed and their recommendation is to do more of the same?

The title of their resultant article in Foreign Affairs – the premier publication of the Council on Foreign Relations – explains it all:

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Article in CFR Magazine: Give Away Money to Stimulate Economy

This article first appeared at TheNewAmerican.com on Thursday, August 28, 2014:

 

Los Angeles Police Department (LAPD) Bell 206 ...

Mark Blythe, a professor at Brown University, and Eric Lonergan, a hedge fund manager living in London, have conjured the ultimate solution to a stagnant economy: Central banks should give away free money.

These two authors of a lengthy and allegedly erudite article in the September/October 2014 issue of Foreign Affairs, published by the Council on Foreign Relations (CFR), appear to be living in an alternate universe, as their suggestion, if it were fully implemented, would push the world’s economy back to the Dark Ages.

The article, entitled “Print Less but Transfer More: Why Central Banks Should Give Money Directly to the People,” rests on the false assumption that

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July BLS Jobs Report: The Sound of One Hand Clapping?

This article was first published at TheNewAmerican.com on Monday, August 4, 2014:

MarketWatch

To Jeffry Bartash, writing for the Wall Street Journal’s MarketWatch, Friday’s jobs report looked awfully good: 209,000 new jobs were added in July and in all the right places: mining, construction, manufacturing, transportation, and warehousing. In addition, there was almost no growth whatsoever in the “government” sector: just 11,000 new jobs were created there last month. This, according to Bartash, means that the economy is on a hot streak, having generated more than 200,000 new jobs every month for the last six months — the first time that has happened since 1997.

Added Bartash:

In the first seven months of 2014 the economy has gained an average of 230,000 jobs. That’s the best stretch of job creation since the [Great Recession] ended in mid-2009 and 19% faster than the pace of hiring in 2013.

End of story? Not quite.

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Friday’s Underwhelming jobs Report

This article first appeared at the McAlvany Intelligence Advisor on Monday, August 4, 2014:

Liar

Criss Jami, the lead singer of the rock band Venus in Arms, may reasonably be accused of having given the president lessons in deceit, especially as they both live in the city where truth-telling is a lost art. Said Jami:

Just because something isn’t a lie does not mean that it isn’t deceptive. A liar knows that he is a liar, but one who speaks mere portions of truth in order to deceive is a craftsman of destruction.

When Friday’s jobs report came out from the Bureau of Labor Statistics (BLS), President Obama spoke “mere portions” of its truth:

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The New Third Rail: Cutting Government Spending

This article was first published by The McAlvany Intelligence Advisor on Monday, July 14, 2014:

 

Historical government spending in the United S...

Historical government spending in the United States from 1902 to 2010

Back in February the Congressional Budget Office (CBO) estimated that the deficit for the 2014 fiscal year would be $514 billion, or about 3 percent of the total economic output of the country. Since this was a nearly 27 percent drop from last year, the implication is that all is well, nothing to see here, move along please. After all, the perception has been that the White House has been spending money faster than at any time in history, running up deficits and the national debt to staggering levels. Half a trillion? Is that all? Pocket change!

Greg Valliere, the chief political strategist for the Potomac Research Group, said at the time that this guaranteed that there would be no pressure for any sort of entitlement reform this year. Jack Lew, Obama’s Treasury Secretary, said the numbers bought some time: “We have a little time to deal with the long term.”

Last week both the White House and the CBO revised downward even further the expected deficit, with Obama taking full credit for the result:

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Chinese Economist at IMF warns of Global Housing Bubble

Board of Governors - International Monetary Fu...

Board of Governors – International Monetary Fund (IMF) (Photo credit: Wikipedia)

The false assumption that regulators can be safely counted upon to steer economies – local, national or global – to full employment with minimal inflation while avoiding booms and busts was unknowingly exposed in the latest yelp from the Deputy Managing Director of the International Monetary Fund (IMF), Zhu Min. In Chinese, his name means “people rule” or “democracy” but his ideology is firmly rooted in the Keynesian fallacy that economies can be successfully managed by experts without assistance or input from the common folk.

In announcing that the IMF has launched a new website, Global Housing Watch, Min delights in thinking that the world’s economy can be driven by looking through the rear view mirror. He said:

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Federal Reserve Notes Soon to Become Irrelevant in Oklahoma

This article first appeared at The McAlvany Intelligence Advisor on Monday, June 9, 2014:

 

Republic of Hawaii Banknote for 20 gold dollar...

Republic of Hawaii Banknote for 20 gold dollars, 1895. (Photo credit: Wikipedia)

Something that the lamestream media missed entirely happened on Wednesday, June 4, in Oklahoma: the governor signed into law a bill affirming what is already guaranteed to each state in the US Constitution: that gold and silver coin are legal tender. Historians looking back may recall that day as the day the Federal Reserve’s hegemony over money ended.

Article I, Section 10, the U.S. Constitution states simply that

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Defense Department Announces Latest Presidential Helicopter Contract

UTC Sikorsky logo

UTC Sikorsky logo (Photo credit: Wikipedia)

It didn’t take long for the skeptics to scoff at the costs of the latest effort to upgrade the fleet of presidential helicopters announced by the Defense Department on Wednesday, May 7. They say the $1.2 billion contract awarded to Sikorsky Aircraft Corporation will be just the beginning.

There are at least two reasons to be skeptical: the open-ended nature of the White House requirements and recent history. The Department of Defense outlined its requirements, stating that Marine Helicopter Squadron One which currently operates 19 presidential helicopters, must provide

 

Safe and timely transportation for the President and Vice President of the United States, heads of state and others as directed by the White House Military Office.

In addition, each aircraft must be equipped with various self-defense features such as bullet-proof glass and body panels and specialized communications equipment that allows the president to maintain “critical command functions” while airborne. Each needs to be large enough to carry up to 14 passengers and several thousand pounds of baggage while being small enough to operate from the White House lawn.

Each must have a minimum range of 300 miles and carry a full complement of defensive countermeasures to thwart heat-seeking and radar-directed missiles and also be hardened against an EMP (electromagnetic pulse), either from an enemy or from the sun. It must be able to send and receive encrypted communications and hold secure teleconferences while in flight.

And each must have air-conditioning and a toilet.

Under the contract Sikorsky promises to deliver two prototypes by 2016, with another 21 fully operational aircraft six years later.

Several questions arise. First,

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British Think Tank Predicts Financial Catastrophe for US

Titled “The Government Debt Iceberg”, the latest report from The Institute of Economic Affairs (IEA) in London was meant primarily for British eyes, but there’s enough in there to concern Americans worried about how

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President Proposes Doubling the tax Subsidy for the Poor

President Obama’s proposal to double the earned income tax credit (EITC) for the working poor on March 4 came with all the attendant benefits such an expansion would provide: it would reduce poverty while encouraging people not working to get a job. It would expand the existing law to cover an additional 16 million families with 30 million children.

In his State of the Union Address in January, the president warned this was coming,

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Latest CBO Outlook Ignores Birth Rates and Tipping Points

This article first appeared at The McAlvany Intelligence Advisor on Wednesday, February 5, 2014:

Just reading the headlines, the average citizen is likely to think that now that the deficits are under control Washington can focus on problems elsewhere. The Congressional Budget Office (CBO) estimated in May that the current year’s deficit would come in at $560 billion, half what it was just two years ago. In its report released on Tuesday, it was pleased to note that

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Rosy CBO Report Leaves out Critical Factors

At first reading the latest report on the government budget and the economy released on Tuesday by the Congressional Budget Office (CBO) is all sunshine and roses. In its summary of the 182-page report the CBO noted that deficits this year (from last October to next September) will be even lower than initially estimated, dropping to $514 billion, down from $680 billion last year and $1.1 trillion in 2012. And, in the very short run at least, further declines in deficits are expected through 2015, perhaps touching a low of

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Argentina’s economy is cratering, again

While Wall Street declined by 3 percent over global growth concerns last week, few were noting or even interested in the 11 percent decline in the Merval, Argentina’s stock market index. It hit a high of 5,970 on Tuesday, January 21, the day before the Argentina government devalued its currency, and closed at 5,337 on Monday. The peso itself has been in decline far longer, having lost nearly

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Controversial Harvard Professors predict high inflation and defaults for the US

The two Harvard professors who made themselves famous, and then infamous, are at it again, now predicting that America will soon be forced to

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The IMF threatens a dangerous “wealth tax” proposal

The populist notion of taxing the rich once again turned up in the International Monetary Fund’s “Fiscal Monitor Report” released in October, but scarcely anyone noticed. In an arcane chart-laden 107-page long report that was competing at the time with the government shutdown, the failing rollout of Obamacare, and other concerns, crises and disasters, why would they?

Here’s why.

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Even Lower Gas Prices are Coming, says CNBC

On Friday Anthony Grisanti was jubilant. Writing for CNBC, he predicted that gas prices, down significantly from where they were in April, would continue to slide by at least another 10 cents per gallon, perhaps more. That would bring the average price, currently at $3.29 a gallon, closer to

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House Bill Offered to Study “Real World” Effects of Fed Policy

In anticipation of the upcoming 100th anniversary of the Federal Reserve on December 23rd, House member Kevin Brady (R-Texas) and Chairman of the House’s Joint Economic Committee, decided back in March to offer a bill to create a commission to

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The S&P 500 Index at a new all-time high? Not quite.

It’s nice to get confirmation about something I’ve held for years, especially from someone like Mark Hulbert who has been in the investment game for years: the S&P 500 Index is nowhere near a new all-time high, on an inflation-adjusted basis. Not even close.

The all-time high was back in

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Gary North is worth much more than $10 a month

My subscription to Gary North’s newsletter just paid for it self in one commentary. His analysis of this article helped improve my understanding of their conclusion: prices could decline in the near future.

I subscribe to John Mauldin’s free newsletter which today consisted of an outlook by two other very bright guys, Lacy Hunt and Van Hoisington. I have read both of them. And Mauldin used to be a partner of Gary North. Confused? Don’t be. This is just to say that they have immense credibility with me and I would automatically be sympathetic to their point of view.

But with North’s analysis I now have a better understanding:

The Fed is deliberately driving down the velocity of money (how fast money circulates) by keeping the banks’ excess reserves with them rather than letting the banks lend them out. They do that by paying interest on those reserves. Look at it from the bankers’ perspectives: why would you loan your precious reserves to risky customers, even those with excellent credit ratings, when you can make risk-free loans to the Fed and earn interest there? True, it’s less interest than you might get from a customer, but with them you run the risk of not getting your money back. You don’t have to worry about that with the Fed.

So North thinks it’s a deliberate policy to keep the banks from lending, which keeps price inflation from hitting the grocery stores. He says it’s the best of all possible worlds for the Fed: they can continue to finance the government deficits with digital money without price inflation.

If, however, the Fed decides to stop paying interest on those reserves, or worse, decided to start charging interest on those reserves, this action would force the banks to take back those reserves and start lending them out. This would result in price inflation almost immediately. North thinks that if the Fed does that (reverses course), we could see prices double in a matter of months. For the time being, however, the Fed has no interest in doing that. I’m not sure why the Fed would ever start charging interest on those reserves. So price inflation is highly unlikely, and we might even see some small decrease in the overall price level. This is helpful information. It agrees with the conclusion by Hunt and Hoisington but I have a better understanding, thanks to North.

Here’s the link to North’s analysis. You’ll see that it’s a paywall. I pay $9.95 a month to get over that wall and read his stuff. This single analysis of a well-written article which could have misled me and my understanding of the world has paid for my subscription for a least a year. I think North is way undercharging. Don’t tell him I said so.

Today is Tax Freedom Day, Except…

According to the Tax Foundation, “tax freedom day” – the day when the nation as a whole has earned enough money to pay all of its taxes for the year – arrived five days later this year than last year: Thursday, April 18th. The math is simple:

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Many of the articles on Light from the Right first appeared on either The New American or the McAlvany Intelligence Advisor.