It has often been said that “insanity is doing the same thing repeatedly and expecting different outcomes.” The origin of this remark is unclear, as it has been attributed to celebrated figures like Albert Einstein, Mark Twain, and Benjamin Franklin, as well as an Ancient Chinese Proverb. What is certain is that the phrase has been reiterated so frequently that its existence ironically exemplifies its own meaning.
We mention this once more because it resonates particularly well with our current reflections. Today we embark on a retrospective journey, aiming to glean insights from history. The errors of the past persist in shaping the irrationality that characterizes our present circumstances.
Consider, for instance, an industrious Italian from long ago who embarked on a dubious mission. His aim was to formulate a pure theoretical framework for a socialist economy. He sought to reinterpret the troubling tenets of Marx, outlining how a centrally planned economy could potentially provide security and abundance for everyone. What follows is a recount of his controversial venture. Continue reading
On a recent Wednesday morning, we stepped outside to embrace the day.
The sky was enveloped in darkness just before dawn, the air crisp and invigorating. A gentle coastal fog lingered, while the faint twinkle of stars, some extinguished for millennia, flickered above the glow of streetlights.
After a moment of reflection, we secured our home and entered our car. Mornings in Southern California during spring are delightfully refreshing, yet the drive to downtown Los Angeles can feel torturous.
Despite this, we endure it as we would a visit to the dentist or a meeting with our accountant. If nothing else, it offers a rare opportunity to engage in thoughtful contemplation.
Before long, we arrived at our destination, but not before uncovering several unresolved inconsistencies—issues that seem futile to reconcile.
One glaring concern that troubled us was how main street depositors and lenders are often treated unfairly by credit unions and commercial banks. Continue reading
Economic absurdities are commonplace today. Federal Reserve Chair Janet Yellen recently asserted that “we have a healthy economy now.” She even stated this at the University of Michigan’s Ford School of Public Policy. Is she truly well-informed?
If we rely solely on a limited set of ‘official’ government metrics, it may seem so. The unemployment rate sits at 4.5 percent, generally considered full employment, and inflation is “reasonably close” to the Federal Reserve’s target of 2 percent. But what do these figures genuinely signify?
According to Yellen, they indicate that it’s time to tighten the country’s monetary policy.
By now, you may have heard her puzzling automotive analogy aimed at explaining how to normalize monetary policy. Yet, we can’t help but shine a light on its bewildering nature. During her visit to the greater Detroit area, Yellen shared this intriguing perspective with all of us. Continue reading
Choosing the path of least resistance doesn’t always lead to desirable outcomes. In fact, it often brings you to places best avoided. Regularly skipping work to enjoy a lie-in or living off credit cards will likely lead to financial ruin.
This principle applies equally to monetary policy. In particular, short-sighted credit policies that prioritize immediate comfort can result in a society burdened by long-term complications. The artificially low interest rates set by central banks through asset purchase programs carry significant repercussions.
Once these repercussions are set in motion, they continue until they’ve fully played out. The booms created by easy credit are inevitably followed by the busts of unsustainable debt. As an increasing amount of debt becomes delinquent, the overall debt structure deteriorates. However, knowing precisely when this breaking point is reached often only becomes clear in hindsight.
It’s been over two years since quantitative easing “officially” came to an end. During this interim period, market conditions have remained relatively calm, with asset prices continuing to rise. Yet, lurking on the horizon is the inevitable fallout from quantitative easing. Continue reading
