Our monetary system is insane

pmbug

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The Federal Reserve’s low interest rates, the perception that there is a high bar to future increases and expansion of its balance sheet are helping to lift asset prices, Federal Reserve Bank of Dallas President Robert Kaplan said.

“All three of those actions are contributing to elevated risk-asset valuations,” Kaplan told Michael McKee in an interview Wednesday on Bloomberg Television. “And I think we ought to be sensitive to that.”
...
“My own view is it’s having some effect on risk assets,” Kaplan said. “It’s a derivative of QE when we buy bills and we inject more liquidity; it affects risk assets. This is why I say growth in the balance sheet is not free. There is a cost to it.”
...
https://www.bloomberg.com/news/arti...in-risk-assets-with-balance-sheet-kaplan-says

A rare moment of honesty from a central banker. It's not part of the approved messaging, so Kaplan is going to suffer some consequences I'd imagine.
 

pmbug

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Congress - Republicans in Congress no less - are now discussing the possibility of dropping helicopter money for the people. $1K per adult, $4k per 4 person family was last I heard being discussed.

Treasury Secretary Steve Mnuchin just gave a press conference wherein he said:
... "Americans need cash now," Mnuchin said during a White House press briefing on the administration's latest efforts to combat the disease. ...
Hey Steve!

 

11C1P

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Apparently they are saying let them eat paper. I guess paper would still be more filling than cyber credits.

.
 

pmbug

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In an attempt to help ease the burden of the coronavirus pandemic on Americans, Rep. Rashida Tlaib, D-Mich., released a plan last week for what is essentially a temporary universal basic income (UBI) that would be distributed to all individuals in the United States, including illegal immigrants, and be funded by the printing of two $1 trillion coins.

"Hey @realdonaldTrump, let's provide relief from this crisis for people by giving pre-loaded debit cards to every person in America," Tlaib tweeted over the weekend. "No additional debt -- we'll just mint two coins."

The plan, outlined on Tlaib's website, would send a debit card with $2,000 pre-loaded on it to every person in the U.S. and reload it with $1,000 every month "until one year after the end of the Coronavirus crisis."
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https://www.foxnews.com/politics/tlaib-coronavirus-debit-trillion-coins

The idea of the $1T platinum coins has been joked about for years. Now a member of Congress is serious about it. The world has gone crazy.
 

rblong2us

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wow !

"It's Safe!" - FDIC Urges Americans To Keep Their Money In The Banks

The FDIC insists that there’s nothing to worry about.

That’s ridiculous. The FDIC only has $109 billion to insure the entire $13 trillion US banking system. That’s less than 1%!

The FDIC also insists that they’ve always been able to prevent depositors from losing money. “Not a single depositor has lost money since 1933.” And that’s true.
https://www.zerohedge.com/personal-finance/fdic-urges-americans-keep-their-money-banks
 

pmbug

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What, meanwhile, does gold tell us about the stock market? I am not a fan of returning to the gold standard, but it is undeniable that the decision by President Richard Nixon to break that link in 1971 had a profound effect on what followed. If we regard gold as the continuing true measure of monetary stability, it suggests that stock markets’ gains in the almost 50 years since are almost entirely due to “money illusion,” or the erosion of the dollar’s buying power. The following chart shows the value of the S&P 500 in dollar terms, and the ratio of the S&P 500 to the gold price, both set to 100 when Nixon left the post-war Bretton Woods agreement:



In gold terms, the stock market was higher than in 1971 for a few years around the top of the dot-com bubble, and again for a few months at the top of the latest bull market. It is now almost 30% below where it was in 1971.

To be clear, stocks would still have been a better investment than gold in 1971, because these numbers don't include reinvested dividends. But this exercise suggests that stocks’ function as a store of value is largely an artifact of the dollar. The higher gold price also suggests that confidence in the dollar is waning.
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https://www.bloomberg.com/opinion/a...till-shines-50-years-after-nixon-will-netflix
 

Fiddle & Rose

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The fed can brrr forever, but at some point it will have to stop. It just seems like madness at this point.
 

pmbug

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I don't care necessarily for the partisan political sniping in the following, but it is good to see the primacy of the monetary policy issue being asserted with respect to modern problems.

... Thomas Piketty. His chart 9.8 shows a sudden and staggering take off in the inequality rate, first in America, then in Europe. Yet it wasn’t the rejection of socialism that swept the world at that juncture. Socialism was rejected after World War II. What happened in the 1970s was the advent of fiat money — money with no legal attachment to any standard of value.
...

Bretton Woods was untenable circa 1970, but the untethering of fiscal policy to sound money is the root of the exponential math issues that are on our horizon.
 
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