Category Archives: Uncategorized

“My father made him an offer he couldn’t refuse. Luca Brasi held a gun to his head and my father assured him that either his brains, or his signature, would be on the contract.”                                                                                                                                                 — The Godfather (1972)

In the modern global banking system, all banks need a credit line with the central bank in order to be part of the payments system. Choking off that credit line was a form of blackmail the Greek government couldn’t refuse. 

Janet Yellen and the Federal Reserve’s Federal Open Market Committee (FOMC) have not made any change in interest rates. Again. While that no-change was expected, there just wasn’t really any serious rate hike scare in the statement beyond a strong labor market. It is almost as if Yellen and the Fed are keeping the door open to not starting the interest rate hike cycle until after 2015 or at least very late in the year rather than the September/October timeline.

One more hawkish tone came around the current employment situation having improved. Still, the overall tone remains very dovish. in fact, the vote was 10 to 0 to keep the Fed Funds at the never-ending 0.00% to 0.25% target.

Also, the first formal rate hike is expected to only go to 0.25% — not even up to 0.50%. Now investors have to stomach there not being a press conference after…

Investors have had years and years now to prepare for a Federal Reserve interest rate hike cycle in the United States. There remains much debate on the magnitude of how much tightening will be seen, how fast that tightening will actually take short-term interest rates up once it starts, and ultimately how high the interest rates will really go.

That being said, there is about to be a very large discrepancy in the world of how central banks are treating their economies. The United States may be followed by the United Kingdom in an interest rate hike cycle, while the European Central Bank, the Bank of China, the Bank of Japan and many central banks in South America and other growth markets are still figuring out how to ease rates or to keep pursuing their own quantitative easing measures.

24/7 Wall St. has a question — Can the global economy…

Recently the communication from the Federal Reserve seems to have become more hawkish. It all started on July 15 when Fed chair Janet Yellen testified in front of the House Financial Services Committee. Yellen among other things said:

“If the economy evolves as we expect, economic conditions likely would make it appropriate at some point this year to raise the federal funds rate target”

This has been followed by comments from other Fed officials such as St. Louis Fed president James Bullard who in an interview with Fox TV on July 20 said that there was a “50% probability” a September rate hike. As my loyal readers know I like to watch the markets to assess monetary conditions. So lets see what the markets are saying about the US monetary policy stance right now – and how it has changed on the back of Yellen and Bullard’s comments…

Gold was down nearly 2% in Monday morning trading. It briefly touched $1,088.05 per ounce, representing its “weakest” point since March 2010, according to Reuters. Moreover, gold suffers from an overall bearish sentiment in general. Let’s take a look to see what specifically is driving gold downward and ascertain whether it will turn around anytime soon.

Gold, like everything else in the financial markets, is subjected to the expectations game. Sometimes the change in fundamentals does not matter as much as the change in fundamentals versus the expectations of pundits who help drive prices in the market. China, after six years of radio silence on its gold transactions, revealed that it owned 1,658 metric tons of the metal, which represented an increase, according to Bloomberg. However, it was not as much as expected by some notable brokers. This adds to the bearish sentiment toward gold, compelling investors to exit the…

In my earlier post The Euro – A Fatal Conceit I argued that had the euro not be introduced and had we instead had freely floating exchange rates then “European taxpayers would (not) have had to pour billions of euros into bailing out Southern European and Eastern European government”. Said in another way had we not had the euro then there would not have been a European “debt crisis” or at least it would have been significantly smaller.

A simple way of illustrating this is to have a look at the debt development in the euro countries (and the countries pegged to the euro) and comparing that with the debt development in the European countries with floating exchange rates.

I use the same countries as in my previous post – The Euro – A Monetary Strangulation Mechanism. 21 euro countries (and countries pegged to the euro) and 10…

If you have been watching the global financial news during any point of the last month, chances are high that the coverage of Greece may have become more than just overwhelming. This nation has systemic problems that go very deep, and their fate inside the European Union and/or inside of the euro currency remains up for debate. That being said, shouldn’t most market watchers assume that news of the Greek banks being set to reopen on Monday be interpreted as good news?

Reports are out that Greek banks will finally reopen on Monday, July 20, 2015. With Greece’s economy frozen down to 60 euros per day, with international businesses either unable to get products to Greece or refusing to send products to Greece, this seems like good news.

National Bank of Greece S.A. (NYSE: NBG) is one of the official trading proxies that is used by investors to judge the daily…

The crushing Greek debt could be canceled the way it was made – by sleight of hand. But saving the Greek people and their economy is evidently not in the game plan of the Eurocrats.

Greece’s creditors have finally brought the country to its knees, forcing President Alexis Tsipras to agree to austerity and privatization measures more severe than those overwhelmingly rejected by popular vote a week earlier. No write-down of Greece’s debt was included in the deal, although the IMF has warned that the current debt is unsustainable.

Former Greek finance minister Yanis Varoufakis calls the deal “a new Versailles Treaty” and “the politics of humiliation.” Greek defense minister Panos Kammenos calls it a “coup d’état” done by “blackmailing the Greek prime minister with collapse of the banks and a complete haircut on deposits.”

In my previous post I claimed that the ‘Greek crisis’ essentially is not about Greece, but rather that the crisis is a symptom of a bigger problem namely the euro itself.

Furthermore, I claimed that had it not been for the euro we would not have had to have massive bailouts of countries and we would not have been in a seven years of recession in the euro zone and unemployment would have been (much) lower if we had had floating exchange rates in across Europe instead of what we could call the Monetary Strangulation Mechanism (MSM).

It is of course impossible to say how the world would have looked had we had floating exchange rates instead of the MSM. However, luckily not all countries in Europe have joined the euro and the economic performance of these countries might give us a hint about how things could have been if we had…

It is wrong to suggest that people should be held accountable for the actions of their ancestors. Blaming each other for the deeds of our ancestors is the cause of vast tracts of human suffering and conflict. Tribes and nations have fought each others for centuries — and, in some places, continue to do so — based on the actions of that tribe or nation’s forefathers. This is irrational. We cannot change the actions of our ancestors. That is perhaps one reason why John Cleese’s portrayal of an idiot hotelier beating down his German guests with a spiel of cringe-inducing World War 2 and Nazi clichés is so absurdly funny.

That being said, we do have a responsibility to learn from and not repeat the mistakes of our ancestors. Failure to learn from the mistakes of one’s ancestors is the point at which the actions of past generations become relevant in a…