Posts Tagged ‘Weimar Collapse’

Some Common Fallacies About Inflation and Deflation: the Weimar Nightmare in Review

Here’s an article by Jesse’s Café Américain on inflation and deflation. 

Some Common Fallacies About Inflation and Deflation: the Weimar Nightmare in Review

Le Café AméricainThere are several fallacies making the rounds of the economic community, often put forward by pundits on the infomercials for corporate America, and also on the internet among well-meaning but badly informed bloggers.

The first of these monetary fallacies is that ‘the output gap will prevent inflation.’ The second is that a lack of net bank lending or other ‘debt destruction’ will require a deflationary outcome. Let’s deal with the output gap theory first.

Output gap is the economic measure of the difference between the actual output of an economy and the output it could achieve when it is most efficient, or at full capacity.

The theory is that when GDP underperforms its potential, with unemployment remaining high, there can be no inflation because demand is weak and median wages will be presumably stagnant. This idea comes from neoliberal monetarist economics, and a misunderstanding of the inflationary experience of the 1970s.

The thought is that sustained inflation is due to a ‘wage-price’ spiral. Higher wages amongst workers cause prices to rise, prompting workers to demand higher wages, thereby fueling inflation. If workers do not have the ability to demand higher wages there can be no inflation.

While this is in part true, it tends to confuse cause and effect.

The cause of a monetary inflation, which is a broadly based inflation across most products and services relatively independent of demand, is often based in a monetary expansion of the currency resulting in a debasement and devaluation.

A monetary expansion is relatively difficult to achieve under an external standard since it must be overt and often deliberative. A gradual inflation is an almost natural outcome under a fiat currency regime because policy-makers can almost never resist the temptation of cheap growth and the personal enrichment that comes with it.

There can be short term non-monetary inflation-deflation cycles that tend to be more product specific in a market that is not under government price controls. But this is not the same as a broad monetary inflation or deflation.

The key difference is the value of the dollar which has little or nothing to do with a business cycle or product demand/supply induced inflation/deflation.

In the modern era the Federal Reserve can increase the money supply

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Zero Hedge

"Insurgents" Shell Russian Embassy In Syria After Al-Qaeda Calls For Jihad Against Russian Civilians

Courtesy of ZeroHedge. View original post here.

Submitted by Tyler Durden.

As the twin blasts that ripped through Ankara on Saturday underscore, being around large gatherings of people who are protesting (peacefully or otherwise) in public places can be dangerous if you’re in a Mid-East war zone. Large crowds make for easy targets and as we’ve seen in Turkey, at least some governments seem to believe that inflicting casualties on civilians is a legitimate tool for shaping public opinion.

With that in mind, consider that on Tuesday, “insurgents” hit the Russian embassy in Damascus as more than 300 people gathered to express their support for Moscow’s intervention in Syria. As ...

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Kimble Charting Solutions

What’s It Mean When Everyone Expects A Black Swan Event?

Courtesy of Chris Kimble.

Yesterday might have seemed like a boring day, but a little known event took place that is very worthwhile.  Turns out, the CBOE SKEW Index hit an all-time high.  Here’s from the CBOE’s website says the SKEW is.  The CBOE SKEW Index (“SKEW”) is an index derived from the price of S&P 500 tail risk. Similar to VIX®, the price of S&P 500 tail risk is calculated from the prices of S&P 500 out-of-the-money options.  SKEW typically ranges from 100 to 150. In essence, the SKEW compares how much option traders are willing to pay for out-of-the money put versus call options.  When the SKEW is high (like we just saw), it says traders are willing to pay anything for the protection that ...

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Chart School

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Phil's Favorites

Banks Give Up Hopes of Hikes, Plow Into Long Dated Treasuries and Mortgage-Backed Securities

Courtesy of Mish.

Banks have become convinced the Fed simply isn't going to hike. So instead of waiting any longer, large banks like Wells Fargo are plowing billions of dollars into longer dated treasuries and agencies.

Simply put, Big US Banks Lose Patience With the Fed
In the years since the crisis the banks have grown used to grappling with higher costs and subdued demand for credit, while keeping plenty of cash and cash-like instruments on hand in the hope of benefiting from an uptick in short-term rates.

But, after the decision from the US Federal Reserve to keep its target overnight rate on hold this month, more lenders are taking their cue from Wells Fargo, the biggest bank in the world by market capitalisation, said analysts. ...

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Market News

News You Can Use From Phil's Stock World


Financial Markets and Economy

Japan Futures Signal Drop Before China Data; Dollar Holds Losses (Bloomberg)

Asian equities looked set to snap the longest rally for global stocks since February, with Chinese trade figures expected to provide a catalyst for investors. The dollar was weaker following a rally in commodity-linked currencies as traders continue to bet U.S. interest-rate increases will be pushed out until 2016.

What to watch for in Intel’s earnings (Market Watch)

Intel Corp. ...

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Sector Detector: Bulls rally, but bears lurk

Reminder: Sabrient is available to chat with Members, comments are found below each post.

Courtesy of Sabrient Systems and Gradient Analytics

Last week, the S&P 500 put up its best week of the year, closing above key psychological levels and breaking through bearish technical resistance, with bulls largely inspired by the dovish FOMC meeting minutes. But this year’s market has been news-driven and quite difficult for traders to read. Even our fundamentals-based and quality-oriented quant models have struggled to perform. With corporate earnings season now underway, equities might take a breather at this point of the oversold rally until some clarity from key corporate bellwethers begins to take shape, particularly with respect to forward guidance. But despite severe global headwinds, there remain strong rea...

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All About Trends

Mid-Day Update

Reminder: David is available to chat with Members, comments are found below each post.

Click here for the full report.

To learn more, sign up for David's free newsletter and receive the free report from All About Trends - "How To Outperform 90% Of Wall Street With Just $500 A Week." Tell David PSW sent you. - Ilene...

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Swing trading portfolio - week of October 12th, 2015

Reminder: OpTrader is available to chat with Members, comments are found below each post.


This post is for all our live virtual trade ideas and daily comments. Please click on "comments" below to follow our live discussion. All of our current  trades are listed in the spreadsheet below, with entry price (1/2 in and All in), and exit prices (1/3 out, 2/3 out, and All out).

We also indicate our stop, which is most of the time the "5 day moving average". All trades, unless indicated, are front-month ATM options. 

Please feel free to participate in the discussion and ask any questions you might have about this virtual portfolio, by clicking on the "comments" link right below.

To learn more about the swing trading virtual portfolio (strategy, performance, FAQ, etc.), please click here ...

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Whitney Tilson On LL, EXACT, And Martin Shkreli


Whitney Tilson On LL, EXACT, And Martin Shkreli

Courtesy of Value Walk

1) The shares of one of my largest short positions (~3%), Exact Sciences, crashed by more than 46% yesterday. Below is the article I published this morning on SeekingAlpha, explaining why I think it’s still a great short and thus shorted more yesterday. Here’s a summary:

  • The U.S. Preventative Services Task Force’s Colorectal Cancer Screening Draft Recommendation issued yesterday is devastating for Exact Sciences’ only product, Cologuard.
  • I think this is the beginning of the end for the company.
  • My price target for the stock a year from now is $3, so I shorted more yes...

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Baxter's Spinoff

Reminder: Pharmboy and Ilene are available to chat with Members, comments are found below each post.

Baxter Int. (BAX) is splitting off its BioSciences division into a new company called Baxalta. Shares of Baxalta will be given as a tax-free dividend, in the ratio of one to one, to BAX holders on record on June 17, 2015. That means, if you want to receive the Baxalta dividend, you need to buy the stock this week (on or before June 12).

The Baxalta Spinoff

By Ilene with Trevor of Lowenthal Capital Partners and Paul Price

In its recent filing with the SEC, Baxter provides:

“This information statement is being ...

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Mapping The Market

An update on oil proxies

Courtesy of Jean-Luc Saillard

Back in December, I wrote a post on my blog where I compared the performances of various ETFs related to the oil industry. I was looking for the best possible proxy to match the moves of oil prices if you didn't want to play with futures. At the time, I concluded that for medium term trades, USO and the leveraged ETFs UCO and SCO were the most promising. Longer term, broader ETFs like OIH and XLE might make better investment if oil prices do recover to more profitable prices since ETF linked to futures like USO, UCO and SCO do suffer from decay. It also seemed that DIG and DUG could be promising if OIH could recover as it should with the price of oil, but that they don't make a good proxy for the price of oil itself. 


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Watch the Phil Davis Special on Money Talk on BNN TV!

Kim Parlee interviews Phil on Money Talk. Be sure to watch the replays if you missed the show live on Wednesday night (it was recorded on Monday). As usual, Phil provides an excellent program packed with macro analysis, important lessons and trading ideas. ~ Ilene


The replay is now available on BNN's website. For the three part series, click on the links below. 

Part 1 is here (discussing the macro outlook for the markets) Part 2 is here. (discussing our main trading strategies) Part 3 is here. (reviewing our pick of th...

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Help One Of Our Own PSW Members

"Hello PSW Members –

This is a non-trading topic, but I wanted to post it during trading hours so as many eyes can see it as possible.  Feel free to contact me directly at with any questions.

Last fall there was some discussion on the PSW board regarding setting up a YouCaring donation page for a PSW member, Shadowfax. Since then, we have been looking into ways to help get him additional medical services and to pay down his medical debts.  After following those leads, we are ready to move ahead with the YouCaring site. (Link is posted below.)  Any help you can give will be greatly appreciated; not only to help aid in his medical bill debt, but to also show what a great community this group is.

Thank you for you time!

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Philip R. Davis is a founder Phil's Stock World, a stock and options trading site that teaches the art of options trading to newcomers and devises advanced strategies for expert traders...

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