Debt | timiacono.com - Part 4

David Stockman Does Not ♥ the Fed

David Stockman on Bloomberg on the impact of low interest rates:

To summarize:

You shouldn’t be pegging the money market rate. That is a false function. It doesn’t work in a world that’s drowning in debt. The only reason to peg the interest rate below the market is if you’re trying to encourage businesses and households to borrow. Businesses in America have all the debt they’ll ever need and they’re spending it to buy back their own stock. Households are at peak debt. Ninety percent of households can’t borrow more if they wanted to. So the only thing that zero interest rates do is create a tremendous subsidy, a tremendous incentive for Wall Street to gamble more and more recklessly.

Barro and Schiff on Gold and Inflation

Josh Barro of the New York Times and Peter Schiff of Schiff Gold talk about the yellow metal and how fast consumer prices are rising. The result of the discussion is pretty predictable.

Also see fellow NYT scribe Paul Krugman’s take on the subject here.

For some time now, I’ve thought that it will be instability (and probably much worse) in the global monetary system that eventually pushes the gold price higher, an idea that is not mentioned in any of the above discussion, but which should have been.

The Emporer is Indeed Naked

From Alberto Gallo, head of credit research at RBS, via this item at the Fiscal Times comes this handy guide to post-Great Recession monetary policy and its various effects.

How long will it take for this to become the mainstream view?

After the events of the last few days or so, perhaps sooner rather than later.

Panic on the Street

It looks like they’ll have plenty to talk about this week beyond the official topic of  Inflation Dynamics and Monetary Policy at the Federal Reserve’s annual gathering of the brain trust in Jackson Hole, WY, what with the sky being full of smoke from physical fires burning to the West and financial markets around the world figuratively going up in smoke.

What’s interesting about recent developments (if not surprising) is that China’s disappointing economy is being blamed for the market turmoil, prime evidence being the graphic below in this Wall Street Journal story today:

What gets short shrift from most media outlets (this Forbes piece by Steve Keen being the exception to the rule) is that we may be looking square in the face of yet another ugly unwind of yet another reckless expansion of credit and debt. Oh well…

Almost Total Capitulation

It should be an interesting couple of days in Athens as the Greek people come to understand that the deal Prime Minister Alexis Tsipras brought back from Brussels is worse than the one they rejected ten days ago, a key element being that lawmakers approve it by tomorrow.

The pundits seem to be almost universally pessimistic:

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