FIRE Economy | timiacono.com - Part 4

Millennials on Debt: “Me No Likey”

A new report from the New York Fed shows a disturbing trend (if you’re a bank, that is) about consumer credit as the borrow-and-spend baby-boomer generation heads off into the sunset with a chastened millennial generation not able/willing to take up the slack.

Here’s the key take-away:

We find that aggregate debt balances held by younger borrowers have declined modestly from 2003 to 2015, with a debt portfolio reallocation away from credit card, auto, and mortgage debt, toward student debt. Debt held by borrowers between the ages of 50 and 80, however, increased by roughly 60 percent over the same time period.

It appears that getting saddled with monstrous student loan debt might be good for tenured professors and college administrators, but bad for an economy that is based largely on buying things you don’t need with money you don’t have.

Losing Faith in the Central Banks

It’s become increasingly difficult to read any financial news these days without coming across one or (sometime many) more stories detailing how the world is quickly losing faith in central bankers, one of the latest being this offering from The Economist.

WORLD stockmarkets are in bear territory. Gold, a haven in times of turmoil, has had its best start to a year in more than three decades. The cost of insurance against bank default has surged. Talk of recession in America is rising, as is the implied probability that the Federal Reserve, which raised rates only in December, will be forced to take them back below zero.

One fear above all stalks the markets: that the rich world’s weapon against economic weakness no longer works. Ever since the crisis of 2007-08, the task of stimulating demand has fallen to central bankers…

Clearly, Jim Grant of Grant’s Interest Rate Observer put it best in recent years when he concluded, “The price of gold is the reciprocal of the world’s faith in central bankers“, an idea that, surely, more than anything else, is anathema to said central bankers.

Sam Zell on Future and/or Current Recessions

Billionaire American business magnate (and frequent gold mine for business news shows) Sam Zell thinks that the U.S. economy isn’t doing so well at the moment.

Also see this segment where Zell offers up some thoughts on Donald Trump – their relationship over the years and his chances of ending up in the White House.

The New Abnormal

In this Telegraph story, the brave new world of negative and near-negative interest rates is mapped for anyone interested in seeing just how far central bankers have strayed from anything that might be considered “normal”.

Some related “success” to report from Sweden:

We just got a sign that Sweden’s crazy negative interest rate experiment is finally working

Uncork the champagne everyone…

Haven’t heard from Investment Biker Jim Rogers in quite a while and, in this interview with CNNMoney’s Nina dos Santos the other day, he’s looking a bit jowly, but he still makes a good deal of sense in his assessment of the world’s central bankers.

Highlights include:

We’re all going to pay a horrible price for the incompetence of these central bankers. We got a bunch of academics who don’t have a clue what they’re doing … This is going to be a disaster in the end and you should be very worried and you should be prepared.

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