The Awesome Science of Chinonomics

9/11 changed our way of life. It eroded our liberties. The Patriot Act made us slaves to a new reality in which we now gladly accept to be taken pictures that penetrate our clothes by the TSA with the sole objective of confirming we will not hijack our plane and slam it into a landmark. COVID19 will erode our liberties too. Just like 9/11 makes us willfully pose naked in exchange for the right to fly, COVID19 will eventually and make us gladly share our location to cross-reference it with healthcare databases to know if we've been exposed to infected people in exchange for the right to walk into a restaurant, a stadium or visit grandma at the nursing home. Just like life on the streets went on after 9/11 --it in a slightly different way-- life will go on on the streets after COVID19 --in a slightly  different way. The change in the world of economics will be more pronounced, though. The stock market represents the present value of the cash flows to equity, not...

"One more round of QE  please. The world economy needs it. I am feeling the withdrawal." That is the market's plea to our MIT-trained monetary Dictator . The market's starvation for the much-needed next QE fix seems to be creating a never-ending game. "The market needs more accommodating monetary policy. We can't allow deflation to set in", the rational goes. The terror of deflation drives Central Bankers around the world into competitive devaluations, pushing everybody else into a self-accelerating monetary easing race that precipitates a monetary flood of epic proportions. USD $2.3 trillion in the United States. GBP £375 billion  in Great Britain. EUR €1.0 trillion in Europe via the ECB's LTRO , just to name a few significant examples. Central Banks around the world are forcibly participating in a game of one-upmanship , the likes of which we have never seen . Central Banks Balance Sheet size has almost tripled in 6 years. Graph by James Bi...

If you found a penny on the ground, would you pick it up? Most people would not. In fact many believe they should be discontinued . They argue that pennies are not commonly accepted, that they are worth more for their metal content than for their monetary (fiat) value, that they are impractical to carry around, and that they are an inefficient store of value (breaking 2 out of 3 qualities money must have: medium of exchange, store of value and unit of account). In sum, the penny is a vestigial remnant of an era long gone that has no purpose anymore - much like the appendix or the wisdom teeth in the human body. Does this mean that pennies are really worthless? Fiat money is a very funny thing. It is worth something because we are told so by decree and because we expect (or believe) that someone else will also expect (or believe) it will be worth something when they take it from us in exchange for a good or a service. Enter the key word: "expectations". We hear often abou...