Tag Archives: Economics

Bill Bonner: It’s a Mad, Mad World… and Getting Madder

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“Want to make beaucoup money? Start a company. Borrow money. Buy your own shares.  Everybody does that, right?  But our innovation is this: Buy your own products too!  Raise $1 billion by selling bonds to the public. You have no credit and no credibility? No worries. The companies that have done best lately are those with the worst credit.  You have to pay $40 million in annual interest. But you take the $1 billion and use it to buy your products (whatever they are). Your company shows sales of $1 billion. Then, if your shares sell for 20 times earnings (modest for a tech company), the capital value of your company will soar by 20 x $400,000,000 = $8 billion!  Sound crazy?”

http://www.bonnerandpartners.com/its-a-mad-mad-world-and-getting-madder/

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San Francisco voters just voted to make housing less affordable

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“Yesterday, San Francisco voters handily voted in favor of Measure B. That’s a ballot initiative that will make it more difficult to construct tall buildings on the San Francisco waterfront by requiring buildings over a certain size to obtain voter approval via referendum.  Thanks to the miraculous technology of the elevator, it is perfectly possible for lots of people to live and work in a small geographical area via the mechanism of tall buildings. But when tall buildings are banned, space becomes scarcer. And when space is scarce, the tendency is that the richest people around will be the ones who are able to bid for it.”

http://www.vox.com/2014/6/4/5778696/measure-b-san-francisco-will-reduce-affordability

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Fed Money Pumping Brings Results: The Affluent Society Returns

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“Once again, monetary inflation is being confused with high-end entrepreneurialism. Ludwig von Mises, the great Austrian economist, was not fooled about the wealth effect of modern finance and, indeed, with his colleague FA Hayek dealt a devastating blow to the ever-reoccurring idea that ‘this time it’s different.’ It’s not different. Never. It just depends on where you are in the business cycle. Like a bad penny, this dream often recurs when the Fed has dumped enough money into the economy. These funds slosh around in the recesses of commercial banks and financial firms and then gradually find their way into stock markets and thence into high-end real estate.”

http://www.thedailybell.com/news-analysis/35370/Fed-Money-Pumping-Brings-Results-The-Affluent-Society-Returns–For-Now/

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When parents pay for college, student debt becomes a family affair

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“Their collective student debt bill quickly grew to more than $500,000. Two of their children have managed to pay off their debt since graduating, but the couple is still strapped with more than $150,000 worth of loans and will add more to their load when their youngest son graduates next year.  Although their loans are federal and they have the option to apply for an income-based repayment plan, the Shippens were told their combined income was too high to qualify.  College costs have increased by nearly 30% over the last five years alone.  Nearly 30% of the 38 million federal student loan borrowers in the U.S. today are between 40 and 59 years old.”

https://finance.yahoo.com/news/student-debt-nearly-destroyed-this-family-s-finances-150749696.html

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Bill Bonner: This Should Make Every American Angry…

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“When the price of money goes down banks’ profit margins go up; by moving to zero interest rates, the Fed handed them higher earnings. And by guaranteeing the debt of the weakest institutions, the Fed gave big bonuses to the worst managers.  Now, the alcohol is taking effect. All around the world markets stagger. Economies slur their words. Investors have severe memory loss. Businessmen can’t tell up from down. And the poor consumer gets a headache every time he checks his bank balance.  Some people have access to the free money. Others don’t.  Those with the access tend to be in the financial elite. It is no wonder the rich get richer; the game is rigged.”

http://www.bonnerandpartners.com/this-should-make-every-american-angry/

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Is It a Crash Yet?

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“Nothing about these markets is normal – especially in the face of continued economic weakness. These markets are being shoved higher for a reason. In fact, the idea behind these nonsensical valuations is to convince investors to buy-buy-buy. Only when enough of them have entered again will markets ready themselves for a crash. We’ve stuck to our predictions of higher equity marts not because there are any underlying factors that justify these valuations – there are not. But our conviction remains that powerful players want a higher market – a sky-high market – because a crash from that elevation may be painful enough to produce a consensus for yet more market globalization.”

http://www.thedailybell.com/news-analysis/35364/Is-It-a-Crash-Yet/

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Bill Bonner: What Do Bond Investors Know That Stock Investors Don’t?

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“Your Rogue Economist entered the labor force when he was 14.  Thereafter, he was either in school or at work. He worked as an usher, a dishwasher, a carpenter’s helper, a mason, a painter, a truck driver, a teacher. It never took more than a day or two to find a job.  Times have changed. Now, it’s much harder to get on the bottom rung.  And according to the Financial Times, things aren’t much better for those on the economic ladder. If they are lucky enough to get a foothold… and eventually climb their way into the middle class… they will earn, on average, about as much as a middle-class wage earner a half a century ago!  How’s that for something to look forward to?”

http://www.bonnerandpartners.com/what-do-bond-investors-know-that-stock-investors-dont/

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Legal Pot in the US Is Crippling Mexican Cartels

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“Given the DEA’s historic relationship with the Sinaloa cartel, and the agency’s fury over legalized marijuana, it almost seems like the DEA wants to crush the legal weed market in order to protect the interests of their cartel friends. Almost.  ‘The DEA doesn’t want the drug war to end,’ said retired federal agent Terry Nelson, when asked about a possible connection between the agency’s hatred of legal pot and its buddies in Sinaloa. ‘If it ends, they don’t get their toys and their budgets. Once it ends, they aren’t going to have the kind of influence in foreign government. I’m not a conspiracy theorist, but where there’s smoke there’s probably fire.’

https://news.vice.com/article/legal-pot-in-the-us-is-crippling-mexican-cartels

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New Orleans replaces all public schools with charter schools

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“An all-charter district signals the dismantling of the central school bureaucracy and a shift of power to dozens of independent school operators, who will assume all the corresponding functions: the authority to hire and fire teachers and administrators, maintain buildings, run buses and provide services to special-needs students.  Of the Recovery School District’s 600 employees, 510 will be out of a job by week’s end. All 33,000 students in the district must apply for a seat at one of the 58 public charter schools.  Just before [Katrina], the elected Orleans Parish School District was bankrupt and couldn’t account for about $71 million in federal money.”

http://www.washingtonpost.com/local/education/in-new-orleans-traditional-public-schools-close-for-good/2014/05/28/ae4f5724-e5de-11e3-8f90-73e071f3d637_story.html

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Former ECB Chief Economist: Buy Gold; Economic System is ‘Pure Fiction’

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“Jürgen Stark, former vice president of the Bundesbank, and also former chief economist of the ECB, resigned in late 2011 for his outright rejection to the purchase of government bonds by the ECB.  The monetary system was saved in 2011 through concerted action by major central banks worldwide. But, according to Stark, the whole system is ‘pure fiction’.  The problem is the monetary model itself. That is, the printing of paper currency without real backing and the multiplier by which the commercial banks can expand credit-uncontrolled without prior savings. Stark recommended allocating part of this fictional savings to investment in traditional ‘safe havens’ such as gold or silver.”

http://globaleconomicanalysis.blogspot.com/2014/05/former-bundesbank-vice-president.html

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