|»Vivek Kaul's Diary|
Charlie Munger Says It's Time to Prepare for the Worst
1 APRIL 2016
BALTIMORE - Finance or politics? We don't know which is jollier.
The Republican presidential primary and Fed monetary policies seem to compete for headlines. Which can be most absurd? Which can be most outrageous? Which can get more page views?
Politics, led by Donald J Trump, was clearly in the lead...until yesterday. Then, the money world, with Janet L Yellen wearing the yellow jersey, spurted ahead in the Hilarity Run.
The Dow gained 83 points.
|Modi 2016: An Agenda For Revival |
| The landslide victory of 2014 handed Modi more than just a clear mandate...It handed him immense responsibility of a nation dreaming of great progress.|
From the euphoria of Achche Din the mood in India has swung to cautious disappointment and now we are in 2016...
Who will answer the question how Modi can turn this ship around and get India back on track?
Vivek Kaul has the answer and he has put it all down, along with his deepest thoughts on the challenges India faces, in our latest special report titled - Modi 2016 - An Agenda For Revival.
And the best part is that he wants to give you this special report for free!
So, don't delay...Click here to download this special report right away!
Asked whether the Fed would reduce its balance sheet to pre-Great Recession levels (by selling back to the private sector the $4 trillion worth of bonds it bought over the last eight years), Warren Buffett's long-time business partner had this to say:
The 'normal' financial world is no longer habitable.
Ms Yellen went on to say that these soupcons of recklessness - her hints about not returning to normal - provided an 'automatic stabiliser', to the global financial system. That's right. (And here is where we begin to laugh uncontrollably.) Not only does outrageously easy credit help 'stabilise' the system, so does the anticipation of more of it!
Maybe giving out the news that she will NOT even try to get back to normal helps to settle investors' nerves. Maybe normal wasn't all that great anyway.
Either way, speculators can continue whatever perverted hustles they have going...free from the fear that 'normal' will walk around the corner and catch them in the act.
But what's this? A complicating factor, the 'outlook for inflation', is 'uncertain', says Ms Yellen. The Financial Times clarifies: '[I]nflation could take longer to return to the Fed's 2% target.'
Ms Yellen is worried about a lack of inflation in much the same way primitive farmers worried about a lack of rain. Her response is to do more of the ritual dances...and say more of the magic incantations...that have so far only produced more drought conditions.
In Japan, they've been doing this voodoo for 26 years. We've had our eye on Japan since the mid-'80s, when everyone was sure that Japan Inc was the hottest thing in the econosphere.
The miracle economy blew up in 1989, and liquidity disappeared. Since then, Japan Inc has been the Sahara of the developed world. QE, ZIRP, NIRP, monumental deficits, Abe's Arrows...nothing worked to make it rain.
Negative interest rates, announced late last year, were supposed do the job. Savers were supposed to throw up their hands, open up their wallets...and spend, spend, spend to avoid paying the tax on saving.
Instead, savers saved more. What else could they do? With negative rates they needed more savings to get the same financial bang per buck.
Result: In January, Japan's retail sales fell 2.3% over the previous month.
But the Japanese feds aren't giving up. And now they turn to two of the world's most celebrated witchdoctors - Paul Krugman and Joseph Stiglitz - for advice on what to do next.
Japan has famously run huge fiscal deficits in an effort to get the economy moving. Thanks to a quarter century of these loose budgets, the island now has gross government debt equal to 240% of GDP and nearly nine times tax revenues.
Most of the spending is used to fund programs for old people - health care and pensions - making it hard to cut back. Japan's government finances are nothing more than a huge, compulsory, unfunded, old-age benefit program...one that is sure to go broke.
But don't worry, Japan. According to the Financial Times, the two Nobel Laureates went to Tokyo and argued - if you can believe it - that Japan needs more liquidity, that is, 'a looser fiscal policy'.
Yes, like New Orleans needed a shower after Hurricane Katrina.
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