Collateral Transformation: The Latest, Greatest Financial Weapon of Mass Destruction

In 2002 Warren Buffet proclaimed that derivatives were ‘financial weapons of mass destruction’ (FWMDs). And he was proven correct. But who cause crises? And why? And can so-called ‘liquidity regulation’ prevent the next crisis? Let’s take a closer look at proposed liquidity regulation as a response to the growing use of ‘collateral transformation’: the latest, greatest FWMD in the arsenal.

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Why talk of Fed “tapering” is just talk

Investors expect the Fed to begin reducing QE as early as this summer. However, whether or not the Fed follows through on “tapering” largely depends on whether the US economy can stand on its own two feet without support from the central bank? Our view is that it cannot and this article examines why that’s the case and why talk of “tapering” is just talk.

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“Tug of War” in Gold and Silver, “Blame Bernanke” for Recent Volatility in Markets

Gold prices hovered just below $1380 an ounce Wednesday morning in London, with silver trading around $21.80, after the metals failed to break through $1380 and $22 respectively. European stock markets ticked higher by lunchtime – with the exception of Germany’s DAX – regaining some of yesterday’s losses, which were followed by sell offs in the US and Asia.

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The Number That Matters

Friday was one of those days when so many markets move so dramatically that it’s hard to know what to focus on. But in this case the headline numbers – US stocks way up, gold way down, foreign markets all over the place — matter less than the interest rate on 10-year Treasuries, which spiked.

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Dollar At Risk? Case for Managing Currency Risk

The “cleanest” dirty shirt, the U.S. dollar, is down versus the euro so far this year; and was down last year. If this is a strong dollar environment, are investors prepared for a weak one? With plenty of dirty laundry in the world, we ponder how investors might be able to profit from actively managing currency risk.

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The nonsense behind state intervention

Both Keynesians and monetarists believe that increased government spending is sometimes necessary. The intervention is in the form of unfunded government spending, artificially low interest rates, or a drive to make the currency “competitive”. These methods have been tried unsuccessfully time and again, and they must be denounced if we are to understand our true economic condition.

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Where would UK property prices be without QE & ZIRP?

In response to the 2008 global financial crisis the government in Britain slashed interest rates to 0.5%, a policy known as ZIRP (zero interest rate policy), and embarked on a £375 billion program of QE (quantitative easing). These measures arrested the fall in property prices, but the question is, where would UK property prices be without QE & ZIRP?

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