Well-known Austrian economist and author Bob Murphy recently joined Tom Woods in a strong critique of popular, mainstream economics. Murphy tore apart everything from a recent Paul Krugman blog post to the Keynesian explanation for the 2008 financial crash. The interview is long and in-depth, but a great listen if you want a detailed rebuttal of modern Keynesian economics.
A couple weeks ago, in a surprising policy shift, the United States government announced its willingness to work with the Chinese-led Asian Infrastructure Investment Bank (AIIB). Lew Rockwell explained to RT that after many allies applied for membership to the AIIB, the US had no choice but to cooperate. While there is already an Asian Development Bank in place, it functions as just another subsidiary of the US government. This new bank will reduce American economic influence in Asia and reduce the power of the dollar. Yet Rockwell argues that decentralizing power over international trade makes way for more freedom and prosperity.
I think we’re not going to have a world government anymore. We’re not going to have a power able to exert its influence all over the world, like the US [and] its military influence. Chinese influence tends to be economic influence. That’s all to the good… Let all the world trade together.”
Former Federal Reserve Governor Kevin Warsh told CNBC’s “Squawk Box” that the Fed’s wishy-washy language and behavior has been spoiling the financial markets. Every nuanced speech of central bankers can influence markets, making it impossible for Americans to get a true idea of how the economy is behaving. Warsh finds it disturbing that the Fed has run its quantitative easing and interest rate experiments for 7 years while ignoring real economic indicators.
Warsh believes Fed officials have fallen prey to “groupthink,” which has put them completely out of touch with normal Americans. In this 2-part interview, Warsh says exactly what Peter Schiff believes, only less pointedly — not only has the economy not legitimately recovered, but it’s in for a rude awakening when the Fed’s policies drag it down again.
Another remarkable thing about this interview is the lack of push-back from the CNBC anchors. In fact, they agreed with Warsh that the Fed is relying too much on stock market performance to inform its decisions. Warsh concluded that central bankers need to change their attitude:
The most important thing that all central bankers should have right now is humility. We have never run this experiment, which we should all describe as radical. The idea that we somehow suggest that it is riskless to stay at these sorts of rates 7 years into a recovery strikes me as unnecessary.”
Part 1
Gold Prices Could Skyrocket as Asian Demand Increases
Bloomberg – Australia & New Zealand Banking Group Ltd. published a report predicting that gold demand in Asia will double by 2030. The price of gold could increase to up to $2,400 in the same time frame to keep up with demand. As incomes in India and China rise, consumers will purchase more jewelry and invest in the commodity. Central banks in these and other countries will also continue to buy gold. The report predicted that if global financial instability continues, the price of gold may reach as high as $3,230.
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Frank Holmes, Chief Executive at US Global Investors, told Kitco News that an interest rate hike would send the stock market plummeting. In fact, he thinks a drop in the market would far outpace any dip in gold prices. At the same time, problems with mining exploration means that both gold reserves and supply are going to shrink in the next several years. Holmes emphasized that it’s important to ignore the “short-term noise” of asset prices. Gold is an important asset class, and provides a buffer against a plunging stock market.
Kitco News interviewed CME Group’s Executive Director of Metals Products Harriet Hunnable, who talked about how the rise of China’s renminbi is opening up more trade for gold. While her analysis was a bit technical, Hunnable’s ultimate point was that gold is a “fantastic commodity” that holds universal appeal for trade. Rising demand for gold in Asia is just the latest reason to want it in your portfolio.
Tom Woods and Mark Thornton, Senior Fellow at the Mises Institute, discuss the Federal Reserve’s long history of being completely wrong about the state of the United States economy. He shared some choice quotes from Fed officials in which they claimed the economy was in great shape just before the 2008 crash. Instead of working to improve its forecasts, the Fed strives to have as many economists agree with its position as possible, giving it an air of authority. As Thornton put it:
The reality is that this whole thing is a con game where they’re taking advantage of us, and they’re doing so with fancy words and misleading languages. So you have to understand that that’s what the Fed is about. They’re operating an economy, a monetary system, and a banking system where money is just pieces of paper… They’re always trying to build confidence, and they use the language of the Federal Reserve to try to mislead people about what’s really going on.”
Jim Grant told Fox Business that the Federal Reserve has kept itself in emergency mode for too long, with interest rates near zero for almost 7 years. In fact, remaining in emergency mode has only made the next emergency more likely. Grant fears that central banks (the Fed in particular) have become far too powerful in their ability to bail out irresponsible bankers by destroying the wealth of savers.
The Fed, the government… are instituting a de facto nationalization of essential banking activities… It can’t be that the single purpose of banking is to prevent banks from going bankrupt. Yet this has become in effect the policy of our minders at the Federal Reserve. They are becoming quite all-powerful…”
Jim Rickards spoke to ABC News Australia about the long-term costs of devaluing currency. Sustained economic growth cannot come from devaluation when the entire world is cheapening currencies at once. Instead, people just lose their purchasing power and global inflation is the long-term result. Like Peter Schiff, he warned that the Federal Reserve won’t be raising rates any time soon and that the world faces a fiscal crisis bigger than the crash in 2008.
John Tamny, Political Economy Editor at Forbes, spoke to the Austrian Economics Research Conference about the roots of the Great Depression, the financial crisis, and the Great Recession. He explained how most modern economists ignore important economic fundamentals, or simply misunderstand them. For example, contrary to popular belief, governments cannot stimulate demand by simply spending more. He also focused on the beauty of recessions, which allow an economy to cleanse itself of bad business practices. Like Peter Schiff, Tamny argues that the US needs to experience a painful, but necessary recession sooner than later to truly heal its economy.
