Pater Tenebrarum's Contributions

I noticed a lot of women wearing sparkling red shoes this holiday season, now I know why. They all want to follow the yellow brick road to Kansas, the land of no cliffs.

The erroneous belief that one can get something for nothing by cranking up the printing presses is of course deeply ingrained all over the world, but as policy options go, it is an especially bad one for Japan with its graying and society and declining population. As we have mentioned before, inflation is about as useful to Japan's citizens as a hole in the head.

Many of our readers have probably seen this widely circulated article at the WSJ: “Secret Talks Behind Central Banks' Bets”, in which the Fed's favorite press mouthpiece Jon Hilsenrath talks about the 'secret meetings' the world's central bankers regularly hold in Basel at the BIS (the Bank for International Settlements, the nexus of global central banking).

Although it was widely expected, it still is slightly disquieting to know that 'QE3' has just become 'QE4', with the total size of outright asset purchases per month henceforth running at a nearly 50% higher rate than 'QE2' had.

Every discussion of the ‘political metal’ gold should probably be prefaced with an anecdote of this sort so as to make clear what the main difference between a market chosen money like gold and government-imposed legal tender actually is: the latter depends on promises that are rarely kept.

It is incredible how a bearish social mood often leads to actions that will only tend to make it even worse and are likely to result in a plethora of usually very costly unintended consequences.

It is widely held that China's economic boom of the past several decades is the chief reason for the big rise in nominal commodity prices since about 2001 (depending on which commodity one picks, the boom began for some in 1998 already, for others as late as 2002).

Keep in mind that Moody's actually had France rated Aaa hitherto and has now altered this to Aaa minus, which is only a minor change. However, the credit outlook rightly remains negative.

We always stress that the great financial crisis has indeed left the economy with what one might term a 'deflationary undertow'. To the extent that households try to deleverage and are paying back debt and to the extent that banks refuse to expand credit concurrently...

John Williams, president of the San Francisco Fed, yet another noted dove, thinks nothing can go wrong by printing gobs of money. There is no inflation, and there never will be. They have the 'tools' to avert it. Never mind the explosion of the money supply over the past four years – it is all good.

CIBC thinks the huge amount of household debt in Canada and the beginning cracks in the housing bubble are nothing to worry about. The main reason for this benign assessment seems to be that there have been a few other credit and real estate bubbles in the world that have grown even bigger than the US one before it burst.

The choice of the word “unadulterated” is not accidental. There were many different kinds of gold standard, including what we now call the Classical Gold Standard, the Gold Bullion Standard, and the Gold Exchange Standard. Each contained flaws; each was adulterated.

Readers may recall that Ron Paul once surprised everyone with a seemingly very elegant proposal to bring the debt ceiling wrangle to a close. If you're all so worried about the federal deficit and the debt ceiling, so Paul asked, then why doesn't the treasury simply cancel the treasury bonds held by the Fed?

As a friend recently reminded us, the charts of credit default swaps (CDS) on sovereign debt in the euro area that we are regularly updating in these pages may no longer be indicative of the underlying reality of market perceptions.

Economists, market analysts, journalists and investors alike are all talking about it quite openly, generally in a calm and reserved tone that suggests that - to borrow a phrase from Bill Gross – it represents the 'new normal'.

When money is debased, social cooperation is hampered. There is even more to this in fact: the fiat money system, which has become such an indispensable feature of the modern-day welfare-warfare State, severely erodes peoples moral values. This is because it enables the belief that one can get something for nothing to become ever more entrenched.

The recent burst of market enthusiasm has meanwhile been accompanied by an inordinate number of technical divergences, including a strong warning sign in the form of a Dow Theory divergence between industrial and transportation stocks. All of these are to be filed under 'they won't matter until they do', but it would be a mistake to simply ignore them.

It appears it is after all not Scott Sumner who 'saved the US economy' by urging the helicopter pilot to create even more money ex nihilo than hitherto. What will save us instead is Apple, or rather, its latest product, the iPhone 5. Who needs Bernanke when this wondrous device stands ready to pull the economy up by its bootstraps?

Keith Weiner, the president of the US Gold Standard Institute and a follower of Dr. Fekete's school, has become a regular and valued contributor to this site. It is our hope that the occasional juxtaposition of points on which we disagree serves as an encouragement for readers to carefully think through the arguments that are presented and helps to foster debate...

Mrs. Merkel has just visited China, a big delegation in tow, for extensive talks with Wen Jiabao and his government. Germany has good reason to keep in close touch with China: it is one of its biggest export destinations these days.