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 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 […]
It might sound like the latest new product from Apple, but IPAB is actually the newest major legal challenge to Obamacare.Recently, a three-judge panel in the 9th Circuit Court of Appeals in San Francisco heard arguments about the Independent Payment Advisory Board, or IPAB, a 15-member panel created by the Affordable Care Act and empowered […]
Americans have come to believe that the IRS and the income tax are inevitable parts of our lives. After all, most everyone alive today has lived his entire life under federal income taxation.It wasn’t always that way. For some 125 years, the American people lived without having any tax imposed upon their income.The obvious question […]
Here’s a fun fact: Although we all hate the U.S. dollar, as it continues to hemorrhage wealth, its foothold as the world’s reserve currency isn’t going to disappear overnight.A Russian gas deal with China won’t change that — as we’ll highlight below.But before we get to the nitty-gritty, let’s dive into a story that’s right […]
Franklin Delano Roosevelt famously used the term “forgotten man” in a 1932 speech to describe those at the bottom of the economic pyramid who, he felt, government should aid.But the originator of the phrase “forgotten man” had a whole different meaning in mind. He aimed to expose the seeming good intentions of government to reveal […]
The Keynesian disaster recovery plan has been to lower rates, force people to take more risk in search of yield, and entice others to borrow and spend and, magically, more jobs will be created. If people won’t buy stocks, central banks will.Back in 2011, Ben Bernanke, when asked if QE2 was driving up stock prices, […]
I want to share some insight and give you a front-row seat to America’s next big shale play.Let’s get to it…Over the past 10 years, the U.S. has turned the ship around, quite literally.We’ve gone from a country that was expecting to import massive amounts of oil and gas — to a country that’s sitting […]
Whatever your views on the role of government, one thing is clear: There will be no way to pay for it if the economy doesn’t grow. And I’m not talking by a measly percentage point or two. If we can’t find our way back to 5% annual economic growth or above soon, America’s accumulated federal […]
According to the Bureau of Labor Statistics, consumer prices are rising at a 2.1% annual rate. This suggests to us that the current stock market boom will die with a bang, rather than a whimper.Fed economists say they don’t think inflation rates are rising. They think the most recent reading is a fluke. But why […]
Politicians love raising the minimum wage because they don’t have to ask voters to pay more in taxes. They just dump the costs onto shop owners. But they don’t act like politicians and go into debt to pretend like they have all the money in the world. They face real world situations. And sometimes that means replacing workers with more affordable options...
Regulation is supposed to keep you safe and make the economy function smoothly. At least that’s what they tell you in the news. But there’s another cost to regulation. One that you won’t hear about unless you have to deal with directly. And for the people in the economy who do, they’re the ones who have to pay the final cost.
The experts will tell you the recession is over, but they’re only torturing the data to hide the truth. The economy never recovered from the downturn it experienced. But the downturn happened in 2000, not 2008. The country’s been in the middle of a 14 year recession and hardly anyone knows the truth.
Every time Bitcoin crashes, it winds up at a price greater than it’s previous high. Yet the experts still call it a currency fad that will fade away. But a little over a year since it really took up, the digital currency is still going strong, and is once again seeing its price rise. But is there another reason why people are buying Bitcoins.
All paper currency has a shelf life. It could be 5 years or 500 years, but at some point, the value of any paper currency eventually reaches zero. That's why, for centuries, people have turned to one shiny metal to safeguard their personal store of wealth. And, as Jim Rickards explains, you still have that option. Read on...
According to some estimates, one man - whose name you're probably not familiar with - has saved over a billion lives. Who is he? And how has he influenced the current crop of innovators? Josh Grasmick explains...
It’s a destructive cycle that comes around everytime your politicians ask you to take to the polls. The government’s meddling creates unexpected problems that eventually overshadow the planners’ original intentions. But that only leads the way for even more interventions.
Politicians love inflation. It’s a way to pay for the government’s debts without upsetting the public by raising taxes, or their special interests by cutting government. So they’ll flood the economy with easy money and eat away at your savings. But that’s only part of the story...
You can count the number of people who went to jail over the 2008 financial crisis on one hand. Which is strange considering the U.S. loves to put people away in jail. But as one author discovered in his most recent book, having the right connections and a big enough bank account, can protect you from even the worst crimes.
Obama recently claimed this was the “Decade of the Brain”. But it not the first time the government made that promise. The last time they did it, they wasted millions of your tax dollars. Now they’re back for round two. But this time, their failure could mean more than squandered money. It could mean making Alzheimer’s even worse for those who suffer from it.
“So we have, indeed, had a disappointingly slow recovery, and our consistent expectations for a pickup in growth have been dashed over a number of years… And the labor market is behaving in some perplexing ways and showing patterns that are novel.”–Federal Reserve Chairperson Janet Yellen in a speech to the Economic Club of New […]
When Michael Lewis’ new book Flash Boys came out, the author caused a stir while making the media rounds to promote it. “The stock market is rigged,” he told 60 Minutes flatly. His comments set off a firestorm of debate as to whether sharp techies and their fast computers are screwing small investors.As titillating as […]
Last November, when the Environment Protection Agency (EPA) proposed moderating years of escalating mandates by reducing the amount of ethanol that must be mixed into gasoline, a top ethanol lobbyist seemed perplexed. “We’re all just sort of scratching our heads here today and wondering why this administration is telling us to burn less of a […]
Back in the 1980s, John Nestor became infamous for single-handedly causing massive traffic jams on the Capital Beltway. But in his professional life, he created a completely different kind of traffic jam... one that may have contributed to the deaths of thousands of innocent people. Juan Enriquez has the full story. Read on...
In 2001, President Bush demanded that Americans immediately go out and spend, racking up more debt in the hopes of inspiring economic recovery. President Obama has done this too, and his central banking henchmen have rigged the monetary system to punish anyone who saves.
You might think it would work, and it has, among some classes. But the wealthy are different. New surveys from people who make more than $750,000 per year show a new record level of savings among them.
CNBC says, “According to research from American Express Publishing and Harrison Group, the savings rate of the wealthiest 1% in the second quarter rose to 37%. That’s up from 34% in the second quarter of 2012 — and more than three times their savings rate in 2007.”
In other words, their saving is actually increasing, even given the evidence that the everlasting recession has abated in some ways. The rich continue to act as if it is 2009 — which suggests that this class has little confidence that the high stock market and seemingly good news that trickles out are really sustainable. They are preparing for the next crisis in ways they wish they had prepared for the last one.
It’s fascinating too to consider their investing and spending habits. CNBC further notes that only 40% are looking to invest anything in new companies over the next two years, and only 16% are considering doing that over the coming months.
This is a deep psychology of risk aversion. The Fed has driven interest rates to zero and attempted to put the screws to anyone who undertakes this Scrooge McDuck strategy of financial preservation. But it still doesn’t work. The rich won’t let go. They will not be fooled again.
Economists tend to forget the impact of past events on people’s current behavior. My mind often drifts back to the lady who lived in the house behind mine for years. She grew up in the worst of the Great Depression and recalled just how hard it was to get pans for the kitchen or basic materials for making dresses. Everything was precious. Nothing could be taken for granted. Therefore, she threw nothing away, no matter what. This habit persisted to the end.
After she died, her children went through the house and found hundreds and hundreds of foil pie pans, stacked higher and higher. There was a room with pillars of them. She loved pies and bought many at the store. But she could never bring herself to throw away the foil pans. To her, this was an item of high value. She couldn’t shake the feeling that it would be gravely irresponsible to toss away something that might have cost a week’s wages in 1937.
It’s common to dismiss this sort of attitude as evidence of senility. Surely, it is irrational! Her kids, of course, just rolled their eyes and tossed it off as sheer nuttiness.
I wouldn’t say so. If you live through times of grave privation, you never quite get over it. You come to understand a great truth that people who grew up amid plenty do not understand. You see the physical prosperity around you as a contingent condition that can be wiped out under the right circumstance. You no longer trust those in authority to bail you out. You come to understand the obligation to provide for yourself no matter what.
In short, you come to realize that no economic value is permanent and all is subject to change.
The savings behavior of the rich today is evidence that they are much like the old widow and her pie pans. They were burned very badly in the great collapse of 2008. It affected mainly real estate, a sector every respectable voice said would never fall. This was a safe haven, a permanent asset, and the best investment you could ever make. In a few short months (and in some cases even weeks), all those assumptions were blown away. Then the contagion started: The banks, the stock market, commercial real estate, old-line investment firms — everyone suffered.
That lesson tends to last, and it accounts for why it is so difficult for the federal government to stop this tendency to hoard cash and prepare for another rainy day.
What’s more, this approach is actually socially beneficial. You have to ask the question: Where does investment come from? Of course, people like Obama never ask this question. To him, the answer is obvious: The Fed can just print money and people will invest it. Or the federal government can just tax people and use the money to “invest” in his favorite sectors, like electric cars and electricity-generating windmills.
This is sheer fantasy. There is only one source of genuine investment. That is savings. Savings comes about from forestalling consumption. You have to give up things today so that you can have more tomorrow. There is no other path. The attempt to skirt that savings obligation and replace it with fiddling by the central bank and the government is pure folly. At best, it creates another round of false booms that end in busts. At worst, it destroys wealth and creates nothing at all.
What’s interesting is how individuals and institutions seem to understand something here that government and its economists do not. Despite every attempt to stop savings altogether — under the misbegotten theory that consumption causes growth — savings in general actually soared after 2008. Only recently has the rate dipped among most of the populace, even as it has continued to increase among the smart set.
You will note that the same thing happened at the attacks of Sept. 11, 2001. The president went on television to demand that everyone immediately go out and buy something. But Americans were at the point of assuming that whatever the president wants is probably not what is best for them and their families. Savings went up. But this was nothing compared with what happened after 2008. This was when people really started stuffing their mattresses.
The beautiful thing about this example is that it shows that government can’t always get what it wants. In fact, it rarely gets what it wants. The whole of its economic policy models are predicated on the idea that people respond to economic signals like machines. Change the signal and people fall in line. But that’s not how it works in the real world. People have brains and they have memories. The memory of 2008 is still with us, and it’s a good thing, too, for the prosperity of the future can come only from the savings of the past.
Let’s hear it for the Scrooge McDucks of the world. They dare to disobey, and, in so doing, they are building for the future, from which we will all benefit. We might all consider emulating them. Saving money is the ultimate revenge.