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India and Gold

India and Gold

The Indian government made headlines recently with its attempts to obtain possession of the gold held by its citizens. It claims it is in the national interest to restrict gold imports, which would reduce India’s trade deficit. Accordingly, Indians are being asked to deposit their physical gold in the banks for a promised yield of […]

December 13, 2015 | By | Reply More
India and Gold

India and Gold

The Indian government made headlines recently with its attempts to obtain possession of the gold held by its citizens. It claims it is in the national interest to restrict gold imports, which would reduce India’s trade deficit. Accordingly, Indians are being asked to deposit their physical gold in the banks for a promised yield of […]

December 10, 2015 | By | Reply More
The Fed’s in a bind

The Fed’s in a bind

One can understand the Fed’s frustration over the failure of its interest rate policy, and its desire to escape the zero bound. However, since the FOMC has all but said it will increase rates at its December meeting, events have turned against this course of action. The other major central banks are in easing mode, […]

December 4, 2015 | By | Reply More
China’s 1929 moment

China’s 1929 moment

Anyone with a nose for markets will tell you that the Chinese government’s attempt to rescue the country’s stock markets from collapse is far from succeeding. Bubbles collapse, period; and government interventions don’t stop them. Furthermore, we are beginning to see a crack widen in the foundations of China’s capital markets that could end up […]

November 30, 2015 | By | Reply More
Gibson’s paradox: the consequences

Gibson’s paradox: the consequences

We now have an explanation for Gibson’s paradox (posted here), a puzzle that has defeated mainstream economists from Fisher to Keynes and Friedman. The best way to illustrate the puzzle is through two charts, the first showing empirical evidence that interest rates correlate with the price level. And the second, showing no correlation between interest […]

November 28, 2015 | By | Reply More
Welcome to the world of ZIRP zombies

Welcome to the world of ZIRP zombies

Interest rates in the US, Europe and the UK were reduced to close to zero in the wake of the Lehman crisis nearly seven years ago. Initially zero interest rate policy (ZIRP) was a temporary measure to counter the price deflation that immediately followed the crisis, but since then interest rates have been kept suppressed […]

November 26, 2015 | By | Reply More
China chooses her weapons

China chooses her weapons

China’s recent mini-devaluations had less to do with her mounting economic challenges, and more to do with a statement from the IMF on 4 August, that it was proposing to defer the decision to include the yuan in the SDR until next October. The IMF’s excuse was to avoid changes at the calendar year-end and […]

November 24, 2015 | By | Reply More
Economics of a crash

Economics of a crash

This month has seen something that happens not very often: it appears to be the early stages of a global stock market crash. For the moment investors are in shock, seeking reassurance and keenly intent on preserving their diminishing assets, instead of reflecting on the broader economic reasons behind it. To mainstream financial commentators, blame […]

November 22, 2015 | By | Reply More
China’s 1929 moment

China’s 1929 moment

Anyone with a nose for markets will tell you that the Chinese government’s attempt to rescue the country’s stock markets from collapse is far from succeeding. Bubbles collapse, period; and government interventions don’t stop them. Furthermore, we are beginning to see a crack widen in the foundations of China’s capital markets that could end up […]

November 19, 2015 | By | Reply More
The danger of eliminating cash

The danger of eliminating cash

In the early days of central banking, one primary objective of the new system was to take ownership of the public’s gold, so that in a crisis the public would be unable to withdraw it. Gold was to be replaced by fiat cash which could be issued by the central bank at will. This removed […]

November 17, 2015 | By | Reply More