Tag Archives: Featured

The greater the excesses, speculative euphoria and moral hazard, the greater the reversal. A very convenient conviction is rising in the panicked financial netherworld that the Federal Reserve and its fellow dark lords will “save the market” from COVID-19 collapse. They won’t. I already explained why in The Fed Has Created a Monster Bubble It Can No Longer Control (February 16, 2020) but it bears repeating. Contrary to naive expectations, the Fed’s primary job isn’t...

This article is part of the Understanding Money Mechanics series, by Robert P. Murphy. The series will be published as a book in late 2020. In chapter 5 we reviewed the textbook analysis of how a central bank buys government debt in “open market operations” to add reserves to the banking system, with which commercial banks can then advance loans to their own customers. However, in the wake of the financial crisis of 2008, the Federal Reserve and other central banks...

[This article is excerpted from a talk delivered on February 22, 2020 at the Austrian Student Scholars Conference, hosted by Grove City College in Pennsylvania.] I. Introduction What a wonderful gathering of students today, on this impressive and beautiful campus. We can see why Hans Sennholz loved this place, and why Drs. Herbener and Ritenour so enjoy living and teaching here. You are all too young to serve as the “remnant,” so we will consider you the vanguard...

Earlier today, Mexico’s Instituto Nacional de Estadística y Geografía (INEGI) confirmed the country’s economy is in recession. Updating its estimate for Q4 GDP, year-over-year output declined by 0.5% rather than -0.3% as first thought. On a quarterly basis, GDP was down for the second consecutive quarter which mainstream convention treats as a technical recession. On a yearly basis, it was actually the third straight. Nothing seems to have changed as 2019 drew to...

Historically the first two months of a new global virus have been a good opportunity to buy stocks. Markets behave a bit like in a small recession. But recessions is the moment when stock investors make money. Long-Term Profits Decide One should still remember that even if short-term profits decline,only the expected long-term profits finally decide about share prices. And there the virus does not have an influence. Virus Symptoms and Symptoms of Declining...

Swiss Franc The Euro has fallen by 0.16% to 1.0601 EUR/CHF and USD/CHF, February 26(see more posts on EUR/CHF, USD/CHF, ) Source: markets.ft.com - Click to enlarge FX Rates Overview: The warning by the US Center for Disease Control and Prevention that Americans should prepare for an outbreak of Covid-19 sent the S&P 500 tumbling to an 11-week low and the 10-year Treasury yield to a record low near 1.30%. The volatility of the S&P (VIX) jumped to its...

Federal Railways has the personal data of some 3.7 million commuters. (SRF-SWI) Swiss Federal Railways is coming under fire for using the personal data of commuters for advertising purposes. The data commissioner and a watchdog group have sounded the alarm bell as the volume of data being harnessed grows. Thanks to the increasing digitisation of its services, the Federal Railways now has customer names, addresses, age, sex, telephone numbers, photos, details of trips...

USD/CHF holds onto losses amid fears of coronavirus outbreak. Soft coronavirus statistics from China fail to counter widespread disease data from the rest of the globe. China’s ability to meet phase-one deal terms seem to gain a little appreciation among traders. The US New Home Sales, Swiss ZEW Survey can offer intermediate moves. USD/CHF flashes 0.03% loss while trading around 0.9760 during early Wednesday. In doing so, the quote declines for the fourth day in a...

When Mario Draghi sat down for his scheduled press conference on April 4, 2012, it was a key moment and he knew it. The ECB had finished up the second of its “massive” LTRO auctions only weeks before. Draghi was still relatively new to the job, having taken over for Jean-Claude Trichet the prior November amidst substantial turmoil. The non-standard “flood of liquidity” was an about-face from his predecessor (who had been raising rates in 2011 before the wheels...

Below is a non-exhaustive list of medium- and long-term implications from the Covid-19. We discuss the yuan, China’s competitiveness, its position in the global production chains, the impact on the Phase One trade deal, and rising financial stability risks. Globally, the virus will bring about a new wave of fiscal spending and revive the discussions about the limits of monetary policy. Lastly, we are concerned that the virus may provide further momentum for the...