Tag Archives: monetary policy

The Cats and Dogs of the Equity Markets

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Driving the economy to fuller employment is a macroeconomic policy success. But it comes at a cost of higher employee costs and generally reduced profit and stock returns. Some firms, in this global economy, produce with foreign labor and benefit from weaker foreign currencies. Hence, there will be both purring cats and offsetting dogs in diversified portfolios. Investment returns call for targeting those firms gaining cost advantages via foreign labor. Continue reading

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Manna from Heaven and Government Debt

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Baby Boomer entitlements are now upon us with an acceleration in the government debt overhang. In a novel approach to debt containment, the European Central Bank pays high enough prices for existing debt to create a cash bonus to issuers of debt but with adverse incentives and unfortunate side effects.
We must conclude, the rules of propriety have changed regarding debt. We were naïve to believe that when governments borrowed they intended to tax in the future and retire debt. Instead reliance is being placed on the central banks to not just neutralize debtor governments’ debt but award governments a monetary subsidy to keep on issuing debt. Continue reading

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The Point of No Return for Government Debt






The developed world economies have high government debt loads and as a result retard economic growth. The adoption of central bank quantitative ease (QE) is billed as a monetary policy but in reality is a fiscal policy of debt service reduction. QE creates microscopic bond market yield that in turn creates capital flight. This further lowers income and raises the debt ratio. So efforts to do “Whatever it takes” to save the sovereign are too late and counterproductive. Continue reading

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Oil Boombustology

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It’s long been in the DNA of market observers that when money growth outpaces the economy’s growth, booms are created and so are busts. The latest is the oil boombustology with greater impact than is commonly understood. This raises the question of what is left of growth in the US economy without oil expansion. Continue reading

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Goodbye to the Robinson Crusoe Bond Market

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With the U. S. economy having achieved lift-off momentum, the Federal Reserve has ended it epic and historic bond buy known as quantitative ease. The corollary reflex is that interest rates will return to our historic sense of normal, but that is not occurring. The Fed is not all-powerful and is losing pricing control to collective global forces. Continue reading

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The Vulnerability of Private Wealth to Government Financial Stress

“The Vulnerability of Private Wealth to Government Financial Stress”





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The Slow-Moving Train Wreck Has Picked up Speed: Foreign Depositors in European Banks Will Be Outed

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Economies have natural self-correction mechanisms to keep the economic train on the tracks and moving at accustomed speed unless undercut by governments. In their desperation for tax revenues, Euro zone governments have “outed” their foreign depositors to the foreigners’ home taxing authority. Thus, the slow moving train wreck has just picked up speed. Continue reading

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Is the Printing Press Engaged for the Duration?

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A printing press is a handy thing to have. When a government or central bank can fund itself with money or claims on money, it can buy a lot of things and solve a host of problems, all without the need to tax. I wish I had one. Continue reading

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The Stock Market, QE3 and Voodoo Finance

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As we look across the economic landscape there is an abundance of reason to anticipate a global economic slowdown. It is already well in the works as reflected in anticipatory data. It would not be a garden-variety recession emanating from … Continue reading

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Denial, Default or Treasury Currency: the Hobson’s Choice

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Spain’s financial vulnerability has been in the spotlight recently. The trickle-down from a single bank’s insolvency gives us a glimpse of how country funding shortfalls are likely to be handled in the coming decades. The Spanish bank in question, Bankia, … Continue reading

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