It looks like Trump’s pick to chair the Federal Reserve plans to walk in the footsteps of his predecessors.
In other words, we can expect the legacy of Ben Bernanke and Janet Yellen to continue unbroken. That means a continuation of interventionist monetary policy, artificially low interest rates into the foreseeable future, and plenty of quantitative easing when the time comes.
The middle class is not getting tax relief under the Senate plan currently under consideration. It’s getting big government on a credit card.
Here’s a fun fact. Did you know virtually all of the individual tax cuts in the Senate version of tax reform are temporary?
Indeed, what the Senate giveth, it also taketh away. Most of the tax cuts for individuals would expire in 2026 under the Senate plan.
So what’s the reasoning behind sunsetting the tax cuts?
Some people were predicting Bitcoin would push through the $10,000 level before the end of the year. At the rate it’s going, it may happen before the end of the month.
Bitcoin is on a roll. The cryptocurrency broke $9,000 over the Thanksgiving holiday and quickly pushed up to $9,700. There are also increasing signs of mainstream adoption. CME Group plans to list Bitcoin futures beginning in mid-December, and Coinbase says it added more than $100,000 new users over the Thanksgiving holiday.
Some analysts look at all the action in the world of cryptocurrency and predict the demise of gold. But there are plenty of reasons to believe gold will be just fine.
2017 may well go down in history as the year of the bubble.
We’ve talked a lot about the stock market bubble in recent months, but there are a whole slew of bubbles floating around out there – most of them created by loose monetary policy that has dumped billions of dollars of easy money into the world’s financial systems over the last eight years.
The Federal Reserve released the minutes from its most recent FOMC meeting on Wednesday and it appears the monster they created has finally spooked the central bankers.
Over the last couple of months, we’ve focused a lot of attention on the stock market bubble. But some analysts say we should be watching the bond market bubble. Last summer, former Fed chair Alan Greenspan issued an emphatic warning: Beware, the bond bubble is about to burst. And when it does, it will take stock prices down with it.
Last week, Mint Capital strategist Bill Blain issued a similar warning.
The truth is in bond markets. And that’s where I’m looking for the dam to break. The great crash of 2018 is going to start in the deeper, darker depths of the credit market.”
As we reported last week, investors are in an era of “irrational exuberance.”
The US stock market is at all-time highs. Meanwhile, market volatility is at lows not seen since the 1990s. In an odd juxtaposition of seemingly contradictory points of view, investors realize the market is overvalued, but at the same time, they believe it will continue to go up. According to a Bank of Ameria survey, 56% of money managers project a “Goldilocks” economic backdrop of steady expansion with tempered inflation.
In an article published at the Mises Wire, economist Thorsten Polleit adds some further analysis and asks a critical question.
Credit spreads have been shrinking, and prices for credit default swaps have fallen to pre-crisis levels. In fact, investors are no longer haunted by concerns about the stability of the financial system, potential credit defaults, and unfavorable surprises in the economy or financial assets markets.
“How come?”
Last week, the House passed its version of “tax reform,” along party lines. The final vote came in at 227-205, with the entire Democratic caucus opposing the bill. Thirteen Republicans joined the Democrats in voting no.
The debate now shifts to the Senate where things will likely become more contentious. Wisconsin Republican Sen. Ron Johnson has already announced he opposes the current Senate plan. And the Senate bill differs from the House version – significantly putting off corporate tax cuts for a year. If the Senate can get something passed, the two chambers will have to figure out a compromise plan.
Peter Schiff has been saying the Republicans aren’t even really attempting to reform the tax system. He called the GOP plans “tax cuts masquerading as reform.” Peter is not alone in this thinking.
There’s a significant platinum shortage on the horizon according to an industry report.
According to a quarterly report released by the World Platinum Investment Council, a resurgence in demand for platinum jewelry, increasing industrial demand, along with falling production, will lead to a shortfall of 275,000 ounces in 2018.
According to data compiled by the Chicago Fed, financial conditions have reached the loosest level in the US since January 1994. This despite Federal Reserve tightening over the last year.
On Nov. 10, the Chicago Fed National Financial Conditions index hit -0.93. As Peter Schiff pointed out in his most recent podcast, that was early on in the dot-com bubble. The Fed has been raising interest rates and talking about shrinking its balance sheet. Why is it that financial conditions are looser now then when rates were still at zero?
Peter said it’s because the Federal Reserve is way behind the curve.
