Money and Finance
- Hussman Weekly Market Comment: The Outlook Will Shift As Conditions Shift
Our investment outlook will shift as market conditions shift, and we will lean toward a more constructive stance when conditions support it. There are straightforward ways to do that while still remaining careful about larger cyclical risks. Present conditions...
- Hussman Weekly Market Comment: Not In Kansas Anymore
Even in the event that quantitative easing is sufficient to override hostile market conditions in the near-term, it is worth noting that long-term outcomes are likely to be unaffected. We presently estimate a prospective 10-year total return on the S&P...
- Ray Dalio On Monetary Policy During Deleveragings
As quoted by Jack Schwager in his book Hedge Fund Market Wizards: “Unlike in recessions, when cutting interest rates and creating more money can rectify this imbalance, in deleveragings monetary policy is ineffective in creating credit. In other words,...
- Hussman Weekly Market Comment: The Reality Of The Situation
For nearly two years, the massive interventions of central banks have repeatedly pulled a fundamentally weak and debt-burdened global economy from the brink of resumed recession. The Federal Reserve's balance sheet is now leveraged 52-to-1, with assets...
- Hussman Weekly Market Comment: Sixteen Cents: Pushing The Unstable Limits Of Monetary Policy
This week's comment focuses on the current, unstable stance of monetary policy. We'll start by reviewing some important monetary relationships. While I've included a variety of graphs and equations to support the analysis, I've boldfaced...
Money and Finance
Hussman Weekly Market Comment: Out On A Limb - An Investor's Guide to X-treme Monetary and Fiscal Conditions
Government intervention in the U.S. economy is approaching the point where probable long-term costs exceed short-term benefits – straining to maintain the pace of extraordinary fiscal and monetary measures that have repeatedly nudged the U.S. economy from the border between new recession and tepid growth for three years. U.S. Treasury debt now exceeds 105% of GDP (publicly held debt approaching 75% of GDP). Meanwhile, the Federal Reserve has expanded the monetary base to more than 18% of GDP (18 cents per dollar of nominal GDP), where a century of U.S. economic history indicates that a normalization to Treasury bill yields of just 2% could not tolerate more than 9 cents of monetary base per dollar of GDP without inflation.
The federal government continues to run a deficit of about 7% of GDP, which the $85 billion sequester would reduce to about 6.5% under the unlikely assumption that economic activity and revenues don’t contract somewhat. Current Federal Reserve policy absorbs about $45 billion per month in new government debt as part of QEternity, but even the Fed continues this policy indefinitely, U.S. publicly held debt is still likely to expand by several percent annually assuming no recession occurs. Any eventual normalization of Fed policy would dump Treasuries back into public hands (or require public purchases of new debt in the event the Fed decides to let the holdings “roll off” as they mature). Massive policy responses, directed toward ineffective ends, are scarcely better than no policy response at all.
Let’s take a look at the current monetary and fiscal policy environment, and then examine more effective policy initiatives and why they make sense.
- Hussman Weekly Market Comment: The Outlook Will Shift As Conditions Shift
Our investment outlook will shift as market conditions shift, and we will lean toward a more constructive stance when conditions support it. There are straightforward ways to do that while still remaining careful about larger cyclical risks. Present conditions...
- Hussman Weekly Market Comment: Not In Kansas Anymore
Even in the event that quantitative easing is sufficient to override hostile market conditions in the near-term, it is worth noting that long-term outcomes are likely to be unaffected. We presently estimate a prospective 10-year total return on the S&P...
- Ray Dalio On Monetary Policy During Deleveragings
As quoted by Jack Schwager in his book Hedge Fund Market Wizards: “Unlike in recessions, when cutting interest rates and creating more money can rectify this imbalance, in deleveragings monetary policy is ineffective in creating credit. In other words,...
- Hussman Weekly Market Comment: The Reality Of The Situation
For nearly two years, the massive interventions of central banks have repeatedly pulled a fundamentally weak and debt-burdened global economy from the brink of resumed recession. The Federal Reserve's balance sheet is now leveraged 52-to-1, with assets...
- Hussman Weekly Market Comment: Sixteen Cents: Pushing The Unstable Limits Of Monetary Policy
This week's comment focuses on the current, unstable stance of monetary policy. We'll start by reviewing some important monetary relationships. While I've included a variety of graphs and equations to support the analysis, I've boldfaced...