Information about finance, the economy and business. Entertaining and informative. Seeking Alpha Certified Mark Sunshine Chairman & CEO

Category Archive: monetary policy

  1. Gold Bugs Beware Of Fed Extermination

    Today I heard it again on the car radio — an adver­tise­ment claim­ing that since gold has topped $1,500 an ounce it’s a “must buy” for every respon­si­ble saver.

    If only it were true that I could pro­tect my fam­ily from eco­nomic Armaged­don by buy­ing gold.

    Unfor­tu­nately, the hard facts are that increas­ingly since 2000 gold has been the oppo­site of an infla­tion hedge. Even worse, when inter­est rates rise in response to infla­tion, gold will fall in value, and maybe by a lot.

    The his­tor­i­cal rela­tion­ship of gold to infla­tion, i.e., that it is a hedge, is no longer true. Gold has been “finan­cial­ized” by Wall Street and its price is being dri­ven by insti­tu­tional spec­u­la­tors that buy it by bor­row­ing money at near 0% inter­est. As long as inter­est rates remain low, the cost of bet­ting on gold is very low and money flows into the gold market.

    As gold prices soar indi­vid­ual investors need to beware. One day inter­est rates will start to rise and gold prices will plum­met. Inno­cent vic­tims that buy gold because of a mass mar­ket sales pitch will be sorry.

    My strong advice to read­ers is don’t be a gold bug. It’s only a mat­ter of time before the Fed exter­mi­nates you. [read full story]

    Posted in: BLS, commodities, CPI, economy, Federal Reserve, Finance, Gold, Inflation, Investments, monetary policy, Public Policy
  2. The Hyper-Inflation Myth

    Con­ven­tional wis­dom is that the Fed’s print­ing presses are run­ning over­time and the econ­omy is awash with liq­uid­ity.  Just yes­ter­day the National Asso­ci­a­tion for Busi­ness Eco­nom­ics reported that almost half the econ­o­mists they sur­veyed believed that Fed­eral Reserve Pol­icy is infla­tion­ary.  Too bad the NABE sur­veyed econ­o­mists and con­ven­tional wis­dom are wrong. Econ­o­mists, pun­dits and jour­nal­ists […] [read full story]

    Posted in: BANKS, Economic Statistics, economy, Federal Reserve, Finance, Inflation, monetary policy, Money Supply
  3. The New Supersized Fed

    Fed watch­ers need to stop pan­ick­ing when they look at the new super­sized Fed bal­ance sheet and mon­e­tary base. The Fed’s bal­ance sheet doesn’t nec­es­sar­ily mean run­away infla­tion is in our future or that the Fed is out of con­trol. The Fed got super­sized because Bernanke & Com­pany came to appre­ci­ate the U.S.‘s spe­cial role […] [read full story]

    Posted in: Bernanke, economy, Excess Reserves, Federal Reserve, Finance, monetary policy, Money Supply, Politics, Public Policy
  4. What If The Fed’s Isn’t Printing Money Like A Drunken Sailor?

    What if con­ven­tional wis­dom about the Fed is wrong and it isn’t print­ing money like a drunken sailor? Well…that would make most of the media cov­er­age of the bond mar­ket and the econ­omy wildly off the mark. As it turns out while media talk­ing heads were rant­ing about how the Fed was run­ning their print­ing presses […] [read full story]

    Posted in: Bernanke, Brad Setser, Economic Statistics, Federal Reserve, Finance, M1, M2, M3, monetary policy, Money Supply, Politics, Public Policy
  5. Don’t Worry About The Debt Tsunami

    It looks like in the next few years newly issued Trea­sury and agency guar­an­teed res­i­den­tial mort­gage debt may cre­ate a debt tsunami that will swamp the econ­omy. For­tu­nately, looks can be deceiv­ing. While inter­est rates are likely to rise for both long matu­rity Trea­sury notes and bonds and agency guar­an­teed res­i­den­tial mort­gage debt, ris­ing rates […] [read full story]

    Posted in: Credit Crisis, Economic Statistics, economy, Federal Reserve, Finance, monetary policy, Money Supply, Public Policy
  6. Regulatory Reform Shouldn’t Rely On The Fed

    I am still shak­ing my head in amaze­ment at Alan Greenspan’s edi­to­r­ial in last Wednesday’s Wall Street Jour­nal titled The Fed Didn’t Cause the Hous­ing Bub­ble.  In the arti­cle Greenspan explained why the hous­ing bub­ble wasn’t the Fed’s fault (and since he was Chair­man of the Fed, by impli­ca­tion it wasn’t his fault either).  While […] [read full story]

    Posted in: Alan Greenspan, BANKS, Bernanke, Credit Crisis, economy, Federal Reserve, Finance, monetary policy, Politics, Public Policy, Regulatory Reform, Timothy Geithner
  7. Will Monetary Policy Cause Rapid Inflation? Maybe Not Says An Economist At the St. Louis Fed.

    Con­ven­tional wis­dom sug­gests that a very aggres­sive mon­e­tary pol­icy will cause rapid infla­tion. How­ever, in this month’s Fed­eral Reserve Bank of St. Louis Review, William Gavin says that the con­ven­tional wis­dom maybe wrong and that infla­tion isn’t pre­des­tined or even a likely result of cur­rent mon­e­tary pol­icy. Gavin believes that if the econ­omy recov­ers before […] [read full story]

    Posted in: BANKS, Credit Crisis, Deflation, Depression, Economic Statistics, economy, Excess Reserves, Federal Reserve, Finance, Inflation, monetary policy, Public Policy
  8. 7 Faint Signs That The Economy’s Bottom Is In Sight

    There are opaque and early signs that the U.S. econ­omy has started the begin­ning of a bot­tom­ing process. Just like a div­ing sub­ma­rine needs to stop its down­ward motion and reach its low­est depth before it can resur­face, the econ­omy needs to go through the steps of slow­ing its decline and sta­bi­liz­ing before it can […] [read full story]

    Posted in: BANKS, Bernanke, CPI, Credit Crisis, Deflation, Economic Statistics, economy, Federal Reserve, Finance, Fiscal Policy, Inflation, M1, M2, monetary policy, Money Supply, Obama, Politics, Public Policy, TARP
  9. Sunshine Travel Log Blog – I Went Fishing And The Fed Slowed Money Supply Growth

    Last week­end I went fish­ing in Tokyo har­bor. The below pic­ture is my friend Masura Ono with a really big fish that he caught on his boat. Ono-san is a famous lawyer in Tokyo. He is a senior part­ner at the largest law firm in Japan as well as a law pro­fes­sor at the Uni­ver­sity […] [read full story]

    Posted in: BANKS, Deflation, Economic Statistics, Federal Reserve, Finance, Inflation, M1, M2, monetary policy, Money Supply, Public Policy
  10. 9 Predictions for 2009

    Set forth below are my pre­dic­tions for 2009. Let’s hope that at least some of them come true. Early in 2009, the banks start lend­ing again In Jan­u­ary, the banks will real­ize that they can­not avoid lend­ing for­ever. The Fed­eral Reserve will finan­cially pun­ish any bank that refuses to lend by manip­u­lat­ing inter­est rates so that banks […] [read full story]

    Posted in: 2009 Predictions, BANKS, Credit Crisis, Deflation, Economic Statistics, Finance, Fiscal Policy, Inflation, Madoff, monetary policy, Obama, Politics, Public Policy, Regulatory Reform