The Counter-Productive Monetary Policy of the Fed

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Sowing Inflation, Reaping Deflation

Courtesy of Antal E Fekete @ New Austrian.org

New Austrian School of Economics

Introduction

Typically, bond speculators carry on interest arbitrage along the entire yield curve. They sell the short maturity and buy the long, hoping to capture the difference between the higher long rate and the lower short rate of interest (borrowing short and lending long). This arbitrage is not risk-free per se as it has the effect of flattening the yield curve. As a result the normal yield curve could get inverted unexpectedly, that is, turned upside down, making the rising curve into a falling one while turning the speculators’ profit into a loss.

However, as a direct result of the policy of open market operations (introduced clandestinely and illegally in 1922 through the conspiracy of the US Treasury and the Fed, long before the practice was legalized ex post facto in 1935) interest arbitrage was made risk-free. Astute bond speculators could thereafter pre-empt Fed action profitably. It never fails. Speculators know that sooner or later the Fed will have go to the bill market to buy in order to boost the money supply. They will buy beforehand. On rare occasions the Fed would be a seller. Then speculators, perhaps acting on inside information, will sell beforehand. This copycat action is an inexhaustible source of risk-free profits. Thanks to the Fed’s open market purchases speculators are assured that they will always be able to dump the bonds at a profit which they have bought pre-emptively. The more aggressively the Fed persists in its effort to increase the monetary base, the greater the bond speculators’ profits will be.

Absolute bad faith Continue reading

A Copper Bedrail Could Cut Back On Infections For Hospital Patients

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Courtesy of NPR:

Checking into a hospital can boost your chances of infection. That’s a disturbing paradox of modern medical care.

And it doesn’t matter where in the world you’re hospitalized. From the finest to the most rudimentary medical facilities, patients are vulnerable to new infections that have nothing to do with their original medical problem. These are referred to as healthcare-acquired infections, healthcare-associated infections or hospital-acquired infections. Many of them, like pneumonia or methicillin-resistant Staphylococcus aureus (MRSA), can be deadly.

The World Health Organization estimates that “each year, hundreds of millions of patients around the world are affected” by healthcare-acquired infections. In the United States, the Office of Disease Prevention and Health Promotion in the Health and Human Services Department estimates that 1 in 25 inpatients has a hospital-related infection. In developing countries, estimates run higher.

Hospitals Struggle To Beat Back Serious Infections Oct. 22, 2014
Hospital bed safety railings are a major source of these infections. That’s what Constanza Correa, 33, and her colleagues have found in their research in Santiago, Chile. They’ve taken on the problem by replacing them, since 2013, with railings made of copper, an anti-microbial element.

Copper definitely wipes out microbes. “Bacteria, yeasts and viruses are rapidly killed on metallic copper surfaces, and the term “contact killing” has been coined for this process,” wrote the authors of an article on copper in Applied and Environmental Microbiology. That knowledge has been around a very long time. The journal article cites an Egyptian medical text, written around 2600-2000 B.C., that cites the use of copper to sterilize chest wounds and drinking water. Continue reading

Yes, we can reshape the state – if corporations pay more tax

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George Osborne has announced the so-called Google tax. Photograph: Peter Macdiarmid/Getty Images

Courtesy of Will Hutton @ The Guardian:

If companies in Britain paid, proportionally, as much tax as they did in the last year of Mrs Thatcher’s prime ministership, the country would be £30bn better off. There would still be a deficit, but the fiscal situation would be transformed. The crisis talk of the unprecedented reshaping of the state to the same level – in terms of percentage of GDP – as it stood in the 1930s would recede. It would not be necessary.

The chancellor has nothing if not sensitive political antennae. This kind of claim cannot be allowed to get any traction. It is a political imperative that he and his allies keep the national conversation away from the structure of the tax base. Instead they need to concentrate firmly on the shortcomings of the allegedly inefficient state and featherbedding of the welfare system – always taken as axiomatic – and thus the inevitable necessity for their reshaping and downsizing. The Conservative party’s brand is toxic enough without being seen as being soft on companies and tough on the poor and average citizen.

So last week Mr Osborne announced the popular profits diversion tax, or Google tax. It is widely advertised that he is doing all in his power to increase the tax take from rogue multinationals who artificially organise their affairs to reduce their British taxes. Company directors have a new duty to notify Her Majesty’s Revenue and Customs every year if, in their opinion, their tax arrangements qualify as artificial: instead of paying 21% corporation tax they would pay a penalty 25%. It was left unsaid in the accompanying documents, but any financial officer who did not notify the tax authorities of what his or her company was doing would risk being disqualified from holding office. Continue reading

NHS Services Cut in Nottingham After Doctors Quit Rather than Work for Private Firm

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Courtesy of Charlie Cooper @ The Independent:

An NHS hospital has been forced to scrap highly rated services for patients with severe skin conditions including skin cancer after an “exodus” of senior doctors reluctant to work for a private-sector subcontractor.

Nottingham University Hospitals Trust said it would no longer be able to provide acute adult dermatology, including emergency care, after losing six of its eight consultants.

Five of those departing are understood to have left rather than transfer to Circle, a private healthcare company which won a contract to provide most of the local dermatology services last year. The closure of the service has raised concerns about the impact of privatisation on the NHS, with doctors worried about job security in the private sector.

The trust lost out to Circle, despite warnings from senior doctors that they would leave rather than be transferred out of the NHS, the Health Service Journal reported.

It is understood that the senior doctors who left were concerned over job stability at a private employer, and also had fears that a profit-driven provider would not offer opportunities for academic research or training.

The trust has said it will stop providing acute dermatology services to new patients from early next year because of a lack of consultants.

While Circle’s outpatient treatment centre will remain open, any patients with severe conditions will no longer be seen by a specialist at the hospital and may have to be referred elsewhere.

Health commissioners said they were working with the trust and Circle to ensure patients get the care they need. Circle said its Nottingham treatment centre was providing a good service, that it had taken on extra staff and would work with local commissioners to “find a solution”. Continue reading

ECON 101 – LECTURE 3

GOLD STANDARD UNIVERSITY

Summer Semester, 2002

Monetary Economics 101: The Real Bills Doctrine of Adam Smith

Lecture 3

CREDIT UNIONS

- The Invisible Vacuum Cleaner -
– The Quantity Theory of Money -
– Destruction of the Gold Standard -
– And Discrediting the Real Bills Doctrine -
– Are Two Sides of the Same Coin -
– The Working Man As the Guardian of Sound Money -

Lending versus Clearing

July 15, 2002

I dedicate this lecture to the memory of Ely Moore, the first union official ever to have been elected to the Congress in 1834. He was a solid gold-standard man who believed, with Daniel Webster, that

“Of all the contrivances for cheating the laboring classes of mankind, none has been more effective than that which deludes them with paper money.”

Daniel Webster

In the first two Lectures I dealt with a new blueprint for a gold coin standard for America and the world, designed to avoid two great pitfalls: (1) the pitfall of breakdown of social peace between creditors and debtors, (2) the pitfall of entrusting gold coins that represent the savings of the people to the banks. In this Lecture I shall recommend that the guardianship to preserve the system of sound money should, instead, be entrusted to the laboring classes and their representatives, the Credit Unions, which would be the only financial institutions chartered to carry deposit accounts denominated in Gold Eagle coins, and which would act as clearing houses for the circulation of real bills.

Recall that real bills provide credits to move urgently demanded consumer goods from the producers to the retail outlets. We don’t need banks for that. In any event, short term commercial credits arise not through lending but through clearing. As the supply of consumer goods emerge in production, purchasing media to finance its movement to the consumer emerge simultaneously through the process of clearing. No lending is involved. Coin, credit, circulation, clearing – the four C’s – are central ideas that economics has ignored. We are going to revive them here in preparation to pave the way to a new gold coin standard. Continue reading

The Oil-Price-Shock Contagion-Transmission Pathway

Courtesy of Zerohedge:

As we noted previously, counterparty risk concerns (and thus financial system fragility) are starting to rear their ugly heads. In the mid 2000s, it was massive one-way levered bets on “house prices will never go down again.” When the cracks started to appear, the mark-to-market losses in derivatives led to forced liquidations and snowballed systemically. In the mid 2010s, it is massively levered one-way asymmetric bets on “commodity prices [oil] will never go down again.” Meet WTI-structured-notes… the transmission mechanism for oil-price-shocks blowing up the financial system.

Because nothing says exuberant ignorance like limited upside, unlimited downside OTC (illiquid) derivatives…

Here’s BNP Paribas’ 1-Yr WTI-linked notes that collapse if oil drops below $70…

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Continue reading