Finance / the Economy

• Save The Middle Class While Fixing the Banks for Good

  While I’m disgusted with the level of banker’s bonuses and with the obscene leverage practices financial institutions undertook, I do not think the answer to how we clean up them up now is to pile on yet more regulation. To be sure, banks that helped bring down the world economy and then subsequently got bailed out by the taxpayers should not be making billions of dollars in bonuses, especially while the middle class is suffering so greatly. And if we’re going to keep the FDIC in effect, a certain amount of regulation is required to protect taxpayer-backed deposits. But the…

• The Tepee Shaped Recovery

  The shape of this economic recovery will not be in a “V”, as many pundits have promulgated, but instead may be the inversion of that letter…which will unfortunately look much more like a tepee. The upcoming downfall will surprise most investors who have been tricked into believing that a government can print and spend their way into prosperity. Undeniably, there has been a superficial recovery in the economy, which was presaged by a 65% rebound in the S&P 500 since March of 2009. Third quarter GDP was positive—albeit at a subpar and marginal 2.2%—and Q4 of 2009 and Q1 of…

• Lending Takes Another Teeth-Kick

  The "Financial Crisis Responsibility Fee" dropped today on Capitol Hill. The odd-sounding measure ("You've caused a financial catastrophe. That'll be $8.50 please.") is the Obama government's latest plan to recoup the cost of bailing out the financial system over the last 18 months. The plan basically taxes large American banks. Based on how aggressive they are. The FCRF will require large financial institutions (those with more than $50 billion in consolidated assets) to pay fees equal to 0.15% of their "covered liabilities" each year. Covered liabilities defined as the total value of the bank's assets minus Tier 1 capital (cash…

• So You Think You Can Debase a Currency

  Yesterday I visited the nicest public pool I've ever set trunks in. The place was airplane hangar-sized. Giant hot tub. Towering waterslides. A float-along river for the kids. All this to be found in a tiny Tokyo suburb, the kind of place even most Japanese have never heard of. The pool's users can thank the Japanese government. Tokyo knows how to spend. Following the Japanese crash in the early 1990s, the government spent in an attempt to keep the economy afloat. Between 1990 and 2008, central government debt surged from $2.2 trillion to $8.5 trillion as the feds pumped out…

• Unstimulating America - How do you Undo a Trillion Dollars?

  That question has been on the minds of leaders and financial thinkers worldwide, since the financial crisis broke last fall. In response to falling asset prices, governments around the globe created trillions of dollars in stimulus spending and rescue funding. In the U.S. alone, the monetary base grew by a trillion dollars in a matter of months. At the time, it was believed that the crisis had to be stemmed at all costs. Politicians recognized that massive money creation could lead to inflationary problems down the road. But they took a "deal with that bridge when we come to it"…

• Death of the Dollar! Is the end of the Greenback Truly at Hand?

  There were a lot of reports this week about the demise of the dollar. Is the end of the greenback truly at hand? Or are reports of the dollar's death greatly exaggerated? And what does this mean for commodities? This week we cast a critical eye on some of the recent action in currency markets. One of the major "strikes" against the dollar recently was a report that oil market players may secretly be making plans to dump the buck. Many investors believe that a shift away from the dollar is already underway in some of the world's markets. Causing…

• Keeping our eyes on the ball

  Question: Can the debt mountain keep on growing to the sky or will we eventually see a landslide collapse? Answer: The evidence in the USA (continuously rising unemployment levels, ongoing home foreclosures, unusually high savings rate, falling velocity of money) suggests that the debt mountain is unstable. Given this, every dollar of debt that is added to it will increase the probability of a landslide. The following link will take the reader to a website which records – on a week by week basis – some selected news items which were published during the passing days in 1930. http://newsfrom1930.blogspot.com/It gives…