Baltic Dry Index. 2462 -37 Brent Crude 61.54 Spot Gold 1506
Never ending Brexit now October 31,
maybe. 53 days away.
Trump’s Nuclear China Tariffs
Now In Effect.
USA v EU trade war postponed to
November, maybe.
“Lenin is said to have declared that the best way to destroy the
Capitalist System was to debauch the currency. By a continuing process of
inflation, governments can confiscate, secretly and unobserved, an important
part of the wealth of their citizens. By this method they not only confiscate,
but they confiscate arbitrarily; and, while the process impoverishes many, it
actually enriches some.”
The Economic Consequences of the Peace
With the next
global recession all but here, get ready for more funny money. Digital
dollars or e-dollars. Virtual dollars that in good times pay a slight interest
rate to holders, and in bad times charge a negative interest rate. I think you
can guess what’s coming next – negative interest rates.
At least that’s the plan of Michael
Bordo, an economist at Rutgers University and a fellow at the Hoover
Institution, the public-policy think tank at Stanford University according to
MarketWatch.
After 58 years of the Great Nixonian Error
of fiat money, communist money, the whole financial system is essentially
broken, we have the greatest wealth disparity since the 1930s, polarised
politics, and central banksters out of ammo and ideas.
Over a decade of zero interest rates, quantitative
easing, stock market bailouts, bond market rigging, and the longest but weakest
rigged recovery in history, the Great Nixonian Error is nearing it’s end as
other digital currencies get proposed, Facebook’s Libra and China’s proposed equivalent. We are about to enter the age of private and
public funny money.
To which this old dinosaur market
watcher can only say, get gold (and silver) for that same rainy day
revulsion sets in on the fiat
currencies.
Why the coming recession could force the Federal Reserve to swap greenbacks for digital dollars
Published: Sept 7,
2019 5:20 p.m. ET
The Federal Reserve has never been more famous than it is
today. It drew praise, and ire, for its handling of the financial crisis a
decade ago, and the extraordinary measures it took subsequently to stimulate
the U.S. economy have made it an important driver of financial markets.
Meanwhile, President Trump has made its chairman, Jerome Powell, a household name by frequently criticizing the central bank’s policies on Twitter and to the press.
A movement, meanwhile, has been brewing among economists, financial-services professionals and central bankers to encourage a rethinking of the technology of currency — those paper notes we carry in our wallets — with an eye toward issuing a digital currency. Some argue that could give central banks the tools necessary to break free of chronic disinflation and persistently low or negative interest rates, while providing Americans a risk-free means to transact in a world where digital commerce constitutes a growing share of the economy.
“The debate isn’t about whether we need [a digital currency],” Michael Bordo, an economist at Rutgers University and a fellow at the Hoover Institution, the public-policy think tank at Stanford University, told MarketWatch. “It’s about how you do it.”
Americans already use digital currency for most of their purchases. In 2018, they used physical dollars for just 26% of transactions, versus 62% with digital currency, which includes credit cards, debit cards and bank transfers, according to the Fed.
A central-bank digital currency could work much like the mostly bank-issued digital money Americans use today, with some key differences. First, it would be backed by the full faith and credit of the United States government and, therefore, risk-free. The local bank that manages your savings account could fail at any time and the dollars in your account (beyond those insured by the FDIC) would disappear. A Fed “e-dollar” would persist as long as the U.S. government does.
More important, an e-dollar could pay
interest. The idea that cash should pay interest dates back to monetary
economist Milton Friedman, who argued in 1969 that the most efficient monetary
system would be one in which cash bears interest equal to that of short-term
government bonds, to encourage greater use of the dollar.
In good times, earning interest on your e-dollars would simply make everyone a little richer, but in times of crisis it could also be used to institute negative interest rates, essentially a tax on holding cash. Such a policy would likely strike Americans as governmental overreach, but, Bordo argued, the alternative is worse.
Central bank ammunition
The current economic expansion is the longest in U.S. history, but warning signs of a recession abound, including slowing economic growth and the recent inversion of the yield curve for U.S. government debt. In response, the Fed reduced interest rates in July and hinted at more cuts to come.
But economists worry that the Fed will not have enough ammunition to fight the next downturn, as the central bank has typically had to cut rates by at least five percentage points to stimulate the economy following a recession.
The Fed may
be forced to restart its program of “quantitative easing,” or the purchase of
long-term government debt to push down long-term interest rates, though there
is growing concern that this is an ineffective tool. Take a look at Japan,
which has been mired in a decades-long economic malaise.
Interest rates have
been stuck near zero for almost 20 years. Despite a massive program of
government bond buying that has led to the Bank of Japan’s owning more than 40%
of all Japanese government debt, it has still suffered four recessions over the
past 20 years.
The eurozone
hasn’t fared much better despite imposing negative interest rates on large
banks, as it’s suffered two recessions since the financial crisis.
Bordo said
the problem with negative rates in Europe and Japan is that, without a
central-bank digital currency held by the public at large, those rates can only
be imposed on banks, which hurts banks’ ability to lend and does little to
encourage the magnitude of spending needed to jolt economies back to normal
levels of growth.
More
China says new digital currency will be similar to Facebook's Libra
September 6, 2019 / 7:43 AM
SHANGHAI (Reuters) - China’s proposed new
digital currency would bear some similarities to Facebook’s Libra coin and
would be able to be used across major payment platforms such as WeChat and
Alipay, a senior central bank officer said.
Mu
Changchun, deputy director of the People’s Bank of China’s payments department,
said the development of the coin would help protect country’s foreign exchange
sovereignty as commercial applications of such currencies expanded.
“Why is the
central bank still doing such a digital currency today when electronic payment
methods are so developed?” said Mu, according to a transcript of a lecture he
gave this week that was published online.
“It is to
protect our monetary sovereignty and legal currency status. We need to plan
ahead for a rainy day.”
He said the tokens would be as safe as central bank-issued paper notes and could be used even without an internet connection. They could also be used on Tencent’s (0700.HK) WeChat and Alibaba-backed (BABA.N) Alipay.
The state-run newspaper Shanghai Securities News reported his comments on Friday.
More
If
economists could manage to get themselves thought of as humble, competent
people on a level with dentists, that would be splendid.
John
Maynard Keynes
The monthly Coppock Indicators finished August
DJIA: 26,403
+52 Down. NASDAQ: 7,963 +59 Down. SP500: 2,926 +53 unchanged.
An inconclusive month, but all three shows signs of weakening.
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