Bumps, Dips, Bubbles, and Storms (Part 1)
Real estate had become so overvalued it was destined to end badly, and most of the new millionaires the boom had created were now paupers once again
Fiat Money Inflation in France
There is a lesson in all this which it behooves every thinking man to ponder
Aug 09 2013
Oct 30 2012
Last Thursday we reported on the latest from hedge fund manager Hugh Hendry of Eclectica Asset Management where he shared his view on gold and much more at the recent Buttonwood Gathering. In the article linked above, just below the Buttonwood Gathering video, we posted a shorter clip of his “Greatest Hits,” revealing that Hendry argued years ago that the policies of central banks were specifically to achieve inflation, but nevertheless were, on net, very deflationary. This has proved to be both true and prescient.
Oct 26 2012
European Central Bank President Mario Draghi has been busy this week trying to convince grumpy German bankers that his program of buying up Eurozone nations’ debt is not simply tantamount to firing up the printing presses, will not lead to price inflation and does not represent a bailout of profligate nations at German taxpayer expense. His justification for undertaking the program, which is similar to the Federal Reserve’s quantitative easing programs, now in their sixth and apparently endless, iteration, is that “the market is wrong.”
As Wealth Cycles readers know, the market, when left to function free of government interference, contains a universe of information about supply and scarcity, input costs, prices and demand—far more information than any individual, institution or government can encompass. A properly functioning free market is not wrong.
However, given the continuous manipulation of the markets by central banks in recent decades, tremendously accelerated since 2008, Draghi, today, probably is correct: the market is wrong.
Oct 22 2012
The German Bundesbank is now concerned with acquiring their physical gold, while other central banks are busily investing the cash they create into stocks (see the Banks of Japan, Israel, and the indirectly Federal Reserve-funded plunge protection team). Meanwhile, risk appetite in markets has reached extreme levels, according to the Barclays chart below.
Sep 13 2012
Jul 31 2012
A second blackout in two days plunged one-half of the 1.2 billion Indian citizens into darkness. Convenience is not the only sacrifice. Agricultural supplies fall under further pressure as a result of the dry weather--the dryness is also the cause of the twin grid failures.
Jul 23 2012
It is obvious today, after years of first-hand evidence, that money supply and expectations for changes in the money supply--in other words, dollar printing--impact asset prices and investing more than any other factor.
The word “cycle” comes from the Greek word kyklos, meaning cycle or circle. One common definition of cycle is “a periodically repeated sequence of events.”
The idea of a cycle is symbolized by a circle, which, because there is no beginning or end, represents recurrence. The symbolic circle is often divided into segments—often two, such as the Chinese yin and yang or day/night, but more often four segments, like the seasons.
A recognition and understanding of cycles is one way human beings are able to recognize patterns in data. As early humans learned that events in nature recur over and over again with regularity, they developed the ability to plan for the future, which ultimately led to advanced civilizations.
The Consumer Price Index (CPI) is a measure generated by the U.S. Bureau of Labor Statistics (BLS) by tracking the cost of a standard basket of goods and services over the years. At one time, the CPI was a valid yardstick of prices, based on the actual price of the same items year after year. But for the past few decades, the CPI has been comparing apples and oranges, so to speak. Under the methodology used to calculate CPI since 1982, when the price of one item—say a pound of steak—rises significantly, BLS simply substitutes another, less costly item—say a pound of chicken breast. In other cases, BLS uses a technique called hedonic regression, by which its statisticians guesstimate, for example, that an item—say a home computer—built today is probably faster and better than a home computer built 10 years ago. So they adjust the price increase downward to compensate for the assumed higher value of the newer item.