Posts Tagged ‘Marshall Auerback’

DO BOND MARKETS FUND OUR SPENDING?

DO BOND MARKETS FUND OUR SPENDING?

Courtesy of The Pragmatic Capitalist 

High angle view of a globe on a heap of Indian banknotes and Euro banknotes Vertical

This idea that the United States is the next Greece persists.  We saw it several times this week from various analysts and the regular pundits who continue to trot out this argument despite having been terribly wrong about their hyperinflation and/or default thesis over the last few years.  I think it’s very important that investors understand that the United States cannot default on its obligations in the same way that Greece, a US state or a household can.  Why is it important to understand this?  Because markets are psychologically driven.  Regular readers know I am not the most optimistic prognosticator.  Anyone who has read this site over the last few years knows that I have and continue to believe we are mired in a balance sheet recession.  My outlook is not rosey, but it is not dire either.  I do not believe doom is on the horizon and I most certainly do not believe the United States, as the sovereign supplier of a non-convertible floating exchange rate currency, will default on its obligations.

At the center of this argument is the actual workings of our monetary system. So, how does the United States actually fund itself?  Unlike a household, the United States does not require revenue or debt to fund itself.  The United States government simply credits bank accounts.  They walk into a room and input numbers into computers – literally.  This might sound counter-intuitive to the rest of us who fund our spending through debt issuance or revenue streams, but the same is not true for the Federal Government. This was best explained last week in an interview on BNN by Marshall Auerback, a portfolio strategist with RAB Capital:

“Governments spend by crediting bank accounts.  The causation is that you spend money first.  What happens afterwards is bonds are issued as a reserve drain.  They don’t actually fund anything.  This is one of the great myths that is perpetuated by most of the economics profession.  So the idea that we have “unfunded liabilities” is ludicrous.  If we declare a war, for example, in Iraq or Afghanistan, we don’t go to our bond holders.  We don’t go to China to give them a line-item veto for what we can and can’t spend.  We just spend the money. The implicit assumption here is that somehow we have some external constraint.  The


continue reading


Tags: , , , , , , , , , ,




Greece Signs its National Suicide Pact

Greece Signs its National Suicide Pact

Courtesy of New Deal 2.0, by Marshall Auerback

greek-flag-150Weighing in on Europe’s new “rescue” package for Greece, Marshall Auerback warns that deficit-bashing is an increasing threat the global economy.

Agreement has been reached in Europe on a “rescue” package for Greece. But it’s no cause for celebration. It’s the kind of “rescue” sensation one experiences after paying out what’s left in one’s wallet when confronted with a robber with a gun. The insanity of self-imposed budgetary constraints will be manifest to all soon enough. Economists and the EU bureaucrats who advocate a slavish adherence to arbitrary compliance numbers fail to comprehend the basis of government spending. In imposing these voluntary financial constraints on government activity, they deny essential government services and the opportunity for full employment to their citizenry.

Score another one, then, for the high priests of fiscal rectitude. Harsh cuts, tax increases — this is by no means a recovery policy. The capital markets have got their pound of flesh. But Greece is no more able to reduce its deficit under these circumstances than it is possible to get blood out of a stone. Politically, it means ceding control of EU macro policy to an external consortium dominated by France and Germany. Greece becomes a colony.

Nor will the policies work, as the ’strict enough conditions’ imposed will further weaken demand in Greece and, consequently, the rest of the European Union. Furthermore, the rapidly expanding deficit of Greece has benefited the entire EU because it supported aggregated demand at the margin, and the sudden reversal contemplated by this package will reverse those forces.

The requirement that budget deficits should be zero on average and never exceed 3 per cent of GDP or gross national debt levels should not exceed 60 per cent of GDP not only restrict the fiscal powers that governments would ordinarily enjoy in fiat currency regimes, but also violates an understanding of the way fiscal outcomes are effectively endogenous, as Bill Mitchell has noted on several occasions.

Meanwhile, Greece and the rest of the Euro zone is being revealed as necessarily caught in a continual state of Ponzi style financing that demands institutional resolution of some sort to be sustainable. The separation of the monetary authorities from the fiscal authorities and the decentralization of the fiscal authorities have inevitably made any co-ordination of…
continue reading


Tags: , , , ,




Stop the madness now!

Excellent post on the economy and saving it (or not) by Edward Harrison at Credit Writedowns. (My yellow highlighting) – Ilene

Stop the madness now!

mad as hellThis is a post I just wrote over at Yves Smith’s site Naked Capitalism in response to a reader request. Marshall Auerback has already written a reply as well and I will post this later today.

A reader at Naked Capitalism asked us to respond to a recent article from the Christian Science Monitor asking Does US need a second stimulus to create jobs?

Marshall Auerback has already done some heavy lifting. He says emphatically yes. Now I want to take a crack at this. My short answer is no. But before I go into this, as an aside, I wanted to mention Marshall’s new smiling, happy picture up at the great blog New Deal 2.0 where he now writes.  Earlier, when Credit Writedowns was hosted at Blogger, he used a picture best described as a mug shot in his profile, but he has changed that one too (although he smiles there a little less). He thinks we haven’t noticed this sleight of hand.  Well I have! Once upon a time, Marshall wrote with a man I called all bearish, all the time this summer. Take a look at that post; you don’t see him smiling now do you? We have Lynn Parramore, New Deal 2.0’s editor to thank for making Marshall Auerback into an optimist.

Different policy choices

But all teasing aside, I do want to take the opposite side of this trade.  You see I too was a deficit hawk. And while I may have been backing fiscal stimulus, I have felt conflicted for doing so. Here’s how I see it. 

You have four options:

  1. No stimulus. Let the chips fall where they may. Yves Smith calls this the ‘Mellonite liquidationist mode.’ The thinking here is that trying to avoid the inevitable bust only makes it that much larger. And the economic policies during recessions in 1991 and 2001 seem to bear that out. The Harding Recession of 1921 is commonly seen as gold standard response.
  2. Monetary stimulus only. Quantitative easing mania. My understanding is this is what Ambrose Evans-Pritchard has been advocating.   The thinking here is that the flood of money and the


continue reading


Tags: , , , , , , , , , , , , , ,




 
 
 

Phil's Favorites

US House condemns Donald Trump's racist tweets - why his language is so dangerous

 

US House condemns Donald Trump's racist tweets – why his language is so dangerous

Courtesy of Natasha Lindstaedt, University of Essex

President Donald Trump has been denounced by the US House of Representatives for tweets attacking four Democratic Congresswomen of colour calling on them to “go back and help fix the totally broken and crime infested places from which they came”. The resolution, which passed by 240 to 187 votes on July 16, condemned the “racist comments that have legitimised fear and hatred of New Americans and people of colour”.

In response to Trump’s threat, the four...



more from Ilene

Kimble Charting Solutions

Aussie Dollar About To Send Bullish Message To Precious Metals?

Courtesy of Chris Kimble.

The Australian Dollar and its ETF (NYSEARCA: FXA) have traded sideways for much of the past 4 years (see blue shaded area on chart above).

And since the Aussie Dollar and precious metals are highly correlated, this hasn’t helped gold and silver.

But this setup may be changing soon as a big test comes into play for the AU$.

It is currently testing falling resistance on a bullish falling wedge pattern.

If it succeeds in breaking out at (1), it will send metals and commodities a short-term bullish message. Stay tuned!

This article was first writ...



more from Kimble C.S.

Zero Hedge

Three Iranians Caught Smuggling "Many Tons" Of Nuke-Related Material Out Of US

Courtesy of ZeroHedge. View original post here.

A major case involving three Iranian citizens who for years allegedly smuggled nuclear related materials into Iran from a US broker has been revealed this week in a New York federal court. 

The scheme involved illegally exporting "many tons" of carbon fiber out of the United States between 2008 and 2013, which federal prosecutors say violated existing US sanctions and a UN em...



more from Tyler

Insider Scoop

Cannabis Stocks Gainers And Losers From July 17, 2019

Courtesy of Benzinga.

Read more about our latest Cannabis News! CANNABIS HOME Gainers
  • Aurora Cannabis (NYSE: ACB) shares rose 3.49%, to close at $7.41.
  • Aphria (NYSE: APHA) shares increased by 3.97% to close at $6.55.
  • Canopy...


http://www.insidercow.com/ more from Insider

Digital Currencies

Bitcoin Breaks Back Below $10k, Crypto-Crash Accelerates As Asia Opens

Courtesy of ZeroHedge. View original post here.

Update 2010ET: Having briefly stabilized after this morning's weakness, cryptos are tumbling once again as Asian markets open.

Bitcoin has broken below $10,000 again...

*  *  *

While all eyes are on Bitcoin as it slides back towards $10,000, the real mover in the last 12 hours has been Ethereum after...



more from Bitcoin

Biotech

DNA testing companies offer telomere testing - but what does it tell you about aging and disease risk?

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

 

DNA testing companies offer telomere testing – but what does it tell you about aging and disease risk?

A telomere age test kit from Telomere Diagnostics Inc. and saliva. collection kit from 23andMe. Anna Hoychuk/Shutterstock.com

Courtesy of Patricia Opresko, University of Pittsburgh and Elise Fouquerel, ...



more from Biotech

ValueWalk

Professor Shubha Ghosh On The Current State Of Gene Editing

 

Professor Shubha Ghosh On The Current State Of Gene Editing

Courtesy of Jacob Wolinsky, ValueWalk

ValueWalk’s Q&A session with Professor Shubha Ghosh, a professor of law and the director of the Syracuse Intellectual Property Law Institute. In this interview, Professor Ghosh discusses his background, the Human Genome Project, the current state of gene editing, 3D printing for organ operations, and gene editing regulation.

...

more from ValueWalk

Chart School

Gold Gann Angle Update

Courtesy of Read the Ticker.

Charts show us the golden brick road to high prices.

GLD Gann Angle has been working since 2016. Higher prices are expected. Who would say anything different, and why and how?

Click for popup. Clear your browser cache if image is not showing.



The GLD very wide channel shows us the way.
- Conservative: Tag the 10 year rally starting in 2001 to 2019 and it forecasts $750 GLD (or $7500 USD Gold Futures) in 10 years.
- Aggressive: Tag the 5 year rally starting in 1976 to 2019  and it forecasts $750 GLD (or $7500 USD Gold Futures) in 5 years.

Click for popup. Clear your browser cache if ima...



more from Chart School

Members' Corner

Despacito - How to Make Money the Old-Fashioned Way - SLOWLY!

Are you ready to retire?  

For most people, the purpose of investing is to build up enough wealth to allow you to retire.  In general, that's usually enough money to reliably generate a year's worth of your average income, each year into your retirement so that that, plus you Social Security, should be enough to pay your bills without having to draw down on your principle.

Unfortunately, as the last decade has shown us, we can't count on bonds to pay us more than 3% and the average return from the stock market over the past 20 years has been erratic - to say the least - with 4 negative years (2000, 2001, 2002 and 2008) and 14 positives, though mostly in the 10% range on the positives.  A string of losses like we had from 2000-02 could easily wipe out a decades worth of gains.

Still, the stock market has been better over the last 10 (7%) an...



more from Our Members

Mapping The Market

It's Not Capitalism, it's Crony Capitalism

A good start from :

It's Not Capitalism, it's Crony Capitalism

Excerpt:

The threat to America is this: we have abandoned our core philosophy. Our first principle of this nation as a meritocracy, a free-market economy, where competition drives economic decision-making. In its place, we have allowed a malignancy to fester, a virulent pus-filled bastardized form of economics so corrosive in nature, so dangerously pestilent, that it presents an extinction-level threat to America – both the actual nation and the “idea” of America.

This all-encompassing mutant corruption saps men’s souls, crushes opportunities, and destroys economic mobility. Its a Smash & Grab system of ill-gotten re...



more from M.T.M.

OpTrader

Swing trading portfolio - week of September 11th, 2017

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 ...



more from OpTrader

Promotions

Free eBook - "My Top Strategies for 2017"

 

 

Here's a free ebook for you to check out! 

Phil has a chapter in a newly-released eBook that we think you’ll enjoy.

In My Top Strategies for 2017, Phil's chapter is Secret Santa’s Inflation Hedges for 2017.

This chapter isn’t about risk or leverage. Phil present a few smart, practical ideas you can use as a hedge against inflation as well as hedging strategies designed to assist you in staying ahead of the markets.

Some other great content in this free eBook includes:

 

·       How 2017 Will Affect Oil, the US Dollar and the European Union

...

more from Promotions





About Phil:

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...

Learn more About Phil >>


As Seen On:




About Ilene:

Ilene is editor and affiliate program coordinator for PSW. She manages the site market shadows, archives, more. Contact Ilene to learn about our affiliate and content sharing programs.

Market Shadows >>