Here we present a history of the Fed in charts. As you’ll surely glean from the below — the Fed has degenerated from a by and large passive institution (dealing only in high-quality self-liquidating commercial paper and gold) to an active pursuant of junk, an enabler of wars, a ‘benevolent’ combatant of the depressions of its own creation, a central planner of employment & prices and of course a forgiving friend to inconvenient market follies.
If you ever happen to acquire an inclination for being the subject of disrepute and ridicule I highly recommend endorsing the conceit alluded to in the title. Apparently this issue is ‘so obvious’ that even gold bugs and government officials can reach common ground via the contention that I’m deluded. My folly — if you will — is to maintain that dollar debasement can be bullish for the dollar vis-à-vis other currencies at present. Since this long-standing conviction of ours is once again being corroborated by price action in the currency markets I thought I’d attempt to convince you that I’m not completely crazy. Here I outline why dollar debasement is bullish for the dollar against other fiat currencies in this environment.
It may be just me, but it seems like the majority of market participants are terrible at dealing with one of the rudiments of life as a human being; time. It is almost as if the herding man lives in constant contempt for his former self and dogmatic surety about his current convictions (whether they relate to past, present or even the future). If this hunch happens to be true, then it doesn’t take much to see the folly – for surprise surprise; as time passes the much-loved present conviction joins the realm of past regrets. So to thwart the arrogance of the gold bubble-top callers and the long-for-the-sake-of-being-long speculators here I outline why you, they and — hell — I might just buy that forthcoming parabolic move in gold.
Russell Napier (renown financial historian and consultant for CLSA) has articulated some fantastic insights on the generational cycle, bear market bottoms and currencies in recent years. So for this reason we decided to compile a ‘Russell Napier’s Greatest Hits’ video for you to enjoy. See below for the video and summary.
In previous articles we have tried to throw some light upon the tendency of the crowd to deny the validity of gains and losses as they are distributed in the speculative markets. Indeed, in our most recent post (titled ‘Are Crowds Capable of Identifying Stupidity?‘) we suggested that individuals aiming for gain are often faced with a surprisingly harrowing choice; between assuming the role of the ‘lucky fool’ or the ‘perennially unlucky genius’. Here I’d like to expand upon this insight as it relates to secular trends in the monetary sphere. Namely, I outline an implication of the forthcoming generation’s (potential) knee-jerk distaste for leverage.
Behold, after a near-tripling in the total size of the Fed’s balance sheet over just three years, it seems that the monopoly producers of the world’s base currency have finally decided to act in a pseudo-responsible fashion. Although the Fed continues the reality-denying folly of attempting to fix prices in the realm of the production of IOU claims upon central bank notes (ZIRP), at least it’s trying to cease the outright monetary debasement that we’ve all become accustomed to (i.e. central bank balance sheet expansions). Here I outline the implications of a nominally ‘responsible’ (ahem!) Federal Reserve and outline our thoughts on the manner in which the inevitable U-turn back to monetary profligacy might come to pass.
Lacking the haughtiness of the pure ‘intellectual’ fields, the investment business is often thought to consist of all-encompassing ‘camps’ rather than ‘schools’. Apparently, if you’re buying gold, then you’ve got to be in the ‘inflationista’ camp; if you’re long government bonds, then surely you’re a patriotic bond bull; if you’re long stocks then of course you regularly sport rose-tinted glasses and are ever-vigilant for the silver lining,… right?
Wrong! We cannot stress enough that it’s most prudent to be in your own unique camp! However, for anyone who cares to listen, here I outline a key conviction of the greshams-law.com pack (yes… we’re even more brutish than the established investment community): — that it makes sense to be both long gold and long the dollar! continue reading »
