Are you a deflationist? Or an inflationist? No matter which way you believe the wind will blow, the truth is this: it’s up in the air. But, as Jim Rickards explains, there are things you can do to cover your assets, no matter which one wins the tug-of-war. Read on…
There are two things you shouldn’t do this Election Day: one, vote; two, buy gold. Why? Chris Campbell explores this and more in today’s Laissez Faire Today. Read on…
America has about 4% of the world’s population, yet houses 25% of the world’s incarcerated. What’s going on here? Chris Campbell digs deep into the industry to figure out the truth. While many blame the private prison industry, the real culprit, says Chris, begins right outside your door. Read on…
“While I heartily subscribe to your premise of pursuing one’s dream,” one reader, Donald J., wrote, “there are alternate perspectives worth considering.”[We’re listening… go on.]“Some wiseguy once said that life is what happens to you while you’re waiting for something better to come along. Milton put it a little more poetically in one of his […]
Want to get rich? Don’t listen to financial “gurus,” says Chris Campbell. In today’s Laissez Faire Today, Chris shares a Zen proverb and shows how understanding it is the only real way to get rich (and live a rich life). Read on…
Where do great investors come from?I’m not sure what the hurdle rate for greatness is, but Guy Spier has put up impressive results. His Aquamarine Fund has returned 463% since inception in 1997, versus just 167% for the S&P 500 (a broad proxy for the market). Put another way, $1 million invested at inception is […]
Ben Franklin once said, “An ounce of prevention is worth a pound of cure.” In today’s Laissez Faire Today, you’ll learn about one FREE website that has the potential to not only keep your family safe – but also open your eyes to what’s happening in your own neighborhood. Chris Campbell has all the details. Read on…
All over the world, power is dying. The dictators and tyrants of the world are no longer able to wield it like they once used to. And they’re losing it to the “little guy.” Chris Campbell shows you how to be the king of your castle by taking advantage of this fact. Today, you’ll learn how to grab “power gaps” in the market and channel them into your product idea or project. Read on…
The fireflies along the tidal rivers of Malaysia show "feats of synchrony that occur spontaneously, almost as if nature has an eerie yearning for order." Chris Campbell tells you where else this might occur in the world. Also, new technology may revolutionize the agriculture industry and what we think of as a farm.
Jeff Davis is running for Governor in Hawaii and has an interesting campaign strategy. Also, what motivates hackers is revealed and the findings might surprise you. Finally, Ferguson is discussed in a new light. Chris Campbell has more...
Next year is the 65th anniversary of the Peanuts comic strip. And Charlie Brown, Snoopy, Lucy and the rest of the gang will appear in their first full-length feature film in 35 years.One small company has the license to the Peanuts brand. The cash flow due to this company could be enormous. In late October, […]
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...
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 […]
Who can forget Robert Louis Stevenson’s Treasure Island? That map, marked with an “x,” is the stuff of high adventure.There is a modern-day equivalent of a treasure map, and it is just as coveted by those who seek reservoirs of oil and gas. It’s called seismic data.What are seismic data? In essence, they’re collected 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 […]
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 […]
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 […]
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 some […]
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 […]
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, […]
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 […]
I’m sure you’ve seen the news. As if recent, past U.S. policy fiascos in Libya, Egypt and Syria were not enough, the wheels are now coming off the proverbial bus in Iraq, site of so much blood and treasure spent in the last decade.Radical Islamist armies are marching toward Baghdad, slicing through Iraqi government troops […]
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 […]
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 […]
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 […]
In 1995, American agriculture underwent a profound, dangerous change.In that year, Monsanto and other companies pushed through approval for a handful of genetically modified (GM) organisms. These included canola oil tweaked to improve its flavor, potatoes modified to resist pesticide dousing, and tomatoes gene-spliced to delay ripening.“About half of all the crops planted on American […]
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 […]
People jacked up about income inequality can find a new hobby. The 1% are victims of a doomsday machine, and the countdown is ticking. Machine, thy name is “family.”This came to mind as I was reading a preview of Columbia Professor Andrew Ang’s forthcoming, must-read book on Asset Management. Ang is that oxymoron, an exciting […]
The secrecy of the Federal Reserve is legendary, but pressure in recent years has led to some opening up. Already in the last 12 months, we’ve seen some eye-popping records of who received credit during the 2008-09 credit crunch. We’ve seen lists of institutions that the Fed favors, and these lists have confirmed the worst fears. Hint: It’s all about the big banks.
But now we get the really fun stuff. The transcripts, released five years after the fact, of the open market committee meetings provide a fascinating look into how the Fed was thinking about the world just before the greatest market meltdown in modern times. No one at the 2006 meetings saw it coming. Thousands of market commentators, economists and bankers saw it coming, but the Fed — the all-wise and all-knowing Fed — did not see it coming.
That the Fed actually played the largest role in producing the bubble that turned to bust only adds to the irony that the Fed was clueless about the emerging reality on the ground. Ben Bernanke saw some softening in home prices and needed correction to the run-up, but he was somehow sure that there would be a soft landing.
The meetings opened that year with Alan Greenspan at his final meeting and saying his goodbyes. There was some talk about long-term pension problems. Greenspan dismissed it, pointing out that, “We have enough trouble forecasting nine months.” Everyone laughed. Ha ha. Thanks for admitting this — in private.
At this final meeting, the group also heard one of the clearest statements in all the transcripts that there were troubles on the horizon. Fed chief economist David Stockton stated very clearly: “As I contemplate our outlook and the things that I worry about the most on the domestic side of the economy, I’d say the housing sector is clearly one of the biggest risks that you’re currently confronting.”
But the gloom didn’t last long, and the meeting ended with a wildly upbeat report from none other than Timothy Geithner, now secretary of the Treasury. He begins with an over-the-top tribute to Greenspan (“I’d like the record to show that I think you’re pretty terrific”) and continues on with an upbeat forecast of endless growth and happiness forever. Even though he was spectacularly wrong, he is now running the show.
The opening meeting with Bernanke set the tone for all the meetings that followed. Stockton probably sensed that he might be free to speak his mind for the first time in years. He compared the situation in housing to riding a roller coaster blindfolded. “We sense that we’re going over the top, but we just don’t know what lies below.”
But Bernanke intervened to stop all such crazy talk. “I think we are unlikely to see growth being derailed by the housing market,” he said. He assured all present that “the strong fundamentals support a relatively soft landing in housing.”
Ever the pleaser, Geithner agreed. “Equity prices and credit spreads suggest considerable confidence in the prospect for growth,” he said. “Overall financial conditions seem pretty supportive of the expansion.”
Later that summer, Fed Gov. Susan Bies tried again to introduce some caution, pointing out that the banks were all using models that presume falling interest rates and rising home prices. This has allowed many American families to depend on home equity loans more than they should. “It is not clear what may happen when either of those trends turns around,” she cautioned.
Once again, Bernanke smacked down the naysayer. “So far, we are seeing, at worst, an orderly decline in the housing market…As I noted last time, some correction in this market is a healthy thing, and our goal should not be to try to prevent that correction, but rather to ensure that the correction does not overly influence growth in the rest of the economy.”
From the point of view of economic theory, there is an interesting comment made by Dallas Fed president Richard Fisher. He pointed that everyone on the planet was talking about the housing problem, but he cited this as a reason not to be concerned. “If we have not discounted what has been happening in the housing market, we have been living on Mars.”
In other words, he was saying that if something awful were going to happen, it would already have happened. Because everyone was talking about something meant that the awareness of the risk was surely already built into the existing data.
This amounts to a reversal of the old joke about the economist who refused to admit that there is a $20 bill on the ground in front of him on grounds that if the bill were there, someone would have already picked it up. In the same way, if this economist were going to be hit by an oncoming truck, it would have already hit him.
The year ended with Gov. Bies again warning that the risk is much more serious than anyone had yet acknowledged. “A lot of the private mortgages that have been securitized during the past few years really do have much more risk than the investors have been focusing on,” she said. But Bernanke shoots her down yet again: There will be a “soft landing” for the economy.
Look, there is no crime in not knowing the future. No one knows: no palm reader, no philosopher, no economist. You can assemble all the data the world has to offer, but it tells you only about the past. Forecasts are fine, but they are always speculations. The people assembled in the Fed’s meeting room were doing forecasts not unlike what every business in the world does every day. Sometimes they are right, and sometimes they are not.
What is significant here is not that Bernanke did not see the future. The significance is that the power and responsibilities of the Federal Reserve itself are premised on the idea that somehow its managers know something that we do not. They are charged not with planning the past that they can know, but with planning a future that they cannot know. This is the essential error of the central bank’s planning powers.
And there is another problem. The Fed has an institutional bias, and this is clear from the transcripts. It is especially obtuse in taking note of risks and problems that the Fed itself is responsible for creating. In this way, it is just like every other government agency. They all see problems in the world but those that the institution itself caused.
The congratulatory praise of Greenspan at that opening meeting of 2006 is a metaphor for the arrogance and self-congratulatory culture of the entire institution. The Fed imagines itself to be the solution for every problem. The truth is that the Fed itself is the source of a vast number of our problems.