Criticism of QE2 Comes From Some Unlikely Places (The Big Picture)
Greg Ip Answers QE Questions (Felix Salmon)
Mythbusting QE2 (Wall St Cheat Sheet)
You know that when Sarah Palin tries to weigh in intelligently on QE2, things are getting out of hand. The debate over QE2 has raged since the Fed’s announcement of $600 billion in new asset purchases. The amount of coverage, the endless this-is-why-QE2-was-right-right-or-wrong;shouting has been dizzying. Ben Bernanke felt the need to explain his committee’s via a Washigton Post Editorial, and Fed Governors Warsh and Fisher have come out with rather harsh words in regards to QE deux. The debate does not end at home, with China railing that Fed easing will flood the world with “hot money” and a German official labeling the policy action ‘clueless’. Not included in this article is more recent commentary from India in support of QE2 or anything that leads to a (ostensibly) more prosperous United States, because that is good for the rest of the world. It’s the linkfest to end all QE2 linkfests, now please, everyone get off it.
Physical Gold-The Master Proxy of Value (ZeroHedge)
The goldbug end-game is fraught with implausibilites, but here is a well communicated piece on Physical Gold 101. Money, the author explains, is not a tangible thing, but rather a concept that is the sum of its three monetary functions: 1) store of value 2) medium of exchange 3) unit of account. Borrowing (increasing the medium of exchange) is inflationary, and when the same thing is used for medium of exchange and store of value, the real value of savings is reduced. Historically (prior to last 80 years) panics and bank runs, which are deflationary events, served the function of returning the monetary system to equilibrium. But over the last 80 years, the rise of neo-classical economics has led to the blowing of multiple asset bubbles that prevents this equilibrium from being restored. Thus, physical gold, which is unlike debt in that there is no counterparty and we cannot create more of it at will, is the only feasible option for real store of value. Gold is not money, but rather the master proxy of value. Read the comments section too, some good stuff in there.
Our Government Should Completely Re-Tool Our Tax Code (Washington Post)
Over the next two years, the now bipartisan leadership in Washington needs to take a long look at the current tax code and find ways to dramatically improve it as a means for facility growth in the domestic economy for the long-term. Too often is the debate centered around small details in legislation and inconsequential matters, and not often enough focused on visionary overhauls that could set the stage for an American resurgence. It is clear that we need more tax revenues to balance the budget, and we need some more creative ideas for accomplishing that goal. Get rid of the regressive deductions for employer based health care, left over from WWII wage-and-price controls, and mortgage interest, which fueled over-investment in housing. Tax credit fueled consumption, rather than savings and investment. Shift part of income or payroll tax burden to a carbon tax, a tweak that would serve to increase payroll spending and reduce carbon emissions. Get rid of the enormous tax loopholes that allow big companies like Googe to have a net 2.4% effective tax rate. Bring down our corporate tax rates and enforce them more strictly.
What History Tells Us About Silver (Slope of Hope)
Silver Hits Its Fib Extension (Slope of Hope)
Silver has gone parabolic since the QE2 announcement, and investors are probably wondering whether they can still get involved in the second-place metal that is currently outperforming Gold. Even further back, silver has rocketed higher since the CFTC announced investigations into possible silver market manipulation from big players JPMorgan Chase & Co and HSBC, triggering a massive unrolling of shorts that acted as a springboard for the recent move. The last time silver enjoyed this sort of bonanza was in 1979-80. When the breakout came, it was only the start of silver’s massive run, but when it came in, it came in hard. Today, silver hit its Fib extension and some have posited that a calculated short could be nigh (and we saw one this afternoon). But as Tim Knight sees it, “if God popped down for a moment to tell me it would be trading in the triple digits before it was all over, I wouldn’t be that surprised.” I wouldn’t go that far, but currency conflicts show no signs of abating,and I do not, by any means, believe precious metals have put in a top.
Zenyatta Misses History By A Head (NYT, hat tip The Big Picture)
I am a huge sports fan, there is hardly a sport I do not watch this side of bowling. One story of late that has intrigued me is the tale of Zenyatta, the greatest philly to ever lace em up. For me, there has always been something mystical about throughbred horseracing, and last weekend’s breeders cup race felt like it was to be a magical coronation of one of the greatest race horses of all-time, no matter the gender. The majestic Zenyatta always seemed to have another gear when it appeared the pace-setters were out of reach, and she flew (literally, in a custom designed plane from California) into Churchill Downs undefeated at 19-0 for her final race against the best the boys had to offer. She was the oldest horse in a strong field. She stumbled out the gate and ran several lengths in dead last for the first half of the race with what her jockey summarized afterwards as a wobbly, uneven gait. Most horses would have been toast at that point, but not Zenyatta. She steadied herself and reeled in the pack. Darting inside then forced out, she finally was able to showcase her trademark closing speed. All were left in the dust except for a highly-regarded colt named Blame, the only obstacle still standing that could prevent inevitable victory. But the greatest philly of them all ran out of real-estate, falling a head short of victory. Ten more yards and she would have won the race and finished her brilliant career undefeated in 20 races. Jockey Mike Smith was in tears, devastated, distraught, heart-broken, and so was I. But once again, horseracing brought us a magical moment made possible only by one of this earth’s most magical creatures. Don’t let my words drown out the truly brilliant commentary by the author, give it a read. Now you see why I hate wasting my time reading drivel about QE2.
