Monday, October 26, 2009
- Some Financial Notes
- If Ben Bernanke tries to raise interest rates before unemployment falls to 8%, they’re going to find him at the bottom of the Potomac, tied up in the trunk of Rahm Emanuel’s car.
- Contrary to what they tell you on CNBC, inflation causes rising prices not the other way around. First the money supply increases… that’s the inflation. Then as it works its way though the currency supply chain, prices begin to rise. The rising prices are a symptom not a cause, and it may take months before we feel those effects.
- Equity Markets and Gold markets are rising together because equity represents a hard asset. Think about it.
- Support for the dollar is only going to come from the Germans and Japanese for whom a weak dollar is contrary to their interests. Watch the price of gold in euros to stay on top of that situation.
- High inflation can be thought of as a reverse interest rate. It takes from lenders, and gives to borrowers. In that way it can be used as a wealth transfer mechanism (by those inclined to that kind of thing) since the lenders are always the “haves” and the debtors are always the “have nots”.
- Team Obama likes the weak dollar because someone in organized labor (the only people he listens to) told him that it would help our industrial exports. What they didn’t tell him (or they did and he didn’t understand) is that after 30 years of terrible labor laws, virtually our entire industrial sector has already moved to Mexico and China so the upside will be far less than they expect.
- For Team Obama there is no such thing as a problem, until it becomes a political problem. It's only once it will effect election results that a situation will require immediate action. So long as the voting public doesn't care if his economic plans work, neither does Obama.
- Americans understand that higher interest rates slow the economy, but they don't understand where inflation comes from. Higher prices for commodities can be blamed on 'speculators' or 'foreign interests' or whoever, but an interest rate hike will only be blamed on the president. Since that's so, we'll get more of the former, and less of the latter.
PS I have an original copy of the above cartoon which I clipped from a copy of the Wall Street Journal in November, 1989. If that doesn't' date me I don't know what does.