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  • Every Central Bank for Itself

    For the last 25 days I’ve been traveling in Argentina and South Africa, two countries whose economies can only be described as fragile, though for very different reasons. Emerging-market countries face a significantly different set of challenges than the developed world does. These challenges are compounded by the rather indifferent policies of developed-world central banks, which are (even if somewhat understandably) entirely self-centered. Argentina has brought its problems upon itself, but South Africa can somewhat justifiably express frustration at the developed world, which, as one emerging-market central bank leader suggests, is engaged in a covert currency war, one where the casualties are the result of unintended consequences. But the effects are nonetheless real if you’re an emerging-market country.

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  • Central Banker Throwdown

    Today investors are asking themselves a similar question: "Is the meltdown in the stock market the result of Fed tapering, or is there something else going on?" We'll address that question today and take a deep plunge into the emerging markets. We have a good old-fashioned central banker throwdown in progress, and if the results didn't have such an impact on our investment portfolios, it could actually be quite fun to watch. What happens in the emerging markets will unfortunately not stay in the emerging markets. It's all connected. There is more happening here than a simple correction. Let's put our thinking caps on and try to connect some dots.

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  • Interview with Steve Forbes

    I'm not certain how many interviews I've done over the last decade. Hundreds? I know it is a lot. There are some interviewers who can somehow tease out what you really have in you. Tom Keene at Bloomberg, for instance, forces you to bring your A game, at whatever level you play. He brings it out of you. You know that he is smarter than you will ever be and that you should really be asking him the questions. Except that you're not smart enough to ask the questions. I have to confess that every time I walk into the room with Tom I'm a little intimidated. I try never to show it, somewhat like the new kid on the block trying to put on a brave face, but inside I keep looking for the exit doors just in case I throw up all over myself. At the end of the day I'm still a small-town country boy from Bridgeport, Texas, trying to figure out how the big city works.

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  • A Code Red World

    I wasn't the only person coming out with a book this week (much more on that at the end of the letter). Alan Greenspan hit the street with The Map and the Territory. Greenspan left Bernanke and Yellen a map, all right, but in many ways the Fed (along with central banks worldwide) proceeded to throw the map away and march off into totally unexplored territory. Under pressure since the Great Recession hit in 2007, they abandoned traditional monetary policy principles in favor of a new direction: print, buy, and hope that growth will follow. If aggressive asset purchases fail to promote growth, Chairman Bernanke and his disciples (soon to be Janet Yellen and the boys) respond by upping the pace. That was appropriate in 2008 and 2009 and maybe even in 2010, but not today.

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  • Central Bank Insurance

    Possibly, the question I am asked the most is, "What do you think about gold?" While I have written brief bits about the yellow metal, I cannot remember the last time I devoted a full e-letter to the subject of gold. Longtime readers know that I am a steady buyer of gold, but to my mind that is different from being bullish on gold. In this week's letter we will look at some recent research on gold and try to separate some of the myths surrounding gold from the rationale as to why you might want to own some of the "barbarous relic," as Keynes called it. My personal reasons for owning gold have evolved over the years. I will tell you the story of my own journey, and you can decide for yourself whether to think about coming along.

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  • Central Bank Insurance

    Some argue that the economic and political crisis was worse than before the peg was put in place. By the end of 2002, the economy had contracted by 20% since 1998. Over the course of two years, output fell by more than 15%, the Argentine peso lost three-quarters of its value, and registered unemployment exceeded 25%. Income poverty in Argentina grew from an already high 35.4% in October 2001 to a peak of 54.3% in October 2002. To say things were volatile is an understatement: Argentina had five presidents in two weeks.

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  • The Transparency Trap

    This week we take a brief pause in our series on the choices facing the developed world to look at some items that are catching my attention. We will get back to the US next week, as somehow I think we will not solve our problems between now and next Friday, and there will be plenty left for us to talk about. So today we look at the “shift” in Fed policy, and at the balance sheets of central banks, US GDP, Portugal and the ECB, the LTRO policy, and yes, there’s even a tidbit on Greece. Plenty of ground to cover, so with no “but first,” let’s get started.

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