Daily Reckoning

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  • The “Sugar-Rush” Economy

    The “Sugar-Rush” Economy

    This post The “Sugar-Rush” Economy appeared first on Daily Reckoning. It’s useful to think of the economy as we’ve known it as the “sugar-rush economy.” Allow me to explain. Scientific research indicates that heavy doses of refined sugar may impact the human brain in a manner similar to addictive drugs. Stanford professor and neuroscientist Eric Stice has run experiments using MRI scans to study how our brains respond to sweetness. Consuming sugar releases dopamine, the brain’s “reward” chemical. The impact is similar to that of cocaine and other addictive drugs. After scanning hundreds of volunteers, Stice concluded that heavy sugar consumers steadily build up a tolerance. The result: One must consume more and more sugar to release the same amount of dopamine. This process dampens the “reward center” of your brain in response to food. The rising tolerance of the human brain to drugs (or sugar) mirrors how economies can build up a tolerance to government deficits and central bank stimulus. Balanced budgets and shrinking money supplies would bring about withdrawal symptoms that crash the economy. So in order to maintain the status quo, the prescription is more drugs, more sugar, more spending and money printing. And if the effect …Read More »
  • Urgent Questions

    Urgent Questions

    This post Urgent Questions appeared first on Daily Reckoning. “Failure to comply with this order will result in a $5,000 fine and up to one year in prison…” We woke this morning to this menacing threat. It came issuing from the loudspeaker of a prowling police cruiser. It mandated residents to remain indoors (unless necessary)… else take the consequences described. “We are all in this together,” the recorded message concluded — exhorting a spirit of solidarity among the homebound, a sense of shared wartime sacrifice. Together… yet separate, isolated, desolate. And so it has come to pass… The land of the free has become the land of the locked down. And the home of the brave is the home of the fearful. Viewing the slaughter in New York City, the hysteria appears warranted… Horror in New York The city has endured some 1,100 fatalities… and underprepared hospitals overflow with COVID-19 cases. Nurses and doctors are falling in the line of duty, condemned by the very patients they mean to save. Refrigerator trucks have been repurposed as makeshift morgues. We are warned additional cities can expect parallel miseries. The latest figures have United States infections at 206,207. They may run into …Read More »
  • A Warning From the Great Depression

    A Warning From the Great Depression

    This post A Warning From the Great Depression appeared first on Daily Reckoning. 3.28 million. That is the total number of unemployment claims Americans filed last week — nearly five times the prior record of 695,000, from October 1982. “We’ve known this number was coming for a week and a half,” laments Tom Gimbel, who captains a Chicago employment agency, adding: It doesn’t surprise me at all. When you see a city like Las Vegas get shut down, I don’t know what other options there were than seeing a number like this. A fellow must take his comforts where he can find them these days. And precious few are on offer. But if it is consolation you seek, here you have it: Some economists had forecast as many as 7 million claims. Here is additional cheer, however transient: The stock market had itself another day at the races today. Stimulus, at Last! The Dow Jones recaptured another 1,351 points. The S&P gained 154, the Nasdaq 413. Today’s stock market surge follows last evening’s Senate passage of a $2 trillion relief package. It is the largest ever in United States history. The vote was unanimous. The bill includes, per CNBC: One-time …Read More »
  • Get Ready for World Money

    Get Ready for World Money

    This post Get Ready for World Money appeared first on Daily Reckoning. Since Federal Reserve resources were barely able to prevent complete collapse in 2008, it should be expected that an even larger collapse will overwhelm the Fed’s balance sheet. That’s exactly the situation we’re facing right now. The specter of a global debt crisis suggests the urgency for new liquidity sources, bigger than those that central banks can provide. The logic leads quickly to one currency for the planet. The task of re-liquefying the world will fall to the IMF because the IMF will have the only clean balance sheet left among official institutions. The IMF will rise to the occasion with a towering issuance of special drawing rights (SDRs), and this monetary operation will effectively end the dollar’s role as the leading reserve currency. The Federal Reserve has a printing press, they can print dollars. The IMF also has a printing press and can print SDRs. It’s just world money that could be handed out. The IMF could function like a central bank through more frequent issuance of SDRs and by encouraging the use of “private SDRs” by banks and borrowers. What exactly is an SDR? The SDR …Read More »
  • The Great Dollar Shortage

    The Great Dollar Shortage

    This post The Great Dollar Shortage appeared first on Daily Reckoning. The coronavirus pandemic is a human tragedy. It’s also an economic tragedy, as the global economy is collapsing around us. Second-quarter U.S. GDP may drop as much as 30%, which is a staggering figure. Many economists predict a third-quarter recovery, but there are still so many unknowns that it’s impossible to say. It’s still too soon to say when America will reopen for business. And you can’t just flip a switch and return things to normal. That’s not how economies function. Many industries may never recover and millions may be out of work for extended periods. At the very least, we’re heading into a severe recession. And we could well be heading for a full-scale depression. That’s not being alarmist. The crisis will also accelerate the collapse of the dollar as the world’s leading reserve currency. So you need to prepare now. What do I mean? The U.S. dollar is at the center of global trade. The dollar represents about 60% of global reserve assets, 80% of global payments and almost 100% of global oil sales. About 40% of the world’s debt is issued in dollars. The Bank for …Read More »