Interest rates ain’t a’gonna go up significantly anytime soon. It blows up the budget. (Of course if they do, or have to, then things get REALY interesting.)
“I smell…Central bankers.”
How this obvious truth eludes so many economists is beyond me.
It’s simple. The central banks seek to goose the economy. They lower interest rates below the real market interest rate. As such people, institutions, everyone takes advantage of the relatively cheap credit. But as this cheap credit is taken advantage of malinvestment (that is investment that would not have happened if the market had set rates) begins to build up. It builds and builds and builds until there is so much malinvestment the economy topples on itself.
If you think that isn’t going to have tremendous ramifications down the road you’re nuts. Heck, we’ve got plenty of ramifications right now.
Americans are debt addicts. They love to spend. The politicians love to spend. Everyday Americans love to spend. Spend, spend, spend. And we wonder why many things, our society even, feels so cheap.
People live on credit. They finance cars, houses, vacation – cell phones – think about that – PHONES. They don’t save.
And why should they? They get nothing for saving. There’s literally no real return on socking money away in a bank these days.
Indeed he must. As Hunter Lewis the co-founder of Against Crony Capitalism has said, Keynesianism is the mother of crony capitalism as we know it. Keynesian economic theory gives intellectual cover to politicians and social theoreticians who want to spend the money of a society anyway. It is an excuse. It is a cult. It is destructive and it is obviously, especially as we see at this late date, as the world slowly succumbs to its ever growing debt burden,
As I look out the window and see a half completed house across the street that the neighborhood didn’t want I am reminded that real estate guys are debt fiends by nature. (At least that has been my experience.)
The big guys are giving us plenty of signals. In the event the world as a whole moves to negative rates we won’t be able to say that we hadn’t been warned. We’ve been warned.
Why do we have to care so much about what a banking politburo has to say? Rates should be set by markets not gurus sitting in temples. It’s ridiculous if you think about it.
People want to BELIEVE. Wall Street, the City of London, they WANT to believe. Sure there are critics and they are treated as heretics. But the core of the financial world WANTS to believe in central bank magic. Lord knows the political world does.
Image: The Telegraph
This is an excellent map of the continued failure of the post-2008 monetary experiment. We live in a truly extraordinary time for economics and geopolitics.
It wants to see via a “stress test” of banks. But even with the Fed raising a quarter point recently, so called liftoff, the general trend globally is in the opposite direction. Japan just moved to negative rates. There are smatterings of negative rates to be found throughout Europe. Canada is playing with the idea of negative rates.
I’m not a big fan of Mr. Soros generally but he is a guy one should pay attention to on international financial matters. It’s no small thing when he says we might be looking at another 2008-like crisis. Though Soros has made big mistakes in the past.
Regardless of what Mr. Soros says, from looking at the headlines the man made storm, the central bank created storm, appears to be picking up steam. Today should be an interesting one in the markets for sure.
If you want to know what happened in 2008, I mean really want to know, read this excellent (and short) book.
I haven’t seen the movie yet but I might over the weekend. One of the reasons I haven’t seen it yet is because I have heard that it pounds on the same old (false) reasons for the 2008 Crash, that being that somehow the market “failed.” That “greed” was the culprit, etc. etc. It’s what most people believe.
Gold is real power in the hands of people. This is the main reason central banks, Marx, Lenin, Keynes and many other “planners” throughout history have hated it. The “barbarous relic.” A tool of the petty bourgeoisie. Kind of like guns in the hands of the citizenry, gold has served as a check on the excesses of those in power. Gold flows have historically impacted rates of interest. Those who would prefer to set rates of interest themselves however, find gold very inconvenient.
But, the Federal Reserve is apolitical, completely independent. So these folks need to stop barking right? Ahem.