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There is utter madness in the air, and it spans the globe. Japan, after spending the last nearly three years exploding its “money supply” only seems to have realized recently that the ungodly 184 trillion in new bank reserves have acted nothing like money. QQE, the added “Q” adding nothing, is now to be supplemented by negative nominal rates on those “reserves” to try to make them something more than an assault on accounting. The ECB, having led the charge below zero, expanded the negativity and then expanded it again - only to add a QE and now threaten more expanding on the wild side of…

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On January 29th, Japan’s central bank governor, Haruhiko Kuroda, announced that the Bank of Japan would introduce a Negative Interest Rate Policy, or NIRP, on bank reserve deposits held in excess of the minimum requisite. The European Central Bank, and central banks in Switzerland, Denmark and Sweden have already partially blazed this mysterious trail. The banks have done so in order to weaken their respective currencies and to light a fire under inflation. Swiss national bonds now carry negative rates out to maturities of eleven years, meaning investors must lock up funds for eleven years to…

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California has something of a migration problem. Yes, the state’s population growth rate has been hovering just under 1% for a few years with natural increases and international net migration staying just strong enough for the state to continue growing, but California’s consistent net domestic out-migration should be concerning to Sacramento as it develops state policy. As the adage goes, people vote with their feet and one thing is clear, more people are choosing to leave California than come.
First, a note about population growth. A state’s population grows (or shrinks) based on two major…

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There are few industries that offer a picture glass window to see numerous macroeconomic forces as steel does. Excess capacity, trade policy, and the yuan all intersect when looking at the steel industry. Moreover, it also shed light on why the drop of energy and other commodity prices, such as iron ore, have not bolstered the steel industry, let alone the general economy, as many expected. At the heart of the problem is that globally there is greater capacity to produce steel than demand. That excess capacity is not simply a function of the state planning effort of China. Rather Europe…

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“Back off! What perfect advice!” I thought. The New York Times had opined that prescriptive rules imposed on children can arrest their creativity. Regulations by our paternalistic state have the same effect on adults who have emerged from the gantlet of childhood to become the creators and entrepreneurs behind our prosperity. The Small Business Administration reported a few years back that regulations cost our economy close to trillion per year. That’s bad enough, but the same report went on to discuss “knock-on effects” that are harder to quantify. One of these is that regulations cause…

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In many ways, the world has turned upside down. It is not just central banks that have set policy rates below zero, but the entire German curve out through eight years have negative yields. Japan, which has the largest debt burden relative to GDP, has negative yields out through nine years. The Swiss curve is negative through 15 years.
It is not just core countries either. Ireland, which holds national elections in a couple of weeks, has negative yields out four years. Spain, which is struggling to put together a government following the election at the end of last year, has negative…

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The average condo price in Manhattan has hit an astronomical $1,948,221 in the fourth quarter of 2015. In fact, Manhattan has experienced a 20-year stretch of nearly uninterrupted price increases. Will real estate prices continue to rise, or is it about time for a downward price correction? Manhattan is not unique in its meteoric rate of price increases. Potential buyers in other so-called “star” cities, such as San Francisco, Boston, or Los Angeles, must be pondering the very same question.
Luckily, for Manhattan, it has kept a near complete record of real estate transactions going back to…

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The Dow Jones Industrial Average closed down 1.29% on Friday. Does this mean that the markets were disappointed in the “Employment Situation” report from the Bureau of Labor Statistics (BLS), which was released an hour before trading began?
No, it does not.
The Dow actually opened slightly up from its close on Thursday. What disappointed the markets on Friday was the same thing that has been disappointing them all year. The Dow has declined by 7.00% during the first 25 trading days of 2016 because equity investors are (rightly) disappointed in the Federal Reserve.
The Dow is a price. Like…

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In May of 2014, Deutsche Bank raised some eyebrows when it suddenly announced it had both privately floated 60 million shares while obtaining necessary underwriting commitments for an additional 300 million more. The anchor investor in the first was Paramount Holding Services, the main investment fund vehicle of a Qatari Sheik. The €8 billion in new “capital” was somewhat of a shock, but not entirely surprising since Deutsche had been underweight in its “capital” ratios dating back to the panic. The new subscriptions were anticipated to bring the bank’s Tier 1 (under Basel III) to…

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Following the World Economic Forum’s wrap up of its recent annual meeting in Davos, Switzerland, U.S. policymakers should return with strategies for strengthening America’s economic growth and augmenting our global competitiveness. A pessimism for global economic growth was a pervasive mood among CEOs at Davos, and the U.S. can demonstrate leadership by adopting some critical policy prescriptions to accelerate growth. They should begin with lowering America’s corporate tax rate - currently the highest among the OECD and BRIC countries at 39 percent (combined federal and state) - and…

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Sterling has neared the 50% retracement of the 11.5 cent decline since mid-December. It is found near $1.4660. After easing ahead of the BOE announcement, sterling was sold to $1.4530 on the initial headlines that showed the BOE was cutting its growth, inflation, and wage forecasts. However, the short-sterling futures had already largely discounted the rates being low for longer, and UK debt instruments also sold off, and after the initial flurry, sterling stabilized and recovered nearly fully.
BOE Governor Carney wants it both ways. While the central bank is in no hurry to raise rates,…

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In 1992, James Carville popularized the adage “It’s the economy, stupid.” If the economy is ailing, people tend to vote against the party in the White House. That happened in the 1992 election. A recession that started in 1990 was officially over, but it didn’t seem over to millions of Americans. They sent President George H.W. Bush into retirement. The question now is whether something similar will happen in 2016.
All eyes are on New Hampshire, but maybe we should be paying more attention to the economy. Along with the volatile stock market, recent indicators hint at a slowdown or recession….

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Hostility and complacency are undermining America’s greatest strategic asset: its economy. These threats endanger our proper appreciation of our economy’s importance. More importantly, they already undercut our economy’s performance.At its most basic, producing wealth requires a country’s economy create a surplus - a return in excess of its producers’ work. Absent this, a country lacks the resources from which everything else - private revenue and public taxes, private investment and government spending - must come. Inability to do this, and in a manner allowing for its long-term…

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The Bank of Japan surprised investors by introducing negative rates last week. Leave aside the fact that the negative rates do not go into effect for more than another week, and even when in effect, will apply to a relatively small amount of deposits at the central bank. The important point is that it is another central bank to introduce negative rates. Moreover, the yields of Japanese bonds through eight-year maturities have turned negative. In comparison, German yields are negative though seven-year maturities. Swiss government bonds through 15 years have negative yields. Counting…

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“We fail to remember, for instance, that it was the internal combustion engine that gave oil its present value, and not the other way around.” - Warren Brookes, The Economy In Mind, p. 30
Back in the late ‘70s when a weak dollar last authored an illusory commodity boom, Zaire was one of the world’s richest countries in the resource (commodities) sense. At the same time poliitical economist Warren Brookes described Japan as “144,000 square miles of some of the lowest-resource territory in the world.”
Despite the massive distance between the two countries in terms of commodity wealth,…

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