When the government pumps trillions of dollars into the economy, they’re not actually printing the money. It enters as digital entries in banks across the country. It’s made the system fast, responsive, and, unfortunately, vulnerable. Now our money is no longer something we hold in our hands, but something that exists on a very susceptible network.
The so-called recovery is only built on debt and printed cash declares our own Byron King. In the long term, the only option for the government to continue financing it's operations is to print too many dollars. Money printing has it's limits, however. It's Byron's opinion that at some point, perhaps very soon, the government will have to turn to more desperate measures. Namely, capital controls. In the following featured essay, Byron outlines 4 probably ways the government will take your cash and one play you can buy through your broker to prepare today. Read on...
Americans expatriate because they want to get out of the country. Corporations expatriate for similar reasons. Clem Chambers explains...
When’s the best time to invest in something? When everyone else is trying to get their money out of it. It might go against conventional thinking, but following the crowd usually makes you miss the real opportunities. At one monetary metal conference recently, the smartest guys in the industry sat down to discuss where these real hidden gems lay.
Say goodbye to your boring morning commute. New technologies are changing the way people drive their cars. It’s making them safer, more fuel efficient, and could reshape the way America builds its roads and cities. The only thing that could stand in the way...
I bet you use different kinds of money all the time, sometimes without even realizing it. In various online accounts, I currently have: some dollars, some pounds, and some euros. I have some air miles from two different credit card companies. I have some supermarket rewards points from three different companies. And I also have […]
In a 2009 article, the Huffington Post went into considerable detail about the number of people with PhD degrees in economics employed by the Board of Governors of the Federal Reserve System. This is the government’s branch of the Federal Reserve. It is not one of the 12 regional Federal Reserve banks, all of which […]
Greetings from Maine! Right now, I’m writing from within foghorn distance of the sea. And this gives me an opportunity to tell you a down east tale that should serve as a warning to every investor: Maine’s Great Gold Swindle.I’m not talking about central banks, or manipulation of today’s markets. I’m talking about something from […]
The U.S. dollar is the dominant global reserve currency. All markets, including stocks, bonds, commodities, and foreign exchange are affected by the value of the dollar.The value of the dollar, in effect, its “price” is determined by interest rates. When the Federal Reserve manipulates interest rates, it is manipulating, and therefore distorting, every market in […]
When the NSA surveillance news broke last year it sent shockwaves through CERN, the particle physics laboratory in Switzerland. Andy Yen, a PhD student, took to the Young at CERN Facebook group with a simple message: “I am very concerned about the privacy issue, and I was wondering what I could do about it.”There was […]
Is Bitcoin, the popular “cryptocurrency” taking the globe by storm, currency? We get lots of Bitcoin questions here at Laissez Faire HQ in Baltimore. How do I buy them? Why do I need it? And is Bitcoin safe? Those questions are relatively easy to answer. And we’ve put them all in a report for Laissez […]
The game of speculation is the most uniformly fascinating game in the world. But it is not a game for the stupid, the mentally lazy, the person of inferior emotional balance or the get-rich-quick adventurer. They will die poor.– Jesse Livermore, How to Trade in StocksThe trouble with capitalism’s guardians is that they have no […]
Let’s head back in time…In 2004, a mere decade ago, the US national debt rang the register at $7.4 trillion. That represents “debt per citizen” of over $25,000. You, me, your neighbor, your 4-yr old grandson, you name it and they’re portion of the U.S. debt is $25k.But flash forward to today and you’ll see […]
John Foust, a Democrat running for the 10th congressional seat in Northern Virginia, is — like Gov. Terry McAuliffe and other state Democrats — gung-ho to expand Medicaid. His wife’s position is, shall we say, a bit more nuanced.Foust has slammed his opponent, Republican Del. Barbara Comstock, for her opposition to expansion. He has spoken […]
The midterm election season is upon us, and it’s a tossup whether the Republicans will win the Senate, or if President Obama, seemingly oblivious as conflict flares up around the world, will, through his continuous campaigning, keep Harry Reid in his majority leader seat.The only thing we know for sure is that sociopaths will be […]
The Failure of the “New Economics” by Henry Hazlitt Release Date: Aug. 7, 2014 The Austrian economist who was called “Mr. Libertarian,” Murray Rothbard correctly wrote that economic journalist Henry Hazlitt (1894–1993) “is a better economist than a whole host of sterile academicians.” Rothbard was right. Hazlitt is a very good and very accessible economist. […]
Alexander Hamilton was America’s first Secretary of Treasury under President George Washington. When he first entered office in 1789, America was an agricultural nation of just 4 million still broke from its financially costly victory over the British Empire in the Revolutionary War.The states had accumulated relatively massive debts to finance that war, which mostly […]
Remember that correction we’ve been quietly talking about over the past couple of months?Well, it might be right around the corner. Stocks waited until the last day of the month to nose-dive. The S&P 500 posted its first 2% down day since April — and the Dow wasn’t far behind. Early this morning, futures continue […]
I was talking with one of my colleagues the other day, and he raised a very interesting question, one that deserves consideration by anyone worried about their digital privacy. He read an article that championed the idea that the more steps one took to protect their privacy by using anonymous Web-browsing tools like Tor, the […]
A great technology solves a problem that we didn’t know we had. It makes us aware of deprivations we didn’t know existed until we discover the new thing. Once discovered, we can’t go back.People in the 1950s, for example, never missed the smart phone. They were pleased to have a phone at all. But today, […]
Headquartered in Jacksonville, Florida, EverBank is a small bank with a market capitalization of $2.4 billion. Like other banks, it offers traditional U.S. deposits and loans, including mortgages, but it does so primarily via its strong online presence and deep levels of customer service. At its core, the management knows that customers can go anywhere, […]
Fifty years after the 1929 crash, a group of money managers and investment thinkers put together a collection of essays looking back at that experience. The result was a distillation of some pretty fine investment wisdom. Timely, I think, to review now.One of the contributors was Arthur Zeikel, then with Merrill Lynch. The title of […]
Although the mainstream media have turned its attention away from the wreckage of Obamacare, don’t think for a second that all is well.As the politicos in D.C. focus their attention on the midterm elections in November, now is a great time to study, prepare, and seek out the most affordable, accessible, and highest quality options […]
Turn on the tube and economic ignorance seems to be everywhere. There is constant shilling for more government. Business is demonized. Man is said to be trashing the environment. “Workers and women are oppressed” is the constant mantra.And members of the clueless media nod their heads in unison.Only John Stossel has provided the fresh air […]
Health care costs in the U.S. have been rising so steadily for so long that containment barely seems possible. Even optimists don’t dream of cutting the price tag. As its official name — the Patient Protection and Affordable Care Act — suggests, Obamacare aims for affordability, not radical reduction.But at a time when we’re all […]
“We kill people based on metadata.” — Former NSA and CIA director Gen. Michael Hayden “I think video games is [sic] a bigger problem than guns because video games affect people.” — Sen. Lamar Alexander “I know this is a long line. I feel real bad, but — I’m gonna cut.” — President Obama while […]
In early July 1944, delegates from 44 countries gathered at the Mount Washington Hotel in Bretton Woods, New Hampshire. A three-week summit took place, at which a new system was agreed to regulate the international monetary and financial order after the Second World War.The U.S. was already the world’s commercial powerhouse, having eclipsed the British […]
In the minds of many people around the world, including in the United States, the term “capitalism” carries the idea of unfairness, exploitation, undeserved privilege and power, and immoral profit making. What is often difficult to get people to understand is that this misplaced conception of “capitalism” has nothing to do with real free markets […]
When you type a website address into a browser, you might have noticed that the letters “http” appear at the front. “HTTP” stands for Hypertext Transfer Protocol. In typing a Web address, you are actually sending an HTTP command to transmit that website to you. Hypertext Transfer Protocol is the means by which information is […]
Some people are saying it is just what the doctor ordered. Others are saying that the cure is worse than the disease.The Affordable Care Act? Reengagement in Iraq? Tea Party bullying in the GOP?Not this time. Just as protracted in the corridors of Congress and the White House is the debate over the proposed reform […]
It may become increasingly difficult to see a real live doctor as the heavy hand of Obamacare weighs on health care providers. A physician shortage looms due to many opting for early retirement and others becoming overburdened with an influx of Medicaid and other government-subsidized patients. Lack of immediate access to a doctor doesn’t necessarily […]
In 2012, money mandarins running the European Union chose stagnation over restructuring. Here’s a consequence of that choice: expectations for a self-sustaining economic recovery keep getting crushed.Two years ago, European Central Bank (ECB) chief Mario Draghi promised to do “whatever it takes” to hold the eurozone together. He bluffed nervous investors into believing in a […]
Picture the scene. It’s 2020. You’re at the checkout in a convenience store with a carton of milk. But you’ve got no cash and you’ve left your cards at home. No problem. You scan your right index finger; the green light flashes. Purchase approved and you leave. Easy.Is this a realistic vision of the future, […]
It’s four years after the crash in the housing market and the economy is still in a funk. Sure the stock market has recovered, but unemployment remains high, housing prices continue to go nowhere, and plenty of unemployed 50 years olds worry they will never work again. Just how long are we to wait for a recovery and why is it taking so long?
The continued government stimulus of zero interest rates, bailouts, and fiscal stimulus have kept the asset bubble in real estate from correcting, at the same time it has pumped up the stock and bond markets.
But while there are more than a few pundits calling a bottom in the housing market, any slight bounce in activity we’ve seen is merely the resulting malinvestment brought about by zero interest rates, and the legal quagmire stopping home foreclosures. The market has not been allowed the clear. Until it is, the market will continue to meander near the bottom.
Ironically, it is Alan Greenspan who sheds some light on this in an interview with Bloomberg Businessweek. Greenspan points to a key difference between the RTC liquidation process after the S & L crash, and today’s lack of liquidation. When asked about the current administration’s policies, Greenspan said,
Well, it’s not the present administration, it’s the current view of most policy-oriented economists. And here, regrettably, I am in the minority. The notion that if there is an economic problem, the government is obligated to address it, necessarily creates uncertainty about the future. And there’s hard research that shows such activism is responsible in part for the very heavy discounting of earnings on longer-lived business investments, and by households that had dramatically shifted from owner occupancy to short-lived rentals in the face of the uncertainty of the direction of home prices. We need to replace such activism with a policy that allows the markets to correct their own imbalances. Remember the Resolution Trust Corporation in the early ’90s? I was on the oversight board of the RTC. It got stuck with the job of liquidating more than 700 failed savings and loans. Some of the stuff that the RTC wound up with was perfectly liquid and saleable. But a big chunk was uncompleted eight-hole golf courses, half-built office towers, and vacant malls. Nobody wanted it. We all sat around and said, “This stuff is deteriorating very rapidly, and if we don’t get rid of it, the taxpayers are going to take a huge hit.” I mean, the numbers were very, very large. Somebody suggested, “Let’s package it and sell it.” And we did. Needless to say, the bids were less than 50 percent of the original cost. Congress was outraged. We were giving away taxpayer-owned assets to greedy vulture funds.
A couple questions later,
Yes. Investors cleared out our illiquid inventory in a matter of months. The final cost to the taxpayers for the savings and loan crisis amounted to $87 billion, a fraction of the original estimate. Allowing the markets to liquidate worked.
What’s different with this crisis is that the FDIC remembers Congress being outraged. The deposit insurer does not want to be accused of “giving away taxpayer-owned assets to greedy vulture funds” again. So, it sits on almost $22 billion in failed bank assets and is partner in billions more.
For instance, NYSE-traded homebuilder Lennar Corp. purchased 40% stakes in bank loans from the FDIC in 2010, with the FDIC retaining the other 60% ownership along with providing seven-year, interest-free financing for Lennar’s share, beyond the $243 million the homebuilder contributed in equity. The three billion dollars in loans was purchased for $1.22 billion or 40 cents on the dollar according to Wall Street analysts.
Colony Capital was also a buyer of busted bank portfolios, again partnering with the FDIC. Commercial Mortgage Alert wrote about one of Colony’s purchases,
The stake was offered under the FDIC’s structured-sales program – one of the agency’s options for liquidating assets inherited from failed banks. Under the program, the FDIC sells stakes of 20-40% in portfolios to operating partners, which work out the assets. The agency retains an interest in order to share in any upside.
These partnerships are not the quick liquidations of the S&L/RTC days. The assets really haven’t left the government’s hands. The government holds majority shares in the partnerships and the minority partners are beholden to the FDIC for the interest-free financing. The seven -year term of the loan belies the idea that these assets will be quickly liquidated.
So as not to anger Congress, the deposit insurer is hoping the market will magically turn around and the punk loans and assets will be sold at higher prices.
The government braintrust embraces the view that the economy is cyclical and that no matter what the Fed or the government is doing, if they just wait long enough the market will turn around and a whole new real estate bubble will appear for them to sell into.
Unless the market is allowed to correct, these asset values are going nowhere. Meanwhile, the Federal Reserve’s monetary pumping will only create other asset bubbles that will ultimately crash.