Sunday, 4 November 2012

Greece, Portugal, Spain and Ireland erase current account deficits and record surpluses.

The Euro has been in the news a lot for the past 4 or 5 years. It is the currency everyone loves to hate. * It seems like the only way to pump the dollar's tires is to bash the Euro. It doesn't matter where I look, I see everyone pumping the dollars tires. The New York times....ZeroHedge..  I love ZeroHedge but its a closet dollar bulls hotel. We wouldn't want some facts to get in the way of a good Euro bashing now would we.... ? If I had a Euro for every time I heard some jackass say "the dollar is the best horse in the glue factory"(The dollar is the best fiat currency) or some bullshit, I would own a hell of allot more gold. Remember that even before these adjustments, the Eurozone as a whole was a net creditor.

In August and July of 2012, Spain reported two consecutive current account surpluses, the first ever since joining the Euro.
 Greece's current account deficit has become a surplus

Portugal is in surplus

 Ireland is in surplus
And what about the US ? You know, the best of the worst currencies in the world.....

 So the Dollar is the best currency eh ? Considering these recent deficits turned surpluses by these countries, Peter Schiff was right again. This interview was aired in February 2010.

* Why they hate the Euro. Here is the short answer: When the US went off the international gold backing in 1971, they did this in order to raise the price of oil which, they hoped, would help them become independent of cheap OPEC oil. But they made sure that oil is always traded in US$.

Now this imposes a huge tax on their allies in Europe. These had to first export something into the US in order to acquire US$ and could then use these US$ in order to purchase oil. The US, in contrast, could just increase their own credit volume and pay for their oil with newly created US$.
On top of this, they were able to make sure that the oil producers invested the majority of their US$ surplus back into the US (real dollars) and UK (eurodollars) financial institutions, providing additional reserved for further credit expansion.

For a long time, this was a perpetual motion machine that allowed the US to get free oil and free funds to run their government (read: military) whereas the Europeans were automatically conscripted to funding this enterprise whether they liked it or not. (if all oil is sold for US$, what other option did they have?)

Do you think the Europeans liked it or did they not? This is the explanation for why the Euro exists today, why the Europeans want gold back into the international monetary system, why there will be no return to a gold standard in Europe, but why the Europeans will eventually shot the gold price to the moon, and finally for why the Euro will not break up.

It also explains why the Euro is the most serious danger to the US and UK financial systems and why US and UK fear the Euro and bash it whenever possible

Friday, 19 October 2012

3 of the 4 Richest countries in the world have no minimum wage laws.

This post is going to be short and sweet. If you are ever debating your communist/socialist/Marxist friends then this post might come in handy. Can the free market properly price labor ?

List of countries with no minimum wages laws 

no laws or regulations

Qatar none

Norway none

Germany no statutory minimum wage


Top 4 richest countries in the world per capita.
(World bank)

1 Qatar 98,948 2011

Luxembourg 80,559 2011

Singapore 59,710 2011

Norway 53,396 2011

Other banana republic slave states with no minimum wage laws...

Germany 38,077 2011

Italy 30,464 2011

Sunday, 8 July 2012

Warren Buffet and his Gold Delusions.

By now almost everyone has heard Warren Buffets speal on gold. He goes on his predictable mantra about nominal gains. The value of all that gold at today's prices, Buffett observes, would be about $10 trillion.
As for its merit as an investment, Buffett observes the following:

"That cube of gold will not pay you interest or dividends, and it won't grow earnings."

If you had $10 trillion sitting around(in what, US treasuries?), Buffett further observes, instead of buying the cube of gold, you could buy all the cropland in America ($400 billion-worth) and 16 Exxon-Mobils. And you would still have $1 trillion of "walking-around money".

Ok Wawwen, lets see how that works out for you...

Here is the fatal flaw in his thinking. In a world where there is no wealth consolidator(now), interest and  dividends and earnings growth are nominal gains which are progressively self diminishing. The more nominal gains you make, the more medium of exchange you pile up which has to be reinvested again for even more nominal gains. Not only is your new nominal gains competing with other savers nominal gains but your very own present nominal gains will be competing with your future nominal gains. This can only lead to ever higher asset prices and ever lower yields on everything until it reaches its mathematical limit and explodes. 

FOFOA explains..

"Most people are savers, not investors or traders. Yet today we are all forced to be investors chasing nominal gains because there is no such thing as a perfect inflation hedge. If there were such a thing, a large portion of the "investing public" would not be anywhere near stocks and bonds. Even the most "risk free" bonds, US Treasuries, have the greatest risk of all, currency risk. "

"Furthermore, a saver must look deeper than the CPI, or even its shadow-equivalent, for the real inflation that must be protected against. And that is the inflating VOLUME of savings with which one must compete. A perfect inflation hedge would not only keep up with the shadow-CPI but it would also rise in VALUE (as opposed to volume) relative to changes in aggregate monetary savings (nominal gains). "

Lets use a simplified version of Warrens own example.

All the farmland in the US is a cool 400 billion. Lets just count that as another Exxon mobile. Plus we will count his 1 trillion in "walk around money" as 2 more Exxons. That leaves us with 19 Exxon Mobiles with around a 390 billion in market cap each. Remember Warren Buffets claim to fame is to buy stocks with hefty dividends to make money and or store value.
Exxon's current dividend yield is  2.74%.
2.74% of 390 billion is $10,660,134,000. (Ten billion) We have 19 Exxons so we can multiply this number by 19 and that gets us $202,542,546 (Two hundred billion) in nominal gains annually.

2.74% is not Buffets thing though, he would rather have a 6% divvy. So lets go with 6%.

Exxons dividend is 6%

6% of 390 billion is $23,400,000,000 (Twenty three billion) Multiply this by 19 and we get $444,600,000,000 (Four hundered+ Billion) in nominal gains annually.

Now  what the hell do you do with the 444 billion you just made in 12 months ? Buy another Exxon ? So you have an even bigger problem next year ? What will that do to the price and the yield ? What about the other savers who want another Exxon that year too ? Prices to infinity, yield to zero.

Can you see the fatal flaw in Warren Buffets claim to fame that chasing nominal gains as a means to store wealth or investing is completely self defeating ? And his fatal flaw in declaring gold useless ? This is why nothing is cheap anymore relative to yield. Price out condos in Bangkok or farm land in Canada or industrial real estate in Australia or stocks or bonds in any stable part of the world and you will notice that nothing is cheap relative to the nominal gains it can produce. Simply because  of the inflating VOLUME of savings with which one must compete.
A perfect store of value would not only keep up with the shadow-CPI but it would also rise in VALUE (as opposed to volume) relative to changes in aggregate monetary savings. Putting that 444 billion nominal gain into physical gold WILL NOT diminish gold's ability to be a store of value. Putting it back into Exxon mobile WILL diminish Exxons ability to be a store of value or even a nominal gain generator.

So while most cannot understand the significance of this slow motion trend today, the explosive "rock meets hard place" encounter that is overdue at this point will be sure to wake even the sleepiest sheep. And at that point gold's best and highest function—being a physical-only wealth reserve asset—will be known by all. And the meeting of such a wide (awake) demand with a newly physical and stable supply in the absence of external (paper) influences will reveal a gold price that is multiples of any that has ever left Peter Schiff's lips.

Today gold is traded like a volatile commodity by gamblers who like to call themselves traders. Or else it is held as a small percentage of one's wealth for the expressed purpose of "insurance." Gold is actually a pretty poor inflation hedge as long as it is under external influences such as the inflatable supply of paper gold BB liabilities. So the only way it can even hope to perform as prescribed is as insurance in physical form only. Yet so many investors still hold "paper gold" as the insurance portion of their portfolio. This alone really highlights the confusion in Western "professional" investment Thought.

Got gold ?

Friday, 13 January 2012

Global warming and its connection to elitist Keynesian politics.

Jacques Rueff told the story of two different monetary conferences, two "committees of experts" that both met in Genoa, and changed the course of monetary history. The first committee gathered in October, 1445, and the second one began in April, 1922, so Rueff's lecture had ten years on this second conference. The two committees gathered under similar circumstances, to respond to monetary disorder in the aftermath of a protracted war, yet they came to opposite conclusions.
The first committee declared gold the new, sole monetary reserve, unleashing its 500-year reign as the governor of supply and demand that would act as the natural counter-balance to international trade for the next half a millennium. The second committee, under the guise of improving this system, destroyed it, laying the groundwork for the unchecked growth of global imbalance, perpetual malinvestment and the series of periodic monetary crises we have experienced for the last 90 years.

How did the second committee (the debtors, spenders, speculators, bankers) accomplish this ?

Answer: Federal Reserve Sterilisation of Gold Flows
When a country imported gold, its central bank could sterilise the effect of the gold inflow on the monetary base by selling "securities" on the open market…
Sterilisation of gold flows shifted the burden of the adjustment of international prices to other gold standard countries. When a country sterilised gold imports, it precluded the gold flow from increasing the domestic price level and from mitigating the deflationary tendency in the rest of the world. Under the international gold standard, no country had absolute control over its domestic price level in the long run; but a large country could influence whether its price level converged toward the world price level or world prices converged toward the domestic price level…

Traditionally, economists and politicians have criticised the Federal Reserve for not playing by the strict rules of the gold standard during the 1920s.

…Federal Reserve sterilisation in the early 1920s probably served the best interests of the United States.-Leland Crabbe, Washington, D.C., 1988

Board of Governors of the Federal Reserve System
The flow of gold is the flow of real capital, even if today it is obscured by an electronic matrix of imaginary capital (infertile media). Today's debt (the bond market) is imaginary capital in that it cannot perform in real terms; with "real terms" defined as economic goods and services (under current economic conditions) plus gold—and this part is important—at today's prices. It is all nominal debt, but the price of goods and services—as well as the price of gold—is what connects it to reality. And at today's prices of each, bonds are imaginary capital. It is our obsessive compulsion to centrally control the price mechanism that sterilises the vital signals that would otherwise be transmitted to billions of individual market participants keeping the monetary and physical planes connected.
What the 1922 Genoa Conference did was to institutionalise the "sterilisation" of gold for the rest of the world through the reserve structure of the international banking system. And this bit of genius was decided by a "committee of experts" from 34 different countries. They did this by introducing paper gold—or paper promises of gold—into the international banking system as reserves equal to the gold itself. This wasn't the first paper gold, but it was the first time that specific paper gold (that from New York and London) What is acceptable as international reserves is critical because trade settlement is a function of the reserves. This conference was the birth of the bastardised gold standard which lead to the bastardised paper game today.

In 1922, they officially changed the old gold standard into the new "gold exchange standard", which Rueff said was "a conception so peculiarly Anglo-Saxon that there still is no French expression for it." The stated purpose was "the stabilisation of the general price level" which you can feel free to read as code for sterilising the price mechanism and its elegant governance of an extremely delicate and complex balance. This, of course, gave birth to the arrogance of the managed economy and its attendant science, Keynesian Economics (est. 1936) and its step-daughter Monetarism (est.~1956).

And......The birth of  global warming and all the fraud that goes along with it. Mainly, the introduction of "carbon credits"

What they say-

Carbon credits and carbon markets are a component of national and international attempts to mitigate the growth in concentrations of greenhouse gases (GHGs). The concept of carbon credits came into existence as a result of increasing awareness of the need for controlling emissions.    Yeah right....
Could it be that these carbon credits are a continuation of their same old agenda ?
Which is  "the stabilisation of the general price level" which we know to be the code for sterilising the price mechanism  ?

Emission markets

For trading purposes, one allowance or CER is considered equivalent to one metric ton of CO2 emissions. These allowances can be sold privately or in the international market at the prevailing market price. These trade and settle internationally and hence allow allowances to be transferred between countries. Climate exchanges have been established to provide a spot market in allowances, as well as futures and options market to help discover a market price and maintain liquidity.

Futures, options and liquidity eh.....  Looks like a debtor, spender, speculator  bankers Keynesian wet dream.
Currently there are six exchanges trading in carbon allowances: the Chicago Climate Exchange, European Climate Exchange, NASDAQ OMX Commodities Europe, PowerNext, Commodity Exchange Bratislava and the European Energy Exchange. At least one private electronic market has been established in 2008: CantorCO2e.
Yep, that's the Fed primary dealer, Cantor Fitz
Cantor Fitzgerald L.P. is a global financial services firm specialising in bond trading.Cantor handled about one-quarter of the daily transactions in the multi-trillion dollar treasury security market before 9/11. (Cantor was one of the worst hit tenants in the WTC)

Managing emissions is one of the fastest-growing segments in financial services in the City of London with a market estimated to be worth about €30 billion in 2007. Louis Redshaw, head of environmental markets at Barclays Capital predicts that "Carbon will be the world's biggest commodity market, and it could become the world's biggest market overall." Bigger then the treasury market.

Carbon emissions trading has been steadily increasing in recent years. According to the "World Bank's Carbon Finance Unit",(laugh,cry, puke ?) 374 million metric tonnes of carbon dioxide equivalent (tCO2e) were exchanged through projects in 2005, a 240% increase relative to 2004 (110 mtCO2e)[109] which was itself a 41% increase relative to 2003 (78 mtCO2e).

Yale University economics (economics!) professor William Nordhaus argues that the price of carbon needs to be high enough to motivate the changes in behaviour and changes in economic production systems necessary to effectively limit emissions of greenhouse gases.

It gets more surreal...

Nordhaus has suggested, based on the social cost of carbon emissions, that an optimal price of carbon is around $30(US) per ton and will need to increase with inflation.

The global warming  sceptics have done a good job of exposing the science of global warming for the fraud that it is. But not a whole lot is being said about its connection to Keynesian economics. This is Keynesian arrogance and elitism at its worst and it has to be exposed.