Money and Finance
- Links
Hunter S. Thompson on Finding Your Purpose and Living a Meaningful Life (LINK) A great excerpt from Shane over at Farnam Street from the book Letters of Note.Thinking & Writing : The CIA’s Guide to Cognitive Science & Intelligence Analysis (LINK)...
- The Death Of The Dollar? – By Rob Arnott
To no one’s surprise, the Fed announced that it will replace the expiring “Operation Twist”—in which it was selling $45 billion of short maturity treasuries and buying a like amount of long maturity treasuries every month—with continued purchases...
- Richard Duncan Quotes
Longer excerpt from The New Depression (taken from my Kindle highlights, so the excerpts aren't necessarily the paragraphs I have put them in below, and there may be things in between that I didn't highlight). “The amount...
- California Deficit Has Soared To $16 Billion, Gov. Jerry Brown Says
Gov. Jerry Brown announced on Saturday that the state's deficit has ballooned to $16 billion, a huge increase over his $9.2-billion estimate in January. The bigger deficit is a significant setback for California, which has struggled to turn the page...
- Welcome To The Keynesian Nightmare - Annaly Capital Management
British economist John Maynard Keynes was an advisor to the American government in the 1930s when it was struggling to restart the domestic economy. The Depression was tragic but, to put it in historical context, Keynes and his client were dealing with...
Money and Finance
THE TAPER: Recalibrating Liquidity - By Richard Duncan
The “Taper” has begun. It’s important to understand why.
On December 18th, the Fed announced that it will begin to taper the amount of fiat money it creates each month from $85 billion to $75 billion starting in January. Chairman Bernanke also indicated that the Fed is likely to continue reducing the monthly amount of money it creates by $10 billion at each future FOMC meeting – so long as the economy performs in line with his current expectations. That would bring QE3 to an end by December 2014.
The press has attributed the Fed’s decision to taper to an improvement in the outlook for the economy. I don’t believe that is the correct explanation. The recovery is still too weak and uncertain to justify tapering on those grounds. In my opinion, the real reason is to prevent excess liquidity from creating a new, destabilizing asset price bubble in stocks and property.
During 2013, the Fed has injected just over $1 trillion of liquidity into the financial markets through QE. Over the same period, the government has sucked nearly $700 billion of liquidity out of the markets by borrowing to finance its budget deficit. That left $300 billion of excess liquidity that was invested into other asset classes, most notably stocks and property. On top of that, a further $400 billion of liquidity entered the United States from abroad as a surplus on the country’s financial and capital accounts. (See Macro Watch Fourth Quarter 2013 for a detailed explanation.) This massive excess liquidty explains why the S & P 500 Index and home prices are up 25% and 13%, respectively, this year.
- Links
Hunter S. Thompson on Finding Your Purpose and Living a Meaningful Life (LINK) A great excerpt from Shane over at Farnam Street from the book Letters of Note.Thinking & Writing : The CIA’s Guide to Cognitive Science & Intelligence Analysis (LINK)...
- The Death Of The Dollar? – By Rob Arnott
To no one’s surprise, the Fed announced that it will replace the expiring “Operation Twist”—in which it was selling $45 billion of short maturity treasuries and buying a like amount of long maturity treasuries every month—with continued purchases...
- Richard Duncan Quotes
Longer excerpt from The New Depression (taken from my Kindle highlights, so the excerpts aren't necessarily the paragraphs I have put them in below, and there may be things in between that I didn't highlight). “The amount...
- California Deficit Has Soared To $16 Billion, Gov. Jerry Brown Says
Gov. Jerry Brown announced on Saturday that the state's deficit has ballooned to $16 billion, a huge increase over his $9.2-billion estimate in January. The bigger deficit is a significant setback for California, which has struggled to turn the page...
- Welcome To The Keynesian Nightmare - Annaly Capital Management
British economist John Maynard Keynes was an advisor to the American government in the 1930s when it was struggling to restart the domestic economy. The Depression was tragic but, to put it in historical context, Keynes and his client were dealing with...