Crescit Eundo: Collateral and the Deterministic Path of a Logical Irrationality
It seems that the Latin phrase Crescit Eundo (it grows as it goes) fits well into the Fed’s modus operandi. In its latest attempt to justify the non-tapering, the Fed told us that fears of slowing growth, interest rate rising, and Washington infighting about the...
On the Art of Central Banking: The Challenges Ahead
Our Federal Reserve Bank, the ECB, and other central banks of developed nations face a paradox: the same institution that is supposed to hold the ultimate reserves of the commercial banks has a duty of lending those reserves to the banks that are in trouble and which...
On the Road to Damascus: Machiavellian Anatomy and Market Romanticism
One of my favorite songwriters (Rich Mullins) - who died prematurely sixteen years ago - wrote the song “On the road to Damascus”. Let’s recall some of those lyrics: On the road to Damascus I was hung in the ropes of success When you stripped away the mask of life...
World Island Meets World Currencies: Planting the Seeds of Turbulence
In 1904 Sir Halford Mackinder published his famous paper The Geographical Pivot of History. The paper served as the cornerstone for the study of geopolitics in the 20th century. Sir Mackinder claimed in that paper that the age of sea power (initiated by Alfred Mahan’s...
Financial Repression: The Modern Equivalent of Currency Debasement
We live in an era of financial repression where savings are penalized due to low interest rates. The latter is the outcome of the financial crisis. This in turn was caused by collateralizing questionable assets, derivatives’ volume explosion, securitizing...
A Temporary Lapse in Markets’ Trend: Truncation Bias and Shortsightedness
Understanding market trends is more than merely intellectual gymnastics on financial and economic themes. Every market era emphasizes different aspects of its inheritance depending on its own problems. Our challenge nowadays – where a market theme is absent - is to...
On Spendthrift Lords, Rays of Hope, and Market Developments: Pyrrhic Victories and the Fable of Stability
The developed world’s crisis of 2008 was the result of credit over-extension fed by international imbalances and a finance sector that was issuing instruments whose collateral base was questionable. Developing economies such as the Chinese resorted in avoiding severe...
Credit Orphans on the Street Called “Money for Nothing”
For a crisis to culminate and show its true face, time is critical in the sense that it should enter a saturation phase which in turn will signify that the downturn is inevitable. It is my opinion that the next two years will be that saturation phase that may produce...
Momentum and Retrenchment: Market Outlook Amidst Geopolitical Turmoil
The current market record-setting highs may signify an upward bias carried by momentum and liquidity. The first graph below shows the performance of the S&P 500 over the last month, while the second graph portrays its performance in the last twelve months. Two...
Currencies and Hobson’s Choice: The Trajectory for the Revaluation of the Dollar
The best thing that the US has to export is the USD. From that perspective, it is the strategic advantage of the US to create those conditions necessary for the demand of its currency. The phrase “take it or leave it” originates with Thomas Hobson from Cambridge,...
