velocity of money – The Burning Platform

Guest Post by Martin Armstrong

The problem in so many areas is that we can focus on one issue, but the answer is a complexity of variables. The history of interest rates has been provided on this site. Interest rates in a developed economy reflect the “option” value on the expected decline in purchasing power of money. If I expect it to decline by 5%, then I expect a profit and say want 8%. You in turn will pay the 8% only if you think you also can make a profit above 8% perhaps 10%+.

native advertising

In an UNDEVELOPED economy, we transpose the depreciation risk of money with risk in general. Lacking any developed economy, one will lend only based upon the risk of getting repaid. Therefore, without a legal system, the risk is either the person or the political climate. When we look at the history of interest rates, I demonstrated that the rate of interest even within the Roman Empire increased the further you moved away from Rome. Hence, the lowest interest rates are in the dollar and they rise in other countries based upon perceived political risk. Greece’s interest rates are significantly higher than those in Germany. This is a reflection of political risk, not simple the future inflation rate in the Euro.

Continue reading “A Question of Money – Interest – Bankers”

Guest Post by Martin Armstrong

The New York Banks have been my adversary to say the least. Even Alan Cohen who was the court receiver running Princeton Economics was simultaneously on the board of directors of Goldman Sachs and even when the SEC said the contempt should end, it was Cohen who lied to the court to keep the contempt going without even a complaint or charges since the original charges were dropped.

The New York banks have destroyed banking when Robert Rubin of Goldman Sachs managed to get the Clinton Administration to repeal Glass Steagall, Even Mario Draghi, head of the ECB, who is taking interest rates negative, was a vice chairman and managing director of Goldman Sachs International and a member of the firm-wide management committee (2002–2005). So the tentacles of NY spread wide and far.