Shortly after the release of our album, the Fed announced QE3 making our massive radio hit “QE2” feel dated to diehard fans of financial folk. Through three rounds of quantitative easing, the Fed purchased 4.5 trillion dollars in long term fixed income assets. Purchases were stopped on October 29th, 2014 and Janet Yellen recently announced that the Fed has started to gradually reduce its balance sheet. Last week, Trump nominated Jerome Powell to be the man to finish carrying out these plans bringing an end to the four year reign of the first ever female Fed chair.
When we released our album in May of 2011, gold was valued at roughly 1500 dollars per ounce. Today gold is trading at 1287 dollars per ounce much to the dismay of gold bugs like Peter Schiff who predicted gold prices would soon be equal to the Dow Jones Industrial Average. In that same period the Dow has risen from 12,600 dollars to 23,285 today.
One of the factors that has dimmed the shine of gold has been the rise of cryptocurrencies which have partially replaced gold as the doom and gloom asset of choice for investors. Many people who are fearful about the value of fiat money are now buying into cryptocurrencies which like gold are also immune from the problems of excessive money printing and quantitative easing. Unlike gold, bitcoin has very low transaction and storage costs and is based on the sophisticated technology of blockchain.
If you were very smart, you would have listened to Gold Price Factors and appreciated the concerns but come to the independent conclusion that these factors would have a greater influence on bitcoin going forward. If you did that you would have seen the price of bitcoin go from 1 dollar in May 2011 to nearly 7 thousand today. A 150 dollar investment could have made you a millionaire.
If you were having nightmares of stagflation then you have likely been resting a bit easier these days. For quite some time, inflation has been running below the committee’s 2 percent long-run objective. I wouldn’t get too comfortable though. The overnight rate is still quite low (it has only risen 100 basis points since the days of 0% to 0.25% rates).
So far, the classical monetary model has failed to accurately forecast inflation. A rise in the monetary base driven by low interest rates and quantitative easing has not resulted in much greater inflation. Additionally the traditional philips curve model of inflation whereby inflation picks up as unemployment drops has also broken down. So what has kept inflation so low? Some possible reasons include an aging population, technology and globalization. Looks like it’s time to update some of these economic models or we’ll be left behind just like the price of gold.
Last week On November 9, 2017 ,The U.S. government announced that it would begin paying out $772.5 million to more than 24,000 victims of the Madoff Ponzi scheme.
So far nearly 13 billion dollars has been recovered for the victims.
During the crisis, I boasted on the track This Time Around” about the strength of the Canadian economy. “Our leverage rates are only 18 to 1 / you’re off the charts and now you’re reaching the sun”. Now our leverage rates have risen to about 26 to 1 while American banks have become more cautious. House prices in Canada are considered some of the most overvalued in the developed world. The National Post estimates that Toronto housing market is overvalued by as much as 60%. Earlier this year, investors got nervous when shares of Canadian subprime lender Home Capital started plunging and many started seeing visions of 2008. On the next album it will be Kyle’s turn to brag.