Daily Reckoning

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  • Don’t Mess With the U.S. (Financially)

    Don’t Mess With the U.S. (Financially)

    This post Don’t Mess With the U.S. (Financially) appeared first on Daily Reckoning. I’ve been documenting financial warfare in my articles for years, but it still doesn’t get the mainstream attention it deserves. Because as you’ll see below, it can directly impact your wealth. Financial warfare tools include account seizures and freezes, expulsion from global payment systems, secondary fines and penalties on banks that do business with targeted entities, embargoes, tariffs and many other impositions. These tools are amplified by the unique role of the U.S. dollar, which is the currency behind 60% of global reserves, 80% of global payments and almost 100% of transactions in oil. The U.S. controls the banks and payments systems that process dollar transactions. This leaves the U.S. well positioned to impose dollar-related sanctions. Much has been made of the recent killing of Iranian terrorist mastermind Qasem Soleimani. Many say it was an act of war. But guess what, folks? We’ve been in a full-scale war with Iran for two years now. It’s just that most people don’t realize it. It’s not a kinetic war with troops, missiles and ships (except Iran’s use of terrorist bombs and the U.S.’ use of drones). And it’s severely …Read More »
  • 5,000 Years of Interest Rates, Part II

    5,000 Years of Interest Rates, Part II

    This post 5,000 Years of Interest Rates, Part II appeared first on Daily Reckoning. Yesterday we hauled out evidence that interest rates have gone persistently down 500 years running. And the high interest rates of the mid- to late 20th century? These may be history’s true aberration, a violent but brief lurch in the chart… like a sudden burst of blood pressure. Let us here reintroduce the graphic evidence: Here is an extended picture of downward-trending rates — with the fabulous exception of the mid-to-late 20th century. As Harvard economics professor Paul Schmelzing reckoned yesterday, as summarized by Willem H. Buiter in Project Syndicate: Despite temporary stabilizations such as the periods 1550–1640, 1820–1850 or in fact 1950–1980… global… real rates have persistently trended downward over the past five centuries… Can you therefore expect the downward journey of interest rates to proceed uninterrupted? We have ransacked the historical data further still… rooted around for clues… and emerged with worrisome findings. Why worrisome? Details to follow. Let us first look in on another historical oddity, worrisome in its own way — the present stock market. A Lull on Wall Street It was an inconsequential day on Wall Street. The Dow Jones took …Read More »
  • 5,000 Years of Interest Rates

    5,000 Years of Interest Rates

    This post 5,000 Years of Interest Rates appeared first on Daily Reckoning. “At no point in the history of the world has the interest on money been so low as it is now.” Here the good Sen. Henry M. Teller of Colorado hits it square. For 10 years plus, the Federal Reserve has waged a nearly ceaseless warfare upon interest rates. Savers have staggered under the onslaughts. But the timeless laws of economics will not be forever put to rout. We suspect they will one day prevail, and mightily. Interest rates will then revert to historical averages. When they do, today’s crushing debt loads will come down in a heap. They will fall directly on the heads of governments and businesses alike. This fear haunts our days… and poisons our nights. Wait… What? Let us check the date on the senator’s declaration… Kind heaven, can it be? Our agents inform us Sen. Teller’s statement entered the congressional minutes on Jan. 12… 1895. 1895 — some 19 years before the Federal Reserve drew its first ghoulish breath! Were the late 19th century’s interest rates the lowest in world history? Here at The Daily Reckoning, we are entertained infinitely by the dazzling …Read More »
  • A World Gone Mad

    A World Gone Mad

    This post A World Gone Mad appeared first on Daily Reckoning. Today we gasp, stagger, reel. The enormity of it all has finally overmatched our capacities. Consider… Total global debt presently piles up to 322% of GDP — a record. Total “developed world” debt piles higher yet — 383% of GDP — another record. The world’s stock markets combine to $88 trillion, or 100% of global GDP. That is another record yet. Record upon record upon record has come down… as debt has gone relentlessly up. And what does the world have to show for the deluge? Little Bang for the Buck Real United States GDP growth gutters along under 2%. Fair estimates place European and Japanese 2020 growth under 1%. Interest rates, meantime, are coming down. And so the supply of “dry powder” available to the central banks is coming down. They will require heaps of it come the next crisis. Project Syndicate, in summary: The major developed economies are not only flirting with overvalued financial markets and still relying on a failed monetary-policy strategy, but they are also lacking a growth cushion just when they may need it most. Direct your attention now to the Bank of England. …Read More »
  • Now What?

    Now What?

    This post Now What? appeared first on Daily Reckoning. Stocks were up and away this morning, aloft on happy wings. And as stocks went up… records came down. Both the Dow Jones and S&P established fresh highs today. Today is — after all — when the United States and China stowed their differences… and came formally to terms. President Trump and Chinese Vice Premier Liu He signed their names to a “phase one” trade accord late this morning. What precisely did they pledge? AP draws the overall sketch: Under the Phase 1 agreement, which the two sides reached in mid-December, the administration dropped plans to impose tariffs on an additional $160 billion in Chinese imports. And it halved, to 7.5%, existing tariffs on $110 billion of goods from China. For its part, Beijing agreed to significantly increase its purchases of U.S. products. According to the Trump administration, China is to buy $40 billion a year in U.S. farm products — an ambitious goal for a country that has never imported more than $26 billion a year in U.S. agricultural products. Once the handshakes were over, the president seized a microphone and gushed: Today we take a momentous step, one that …Read More »