Wednesday, 31 July 2013

Honourable mention on the Korelin Economics Report! -:) 2013-07-31

I post comments on the website with reasonable frequency, as Silverbug Dave, though I am not really a silverbug, at least not now!

Anyway, I was surpsied to read yesterday an entry where Al Korelin and COry Fleck discussed my post that I put on as a response to their weekend show, which was a really good show, by the way. It often is.

My coment related to the policies of the interventionist economcists, central bankers and governments and James Dines' comment from a couple of years ago that all these people would be defeated paradox and irony.

"On July 27, 2013 at 4:17 am,
Silverbug Dave says:
James Dines gave an interview a couple of years ago and said that the central planners and conventional investors would be defeated by paradox and irony.
Well, the markets certainly abound with seemingly bizarre paradoxes and ironies, where the exact opposite of what should happen happens.
In Europe, the central bank prints money and bails out countries – the Euro goes up. If they don’t print money and practice sound finance, the Euro falls precipitously and everyone says their curreny is rubbish.
In the UK, we have more quantitative easing per unit of GDP than any other country (except maybe Zimbabwe; only joking) and the pound rises against the Euro.
Conclusion: in order to give your exchange rate a boost, print money!
In the USA, well, where to start? Bernanke announces QE to buy Treasury bonds and the yields go up. Then commentators say that means Bernanke and QE are failing. Straight afterwards, the yields went down to new lows. Nobody said that Bernanke is a now success. Bernanke prints money and debases the dollar. What happens? The dollar goes up! The economy starts to roll over, what happens? The stock market goes up like a rocket ship.
I thought inflation should cause interest rates to rise. The yields on bonds fall whenever the economy looks bad. So Bernanke prints money and the yields go up. Then later, they go to new lows. Bernanke needs to print money to make the yields go down further! He needs buy bonds and to cause inflation to make interest rates fall! What is going on?
The threat of deflation rallies the dollar. Everybody seems to like the dollar when the economy stinks. Bernanke needs to print money to drop the dollar and make the US more competitive. So he prints money to drop the dollar and the dollar goes up and the US economy is said to be improving!
Bernanke says he might stop QE eventually or taper it gradually. The markets crash because maybe they think the US will go bankrupt. Bernanke allows the government to take on more debt by buying their bonds even though they are bankrupt. He buys bonds that will never be paid back and everyone is happy. Unless they are on food stamps."

I was then treated to a dicussion of my posting by Al Korelin and Cory Fleck on the daily broadcast on Monday 29th July:

Insights from the Team - 9 comments
"Thank you Silverbug Dave for making an important point!"
It was quite a good discussion and I was very pleased to get such a response. I do feel that the interventists and those who follow them may one day be "hoist by their own petard" to quote an old nautical saying.

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