Other Voices

The Federal Financial Triangle

europac admin — Thu, 25 Apr 2013 13:49:11 +0000

The commentary below is for the benefit of our readers from opinion makers and writers not associated with Euro Pacific. We do not guarantee the accuracy and completeness of third-party authored content. Opinions expressed are those of the writer, and may or may not reflect those held by Euro Pacific, or its CEO, Peter Schiff.

By:

Alex J. Pollock

April 25, 2013

What would it mean for the world’s principal central bank to have negative net worth?

As odd as it may As odd as it may seem to us now, under the National Banking Act from 1863 to 1913, local banks with national charters were the official issuers of U.S. currency, and the government had no central bank. Hundreds of national banks in towns and cities all across the country were issuing dollar bills. They were replaced in this essential role by the Federal Reserve Banks under the Federal Reserve Act of 1913.

Yields Are High Down Under

europac admin — Tue, 23 Oct 2012 14:04:31 +0000

By:

Stephen Kleckner, CAIA

October 23, 2012

Currently, many American investors may be finding themselves in the midst of a largely frustrating quest: the search for a decent yield on fixed income investments. With the Federal Reserve holding rates near zero for the foreseeable future, there is nothing even resembling a mirage on the horizon. But those who refuse to give up the hunt may need to look “no further” than the other side of the globe. Down under and across the ditch (otherwise known as the Tasman Sea) you’ll find the island country of New Zealand.

Chile at a Crossroads

europac admin — Mon, 16 Jul 2012 20:18:22 +0000

By:

Russell Hoss

July 16, 2012

Chile's accession to the Organization of Economic Cooperation and Development in 2010 was more than just a confirmation that they'd earned the right to join the world's top ranked economies. As the first South American country to be accepted into the OECD, it was also a symbolic affirmation of several decades worth of market-oriented reforms that transformed the country from an illiberal backwater to what is arguably one of Latin America's most stable and thriving nations.

Central Banks: Running Out of Ideas, Road

europac admin — Fri, 13 Jul 2012 15:09:35 +0000

By:

Detlev Schlichter

July 13, 2012

On page two of today’s Wall Street Journal Europe you will find the result of a readers’ poll from last Friday: Question: Will the ECB’s rate cut help restore confidence in the bloc’s economy? Answer: 81 percent of readers say no, 19 percent yes.

Obama's Victory Speech Translated

europac admin — Mon, 02 Jul 2012 20:48:34 +0000

By:

John Stossel

July 2, 2012

After the Supremes approved Obamacare last week, the President gave a speech. I think it needs de-coding.

Obama: Today's decision was a victory for people all over this country...

De-coded: It's a victory for central planners, not "people". One thing I've learned in 42 years of reporting is that centrally planned bureaucracy kills innovation, increases costs, and undercuts personal liberty.

Experience is the Teacher of Fools

europac admin — Tue, 26 Jun 2012 18:24:31 +0000

By:

Stephen Johnston

June 26, 2012

Erasmus is reported to have said "experientia magistra stultorum" or for the rest of us who successfully avoided even rudimentary latin instruction "experience is the teacher of fools." What he meant was that a wise person was capable of analyzing the world and avoiding obvious mistakes but that a fool could only learn the hard way - by experience.

What if Greece Just Printed the Euros It Needs?

europac admin — Fri, 15 Jun 2012 20:36:58 +0000

By:

Valentin Petkantchin

June 15, 2012

As it is Spain’s turn to receive EU aid, the Greek situation is attracting a bit less attention in the media these days. However, the elections this Sunday, June 17th, may well put it again under the spotlight, bringing the eurozone crisis to the next level.

So Long, US Dollar

europac admin — Mon, 07 May 2012 21:22:31 +0000

By:

Marin Katusa

May 7, 2012

There's a major shift under way, one the US mainstream media has left largely untouched even though it will send the United States into an economic maelstrom and dramatically reduce the country's importance in the world: the demise of the US dollar as the world's reserve currency.

The Blessing of a Strong Currency

europac admin — Wed, 14 Mar 2012 18:56:54 +0000

By:

David Howden and Brenna Sanae Kajikawa

March 14, 2012

To hear some commentators talk, one would think that America's trade-deficit woes would be miraculously erased with a swift devaluation. A too highly valued greenback makes imports "too cheap" and incentivizes Americans to buy from their foreign competitors. The corollary is that the expensive dollar is making American exporters unattractive to the rest of the world. The result is a trade deficit, whereby Americans buy more imports than they export each year, a phenomenon that seems to have gotten especially worse since the early 1970s.

Fed Flying Blind

europac admin — Fri, 09 Mar 2012 19:02:32 +0000

By:

Axel Merk

March 9, 2012

In assessing whether to make tough decisions, policy makers tend to weigh the cost of action versus inaction. As critical as we are of our dear policy makers, when push comes to shove, they may rise to the occasion. But what if they are not told when it’s time to act, when it’s time to stop printing and spending trillions? In our assessment, the voice of reason has been silenced, posing potential risks to economic stability, as well as the U.S. dollar. That voice of reason is no other than the market itself. Let us explain.

Happy Anniversary Bull Market?

europac admin — Wed, 07 Mar 2012 19:12:23 +0000

By:

Mark Motive of Plan B Economics

March 7, 2012

This month investors worldwide are celebrating the three-year anniversary of the stock market bull that began March 2009. The Dow Jones Industrial Average (DJIA) recently broke the psychological 13,000 barrier.

This is great news, right? Wrong!

Why Not Thorium?

europac admin — Tue, 14 Feb 2012 14:35:33 +0000

By:

Marin Katusa

February 14, 2012

The Fukushima disaster reminded us all of the dangers inherent in uranium-fueled nuclear reactors. Fresh news yesterday about Tepco's continued struggle to contain and cool the fuel rods highlights just how energetic uranium fission reactions are and how challenging to control. Of course, that level of energy is exactly why we use nuclear energy – it is incredibly efficient as a source of power, and it creates very few emissions and carries a laudable safety record to boot.

What Does a Credit Rating Mean?

europac admin — Thu, 09 Feb 2012 21:28:28 +0000

By:

David Howden

February 9, 2012

Credit ratings agencies have come under fire for not being proactive enough in recognizing bad sovereign risks. Even if the ratings agencies were a little quicker with the downgrades, the result would not be significantly different for investors. This is because there are two paths to default.

Perils of Celebrity Central Banking

europac admin — Wed, 11 Jan 2012 15:28:46 +0000

By:

Axel Merk

January 11, 2012

Swiss National Bank (SNB) President Philipp Hildebrand finds himself in the hot seat. SNB rules prohibit his family from trading based on non-public monetary and foreign exchange intentions of the SNB. His wife netted a 60,000 Swiss franc profit buying, then selling U.S. dollars, all within a month; her husband’s intervention in the currency market was mostly responsible for the gain. Arguably, she traded to make a profit, publicly explaining, “what motivated me to buy dollars was the fact that it was at a record low and was almost ridiculously cheap”.

Occupied by Government

europac admin — Wed, 12 Oct 2011 17:20:57 +0000

By:

Rod Rojas

October 11, 2011

I have to say that I share most — if not all — the goals of the honest Left, which would be embodied in a constantly rising standard of living for the lowest economic classes. I often find myself watching Democracy Now for its antiwar, free-speech, and anti-death-penalty stances. But the big problem with the honest Left is their absolute and obstinate refusal to learn the most basic economic principles.

A Short History of US Credit Defaults

europac admin — Mon, 25 Jul 2011 09:20:42 +0000

By:

John S. Chamberlain

July 25, 2011

On July 13th, the President of the United States angrily walked out of ongoing negotiations over the raising of the debt ceiling from its legislated maximum of $14.294 trillion dollars. This prompted a new round of speculation over whether the United States might default on its financial obligations. In these circumstances, it is useful to recall the previous instances in which this has occurred and the effects of those defaults. By studying the defaults of the past, we can gain insights into what future defaults might portend.

Obama “Stimulus” Protected 450,000 Government Jobs, Destroyed One Million Private Jobs

europac admin — Thu, 19 May 2011 11:24:30 +0000

By:

David Theroux

May 19, 2011

In their new study, “The American Recovery and Reinvestment Act: Public Sector Jobs Saved, Private Sector Jobs Forestalled,” economists Timothy Conley (University of Western Ontario) and Bill Dupor (Ohio State University) present their empirical findings of the economic impact on employment of the 2009 Obama stimulus package of $787 billion, entitled the American Recovery and Reinvestment Act (ARRA). ARRA was passed based on Keynesian economic theory that claimed that massive federal spending would boost the economy of the Great Recession and create private-sector jobs.

Debt Ceiling or Not, We Are Already Defaulting

europac admin — Wed, 11 May 2011 11:49:01 +0000

By:

Jacob Hornberger

May 11, 2011

The doomsday crowd claims that the sky will fall in if Congress fails to raise the debt ceiling. If the ceiling isn't raised, they say, the federal government will be forced to default on its debt payments, which apparently will then cause the sky to fall in.

The Trouble With Economic Statistics

europac admin — Mon, 11 Apr 2011 15:56:54 +0000

By:

CJ Maloney

April 11, 2011

"If central bankers threw out all the data that was poorly measured, there would be very little information left on which to base their decisions."- A former research director at the Fed, quoted by Bloomberg's Caroline Baum

How Obama Would Solve the NFL Labor Crisis

europac admin — Wed, 09 Mar 2011 14:56:57 +0000

By:

Wayne Allyn Root

March 9, 2011

Some are now suggesting that President Obama get involved in the NFL strike talks. I was his college classmate at Columbia University and have studied his political career for years. My record of predicting where Obama will come down on the side of an issue and what lie he will tell to rationalize his decision is near perfect. Just call me “The Obama Whisperer.”

Here’s a quick lesson in how he thinks:

Gold Is Our Safeguard Against the Barbarians

europac admin — Wed, 23 Feb 2011 15:23:22 +0000

By:

Valentin Petkantchin

February 23, 2011

Gold hit fresh highs against the dollar recently, trading at well over $1,400/oz last December, from under $300/oz ten years ago. The metal’s mounting value is hooked directly to its economic role as a stable alternative to paper currencies. Its rise should tell us something about the health of the global monetary system. Unfortunately, monetary authorities around the world still broadly misunderstand and even dismiss gold's role. How else to explain their recent policies?

"Low" US Inflation Is a Function of Clever Calculation

europac admin — Tue, 01 Feb 2011 15:19:19 +0000

By:

John Tamny

February 1, 2011

A frequent question posed to those who tilt toward the inflation side of the inflation/deflation debate is: if inflation is such a problem, why isn't it registering in the core Consumer Price Index (CPI)? The answer to this question lies in reports of pricing pressures around the world.

The ECB, Not Greece, Threatens the Euro

europac admin — Tue, 18 Jan 2011 18:22:38 +0000

By:

Louis Woodhill

January 18, 2011

Rahm Emanuel spoke for progressives everywhere when he said, "Never let a crisis go to waste." What he meant was, "Never pass up the opportunity that a crisis offers to expand the size and power of the State and to make it less accountable to the people." Right now, the progressives in Europe are doing their best to use the so-called "euro crisis" as an excuse to force European nations into a "fiscal union," which will conveniently have the effect of transferring power over budgets and tax rates from member-states to the Brussels bureaucracy.

Price Stability Is An Economically Dangerous Fad

europac admin — Mon, 06 Dec 2010 17:32:39 +0000

By:

John Tamny

December 6, 2010

Amid the handwringing about the Fed’s charitably naïve attempts to stimulate the economy through “quantitative easing,” there’s an understandable drive among some Fed critics to severely reduce its mandate. Specifically, their proposition is this: the Fed can’t create jobs as its defenders inside and outside the central bank presume, so better it would be limit its role to that of inflation watchdog.

Stealth Protectionism

europac admin — Thu, 18 Nov 2010 15:25:56 +0000

By:

Alvaro Vargas Llosa

November 18, 2010

We have heard every major world leader reject the notion that protectionism would be an appropriate response to the financial and economic debacle of 2007–08. And yet the signs are unmistakable: we are entering a protectionist era that does not speak its name.

Canada’s supposedly laissez-faire government has banned the purchase of Saskatchewan-based Potash Corp. by BHP Billiton, an Australian natural resources company. China has stopped shipments of so-called rare earth metals (a collection of 17 minerals used for manufacturing various products that are now in high demand) to Japan. But these and other forms of open protectionism pale in comparison to the decision by the Federal Reserve to pump another $600 billion into the economy through the purchase of government bonds.

The United States is doing what every protectionist government does — trying to make its economy competitive by devaluing the currency, a perverse mechanism for making what comes in artificially expensive and what goes out artificially cheap.

The many protests heard around the world on the eve of the G-20 meeting in South Korea this week signal the strong possibility that other major powers will eventually respond in kind. German Finance Minister Wolfgang Schauble did not mince words: “It is not consistent when the Americans accuse the Chinese of exchange rate manipulation and then steer the dollar exchange rate artificially lower with the help of the printing press.”

The Federal Reserve has been trying to get people to consume and businesses to invest by creating money out of thin air — its assets and liabilities have almost tripled since 2007. And, so far, the desired effect has not taken place. Convinced that inaction on his part would lead to pernicious deflation and a prolonged depression, Fed Chairman Ben Bernanke has decided to double down. The government is fully behind this policy, as Treasury Secretary Tim Geithner and President Obama have made very clear.

The policy has not worked because the excess of debt and the unrealistic investments of the bubble years have not yet been purged from the system. It takes time and sacrifice. Deflation has little to do with this natural cleansing process. In fact, deflation is generally a good thing. The more productive an economy is, the less things cost. This is how everything from cars to computers eventually came to be affordable. Historically, productivity grew more than the money supply in the United States; so, for very long periods, the country experienced economic growth and declining prices.

Now, the fear of deflation is pushing the US to do what Japan has uselessly tried to do for the last two decades — spend and print its way out of a slow-growth environment. The authorities think that devaluing the currency will help the economy become competitive and create jobs, forgetting that a debased currency hurts more people than it helps. The result will inevitably be high inflation. That was the history of many Latin American countries in large chunks of the 20th century. I was there. It is not pretty.

It may not be so apparent, but some prices are already skyrocketing. Commodities are the obvious example. The price of gold has risen by 120 percent since early 2007 and the bulk of gold purchases are not related to buying jewelry but investing — i.e., protection from a falling dollar and the inflation that all this money printing will sooner or later generate. Eventually, the inflation we already see reflected in commodities will percolate to consumer products.

How long before there will be a new round of massive money creation in Europe in retaliation against the $600 billion that the Fed is pumping into the system? And how long before we see a protectionist response in those Latin American countries concerned about the effect that the flow of all this cash into emerging markets will have on local currencies?

Perhaps there is one good thing about all this. Many mainstream advocates and outlets are beginning to contemplate radical change regarding money. Going back to the gold standard, getting rid of central banks, or prohibiting commercial banks from lending their depositors’ money unless expressly authorized by them (as Conservatives Douglas Carswell and Steve Baker have proposed in the British Parliament) are some of the ideas now entering the international debate. The more currencies become a protectionist weapon, the more these compelling ideas will grow in stature in the eyes of the public.

Alvaro Vargas Llosa is Senior Fellow of The Center on Global Prosperity at The Independent Institute. He is a native of Peru and received his B.S.C. in international history from the London School of Economics. His weekly column is syndicated worldwide by the Washington Post Writers Group, and his Independent Institute books include Lessons From the Poor: Triumph of the Entrepreneurial Spirit, The Che Guevara Myth and the Future of Liberty, and Liberty for Latin America.

Article originally published November 10, 2010 in the Independent Institute's Beacon newsletter (www.independent.org).