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Cause-Effect Also Applies to Economics

MARKET NEWS / MCALVANY RECAP / MARKET NEWS
McAlvany Recap • Feb 27 2023
Cause-Effect Also Applies to Economics
MPM Posted on February 27, 2023

Many parents know the pain and frustration inherent in watching a teen or adult child make bad choices. It’s heartbreaking because the parent knows what the consequences will be—often from experience.

When those same parents put on their taxpayers’ hats and view the actions of their government or central bank, the angst and pain are greatly multiplied. Wayward officials and central bankers, like errant young adults, are typically driven by selfish motives. But older adults should know better. The youngsters’ train wrecks often destroy families. Officials destroy nations.

Warnings against central banks, fiat currencies, debt-based monetary systems, deficit financing, entitlement programs, and living far beyond one’s means are legion, and they’re centuries old at this point. People who ignored those warnings did so because they benefited from doing so. As they survey the destruction they have wrought, many of them cry all the way to the bank.

The MFG analysts continue their detailed analysis of the economic miasma that is now worldwide. Doug Noland in particular describes it in macro terms this week, providing one of the clearest and most succinct descriptions of the situation you’ll see anywhere. If you know someone completely new to economic analysis—someone who has always found it too obscure to follow before—have him or her read the first seven paragraphs of Doug’s weekly CBB below.

Key Takeaways:

  • BoJ policy outweighs actions of the Fed, ECB, and BoE combined
  • In economics, as in computers, garbage in=garbage out
  • Rumors of inflation’s death have been greatly exaggerated
  • Despite recent reversals, primary trends seem to be reasserting themselves

The McAlvany Weekly Commentary: David and Kevin pay particular attention to the Bank of Japan and its actions this week. Covering less than seven ten-thousandths of the earth’s surface, Japan has nevertheless, through its banking actions, overwhelmed the banking actions of much of the rest of the world. As David puts it, “QE from the Bank of Japan has more than offset all the global quantitative tightening from the US, the eurozone, and the Bank of England combined.” If that’s a bit hard to believe, the specifics are in the dialog this week. With leadership at the BoJ changing, such outsized policy effects could continue to be a factor for some time to come. How will it play out? The hosts discuss the most likely scenarios and their probable effects.

Credit Bubble Bulletin: Beginning his analysis from the perspective of Austrian economics, Doug takes a large-scale look at our current situation. The result is a sweeping summary of a worldwide crisis created by government and central bank malpractice. Very interestingly, he believes many of our most pressing political problems have this errant economic activity as their cause. “The consequences of decades of unsound money are coming home to roost. Our nation is hopelessly divided in an increasingly decoupled world. Predictably, inflation and bubbles are sowing inequality, insecurity, hostility and conflict – at home and abroad. Trust in critical institutions continues to wane.” There is much more. For analysis most experts lack the breadth or depth to attempt, be sure to read this week’s CBB.

Hard Asset Insights: In the process of updating pertinent data and the public’s view of that data, Morgan notes a number of significant developments. For one, he focuses on the extraordinary degree to which the data is being manipulated by the agencies that collect it. For another, he notes that the public’s attitude toward the economy is split. If one owns stocks (which benefit from looser monetary policy), things are looking up. If not, not. A third observation is that indications of increasing inflation have followed hot on the heels of the Fed’s slowing of QT. Surprise, surprise. That outcome is perfectly in keeping with analysis provided in HAI over the past weeks and months.

Golden Rule Radio: Miles takes a look at the gold chart this week, noting recent weakness and suggesting that some further downside action is possible despite an overall bullish scenario. He also views the silver chart and suggests that silver’s more pronounced decline seems to be leading the gold action. However, silver is also in basically strong position, and will likely realize some of that strength in the near future. That is particularly so in light of the equities chart he also reviews, and the dollar chart that brings up the rear of the column this week. In GRR, you’ll see the week’s financial developments in graphic form, with annotations and clear commentary to help you make sense of the week’s market action and help plan for the future.

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