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Pentonomics

Michael Pento, Senior Economist at Euro Pacific Capital, is a well-established specialist in the "Austrian School" of economics. He writes the Pentonomics blog to update investors on his analysis of daily market news and trends. He also contributes an in-depth weekly commentary that can be found under Euro Pacific Brokers' Corner.
Michael Pento
The market has rallied on the hopes of more QE emanating from Bernanke at Jackson Hole. However, one has to ask what good would it do? Interest rates are already profoundly negative and nominal rates are at all time lows. The money supply as measured by M2 is booming at a 20% annualized rate and inflation at the consumer level is up 3.6% YOY—far ahead of Bernanke’s 2% target. And banks already have $1.6 trillion of excess reserves if they need them. My guess is he may lower the interest rate on excess reserves so banks would be forced to lend more money and...
Michael Pento
Of course, it is undeniable that the epicenter of this last credit crisis was the ending of a multi-year boom in home values. But growth in the real estate sector has led the economy out of nearly every recession in the past and is a key component to future consumer health and economic growth. Therefore, it is imperative to take the pulse of the housing market if you want to determine the timing of a return to robust GDP growth. I’m not at all saying home construction needs to return to the pre-bubble 2mm annual pace. Clearly there was an unhealthy and unbalanced...
Michael Pento
Three things that Ben Bernanke doesn’t believe exist are Leprechauns, the Tooth Fairy and Stagflation. He has totally relied on specious theories like output gaps and a very high unemployment rate to keep inflation in check. What he fails to realize is that an increase in the money supply doesn’t always engender job growth or put fallow resources back into production. However, what it does always achieve is to increase the aggregate level of prices in our economy. More evidence of our battle with stagflation was found in today’s economic data. Jobless...
Michael Pento
The Commerce Department reported today that despite record low borrowing costs, Housing starts fell 1.5% to a 604,000 annual rate in July from June’s 613,000 pace, while building permits also dropped to a 597,000 annual rate. It seems that even though money is nearly free, job stability and income growth are still elusive enough to keep the real estate market in a depression. Yesterday saw the release of the Empire State Manufacturing Survey for August. The general business conditions index fell four points to -7.7, its third consecutive negative reading and the...
Michael Pento
The Federal Reserve ventured into unchartered territory yesterday when announcing that the target for the Federal Funds rate would remain near zero percent for two additional years. That will amount to be, at a minimum, four and a half years in duration. But the move is exactly the wrong strategy and does nothing to heal the structural problems of the economy. The market rebounded sharply yesterday on the back of the promise of free money in perpetuity. However, it will soon be surprised at how little Bernanke’s largess goes towards rectifying our problems. Zero...
Michael Pento
I would like to offer, unfortunately, congratulations to Standard and Poor’s for trying to improve their services. After getting so much wrong, they are making an honest effort to get something right and have taken down the U.S. credit rating one notch. And for that they are being excoriated by everyone from Tim Geithner to Warren Buffet. Their major criticism stems from the idea that the U.S. has a printing press and therefore can never default on principal and interest payments. Therefore, some pundits are claiming that the credit ratings agency had no right to...
Michael Pento
Europe bond yields are soaring and the equity markets are falling apart. Last week, the dip-sticks in the MSM were telling us that Apple shares have replaced Treasuries as the world’s safe haven and that the market was cheap because it was only selling at 12 times next year’s bogus earnings. And many market gurus were assuring us that the market would simply levitate higher. However, I was telling investors to keep an eye on European debt problems and warned about markets that seemed far too complacent about the consummation of a debt deal in the U.S. and...
Michael Pento
The only answer central bankers have to solve an inflation problem is to print more money. And the only solution from politicians to fix slow growth is to spend more money. The more answers we get from government, the further exacerbated the stagflation situation becomes. More evidence of U.S. stagflation has come recently from the ISM manufacturing and non-manufacturing reports, which showed a slowdown in new orders and employment in the sub indexes. This morning’s ADP report showed that even after the NBER said the recession ended over two years ago, we still...