Economic Commentaries

Stephan Ernharth, our lead strategist, shares his views in our Economic Commentary series.

Getting Past the GDP BS

"As we will examine in detail, the recently released GDP (Gross Domestic Product) data for Q1 2015 showed a sharp drop-off in Q1 2015 GDP growth compared to that of Q4 2014. Q1 2015 GDP growth was also significantly below initial consensus expectations - but not below ours.

We were not surprised at all by the poor Q1 2015 GDP data simply because the Federal Reserve Bank stopped (for now) its increasing QE/$trillions in currency creation in October 2014.  And as I've long pointed out, since 2008 there has been a very close correlation between the credit-based economy and the Fed's artificially low interest rate policies via $trillions in currency creation and bond buying.”

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The Insolvent Leading the Insolvent

“It is my opinion that when a nation's central bank prints massive quantities of currency to buy a substantial portion of that nation's debt, that country is for all intents and purposes insolvent. Such a phenomenon becomes even more, shall we say, ‘intriguing’ when one considers that it can be argued quite rationally that major world central banks are teetering on the edge of insolvency as well.

Since 2008, the Federal Reserve Bank has created a previously non-existent $3.59 trillion out of thin air which it has used to purchase longer-term United States Treasury securities (debt) and agency mortgage-backed securities (also debt).”

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The Emperor's New Clothes

“I believe the Federal Reserve Bank's ‘stick save’ of the economy and markets from complete collapse in 2008/2009 via $trillions in newly printed Dollars, along with the Fed's artificial suppression of interest rates - has in reality, fundamentally fixed nothing. It's my opinion the underlying causes of the 2008 crisis still exist, and that they have been further (and grossly) exacerbated and distorted by the Fed's ongoing policies. 

I believe we have now reached a time where facts and reality have caught up with the Fed.

A time in which spin, hyperbole, and the parsing of words no longer work.”

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Emergence of the New Monetary Order

"By the day it grows increasingly apparent that nothing less than the emergence of a new monetary order is arriving. To those paying attention, the unfolding events have now become as subtle as a cruise ship plowing into the wooden docks of a small marina. And yet incredibly, as the pace of global de-Dollarization rapidly accelerates, I have yet to see the story covered on any mainstream US news channel - at all. 

I do not view global de-Dollarization as an abstract. I believe it carries serious ramifications, including the end of the Federal Reserve Bank's ability to print $trillions with impunity. As events unfold, I believe the day is drawing nearer where the Fed will no longer be able to print large quantities of dollars without direct, substantially noticeable dollar devaluation. The Dollar's loss of predominant reserve currency status could have profound consequences for each and every Dollar holder - in the form of Dollars worth far less.”

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Facts Are Stubborn Things

"I believe now more than ever it's time to be as discerning as possible, to question things, and to not simply accept information fed by the mainstream financial media.

A time to seek facts, whether we like what we find out or not. And to use positively the information we discover.”

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