Whoever would have thought that some people once called economics the most dismal of sciences? Certainly, as the current crisis goes on and on, those of us who consider ourselves to be economists scarcely are able to find the time to squeeze in a dull moment, even here and there. But even at a broader level, interest in that most dismal of dismal topics - the theory and practice of central banking - seems now to fire up levels of enthusiasm here in Spain that make even the appetising prospect of a forthcoming Real Madrid-Barça football match pale in intensity. Even if it is the case, I have to admit, that the everyday Johnny (or Jill) come lately sitting in the bar still - truth be told - prefers the sports columns of the daily newspapers, or the lacivious details of the latest romantic adventure of one of the rich ...

The trouble with being a contrarian is that you can never be quite contrarian enough.

We began having doubts about the ‘feds inflate… gold soars’ hypothesis last year. It was too easy… too obvious. And if it were that easy to inflate a nation’s currency, how come the Japanese couldn’t get the hang of it in the ‘90s?

So, we moved towards a contrarian position – inflation, yes… but not for a while. And gold? Well, we are in it for the long run. In the short run, anything could happen.

To clarify our view on gold, the Daily Reckoning is not bearish on the metal. It is not bullish on the metal either. It is buggish. We are gold bugs. In the long run, gold will retain its value. Since that’s all we ask of it, we are always satisfied. Even if it is down in the short

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In addition to testifying before Congress, Federal Reserve Chair Ben Bernanke today tried to explain the Fed's plans and options directly to the public through an op-ed in the Wall Street Journal. Here I provide some background on what Bernanke's talking about in terms of an "exit strategy" for the Fed, and offer some thoughts on his remarks.

The basic power of the Fed derives from its ability to create money, which it can use to buy assets or extend loans. We can summarize the Fed's actions in terms of either the asset side of its balance sheet (the assets and loans it holds), or the liabilities side (the money or other obligations it has created). Let's start with the asset side. Up until January of 2008, by far the most important assets held by the Fed were short-term Treasury bills. As last year wore

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Lots of transactions went on in central banking over the past month or so, not only in the United States but in the UK and Europe. Quantitative easing is the game and, at least, the central bankers are getting more and more comfortable with this.

Credit is given to quantitative easing for the drop in the dollar LIBOR rate. The three month LIBOR now ranges between 50 and 60 basis points over the target Federal Funds rate chosen by the Federal Reserve. This is the lowest this spread has been in a long time. For the five years previous to September 2008, the time the financial markets collapsed, this spread averaged between 20 and 30 basis points.

This move reflects the efforts of the Bank of England and the European Central Bank to push short term interest rates lower and to engage in monetary actions that

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The Federal Reserve is puzzled. So are we. The Fed is puzzled that Treasury bond yields are soaring. We are puzzled that the Fed is puzzled. Of course bond yields are soaring! Why wouldn’t they be?

If you happen to be the world’s largest debtor, and you happen to need another $2 trillion of credit from the rest of the world, you should not be surprised that your creditors demand a higher interest rate on the funds they provide. And yet, some members of the Federal Reserve are perplexed by this result.

“The Federal Reserve is not really sure what is driving the sharp rise in long-dated bond yields,” Reuters News reports. “Do rising U.S. Treasury yields and a steepening yield curve suggest an economic recovery is more certain, meaning less need for safe haven government bonds and a healthy demand for credit?…Or does the steepening yield curve mean investors are worried

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We knew that as soon as Venezuelan President Hugo Chavez started talking about introducing a new currency, the "sucre," for the ALBA, I knew that it wouldn't be long before we saw Russia get in on this new currency talk.  Instituting a BRIC currency is a very interesting idea, but it is hard to imagine any of these countries who would be willing to subjugate its central banking and budget/fiscal rules to foreign governments or collaborative decision making.  This is one of the reasons that some people think the euro won't even survive much longer - having Greece manage budgets with monetary policy set by Brussels?  Probelms are bound to occur.

"I do not exclude that the Russian president's idea about the creation of a supranational currency and the rouble as a (world) reserve currency will be discussed," Medvedev's spokeswoman, Natalya

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It is not secret that the author of this space, at times, has been rather critical towards the ECB. The reason has not been so much for its de-facto inability to amend the situation in the sense that this is an inbuilt characteristic of the system, but more so because of the seeming complacency with which ECB policy makers (with notable exceptions) have viewed the crisis.

However, and with the recent rate meeting one is tempted to conclude that the ECB is now seriously committed to considering alternative measures and also, as it were, drastic measures along the lines of its peers at the Fed, the BOE and the BOJ who have all in their distinct way been engaged in QE for quite some time. In the recent print edition, the Economist provides a fine overview of global central banking in the midst of the current financial crisis; what has

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We highlight Fannie Mae (FNM) and Freddie Mac (FRE).Below we present both the most recent Federal Reserve statement and the previous one from its mid-March meeting along with my translation and interpretation interspersed between the paragraphs."Information received since the Federal Open Market Committee met in March indicates that the economy has continued to contract, though the pace of contraction appears to be somewhat slower."Household spending has shown signs of stabilizing but remains constrained by ongoing job losses, lower housing wealth, and tight credit. Weak sales prospects and difficulties in obtaining credit have led businesses to cut back on inventories, fixed investment, and staffing."Although the economic outlook has improved modestly since the March meeting, partly reflecting some easing of financial market conditions, economic activity is likely to remain weak for a time. Nonetheless, the Committee continues to anticipate that policy actions ...

Hate thy neighbor? Giveth his children money; that will fix them all. Few things are as costly as free money.

When the Spanish Galleons came back from the New World with cargoes of gold and silver coins, the Spaniards thought they’d hit the jackpot. All of a sudden, Iberia had plenty of money. Historians report that the Spanish neglected their fields and their manufactures; now they had easy money to spend. Prices rose quickly. Then, when the treasure ships stopped coming, the Spanish were broke. Spain – and Portugal too – went into a decline that lasted four centuries.

In the late 1990s, America got in the habit of getting shiploads of stuff from Asia – and paying for it only with pieces of green paper. Pretty soon, Americans too neglected their own factories – though not their fields. Let the Asians sweat, they said. We’ll think!

Not much serious thinking has taken

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“Substantial doubt,” say auditors at Deloitte & Touche. They’ve been studying GMs figures. The numbers make them wonder whether the automaker can continue as a “going concern.”

Here at The Daily Reckoning, we’ve got substantial doubt about a number of things.

As to GM, we share the auditors’ concern. The world is full of car factories. Most of them can make cars better, faster, and cheaper than GM. Meanwhile, demand for autos is not growing as quickly as the global growth in auto-making capacity – especially in America. Not that we’re trying to pass judgment. Let the Mr. Market do that!

But GM has friends in high places…ready to lean on the scales of Mr. Market’s justice. The automaker has already borrowed $13.4 billion. It is asking for another $30 billion. But what kind of a dope would lend $30 billion to a company whose own auditors say they’re worried

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