Banking

The basic definition of an interest rate is simply the cost of borrowing money. It’s the cost associated with acquiring credit, whether buying a car, getting a mortgage, or taking a vacation. We encounter interest rates every time we make a monthly credit card or student loan payment. Interest and interest rates are a major part of daily life, yet many people don’t have a good understanding of the most critical types of interest or how their rates are set. Broadening our understanding even a little can help empower us to make more informed decisions, whether at the bank or at the ballot box.

The more I think about where the “monetary policy community” of academic elites has brought us, the angrier I get. It has been a long time since I have been this passionately upset about something - and not merely because the policies are stupid - but what the Fed has done is to destroy the retirement hopes and dreams of multiple tens of millions of my fellow U.S. boomers (and when we include the effects of the destructive policies of the rest of the world’s central banks, the number becomes hundreds of millions). This article looks at the FOMC’s decision-making process for monetary policy and surveys the unpalatable future that our leaders are cooking up for us.

The following infographic highlights 9 relatively recent “black swan” events that will have a lasting impact on how investors approach markets.

The complete and total collapse of Deutsche Bank would be an event many times more significant for the global financial system than the collapse of Lehman Brothers was. Global leaders simply cannot afford for such a thing to happen, but without serious intervention it appears that is precisely where we are heading.

Increasing stock market prices are largely driven by an increasing rate of monetary inflation BUT monetary inflation growth has now been either flat or declining for the last three years, depending on what time frame one looks at. Conclusion: Earnings, and ultimately valuations, must fall as an ever-expanding rate of monetary inflation is unsustainable and as interest rates cannot forever be kept artificially low.

The Federal Reserve has decided to leave its target interest rate unchanged at a range of 0.25% - 0.5% while suggesting that a hike later in the year was very likely. This article presents the differing points of view of two former Fed officials as to whether it was the right call or not.

According to a research paper from the latest issue of the Journal of Finance, there is "no evidence that the recommendations of financial consultants to institutions add value, suggesting that the search for winners, encouraged and guided by investment consultants, is fruitless". This article identifies the reasons behind why that shocking revelation is the case.

What you are about to read could give you serious heartburn, especially if you are an economist or a central banker or a retiree or just someone who has lived life playing by the rules, and now you find yourself getting no return on your savings, forcing you to save even more and work even longer.

Although low to negative interest rates could persist for years, odds are the current low-yield craze won’t last a full 30 years. Therefore, at some point down the road, today’s buyers of 30-year bonds will likely wish they had parked some of their savings in physical precious metals instead.

Dark clouds are now moving in fast across the world and this coming autumn could be very troublesome both for the world economy as well as geopolitically and socially. The combined risks are now higher than at any time in world history. When risks are high, it is advisable to stay away from bubble markets but, sadly, the investment world loves owning things that are priced high, totally ignoring the massive loss potential.