Finance - Part 19

November 14, 2010|Posted By Adam Sharp

The Fed is unwinding faster than expected

It seems that the Federal Reserve is unwinding faster than many, including myself, thought possible. Revulsion over QE2 is certainly stronger than I could have hoped for.

And after being repeatedly blocked from chairing various financial committees, Congressman Paul may finally get the chance to do something he’s been working towards for 40+ years: Call the Fed on their bullshit from a position of authority, and attempt to implement desperately-needed reform.

Lew Rockwell, long-time ally of Dr. Paul, explains:

Ron Paul won easy reelection in the 14th district of Texas with almost 77% of the vote. (His opponent, a police chief, had signs that said, “Tell Dr. No he has to go.” No one took up my suggestion for opposing signs: “Send the cop to the donut shop.”

If the Republicans weren’t dishonest, and entirely in the pocket of the big banks, Ron Paul would be taking Barney Frank’s place as chairman of the finance committee. Not satisfied with blocking him there, they have even kept him out of the chairmanship of the monetary policy subcommittee, as Barney has frequently remarked. The first time the Republicans erased Ron’s seniority; the second time, they imported a congressman from another committee to take the job; the third time, they temporarily abolished the subcommittee. This time, I think they would fear the backlash, so Ron will probably be chairman. If so, I can’t wait for his hearings on the QE2, the gold, the business cycle, and much else.

If Dr. Paul somehow does not get the nomination, the backlash will be substantial, as Mr. Rockwell states. I am starting to think banksters may lack the credibility necessary to fight such firestorms. (time to sell silver, so soon? my anxious side says).

I am not sure yet what this means for further QE efforts. My gut says the Fed will win, and continue printing, bullying other countries into acceptance. But their opposition has become rather strong, rather fast.

Since QE1, the dissenters have grown from a fringe group led by Dr. Paul, to include the majority of developed nations. Plus a growing percentage of domestic dissenters, most notably Fisher and Hoenig. The banks are still my favorite to win the flation-currency wars, but at least the match is getting interesting.

Ron Paul: Bernanke’s Worst Nightmare – CNN

November 8, 2010|Posted By Adam Sharp

Financial Blog Reading List

Josh Brown from The Reformed Broker has released his latest who’s who of the financial blogosphere, mapping the landscape out in witty fashion.

This time around it’s titled Financial Blog Wars. The list of sites makes for a fine RSS reading list, and is entertaining to boot — if you’re a finance and/or Star Wars geek, anyway.

Thanks to Josh for upgrading BN from “Goth Kids” in his high school analogy to the “Jedi Masters” and “Rebel Alliance” categories in this Lucasian go-round. It’s an honor to be mentioned alongside my favorite blogs, including Jesse’s Cafe Americain, The Big Picture, Zero Hedge, Financial Armageddon, and Calculated Risk.

Check out TRB, too, of course. Josh injects much-needed humor into the financial blogosphere, which at times seems tired, jaded, and pessimistic — even for my tastes. And he posts a lot of great original content, plus links to good stuff around the web. Also see the classic piece, the Periodic Table of Financial Bloggers.

P.S. – How about them metals?! As happy as I am (having been grossly overweight PMs for years), the speed and strength of this move does worry me a bit. It certainly does not foretell roses and sunshine ahead. If gold and silver prices are any indication of what’s to come, they are saying “Get your shit in order, icebergs and chaos: Dead ahead”.

If it is truly desirable to live in “interesting times”, we can count ourselves blessed many times over.

October 22, 2010|Posted By Adam Sharp

Encourage Krugman to Debate an Austrian Economist

Most Austrian Economists would jump at the chance to debate Paul Krugman. Under traditional arrangements, such a debate is extremely unlikely to ever happen. Krugman has little to gain, and much to lose.

So Mises.org’s Robert P. Murphy is using a carrot, of sorts, in an attempt to lure PK into debate. He is using ThePoint.com, a site that collects charitable donations in escrow, to be paid to a charitable organization (FoodBankNYC.org, in this case) if the desired individual participates in the debate.

The plan in essence: Raise $100k for a NY food bank, on the condition that Mr. Krugman participate in the debate. It’s a simple incentive program, like Celebrity Jeopardy.

$17k has been raised so far.

If you need a reminder on why effectively rebutting Mr. Krugman is so important, refer back to this July 2010 column from Krugman’s objectively-titled Conscience of a Liberal blog, in which he scolds the Fed for not printing enough money.

What should it be doing? Conventional monetary policy, in which the Fed drives down short-term interest rates by buying short-term U.S. government debt, has reached its limit: those short-term rates are already near zero, and can’t go significantly lower. (Investors won’t buy bonds that yield negative interest, since they can always hoard cash instead.) But the message of Mr. Bernanke’s 2002 speech was that there are other things the Fed can do.

It can buy longer-term government debt. It can buy private-sector debt. It can try to move expectations by announcing that it will keep short-term rates low for a long time. It can raise its long-run inflation target, to help convince the private sector that borrowing is a good idea and hoarding cash a mistake.

Nobody knows how well any one of these actions would work. The point, however, is that there are things the Fed could and should be doing, but isn’t. Why not?

Summation: Whatever the Fed could be doing, it should. Punish savers, reward borrowers.

He admits that he has no idea if any of this will work, but argues that we have to do something — no matter the logic or chance of success. Shovel the banks more money, essentially. Mr. Krugman has been a strong supporter of high inflation. A supporter of so-called “price stability”, which somehow involves 2% + inflation per year.

This is the faulty logic of PK. He continues to ignore the fact that stimulus/easing is inevitably wasted. It is put in the hands of appointees with little accountability, used to pay back political favors, and wasted in countless other ways. Also see this.