The following article by Louis Rouanet was originally published at the Mises Institute FedWatch.
Although today high levels of inequality in the United States remain a pressing concern for a large swath of the population, monetary policy and credit expansion are rarely mentioned as a likely source of rising wealth and income inequality. Focusing almost exclusively on consumer price inflation, many economists have overlooked the redistributive effects of money creation through other channels. One of these channels is asset price inflation and the growth of the financial sector.
The rise in income inequality over the past 30 years has to a significant extent been the product of monetary policies fueling a series of asset price bubbles. Whenever the market booms, the share of income going to those at the very top increases. When the boom goes bust, that share drops somewhat, but then it comes roaring back even higher with the next asset bubble.
Pundits and government officials keep telling us the economy is strong. Everything is great. After all, GDP is growing.
But a lot of people recognize things aren’t all that great. Some prominent economic analysts have said a major crash is looming. Nobel Prize winning economist Robert Shiller called stock market valuations “concerning” and hinted that markets could be set up for a crash. Several other notable economists have recently expressed concern about surging stock markets, particularly in the US. Marc Faber has predicted “massive” asset price deflation – possibly of a drop of as much as 40% in stock market value. Billionaire investor Paul Singer recently said the financial system is not sound. And former Ronald Reagan budget director David Stockman said we should get ready of “fiscal chaos.”
So, how is it that some see a meltdown on the horizon while most of the mainstream sees nothing but unicorns and roses? If the economy is growing, how can anybody things recession is right around the corner?
Well, what if the mainstream doesn’t understand a recession?
America is partying like its 1928 – right before the crash the kicked off the Great Depression. Some analysts believe the next crash is looming on the horizon. What will spark it? That remains to be seen. But no matter what the catalyst turns out to be, Mark Thornton says the cause will be the same as the last several collapses – Federal Reserve policy. Therefore, we should dub it the Bernanke-Yellen Bubble-Depression This article by Thornton was originally published on the Mises Wire.
In a recent article I advocated for a new way of naming business cycles. The new approach emphasizes the cause rather than the effect. So instead of the “housing bubble” and “financial crisis,” we should refer to the Greenspan-Bernanke Crisis. Here we will turn our attention to the current situation.
The following article by Ryan McMaken was originally published on the Mises Wire and is reprinted with permission
Earlier this month in the Wall Street Journal, James Grant explored the latest academic attack on the gold standard — this time in the form of One Nation Under Gold by financial journalist James Ledbetter.
Not that the establishment economics profession needs another book trashing gold. Among the university- and government-employed PhDs who hand down their wisdom about economics from on high, few have anything but disdain for the yellow metal.
Grant knows this all too well.
In this episode of Thoughts from Maharrey Head, Tenth Amendment Center national communications director Mike Maharrey talks about state action to undermine the Federal Reserve and the government’s monopoly on money.
Alasdair Macleod has over 40 years’ experience in fund management, corporate finance and investment strategy. He believes government monetary policies are the biggest threat to our financial savings and independence. As head of Research at Goldmoney, Alasdair helps everyday consumers understand the benefits of using gold as both money and a store of value.
We are all too aware of monetary policy and its objectives of targeting both moderate inflation and full employment at the same time. We are of course talking about price inflation, monetary inflation being the means of achieving the objective.
Central bankers don’t seem to understand that these objectives are incompatible, and here’s why. When you expand the quantity of money or credit, you debase the savings and wages of everyone, with two general exceptions. If the Fed expands the quantity of cash, or narrow money, the banks benefit, and in all likelihood they pass this benefit on to the government by spending it on new government debt. If the banks expand the quantity of bank credit, they benefit their favorite customers, who are usually big business. To believe otherwise is to subscribe to a law of financial perpetual motion, which is simply impossible.
Last week, James Rickards explained to CNBC why he is a long-term holder of gold bullion. He pointed to the pattern of financial collapses that threatened the global economy over the past two decades.
In the late ‘90s, Wall Street bailed out a hedge fund. In 2008, the Federal Reserve bailed out Wall Street. But in 2018, it’s the central banks that will need a bailout. And what will happen to the dollar when the Fed loses international credibility?
Scott Nations jumped in to interrogate Rickards and took the opportunity to remind Rickards of his long-running debate with Peter Schiff, who shares Rickards’ long-term prediction of gold reaching $5,000 an ounce or more. Rickards patiently gave Nations a lesson in history, and reminded him that he’s not buying gold as a trading commodity for growing his wealth – he owns gold as one of the best means of wealth preservation.
Don’t think of gold as a commodity. I don’t think of gold as a commodity. I don’t think of gold as an investment. It’s money. But it’ll be a kind of money that people have confidence in. You say you can’t eat gold. Well, take a dollar bill out of your wallet, Scott. Are you going to eat it? You’re not going to eat the dollar. It’s a medium of exchange; it’s a store of value…”
Last week, we reported that billionaire investor Stanley Druckenmiller is publicly advising investors to sell United States stocks and buy gold. Druckenmiller is now joined in his gold recommendation by an equally legendary hedge fund manager – Paul Singer.
In a client letter at the end of April, Singer wrote:
It makes a great deal of sense to own gold. Other investors may be finally starting to agree. Investors have increasingly started processing the fact that the world’s central bankers are completely focused on debasing their currencies… We believe the March quarter’s price action could represent something closer to the beginning of such a move than to the end.”
ReasonTV asked Californians what they thought the “right” minimum wage is. Unsurprisingly, most of the people in the “trendy, hipster enclave” of Silver Lake in Los Angeles just assumed a higher minimum wage is simply a no-brainer, win-win for society and workers. They didn’t hesitate to insist a $15-20 minimum wage was a necessity for the common decency of low-wage workers, even when presented with the prospect of major job losses if the minimum wage were raised. The video reminds us of when Peter Schiff asked Walmart shoppers if they would be willing to pay 15% more for their groceries if Walmart employees got a 15% raise.
This article was written by Nelson Gilliat, a millennial supporter of sound money and Austrian economics. Any views expressed are his own and do not necessarily reflect the views of Peter Schiff or SchiffGold.
During March 16th’s FOMC meeting, the Fed announced that it would leave interest rates unchanged and scaled back its December projections for higher rates in 2016, 2017, and 2018. The Fed’s backtracking comes just three months after raising interest rates 25 basis points, its first hike since June 2006.
While the Fed’s backtracking on higher interest rate projections was the big news of the meeting, another emerging trend also deserves attention – – the Fed’s backtracking from being US data dependent and toward being global data dependent.
Global factors are playing an increasingly larger role in the Fed’s decision to raise interest rates.
According to last week’s FOMC statement, “economic activity has been expanding at a moderate pace despite the global economic and financial developments of recent months” and warned that “global economic and financial developments continue to pose risks.”