NIA Economic Updates - By National Inflation Association (15/11/11) PDF Print E-mail
National Inflation Association   
Tuesday, 15 November 2011 08:42

On Monday of last week we told you that too many people were becoming bearish on Italy all at once and that we thought the Italian 10 year bond yield was near a short-term peak. We said that after it reaches its short-term peak, we would probably see a large decline in the Italian 10 year bond yield back down to below 6% as Italy implements more austerity cuts.

On Wednesday the Italian 10 year bond yield reached a Eurozone-era high of 7.48% and finished the day at 7.25%. We highlighted on Wednesday how the spread between the German and Italian 10 year bond yield had reached a record 553 basis points. We said that there was no reason for such a huge spread between their yields because the bonds of both countries are denominated in the same currency and there is no chance of the ECB allowing Italy to fail.

During the last two trading days of last week, the Italian 10 year bond yield declined 103 basis points from its peak to finish Friday at 6.45%. At the same time, the German 10 year bond yield bounced from 1.72% on Wednesday to finish Friday at 1.89%.



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If We Don't Solve The Jobs Crisis We May End Up With Our Streets In Flames And Society Dysfunctional - By Marshall Auerback (14/11/11) PDF Print E-mail
Marshall Auerback   
Monday, 14 November 2011 09:51

AlterNet

Employers added fewer jobs than was forecast in October, which has lots of folks scratching their heads over what to do about it.

In response to the latest unemployment figures, our nation’s central bank, the Federal Reserve, has again begun talking about additional stimulus measures, such as the purchases of mortgage backed securities (MBS) or a bond-buying program known as “QE3”. But neither of these measures worked before, so why should we expect more success this time?

The Fed’s policies are akin to putting a Band-Aid on a massive bleeding wound. Right now, the US economy is crushed by massive private indebtedness and sluggish job growth. What we really need are policies designed to promote job growth, so that people can service their debts and become open to spending again. Admittedly, the Fed isn’t the only problem. Our whole constellation of policy makers – the Fed, Congress, the Treasury and the White House – keep obsessing about the faux “costs” of the growing budget deficit, rather than the real costs of long term unemployment. And if they don’t give up this flawed economic thinking, then the burning streets and mass riots happening in Europe may soon be coming to a neighborhood near you.



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3 Ways Elites Rig The System - By Michael Lind (14/11/11) PDF Print E-mail
Michael Lind   
Monday, 14 November 2011 09:12

Salon

A growing number of Americans suspect that the American economic system is rigged in favor of the rich and merely affluent. That growing number of Americans is right.

Here are three of the many ways that markets for compensation are rigged to benefit not only the top 1 percent but also the top 10 percent, a group that includes many well-paid professionals:

Financial sector compensation.


By now the phrase “too big to fail” has become so familiar that it is known by its acronym: TBTF. What needs to be emphasized is that TBTF is the basis for the huge bonuses paid to elite American bankers who benefit from a government that socializes their losses while allowing them to keep their profits.



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Understanding The Price Of Money - By Robert P. Murphy (12/11/11) PDF Print E-mail
Robert P. Murphy   
Saturday, 12 November 2011 12:11

Mises Daily

In a money economy, the money commodity is on one side of every transaction, and hence reduces the number of relevant prices. The direct exchange ratio between any two commodities can easily be computed from their respective money prices. The "price" or purchasing power of money is the array of goods and services for which a unit of money can be exchanged.

Individual supply and demand schedules in a money economy are determined by the same principles applicable to a barter economy. An individual's value scale contains units of the money commodity as well as all other commodities and services, and the individual will engage in market exchanges to achieve the bundle of goods (including units of the money commodity) that he or she believes will yield the greatest utility. There have been various attempts to gauge the total "surplus" that individuals enjoy from the existence of markets, but these procedures suffer from methodological errors. Individuals benefit from voluntary exchanges, but it is nonsensical to ask how much they benefit, because utility is not a cardinal magnitude.



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European Debt Crisis Facts And Truth - By National Inflation Association (11/11/11) PDF Print E-mail
National Inflation Association   
Friday, 11 November 2011 09:25

The mainstream media as of late has been focusing its total attention on the sovereign debt crisis in Europe and seemingly has forgotten that we have a much larger debt crisis in the U.S. that hasn't gone away and is only getting worse. Many global economists have been saying in recent weeks that if the European Central Bank (ECB) only went the way of the Federal Reserve, eurozone nations wouldn't be in the desperate situation they are in today. NIA believes that the ECB has already been acting just like the Fed, just not to the same extent.
 
Mario Draghi just took over as the new President of the ECB and as his first act in office, Draghi lowered the ECB's benchmark interest rate by 0.25% to 1.25%. The ECB's interest rate of 1.25%, while not quite as low as the Fed Funds Rate of 0% to 0.25%, is still very inflationary. The ECB's primary stated objective has always been maintaining price stability and containing inflation. However, with all of the rioting and civil unrest that took place in Greece in response to major austerity cuts, public officials in countries like Spain have been putting pressure on the ECB to abandon their objective to maintain price stability and instead focus on helping fuel growth.
 



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