Hat Tip Taichi
Introduction: Ellen Brown developed her research skills as an attorney practicing civil litigation in Los Angeles. In Web of Debt, her latest book, she turns those skills to an analysis of the Federal Reserve and "the money trust." She shows how this private cartel has usurped the power to create money from the people themselves, and how we the people can get it back. Brown developed an interest in the developing world and its problems while living abroad for eleven years in Kenya, Honduras, Guatemala and Nicaragua. She returned to practicing law when she was asked to join the legal team of a popular Tijuana healer with an innovative cancer therapy, who was targeted by the chemotherapy industry in the 1990s. That experience produced her book Forbidden Medicine, which traces the suppression of natural health treatments to the same corrupting influences that have captured the money system. Brown's eleven books include the bestselling Nature's Pharmacy, co-authored with Dr. Lynne Walker, which has sold 285,000 copies.
Daily Bell: Nice to meet you.
Brown: My pleasure!
Daily Bell: Nice to meet you.
Brown: My pleasure!
Daily Bell: Can you tell us your book's thesis in a nutshell?
Brown: Our money is an illusion. Except for coins, which compose only one ten-thousandth of the money supply, all of our money today consists of debt to private banks. Banks always take back more money in principal and interest than they put into the money supply as principal, making the system basically a pyramid scheme. After 300 years, this scheme has spread around the world and has now reached its mathematical limits. The whole world has been captured in the debt trap of a private international banking monopoly.
Daily Bell: These are clearheaded deductions about economics. How did you get interested?
Brown: In my earlier books, which were on health and the politics of health, I saw the pharmaceutical industry as the force to be reckoned with and exposed. I was on the legal team of a Tijuana cancer therapist named Jimmy Keller, who showed Ed Griffin's documentary "World Without Cancer" to all his patients. I read Griffin's book of the same name and realized that the banking, drug and oil cartels were basically the same entities, and that their power came from the power to create money that they had usurped from the people themselves. This was such a mind-boggling insight that I felt I had to write about it.
Daily Bell: How did you make the jump from nutrition to finance?
Brown: My first book was on nutrition but my later books focused on the politics of health and what is wrong with our health care system. I feel we have been misled about drugs and healing, and I wanted to expose that and set it right. After reading "World Without Cancer," I read Ed Griffin's book "The Creature from Jekyll Island," which I thought was great right up to the end; but I felt his solution would not work. I then read other books on the subject and got my grounding in it. I actually got interested in writing on economics and the Federal Reserve in the seventies, but that was before the Internet, and I wasn't able to follow my hunches to the end. When that remarkable tool became available, the missing puzzle pieces fell into place and I could see the larger picture and had to write about it.
Daily Bell: Tell us some more about your background, where you grew up and when you traveled.
Brown: I was born in California, grew up in the Detroit and Denver suburbs, graduated from UC Berkeley in English and then from UCLA Law School. I met my husband Cliff in law school, and we worked as attorneys in L.A. for 10 years (11 for him), until he burned out on Beverly Hills law and decided to join the U.S. Agency for International Development. He always wanted to go abroad, and it gave me a chance to write and have more time with the kids (we have two). From 1989 to 2000, we lived in Kenya, Honduras, Guatemala and Nicaragua. Then I got divorced and returned to the States, where I discovered this most interesting of writing subjects. I'm still good friends with my ex; I just ran out of topics overseas! There was more to it than that, of course, but I do feel I had to come back to the States to find this topic du jour. My daughter now works for a U.N. N.G.O. and my son is a graduate student in economics in Michigan.
Daily Bell: What's been the reaction to your book?
Brown: Remarkably good. I get flooded with email, which is great. With my other books, I didn't have much contact with readers and felt like a ghostwriter. With this one, I feel like a lightning rod, attracting ideas from everywhere. I credit it to the Internet, an amazing historical development that has changed the game worldwide.
Daily Bell: Are you familiar with Austrian finance? What do you think of it?
Brown: I am, and I enjoyed reading Murray Rothbard; but I don't think the Quantity Theory of Money is correct. Prices do not benignly adjust to a contraction in the money supply; this has been shown historically. When the money supply contracts, workers get laid off, businesses shut down, and the economy goes into a recession or a depression. It's a fallacy to think you can control prices by controlling the money supply - or even that you can control the money supply ("you" meaning, of course, the central bank). In the 1970s and 1980s, when Milton Friedman's monetarism was popular, attempts were made to regulate prices by regulating the money supply, and they didn't work. Some major recessions resulted, and Third World countries got locked hopelessly in debt from a radical increase in interest rates, but the money supply couldn't be controlled.
The Federal Reserve doesn't create money; banks do. The Federal Reserve just responds by providing the reserves they need after the fact if they come up short. And adding money to the system doesn't raise prices - not if workers and materials are available to make goods. If you add money to the system, the money will go looking for goods, and merchants will respond by making more. Supply and demand will go up together and prices will remain stable. An increase in interest rates is more likely to raise prices. Merchants raise their prices to cover their costs, and interest is a major cost.
Daily Bell: Are you a free-market economist or something else?
Brown: I believe in free markets, but I don't believe we have them today. Virtually every market now is manipulated and controlled. We lost our free markets when we gave away the power to create money to a private banking elite. They got their power through sleight of hand, and it can be reversed only by reversing the sleight of hand. Ironically, to get back our free markets, we need some government intervention. The economy has been captured by thieves, and we need some rules and regulations to put the genie back in the bottle.
Daily Bell: What's wrong with a gold or silver monetary system?
Brown: To answer that question properly will take more than a few sentences, but I'll try to be succinct. There are three ways a precious metal system could be set up: (1) a "gold-backed" fiat currency, of the sort we had until 1933 domestically and until 1971 internationally; (2) 100% gold coins, as Ed Griffin recommends; or (3) gold, silver and anything else trading freely with dollars, as recommended by Ron Paul.
The first alternative failed historically and doesn't work mathematically. Nixon had to take the dollar off the gold standard internationally after DeGaulle traded in his dollars for gold and the British then tried to trade in theirs, and the U.S. was about to run out of gold. In a "fractional reserve" system, only a fraction of the gold necessary to cash in all the dollars "backed" by gold is actually held in the banks' vaults. When people figure that out, you get runs on the banks and the banks have to close their doors. Roosevelt was faced with the same problem. People had panicked and were trading in their dollars for gold at the banks. The dollar was then 40% backed by gold, so whenever anyone cashed in $2 in paper money, $3 in loans had to be called in. The result was a radical collapse in the money supply.
Option #2, an all-gold currency, won't work for a number of reasons, but I'll just mention one: where are you going to get the gold? To be fair, the government would have to swap all the dollars in the money supply for gold. Assume a $13 trillion money supply (M3) and that there is $4 trillion worth of gold in the world (per the last report I saw). Even if you could acquire every penny's worth of gold, you'd have to revalue the gold so that it was worth $3000/ounce. Goldbugs say that's doable, but here's my question: how are you going to get the gold? What are you going to buy it with? Your paper dollars are going to be worthless. What Indian woman wearing that gold around her neck is going to be foolish enough to trade it for your paper dollars?
Ed Griffin would just divide the outstanding money supply by the gold in Fort Knox, but we don't know if there's any gold left in Fort Knox, and even assuming there is, the dollar value per ounce is going to be so far from anything resembling the real market value of gold that tying the dollar to gold will lose all meaning. If you want a fixed money supply, why not just have Congress order up X number of dollars, forbid any more to be issued, and make it illegal for banks to create credit on their books? Let them lend what they have and no more. Even that won't work though; you'll quickly degenerate into recession or depression, because there won't be enough money for innovation, development and the like. The ability to create and extend credit is a good thing and is necessary to a thriving economy. It's just a question of who gets to create it, private banks (which then proceed to charge interest on it that they siphon off the top as profits) or public banks, drawing on the "full faith and credit of the United States" because they are the United States and can return the profits to the United States, maintaining a mathematically sound system?
The third idea - allowing people to trade in any currency they want - doesn't solve anything and just creates new problems. What's the exchange rate going to be between these various domestic currencies, and who is going to set it? Are you going to allow shortselling between currencies, derivative bets, etc.? If you have silver and gold coins trading together, what happens if gold goes up in value relative to silver? Will you have to change the face value of the coins? They could be left unstamped, but then you won't really have coins; you'll just have round gold bars. Then why not just keep your gold bars and sell them for paper dollars as needed? If the paper dollars lose value, as goldbugs are sure they will, the gold bars will fetch more dollars when sold, so value will have been preserved just as it would have been if the gold were actually turned into gold coins.
Daily Bell: You are somewhat cynical about government, yet your solutions feature government involvement. Can government really be trusted to do the right thing?
Brown: I have faith in the sort of government "of the people, by the people, for the people" described by Abraham Lincoln; but we don't have that now. What we have is government controlled by a few giant corporations, and they got their power by acquiring the power to create the national money supply. "Allow me to issue and control a nation's currency," Amschel Mayer Rothschild allegedly said in the 18th century, "and I care not who makes its laws." That statement may be apocryphal, but that is how they did it, and that is the power we have to get back if we want a just and trustworthy government that represents people rather than wealthy corporations.
Daily Bell: Do you believe in a business cycle - and that central banks aggravate it by printing too much money?
Brown: We had obvious business cycles in the 19th century when we were on the gold standard. Banks would issue banknotes that were many multiples of the gold they held in their vaults, until the paper money supply so far outstripped its backing that people realized the banks could not make good on all their gold-backed notes and there would be runs on the banks. "Fiat money" was not the problem though. The whole system was a ruse. The gold backing allowed private bankers to create paper money on a printing press and lend it at interest, pretending it represented gold the bankers did not really have in their vaults. Privately-issued paper money that is only partially backed by precious metals is a form of counterfeiting whether the sums are prudently managed or not.
Daily Bell: Was central banking over-printing of money the proximate cause of the economic crisis?
Brown: No. Alan Greenspan did lower interest rates to ridiculously low levels in 2001, precipitating the housing bubble that precipitated the current crisis; and he gave his blessing to derivatives, which allowed banks to move loans off their books, package them up, and sell them to investors, making room on their books for more loans and fanning the housing bubble. But it wasn't the central bank that over-printed money. It was the commercial banks, and of course they don't actually "print" it. They just create it as accounting entries on their books. The "crisis" came when there was a sudden shift in accounting rules, from "mark to fantasy" to "mark to market". The idea was to rein in the over exuberance\ of the banks; but the banks were just doing what they had to do to keep the Ponzi scheme going: create ever more loans. The real cause of the crisis was the Ponzi scheme itself: it just ran out of its food source.
Daily Bell: What are the best investments to make throughout the business cycle, and do they change over time?
Brown: They change over time, and because markets are so heavily manipulated, you can't really know what they are unless you're an insider. The rest of us just have to pay very close attention and ride the roller coaster. A case in point was a year ago, when gold was about to break through $1000, oil was hovering near $150/barrel, bank stocks were plummeting, and so was the dollar. Suddenly in July, everything miraculously reversed - the dollar and bank stocks shot up, and gold and oil plunged. What happened? The Japanese central bank later admitted in its local paper that the central banks had colluded to manipulate the markets.
Daily Bell: What do you think of the current economic crisis. Are Western countries handling it well?
Brown: Yes and no. The credit system has collapsed and Western central banks are trying to pump it back up with "quantitative easing," which is a better approach than President Hoover took when he tried to tighten the government's belt and "balance the budget" in the early 1930s. But bailing out the banks is the wrong approach. Governments should be using quantitative easing (essentially money-printing) to build infrastructure and pay the government's bills rather than trying to clean up the toxic books of failed banks. The problem is that the central banks are there to serve the banking system, not the people. We need truly national central banks. England and Canada technically own their central banks, but their governments still borrow from private banks. They don't use their central banks as if they owned them. China, Malaysia, and South Korea do; and they're faring quite well these days.
Daily Bell: Do you believe in the bailouts taking place in America?
Brown: No. We've been extorted into them. We've been made to believe the only way we can save our credit system is to spend our hard-earned taxpayer money to save the banks that got us into the mess, but that's not true. We can set up our own public credit system and let the private parasitic cartel fend for itself. They made billions in the free market; let them go down in the free market.
Daily Bell: Can you explain the genesis of the financial crisis?
Brown: Taking the long view, it's the end of a 300 year Ponzi scheme. Virtually all of our money is created by banks as loans; but banks create only the principal, not the interest necessary to pay their loans back. More is always owed back than is created in the first place, and new borrowers must continually be found to take out new loans to create the money to pay this extra interest. After 300 years, the whole world has been locked in debt, and the parasitic pyramid has run out of its food source.
All sorts of scams and schemes were devised to plunder the last dollar out of borrowers - securitization of subprime mortgages to move them off the banks' books and make room for more, derivatives to supposedly eliminate the risk of subprime default and induce investors to buy, etc. But the schemes have been exposed, and the "shadow lenders" - the investors induced to buy these bundles of subprime debt - have gone away and they aren't coming back any time soon.
The shadow lenders made up $10 trillion worth of the mortgage market. Virtually all of our money consists of credit (or debt), and a big chunk of this credit has disappeared. The money supply is collapsing, and that is what has caused the financial crisis. The solution is to put money back into the system; but the banks can't do it, because the Bank for International Settlements has imposed a tourniquet on lending with the Basel Accords.
We need to set up our own public banks, which cannot run short of "the full faith and credit of the United States" because they ARE the United States (or whatever local government is setting them up). In the U.S., we should nationalize the Federal Reserve and let it operate like a real government-owned bank, issuing money and credit on behalf of the public for infrastructure and other government expenditures. States could also set up their own credit mechanisms by setting up their own banks.
Daily Bell: Do you believe that some of your ideas will be taken up officially?
Brown: I keep trying, knocking at any doors I see; but it's a slow-moving machine. The first step is mass education and popular understanding.
Daily Bell: Have you heard from Wall Street about your ideas?
Brown: No.
Daily Bell: Are you at all worried about the reaction to your ideas?
Brown: I try to suggest solutions that are good for everyone. I think the private banking business has actually come to the end of the line. They're scrambling desperately to hold it all together, but there's not much more they can do. The whole multi-trillion dollar derivatives edifice was constructed in an attempt to bring business back that the banks were losing to their competitor non-bank institutions, but it didn't work in the end. I think the bankers might be relieved to pass the baton. Not that they want to lose their existing fortunes, but they might be ready to retire to their favorite islands and let the next generation tackle the problem; or to take jobs exercising their expertise in a new public banking arrangement with the stable backing of the government.
Daily Bell: You do a great deal of public speaking. What do you emphasize most in your talks?
Brown: Solutions, solutions, solutions. This nut can be cracked. We've been looking at the problem wrong. When we step outside the box and look again, it's all quite simple. Truth is simple.
Daily Bell: What are the most important - seminal -- articles of yours that you would encourage everyone to read? Where can they be found?
Brown: My articles can all be found on my website at WebofDebt.com. I try to write one every week or two, and they're quite topical, but the most popular (per the OpEdNews ratings) have been "It's the Derivatives, Stupid!", written in September 2008 after the Lehman/AIG collapse; "Borrowing from Peter to Pay Paul: The Wall Street Ponzi Scheme Called Fractional Reserve Banking" (December 29, 2008); and "Toward a Solution to the Debt Crisis in California" (July 13, 2009). My latest article is "The Public Option in Banking: How We Can Beat Wall Street at Its Own Game" (August 8, 2009), posted on the Huffington Post among other places.
Daily Bell: On behalf of all of our readers we thank you for sharing your views with us - and for your courageous and important work.
Brown: You're welcome. I don't feel courageous; I just write. I live with my 90-year-old mother in a senior village. I need the excitement!
http://www.thedailybell.com/496/Ellen-Brown-Web-of-Debt.html
21 August 2009
Iceland evades rentiers ~ FT
Can Iceland and Latvia pay the foreign debts run up by a fairly narrow layer of their population? The European Union and International Monetary Fund have told them to replace private debts with public obligations, and to pay by raising taxes, slashing public spending and obliging citizens to deplete their savings.
Resentment is growing not only towards those who ran up the debts - Iceland's bankrupt Kaupthing and Landsbanki, with its Icesave accounts, and heavily geared property owners in the Baltics and central Europe - but also towards the foreign advisers and creditors who put pressure on these governments to sell off the banks and public companies to insiders. Support in Iceland for joining the EU has fallen to just over a third of the population, while Latvia's Harmony Centre party, the first since independence to include a large segment of the Russian-speaking population, has gained a majority in Riga and is becoming the most popular national party. Popular protests in both countries have triggered rising political pressure to limit the debt burden to a reasonable ability to pay.
This political pressure came to a head over the weekend in Reykjavik's parliament. The Althing agreed a deal, expected to be formalised today, which would severely restrict payments to the UK and Netherlands in compensation for the cost of bailing out their Icesave depositors.
This agreement is, so far as I am aware, the first since the 1920s to subordinate foreign debt to the country's ability to pay. Iceland's payments will be limited to 6 per cent of growth above 2008's gross domestic product. If creditors thrust austerity on the Icelandic economy there will be no growth and they will not get paid.
A similar problem was debated 80 years ago over Germany's first world war reparations. But many policymakers remain confused over the distinction between squeezing out a domestic fiscal surplus and the ability to pay foreign debts. No matter how much a government may tax its economy, there is a problem turning the money into foreign currency. As John Maynard Keynes explained, unless debtor countries can export more, they must pay either by borrowing or by selling off domestic assets. Iceland today has rejected these self-destructive policies.
There is a limit to how much foreign payment an economy can make. Higher domestic taxes do not mean a government can translate this revenue into foreign exchange. This reality is reflected in Iceland's position on its Icesave debt - estimated to amount to half its entire GDP.
In taking this stand, Iceland promises to lead the pendulum swing away from the ideology that debt repayments are sacred.
In the post-Soviet economies the problem is that independence in 1991 did not bring the hoped-for western living standards. Like Iceland, they remain dependent on imports. Their trade deficits have been financed by the global property bubble - borrowing in foreign currency against property that was free of debt at independence. Now the bubble has burst and it is payback time. No more credit is flowing to the Baltics from Swedish banks, to Hungary from Austrian banks or to Iceland from Britain and the Netherlands. Unemployment is rising and governments are slashing healthcare and education budgets. The resulting economic shrinkage is leaving large swathes of property in negative equity.
Austerity programmes were common in developing countries from the 1970s to the 1990s, but European democracies have little tolerance for such an approach. As matters stand, families are losing their homes and emigration is accelerating. This is not what capitalism promised.
Populations are asking not only whether debts should be paid, but - as in Iceland - whether they can be paid. If they cannot be, then trying to pay will only shrink economies further, stopping them becoming viable.
Will Britain and the Netherlands accept Iceland's condition? Trying to squeeze out more debt service than a country could pay requires an oppressive and extractive fiscal and financial regime, Keynes warned, which in turn would inspire a nationalistic political reaction to break free of creditor-nation demands. This is what happened in the 1920s when Germany's economy was wrecked by the rigid ideology of the sanctity of debt.
A pragmatic economic principle is at work: a debt that cannot be paid, will not be. What remains an open question is just how these debts will not be paid. Will many be written off? Or will Iceland, Latvia and other debtors be plunged into austerity in an attempt to squeeze out an economic surplus to avoid default?
The latter option may drive debt-laden countries in a new direction. Eva Joly, the French prosecutor brought in to sort out Iceland's banking crisis, warned this month that Iceland would have little left but its natural resources and strategic position: "Russia, for example, might well find it attractive." The post-Soviet countries are already seeing voters shift away from Europe in reaction to the destructive policies the EU supported.
Something has to give. Will rigid ideology give way to economic reality, or the other way round?
The writer is professor of economics at the University of Missouri
http://www.ft.com/cms/s/0/610316c4-8ac4-11de-ad08-00144feabdc0.html?nclick_check=1
Resentment is growing not only towards those who ran up the debts - Iceland's bankrupt Kaupthing and Landsbanki, with its Icesave accounts, and heavily geared property owners in the Baltics and central Europe - but also towards the foreign advisers and creditors who put pressure on these governments to sell off the banks and public companies to insiders. Support in Iceland for joining the EU has fallen to just over a third of the population, while Latvia's Harmony Centre party, the first since independence to include a large segment of the Russian-speaking population, has gained a majority in Riga and is becoming the most popular national party. Popular protests in both countries have triggered rising political pressure to limit the debt burden to a reasonable ability to pay.
This political pressure came to a head over the weekend in Reykjavik's parliament. The Althing agreed a deal, expected to be formalised today, which would severely restrict payments to the UK and Netherlands in compensation for the cost of bailing out their Icesave depositors.
This agreement is, so far as I am aware, the first since the 1920s to subordinate foreign debt to the country's ability to pay. Iceland's payments will be limited to 6 per cent of growth above 2008's gross domestic product. If creditors thrust austerity on the Icelandic economy there will be no growth and they will not get paid.
A similar problem was debated 80 years ago over Germany's first world war reparations. But many policymakers remain confused over the distinction between squeezing out a domestic fiscal surplus and the ability to pay foreign debts. No matter how much a government may tax its economy, there is a problem turning the money into foreign currency. As John Maynard Keynes explained, unless debtor countries can export more, they must pay either by borrowing or by selling off domestic assets. Iceland today has rejected these self-destructive policies.
There is a limit to how much foreign payment an economy can make. Higher domestic taxes do not mean a government can translate this revenue into foreign exchange. This reality is reflected in Iceland's position on its Icesave debt - estimated to amount to half its entire GDP.
In taking this stand, Iceland promises to lead the pendulum swing away from the ideology that debt repayments are sacred.
In the post-Soviet economies the problem is that independence in 1991 did not bring the hoped-for western living standards. Like Iceland, they remain dependent on imports. Their trade deficits have been financed by the global property bubble - borrowing in foreign currency against property that was free of debt at independence. Now the bubble has burst and it is payback time. No more credit is flowing to the Baltics from Swedish banks, to Hungary from Austrian banks or to Iceland from Britain and the Netherlands. Unemployment is rising and governments are slashing healthcare and education budgets. The resulting economic shrinkage is leaving large swathes of property in negative equity.
Austerity programmes were common in developing countries from the 1970s to the 1990s, but European democracies have little tolerance for such an approach. As matters stand, families are losing their homes and emigration is accelerating. This is not what capitalism promised.
Populations are asking not only whether debts should be paid, but - as in Iceland - whether they can be paid. If they cannot be, then trying to pay will only shrink economies further, stopping them becoming viable.
Will Britain and the Netherlands accept Iceland's condition? Trying to squeeze out more debt service than a country could pay requires an oppressive and extractive fiscal and financial regime, Keynes warned, which in turn would inspire a nationalistic political reaction to break free of creditor-nation demands. This is what happened in the 1920s when Germany's economy was wrecked by the rigid ideology of the sanctity of debt.
A pragmatic economic principle is at work: a debt that cannot be paid, will not be. What remains an open question is just how these debts will not be paid. Will many be written off? Or will Iceland, Latvia and other debtors be plunged into austerity in an attempt to squeeze out an economic surplus to avoid default?
The latter option may drive debt-laden countries in a new direction. Eva Joly, the French prosecutor brought in to sort out Iceland's banking crisis, warned this month that Iceland would have little left but its natural resources and strategic position: "Russia, for example, might well find it attractive." The post-Soviet countries are already seeing voters shift away from Europe in reaction to the destructive policies the EU supported.
Something has to give. Will rigid ideology give way to economic reality, or the other way round?
The writer is professor of economics at the University of Missouri
http://www.ft.com/cms/s/0/610316c4-8ac4-11de-ad08-00144feabdc0.html?nclick_check=1
19 August 2009
Rant or Revelation: My Money's on Revelation
Rant or Revelation: My Money's on Revelation
August 18, 2009
Correspondent Michael Goodfellow's rant reaches revelation.
Frequent contributor Michael Goodfellow and I correspond on a great number of issues. Having worked in technology and software his entire career, he brings an engineer's sensibility and rigor to many issues. Recently he wrote a commentary which he titled "A Charles Smith Moment" which leaves rant and enters revelation in my view.
He suggested I introduce it with the phrase "this is what I get when he's in a bad mood..." but I think you'll find a succinct indictment here:
A "Charles Smith" Moment
Unfair to you to call it that, but when reading this item about Iraq off Cato,
Time to Leave Iraq
(and these links on Social Security/Medicare and the Federal budget SSA Trustees Report and Tax Policy Center)
I had that feeling that the whole country is just a Ship of Fools headed into the rapids and there's nothing I can do about it.
It's not just that I disagree with the neocons -- their values, their goals, their plans and their politics. It's that they don't even seem to care. They don't clarify their goals or strategy, they don't learn from their mistakes and they don't even want to look at whether Iraq is a success or failure. It's as if they don't even believe what they say.
They just want to act out some WWII-inspired fantasy of turning countries into democracies and being the world's policeman. But now Iraq is just "so 2005", so ignore it, wrap it up, and off to Afghanistan! And both wars have so much momentum that even the President can't seem to slow them down or divert them, let alone call them off. He'd rather let both wars be huge failures than take any short-term political heat. Again, it's as if no one, even the other party, cares what we accomplish. Thousands of American soldiers die, tens of thousands of Iraqis die, trillions are spent, and for the politicians, pundits and public, it's just "whatever!"
And it isn't limited to the wars. On health care, the Republicans are patting themselves on the back for derailing ObamaCare, but neither side is facing reality. We can't afford existing Medicare. The baby boomers start hitting 65 in a couple of years. Time is up for dealing with that crisis. Even if the Republicans stop health care legislation, they still have that to deal with. And not in some "future generation", but during their term of office. What can they possibly be thinking?
But what can the Democrats be thinking? It's not as if there's any cost control in the ObamaCare plan. They seem surprised that CBO keeps scoring the plan as expensive. Can't any of them do arithmetic? 45 million uninsured times $2000 a year (a very cheap insurance policy) is $90 billion a year, or about a trillion dollars in ten years. CBO is only scoring the first five years of the plan, since it phases in. Still, any back-of-the-envelope calculation would have told them the tab was going to be in that ballpark. And this is on top of the Medicare problem, Social Security, Cap and Trade, and the financial crisis. How does anyone think we can afford all of that?
In fact, the one thing that does seem to unite both parties is a complete disinterest in what the legislation will actually do. They just want to let the usual special interest groups fight it out, write a thousand pages of incomprehensible regulatory gibberish, and call it done. Just don't ask us to read it!
The same was true during the financial crisis. The whole attitude of Congress was "Keep this away from me! I don't understand any of it! You, Federal Reserve, here's a blank check. Just solve this problem and don't even tell us what you are doing."
Again, this isn't a matter of values or priorities. It's beyond incompetence. It's a complete disinterest in the results of their actions. I would call it panic, but that requires a certain alertness. This is some kind of psychosis.
So I look at the entire political system and I think how unreal it all is, and how tired. Republicans are running on intellectual fumes -- neocons and old warhorses like McCain; anti-gay, anti-immigrant, anti-trade sentiment and populist know-nothings like Palin. No awareness of where the country is right now, and no willingness to stick to any principles at all.
I still like the libertarian arguments on Reason and Cato, but they have their problems as well. First, they are a tiny minority. Second, they mostly criticize the system without offering practical, politically possible steps in the right direction. And third, they are hopeless nerds. I watch those guys on video and I think "This guy couldn't sell me ice cream on a hot summer day! And I'm someone who agrees with him!"
I could never take the Democrats seriously either. From the various bailouts to all their plans for the economy, health care, environment, it has the same feel of unreality as the Republicans. As if they just don't want to know whether any of these plans can possibly succeed, or whether we can afford to even try. They just want to act out their fantasies, where they save the Earth, bring healing to the poor and end racism.
I wrote to one guy on global warming that the only thing that matters is what gets invented in a lab somewhere. If we can build better batteries or solar panels, do carbon capture or geoengineering, then we can make a difference. But the hair-shirt conservation measures have no real effect. And you can prove that with statistics about efficiency and the savings they could possibly get.
If you actually cared about global warming, you'd want to know what works. (and build nuke plants, which is apparently being shot down by the Obama administration.) But he doesn't even want to talk about that. It's just "if we don't pass cap and trade, the oceans will rise and the Earth is doomed." And if you don't agree with him, you are an evil "denier." It's not even a reasoned argument. Where am I supposed to go with that?
http://www.oftwominds.com/blog.html
Like you, I expect a train wreck at some point. Unlike you, I don't expect chaos. Instead, it will just be a hunker-down, "do something, anything!" government-orchestrated mess. More of the same, with increasing instability and poverty. I don't think that knowing how to grow veggies or collect rainwater will make any difference at all.
The thing to remember is that most of the third world has worse governance than we do, worse financial problems, fewer natural resources and a less educated population. Still, from Argentina to Poland to India, they just limp along. Anarchy does not break out. I see no reason for it to do so here either. It will just suck.
Thank you, Michael. Such clarity is a rarity these days.
Those of you who have slogged through my free eBook (shameless plug) Survival+: Structuring Prosperity for Yourself and the Nation will recall parallel descriptions of fantasy, disinterest and psychosis.
The entire structure of response and policy is what I term simulacrum, facsimiles of solutions, pseudo-solutions which as Michael points out, are being "sold" with the sort of half-heartedness of those who know full well they are props and facades and thus utterly illusory.
No nation can borrow 13% of its GDP without consequences, but rather than face our situation with what I term an adult understanding of triage and trade-offs--that you can't get everything you want right now, that priorities must be assessed and difficult trade-offs made--we as a nation have entered the delusion that we can just borrow the money to put off any hard choices.
Wars going badly? Borrow another trillion to "stay the course"--whatever that means. As Michael notes, the policy has always been incomprehensible, switching from finding WMDs to fostering democracy to stopping terrorism in Mosel before it gets to Miami to the ideological-flavor-of-the-month.
Sick-care unsustainable and broken? Borrow another trillion, write a 1,000 pages of gobblydigook to placate and pander to the special interests involved, solving nothing and doing nothing to actually cut costs, and then "declare victory": Mission accomplished!
It rings hollow because it is hollow: nothing of substance has been accomplished because as I put it, those with asymmetric stakes in the game are pouring every dime and every ounce of energy into the game to protect their share of the swag, while we citizens and "consumers" are expiring from death by a thousand cuts--none deep enough to spark concerted action.
While the government and corporate Elites protect their fiefdoms, the citizenry are distracted by trash-talk radio and TV, courtesy of a mass media owned lock, stock and barrel by six corporations.
Complacency and fatalism reign supreme, and the Elites are loving it because a confused, doped out, distracted, apathetic, complacent, fatalistic populace is easily duped and manipulated.
What Michael foresees as our future is what I term devolution. We differ on two points, which Michael already knows from our voluminous correspondence. So I want to be sure to note that I am not reading this into Michael's commentary--these are my thoughts.
I think we will devolve to "tipping points" or phase shifts where systems will break down. This won't necessarily lead to chaos but it will lead to something beyond complacency and fatalism. It could be negative or it could be positive; that choice is ours.
I believe that the loss of wealth, the extremes of income inequality and the credit/debt implosion are all phase shifts which have already occurred, but the status quo Power Elites and citizenry alike are in denial, hoping that some miracle of additional borrowing will re-set the clock back to the era of bogus "prosperity."
Those hopes will be proven futile because simulacrum is not reality and delusion is not a practical substitute for actual solutions.
I differ somewhat with Michael on solutions, as I think all solutions come from the margins. While I hope for technological solutions, I am skeptical because our consumerist mindset is fixated on the notion that "buying something new" will somehow solve all our problems.
Mo offense to Prius owners, but I suspect we've all been sold a bill of goods on its benefits. The entire cost of a vehicle, or any manufactured object, is called its lifecycle costs. This means calculating the cost in money, energy and resources of everything required to manufacture the vehicle--not just the steel, but the cost of pumping water to make the steel, mine the ore, etc.
Now a Prius has two components which simply do not exist in a stripped down ICE (internal combustion engine) vehicle: a large battery pack and extremely complex electronics for switching between electric and ICE drive.
Batteries require a stupendous amount of costly resources to manufacture. Until batteries are made of sand (silicon) or equivalent materials and do not require highly complex processes, they will remain costly. They are also toxic and therefore costly to recycle/ dismantle properly.
Thus I suspect that if you include the full lifecycle costs of manufacturing a Prius, the cost of maintenance and the fuel it burns (or the electricity used to recharge its batteries) and the disposal/recycling of its components, and weigh them against a high-mileage cheaper vehicle like a Honda Civic or subcompact Ford/GM, the Prius is probably less efficient and less environmentally sound than the cheap ICE vehicle.
"Buying something new" might not be the answer at all except at the margins--transformers that lose less energy, electronic power converters which are suddenly mandated to be efficient rather than energy hogs, etc. etc. Perhaps the Consumerist Gods will fail to be the "solution."
Just as technology changes at the margin, so too does behavior. I have to disagree with Michael about growing veggies, because as I have said before, "a garden and a homecooked meal are revolutionary acts." These simple acts are revolutionary because they upend the oppressive regime of agribusiness, packaged/fast food and the sick-care system--all parts in a seamless system of ill-health, derangement, torpor and chronic disease which can be treated with enormously expensive and mostly needless medications and procedures.
This is what I term an integrated understanding of the entire system of growing and consuming food and health. Agribusiness, fast food, high salt, high fat and high sugar processed "foods" (poisons is a more accurate term), chronic illness and various derangements, and an immensely profitable sick-care system are all one. There can be no "solutions" without an integrated understanding that simple behaviors are the heart of any and all real solutions. Buying something "new" is a simulacrum "solution" marketed to reap profits.
The solution to sick-care starts not with 1,000 pages of legislation, paid for with trillons of dollars of borrowed money but with an understanding of the causal connections between gardening, vegetables/food, cooking rather than consuming, self-reliance, goal-directed activity and responsibility for one's health.
The market will create the proper incentives to conservation and wise choices if it is given a chance. When gasoline is $10 a gallon (and it will be), then people will change their behaviors as common sense dictates. When peaches cost $10 a pound, then all the fruit that drops to the ground to rot now will be collected before it rots.
I read somewhere about a town in Alaska (I forget the source) which lost its electrical service and had to rely on costly generators for some time. The cost was passed onto consumers. As if by magic, electrical consumption dropped 40% overnight. No new devices were required; the Consumerist Gods were shedding tears and wailing mightily, for the "solution" was behavioral.
Yes, technology promises many innovations, but how we live offers much cheaper, easier and more environmentally sound solutions without waiting around for mechanical/electronic saviors promoted by the Consumerist Gods.
I would like to end with a mindful haiku from resident haiku poet Jed H.:
End of an Era
A Culture of Corruption
End of the Empire.
Here it is with Jed's notes:
END of an Era ( i.e., the Boom-times: 2000- 2007 a la 1920s )
A Culture of Corruption
END of the EMPIRE ! ( i.e., US of A is on its Downhill Slide, like Romans ! )
Thank you, Jed, for a poetic summation of "the end of an era."
August 18, 2009
Correspondent Michael Goodfellow's rant reaches revelation.
Frequent contributor Michael Goodfellow and I correspond on a great number of issues. Having worked in technology and software his entire career, he brings an engineer's sensibility and rigor to many issues. Recently he wrote a commentary which he titled "A Charles Smith Moment" which leaves rant and enters revelation in my view.
He suggested I introduce it with the phrase "this is what I get when he's in a bad mood..." but I think you'll find a succinct indictment here:
A "Charles Smith" Moment
Unfair to you to call it that, but when reading this item about Iraq off Cato,
Time to Leave Iraq
(and these links on Social Security/Medicare and the Federal budget SSA Trustees Report and Tax Policy Center)
I had that feeling that the whole country is just a Ship of Fools headed into the rapids and there's nothing I can do about it.
It's not just that I disagree with the neocons -- their values, their goals, their plans and their politics. It's that they don't even seem to care. They don't clarify their goals or strategy, they don't learn from their mistakes and they don't even want to look at whether Iraq is a success or failure. It's as if they don't even believe what they say.
They just want to act out some WWII-inspired fantasy of turning countries into democracies and being the world's policeman. But now Iraq is just "so 2005", so ignore it, wrap it up, and off to Afghanistan! And both wars have so much momentum that even the President can't seem to slow them down or divert them, let alone call them off. He'd rather let both wars be huge failures than take any short-term political heat. Again, it's as if no one, even the other party, cares what we accomplish. Thousands of American soldiers die, tens of thousands of Iraqis die, trillions are spent, and for the politicians, pundits and public, it's just "whatever!"
And it isn't limited to the wars. On health care, the Republicans are patting themselves on the back for derailing ObamaCare, but neither side is facing reality. We can't afford existing Medicare. The baby boomers start hitting 65 in a couple of years. Time is up for dealing with that crisis. Even if the Republicans stop health care legislation, they still have that to deal with. And not in some "future generation", but during their term of office. What can they possibly be thinking?
But what can the Democrats be thinking? It's not as if there's any cost control in the ObamaCare plan. They seem surprised that CBO keeps scoring the plan as expensive. Can't any of them do arithmetic? 45 million uninsured times $2000 a year (a very cheap insurance policy) is $90 billion a year, or about a trillion dollars in ten years. CBO is only scoring the first five years of the plan, since it phases in. Still, any back-of-the-envelope calculation would have told them the tab was going to be in that ballpark. And this is on top of the Medicare problem, Social Security, Cap and Trade, and the financial crisis. How does anyone think we can afford all of that?
In fact, the one thing that does seem to unite both parties is a complete disinterest in what the legislation will actually do. They just want to let the usual special interest groups fight it out, write a thousand pages of incomprehensible regulatory gibberish, and call it done. Just don't ask us to read it!
The same was true during the financial crisis. The whole attitude of Congress was "Keep this away from me! I don't understand any of it! You, Federal Reserve, here's a blank check. Just solve this problem and don't even tell us what you are doing."
Again, this isn't a matter of values or priorities. It's beyond incompetence. It's a complete disinterest in the results of their actions. I would call it panic, but that requires a certain alertness. This is some kind of psychosis.
So I look at the entire political system and I think how unreal it all is, and how tired. Republicans are running on intellectual fumes -- neocons and old warhorses like McCain; anti-gay, anti-immigrant, anti-trade sentiment and populist know-nothings like Palin. No awareness of where the country is right now, and no willingness to stick to any principles at all.
I still like the libertarian arguments on Reason and Cato, but they have their problems as well. First, they are a tiny minority. Second, they mostly criticize the system without offering practical, politically possible steps in the right direction. And third, they are hopeless nerds. I watch those guys on video and I think "This guy couldn't sell me ice cream on a hot summer day! And I'm someone who agrees with him!"
I could never take the Democrats seriously either. From the various bailouts to all their plans for the economy, health care, environment, it has the same feel of unreality as the Republicans. As if they just don't want to know whether any of these plans can possibly succeed, or whether we can afford to even try. They just want to act out their fantasies, where they save the Earth, bring healing to the poor and end racism.
I wrote to one guy on global warming that the only thing that matters is what gets invented in a lab somewhere. If we can build better batteries or solar panels, do carbon capture or geoengineering, then we can make a difference. But the hair-shirt conservation measures have no real effect. And you can prove that with statistics about efficiency and the savings they could possibly get.
If you actually cared about global warming, you'd want to know what works. (and build nuke plants, which is apparently being shot down by the Obama administration.) But he doesn't even want to talk about that. It's just "if we don't pass cap and trade, the oceans will rise and the Earth is doomed." And if you don't agree with him, you are an evil "denier." It's not even a reasoned argument. Where am I supposed to go with that?
http://www.oftwominds.com/blog.html
Like you, I expect a train wreck at some point. Unlike you, I don't expect chaos. Instead, it will just be a hunker-down, "do something, anything!" government-orchestrated mess. More of the same, with increasing instability and poverty. I don't think that knowing how to grow veggies or collect rainwater will make any difference at all.
The thing to remember is that most of the third world has worse governance than we do, worse financial problems, fewer natural resources and a less educated population. Still, from Argentina to Poland to India, they just limp along. Anarchy does not break out. I see no reason for it to do so here either. It will just suck.
Thank you, Michael. Such clarity is a rarity these days.
Those of you who have slogged through my free eBook (shameless plug) Survival+: Structuring Prosperity for Yourself and the Nation will recall parallel descriptions of fantasy, disinterest and psychosis.
The entire structure of response and policy is what I term simulacrum, facsimiles of solutions, pseudo-solutions which as Michael points out, are being "sold" with the sort of half-heartedness of those who know full well they are props and facades and thus utterly illusory.
No nation can borrow 13% of its GDP without consequences, but rather than face our situation with what I term an adult understanding of triage and trade-offs--that you can't get everything you want right now, that priorities must be assessed and difficult trade-offs made--we as a nation have entered the delusion that we can just borrow the money to put off any hard choices.
Wars going badly? Borrow another trillion to "stay the course"--whatever that means. As Michael notes, the policy has always been incomprehensible, switching from finding WMDs to fostering democracy to stopping terrorism in Mosel before it gets to Miami to the ideological-flavor-of-the-month.
Sick-care unsustainable and broken? Borrow another trillion, write a 1,000 pages of gobblydigook to placate and pander to the special interests involved, solving nothing and doing nothing to actually cut costs, and then "declare victory": Mission accomplished!
It rings hollow because it is hollow: nothing of substance has been accomplished because as I put it, those with asymmetric stakes in the game are pouring every dime and every ounce of energy into the game to protect their share of the swag, while we citizens and "consumers" are expiring from death by a thousand cuts--none deep enough to spark concerted action.
While the government and corporate Elites protect their fiefdoms, the citizenry are distracted by trash-talk radio and TV, courtesy of a mass media owned lock, stock and barrel by six corporations.
Complacency and fatalism reign supreme, and the Elites are loving it because a confused, doped out, distracted, apathetic, complacent, fatalistic populace is easily duped and manipulated.
What Michael foresees as our future is what I term devolution. We differ on two points, which Michael already knows from our voluminous correspondence. So I want to be sure to note that I am not reading this into Michael's commentary--these are my thoughts.
I think we will devolve to "tipping points" or phase shifts where systems will break down. This won't necessarily lead to chaos but it will lead to something beyond complacency and fatalism. It could be negative or it could be positive; that choice is ours.
I believe that the loss of wealth, the extremes of income inequality and the credit/debt implosion are all phase shifts which have already occurred, but the status quo Power Elites and citizenry alike are in denial, hoping that some miracle of additional borrowing will re-set the clock back to the era of bogus "prosperity."
Those hopes will be proven futile because simulacrum is not reality and delusion is not a practical substitute for actual solutions.
I differ somewhat with Michael on solutions, as I think all solutions come from the margins. While I hope for technological solutions, I am skeptical because our consumerist mindset is fixated on the notion that "buying something new" will somehow solve all our problems.
Mo offense to Prius owners, but I suspect we've all been sold a bill of goods on its benefits. The entire cost of a vehicle, or any manufactured object, is called its lifecycle costs. This means calculating the cost in money, energy and resources of everything required to manufacture the vehicle--not just the steel, but the cost of pumping water to make the steel, mine the ore, etc.
Now a Prius has two components which simply do not exist in a stripped down ICE (internal combustion engine) vehicle: a large battery pack and extremely complex electronics for switching between electric and ICE drive.
Batteries require a stupendous amount of costly resources to manufacture. Until batteries are made of sand (silicon) or equivalent materials and do not require highly complex processes, they will remain costly. They are also toxic and therefore costly to recycle/ dismantle properly.
Thus I suspect that if you include the full lifecycle costs of manufacturing a Prius, the cost of maintenance and the fuel it burns (or the electricity used to recharge its batteries) and the disposal/recycling of its components, and weigh them against a high-mileage cheaper vehicle like a Honda Civic or subcompact Ford/GM, the Prius is probably less efficient and less environmentally sound than the cheap ICE vehicle.
"Buying something new" might not be the answer at all except at the margins--transformers that lose less energy, electronic power converters which are suddenly mandated to be efficient rather than energy hogs, etc. etc. Perhaps the Consumerist Gods will fail to be the "solution."
Just as technology changes at the margin, so too does behavior. I have to disagree with Michael about growing veggies, because as I have said before, "a garden and a homecooked meal are revolutionary acts." These simple acts are revolutionary because they upend the oppressive regime of agribusiness, packaged/fast food and the sick-care system--all parts in a seamless system of ill-health, derangement, torpor and chronic disease which can be treated with enormously expensive and mostly needless medications and procedures.
This is what I term an integrated understanding of the entire system of growing and consuming food and health. Agribusiness, fast food, high salt, high fat and high sugar processed "foods" (poisons is a more accurate term), chronic illness and various derangements, and an immensely profitable sick-care system are all one. There can be no "solutions" without an integrated understanding that simple behaviors are the heart of any and all real solutions. Buying something "new" is a simulacrum "solution" marketed to reap profits.
The solution to sick-care starts not with 1,000 pages of legislation, paid for with trillons of dollars of borrowed money but with an understanding of the causal connections between gardening, vegetables/food, cooking rather than consuming, self-reliance, goal-directed activity and responsibility for one's health.
The market will create the proper incentives to conservation and wise choices if it is given a chance. When gasoline is $10 a gallon (and it will be), then people will change their behaviors as common sense dictates. When peaches cost $10 a pound, then all the fruit that drops to the ground to rot now will be collected before it rots.
I read somewhere about a town in Alaska (I forget the source) which lost its electrical service and had to rely on costly generators for some time. The cost was passed onto consumers. As if by magic, electrical consumption dropped 40% overnight. No new devices were required; the Consumerist Gods were shedding tears and wailing mightily, for the "solution" was behavioral.
Yes, technology promises many innovations, but how we live offers much cheaper, easier and more environmentally sound solutions without waiting around for mechanical/electronic saviors promoted by the Consumerist Gods.
I would like to end with a mindful haiku from resident haiku poet Jed H.:
End of an Era
A Culture of Corruption
End of the Empire.
Here it is with Jed's notes:
END of an Era ( i.e., the Boom-times: 2000- 2007 a la 1920s )
A Culture of Corruption
END of the EMPIRE ! ( i.e., US of A is on its Downhill Slide, like Romans ! )
Thank you, Jed, for a poetic summation of "the end of an era."
Must reads ~ Why Iceland and Latvia Won't (and Can't) Pay / GoogleWiki to rule
Iceland promises to be merely the first sovereign nation to lead the pendulum swing away from an ostensibly “real economy” ideology of free markets to an awareness that in practice, this rhetoric turns out to be a junk economics favorable to banks and global creditors.
As far as I am aware, this agreement is the first since the Young Plan for Germany’s reparations debt to subordinate international debt obligations to the capacity-to-pay principle.
http://www.counterpunch.org/hudson08182009.html
Gary concours with my disintermediation of elites thesis...but goes a tad too far, like all libertarians......
Wikipedia and Google Will Bring Down Establishments All Over the World
Back in the early 1990's, I was told about a German economist with an American name: Paul C. Martin. He had written a book titled Paymaster Germany. Its thesis: Germany cannot send home its Turkish and other immigrants. They would break the German economy by pulling their money out of the country. Anyway, that's what my German contacts told me about the book. It has never been translated
Recently, I did a search for "Paul C. Martin." I got a page. The #2 entry was a Wikipedia article on him. It is in German. You can find the page here.
There is an option available on the Google entry: Translate this page. I clicked it. Within a few seconds, I had the article in English. Wiki knew I read English.
The article is readable. There are some minor grammatical errors, but I can easily get the gist of it. The author's books are listed in English.
Wiki is available in dozens of languages. It is replacing all other general encyclopedias. The division of labor is working.
If you find a Wiki entry with an error, you can correct it using the Edit feature. I do this from time to time. I don't get paid, but I want things right. This mentality is widespread among Wiki users. The articles keep getting better.
If readers of encyclopedias were evil-minded, they would deface the entries by adding lies. Yet this is not done often, and the errors are found and corrected rapidly.
Ideological wars do break out. Then the page is locked by a committee. You have to apply to update the entry. If there were many such disputes, it would be impossible to sort them out. There would not be enough volunteers to serve on the committees.
The Wiki system relies on volunteers. It works. It relies on honest intentions. This usually works. It relies on digital translation. This works well enough to allow the transmission of basic information – more than most readers can remember. Our minds are the weak links now, not the translation software.
The translation software will get better. In 20 years, it will probably rival the skills of a human translator who did not learn both languages as a bi-lingual child. It may take less time than 20 years.
This will increase the division of intellectual labor. It will vastly expand our horizons. Already, we can find out what other nationalities think about such topics as the origin of specific wars.
The way we learn about history will change for the better. Revisionist history will spread. The Establishments of all nations will suffer.
Wiki has dramatically increased the world's intellectual division of labor by providing software and open access posting. It is self-policed. This lets decentralization find a central location on the Web. Type in any topic and the type "Wiki." Click. You will find it on Google instantly.
Where did the creator of Wiki get this idea on the intellectual division of labor? From a dead economist, F. A. Hayek, who write a 1945 article on "The Use of Knowledge in Society," one of the most important articles in the history of economics. Who told him about Hayek? Mark Thornton, staff economist at the Mises Institute. What organization makes spectacular use of the Web through posting free books in PDF? The Mises Institute.
Neither Google nor Wikipedia existed a decade ago.
Then there is the sheer volume of local historical materials. Think of American Civil War history if every small-town newspaper were on-line. Researchers could compare accounts of battles. The same goes for archives of letters.
On the top floor of the library at Louisiana State University at Shreveport, there is an astounding collection of antiquarian books. It was assembled by an eccentric millionaire. There is a full-time curator. I have seen this collection. It is mind-boggling. There is a large section on Civil War memorial books written by specific army units. Yet almost no one knows of this collection. In effect, it is closed to the general public because of a lack of publicity.
Let me provide another example. A prominent university in the South has the largest collection of Ku Klux Klan material anywhere. I was informed by a far-left Ph.D. historian whose grandfather was the first professor of psychology at that university in 1918 that if you were not a Klan member, you were not hired to be on the faculty. This is hearsay. I happen to believe it. He told me about the KKK collection. Almost no one knows it is there, except for Klan members who are interested in historical scholarship. This is a limited audience. The library does not publicize its existence. Why not? Because questions might be raised about the origin of the collection. Political incorrectness affects libraries.
ON-LINE LIBRARIES
Collection by collection, Google will scan tens of millions of books and post them. Probably 80% of the world's pre-1923 books will be online in 50 years – maybe less. All it will take is manpower and cheap scanning machines, which keep getting cheaper.
It is possible to have a book scanned and converted to a Google-searchable PDF file for 16 cents a page if you allow the outfit to cut the spine of the book. It's 36 cents if you don't allow this. You can set up a website for $10 a year for domain name hosting, plus an extra $10 if you want your identity as the owner concealed from snoopers. Use Hostgator or Hostmonster to host an unlimited number of domains for $8 a month. You can post PDFs.
In every language these books will be online. They will eventually be translated digitally "on the fly."
Then will come archive collections of letters. They will take longer to convert to searchable typeset words. But that day will come.
The cost of writing history will fall. It is costly to do research in a major research library. You must pay for the plane fair, overnight housing, and a rental car. This can easily cost $300 a day – or three times that in cities like London or Berlin. Only a few people can afford this, and only for short visits.
If the library's pre-1923 books and archive materials were online, anyone could do it at home. The little guy would be able to compete.
Say that you want access to all academic journals. These are all on-line. It is expensive to access them. You must be an enrolled student or a faculty member to access them. Solution? Hire a student intern who has on-line access to the library. Then have the student look up the articles you want to read and send PDFs to you. Or just use his access code to do your own research. "That's cheating," says the librarian. But taxpayers pay for the library. I suffer little guilt.
Every time you find a Google link to a locked article on JSTOR, you contact your intern. Presto. Unlocked!
Some interns work for free to gain college credit. Do I have access to such an intern? To ask this question is to answer it.
Soon, brains and insight will rule, not bank accounts and official accreditation by state licensing bureaus. The Establishments will all be in defensive mode.
It is happening today. This is going to increase.
Truth will fragment. New paradigms will emerge from the competition. The quality of thought will improve when bank accounts are not major barriers to entry.
THE GATEKEEPERS' DILEMMA
The gatekeepers can no longer control the flow of information. This has never happened in man's history. Gatekeepers still control the gates. But the walls have holes in them. These holes are widening.
The gatekeepers control accreditation. They no longer control content except where it is very expensive to do primary research, such as nuclear physics. In the social sciences and humanities, it's just about over.
When I think "Establishment," my mind goes back to Rocky III. Mr. T's character tells Apollo Creed, "you're going down."
If you find something worth posting, post it. Call this "post-it notes." It beats armed revolution every time.
Make a free online YouTube or Blip.tv course out of your favorite controversial topic. Imitate Salman Khan: www.KhanAcademy.org. (Note: Khan graduated from MIT and the Harvard Business School.) He did it with these low-cost or free tools.
In short, if you find something evil that wobbles, push it.
August 18, 2009
Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.
Copyright © 2009 Gary North
Back in the early 1990's, I was told about a German economist with an American name: Paul C. Martin. He had written a book titled Paymaster Germany. Its thesis: Germany cannot send home its Turkish and other immigrants. They would break the German economy by pulling their money out of the country. Anyway, that's what my German contacts told me about the book. It has never been translated
Recently, I did a search for "Paul C. Martin." I got a page. The #2 entry was a Wikipedia article on him. It is in German. You can find the page here.
There is an option available on the Google entry: Translate this page. I clicked it. Within a few seconds, I had the article in English. Wiki knew I read English.
The article is readable. There are some minor grammatical errors, but I can easily get the gist of it. The author's books are listed in English.
Wiki is available in dozens of languages. It is replacing all other general encyclopedias. The division of labor is working.
If you find a Wiki entry with an error, you can correct it using the Edit feature. I do this from time to time. I don't get paid, but I want things right. This mentality is widespread among Wiki users. The articles keep getting better.
If readers of encyclopedias were evil-minded, they would deface the entries by adding lies. Yet this is not done often, and the errors are found and corrected rapidly.
Ideological wars do break out. Then the page is locked by a committee. You have to apply to update the entry. If there were many such disputes, it would be impossible to sort them out. There would not be enough volunteers to serve on the committees.
The Wiki system relies on volunteers. It works. It relies on honest intentions. This usually works. It relies on digital translation. This works well enough to allow the transmission of basic information – more than most readers can remember. Our minds are the weak links now, not the translation software.
The translation software will get better. In 20 years, it will probably rival the skills of a human translator who did not learn both languages as a bi-lingual child. It may take less time than 20 years.
This will increase the division of intellectual labor. It will vastly expand our horizons. Already, we can find out what other nationalities think about such topics as the origin of specific wars.
The way we learn about history will change for the better. Revisionist history will spread. The Establishments of all nations will suffer.
Wiki has dramatically increased the world's intellectual division of labor by providing software and open access posting. It is self-policed. This lets decentralization find a central location on the Web. Type in any topic and the type "Wiki." Click. You will find it on Google instantly.
Where did the creator of Wiki get this idea on the intellectual division of labor? From a dead economist, F. A. Hayek, who write a 1945 article on "The Use of Knowledge in Society," one of the most important articles in the history of economics. Who told him about Hayek? Mark Thornton, staff economist at the Mises Institute. What organization makes spectacular use of the Web through posting free books in PDF? The Mises Institute.
Neither Google nor Wikipedia existed a decade ago.
Then there is the sheer volume of local historical materials. Think of American Civil War history if every small-town newspaper were on-line. Researchers could compare accounts of battles. The same goes for archives of letters.
On the top floor of the library at Louisiana State University at Shreveport, there is an astounding collection of antiquarian books. It was assembled by an eccentric millionaire. There is a full-time curator. I have seen this collection. It is mind-boggling. There is a large section on Civil War memorial books written by specific army units. Yet almost no one knows of this collection. In effect, it is closed to the general public because of a lack of publicity.
Let me provide another example. A prominent university in the South has the largest collection of Ku Klux Klan material anywhere. I was informed by a far-left Ph.D. historian whose grandfather was the first professor of psychology at that university in 1918 that if you were not a Klan member, you were not hired to be on the faculty. This is hearsay. I happen to believe it. He told me about the KKK collection. Almost no one knows it is there, except for Klan members who are interested in historical scholarship. This is a limited audience. The library does not publicize its existence. Why not? Because questions might be raised about the origin of the collection. Political incorrectness affects libraries.
ON-LINE LIBRARIES
Collection by collection, Google will scan tens of millions of books and post them. Probably 80% of the world's pre-1923 books will be online in 50 years – maybe less. All it will take is manpower and cheap scanning machines, which keep getting cheaper.
It is possible to have a book scanned and converted to a Google-searchable PDF file for 16 cents a page if you allow the outfit to cut the spine of the book. It's 36 cents if you don't allow this. You can set up a website for $10 a year for domain name hosting, plus an extra $10 if you want your identity as the owner concealed from snoopers. Use Hostgator or Hostmonster to host an unlimited number of domains for $8 a month. You can post PDFs.
In every language these books will be online. They will eventually be translated digitally "on the fly."
Then will come archive collections of letters. They will take longer to convert to searchable typeset words. But that day will come.
The cost of writing history will fall. It is costly to do research in a major research library. You must pay for the plane fair, overnight housing, and a rental car. This can easily cost $300 a day – or three times that in cities like London or Berlin. Only a few people can afford this, and only for short visits.
If the library's pre-1923 books and archive materials were online, anyone could do it at home. The little guy would be able to compete.
Say that you want access to all academic journals. These are all on-line. It is expensive to access them. You must be an enrolled student or a faculty member to access them. Solution? Hire a student intern who has on-line access to the library. Then have the student look up the articles you want to read and send PDFs to you. Or just use his access code to do your own research. "That's cheating," says the librarian. But taxpayers pay for the library. I suffer little guilt.
Every time you find a Google link to a locked article on JSTOR, you contact your intern. Presto. Unlocked!
Some interns work for free to gain college credit. Do I have access to such an intern? To ask this question is to answer it.
Soon, brains and insight will rule, not bank accounts and official accreditation by state licensing bureaus. The Establishments will all be in defensive mode.
It is happening today. This is going to increase.
Truth will fragment. New paradigms will emerge from the competition. The quality of thought will improve when bank accounts are not major barriers to entry.
THE GATEKEEPERS' DILEMMA
The gatekeepers can no longer control the flow of information. This has never happened in man's history. Gatekeepers still control the gates. But the walls have holes in them. These holes are widening.
The gatekeepers control accreditation. They no longer control content except where it is very expensive to do primary research, such as nuclear physics. In the social sciences and humanities, it's just about over.
When I think "Establishment," my mind goes back to Rocky III. Mr. T's character tells Apollo Creed, "you're going down."
If you find something worth posting, post it. Call this "post-it notes." It beats armed revolution every time.
Make a free online YouTube or Blip.tv course out of your favorite controversial topic. Imitate Salman Khan: www.KhanAcademy.org. (Note: Khan graduated from MIT and the Harvard Business School.) He did it with these low-cost or free tools.
In short, if you find something evil that wobbles, push it.
August 18, 2009
Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.
Copyright © 2009 Gary North
As far as I am aware, this agreement is the first since the Young Plan for Germany’s reparations debt to subordinate international debt obligations to the capacity-to-pay principle.
http://www.counterpunch.org/hudson08182009.html
Gary concours with my disintermediation of elites thesis...but goes a tad too far, like all libertarians......
Wikipedia and Google Will Bring Down Establishments All Over the World
Back in the early 1990's, I was told about a German economist with an American name: Paul C. Martin. He had written a book titled Paymaster Germany. Its thesis: Germany cannot send home its Turkish and other immigrants. They would break the German economy by pulling their money out of the country. Anyway, that's what my German contacts told me about the book. It has never been translated
Recently, I did a search for "Paul C. Martin." I got a page. The #2 entry was a Wikipedia article on him. It is in German. You can find the page here.
There is an option available on the Google entry: Translate this page. I clicked it. Within a few seconds, I had the article in English. Wiki knew I read English.
The article is readable. There are some minor grammatical errors, but I can easily get the gist of it. The author's books are listed in English.
Wiki is available in dozens of languages. It is replacing all other general encyclopedias. The division of labor is working.
If you find a Wiki entry with an error, you can correct it using the Edit feature. I do this from time to time. I don't get paid, but I want things right. This mentality is widespread among Wiki users. The articles keep getting better.
If readers of encyclopedias were evil-minded, they would deface the entries by adding lies. Yet this is not done often, and the errors are found and corrected rapidly.
Ideological wars do break out. Then the page is locked by a committee. You have to apply to update the entry. If there were many such disputes, it would be impossible to sort them out. There would not be enough volunteers to serve on the committees.
The Wiki system relies on volunteers. It works. It relies on honest intentions. This usually works. It relies on digital translation. This works well enough to allow the transmission of basic information – more than most readers can remember. Our minds are the weak links now, not the translation software.
The translation software will get better. In 20 years, it will probably rival the skills of a human translator who did not learn both languages as a bi-lingual child. It may take less time than 20 years.
This will increase the division of intellectual labor. It will vastly expand our horizons. Already, we can find out what other nationalities think about such topics as the origin of specific wars.
The way we learn about history will change for the better. Revisionist history will spread. The Establishments of all nations will suffer.
Wiki has dramatically increased the world's intellectual division of labor by providing software and open access posting. It is self-policed. This lets decentralization find a central location on the Web. Type in any topic and the type "Wiki." Click. You will find it on Google instantly.
Where did the creator of Wiki get this idea on the intellectual division of labor? From a dead economist, F. A. Hayek, who write a 1945 article on "The Use of Knowledge in Society," one of the most important articles in the history of economics. Who told him about Hayek? Mark Thornton, staff economist at the Mises Institute. What organization makes spectacular use of the Web through posting free books in PDF? The Mises Institute.
Neither Google nor Wikipedia existed a decade ago.
Then there is the sheer volume of local historical materials. Think of American Civil War history if every small-town newspaper were on-line. Researchers could compare accounts of battles. The same goes for archives of letters.
On the top floor of the library at Louisiana State University at Shreveport, there is an astounding collection of antiquarian books. It was assembled by an eccentric millionaire. There is a full-time curator. I have seen this collection. It is mind-boggling. There is a large section on Civil War memorial books written by specific army units. Yet almost no one knows of this collection. In effect, it is closed to the general public because of a lack of publicity.
Let me provide another example. A prominent university in the South has the largest collection of Ku Klux Klan material anywhere. I was informed by a far-left Ph.D. historian whose grandfather was the first professor of psychology at that university in 1918 that if you were not a Klan member, you were not hired to be on the faculty. This is hearsay. I happen to believe it. He told me about the KKK collection. Almost no one knows it is there, except for Klan members who are interested in historical scholarship. This is a limited audience. The library does not publicize its existence. Why not? Because questions might be raised about the origin of the collection. Political incorrectness affects libraries.
ON-LINE LIBRARIES
Collection by collection, Google will scan tens of millions of books and post them. Probably 80% of the world's pre-1923 books will be online in 50 years – maybe less. All it will take is manpower and cheap scanning machines, which keep getting cheaper.
It is possible to have a book scanned and converted to a Google-searchable PDF file for 16 cents a page if you allow the outfit to cut the spine of the book. It's 36 cents if you don't allow this. You can set up a website for $10 a year for domain name hosting, plus an extra $10 if you want your identity as the owner concealed from snoopers. Use Hostgator or Hostmonster to host an unlimited number of domains for $8 a month. You can post PDFs.
In every language these books will be online. They will eventually be translated digitally "on the fly."
Then will come archive collections of letters. They will take longer to convert to searchable typeset words. But that day will come.
The cost of writing history will fall. It is costly to do research in a major research library. You must pay for the plane fair, overnight housing, and a rental car. This can easily cost $300 a day – or three times that in cities like London or Berlin. Only a few people can afford this, and only for short visits.
If the library's pre-1923 books and archive materials were online, anyone could do it at home. The little guy would be able to compete.
Say that you want access to all academic journals. These are all on-line. It is expensive to access them. You must be an enrolled student or a faculty member to access them. Solution? Hire a student intern who has on-line access to the library. Then have the student look up the articles you want to read and send PDFs to you. Or just use his access code to do your own research. "That's cheating," says the librarian. But taxpayers pay for the library. I suffer little guilt.
Every time you find a Google link to a locked article on JSTOR, you contact your intern. Presto. Unlocked!
Some interns work for free to gain college credit. Do I have access to such an intern? To ask this question is to answer it.
Soon, brains and insight will rule, not bank accounts and official accreditation by state licensing bureaus. The Establishments will all be in defensive mode.
It is happening today. This is going to increase.
Truth will fragment. New paradigms will emerge from the competition. The quality of thought will improve when bank accounts are not major barriers to entry.
THE GATEKEEPERS' DILEMMA
The gatekeepers can no longer control the flow of information. This has never happened in man's history. Gatekeepers still control the gates. But the walls have holes in them. These holes are widening.
The gatekeepers control accreditation. They no longer control content except where it is very expensive to do primary research, such as nuclear physics. In the social sciences and humanities, it's just about over.
When I think "Establishment," my mind goes back to Rocky III. Mr. T's character tells Apollo Creed, "you're going down."
If you find something worth posting, post it. Call this "post-it notes." It beats armed revolution every time.
Make a free online YouTube or Blip.tv course out of your favorite controversial topic. Imitate Salman Khan: www.KhanAcademy.org. (Note: Khan graduated from MIT and the Harvard Business School.) He did it with these low-cost or free tools.
In short, if you find something evil that wobbles, push it.
August 18, 2009
Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.
Copyright © 2009 Gary North
Back in the early 1990's, I was told about a German economist with an American name: Paul C. Martin. He had written a book titled Paymaster Germany. Its thesis: Germany cannot send home its Turkish and other immigrants. They would break the German economy by pulling their money out of the country. Anyway, that's what my German contacts told me about the book. It has never been translated
Recently, I did a search for "Paul C. Martin." I got a page. The #2 entry was a Wikipedia article on him. It is in German. You can find the page here.
There is an option available on the Google entry: Translate this page. I clicked it. Within a few seconds, I had the article in English. Wiki knew I read English.
The article is readable. There are some minor grammatical errors, but I can easily get the gist of it. The author's books are listed in English.
Wiki is available in dozens of languages. It is replacing all other general encyclopedias. The division of labor is working.
If you find a Wiki entry with an error, you can correct it using the Edit feature. I do this from time to time. I don't get paid, but I want things right. This mentality is widespread among Wiki users. The articles keep getting better.
If readers of encyclopedias were evil-minded, they would deface the entries by adding lies. Yet this is not done often, and the errors are found and corrected rapidly.
Ideological wars do break out. Then the page is locked by a committee. You have to apply to update the entry. If there were many such disputes, it would be impossible to sort them out. There would not be enough volunteers to serve on the committees.
The Wiki system relies on volunteers. It works. It relies on honest intentions. This usually works. It relies on digital translation. This works well enough to allow the transmission of basic information – more than most readers can remember. Our minds are the weak links now, not the translation software.
The translation software will get better. In 20 years, it will probably rival the skills of a human translator who did not learn both languages as a bi-lingual child. It may take less time than 20 years.
This will increase the division of intellectual labor. It will vastly expand our horizons. Already, we can find out what other nationalities think about such topics as the origin of specific wars.
The way we learn about history will change for the better. Revisionist history will spread. The Establishments of all nations will suffer.
Wiki has dramatically increased the world's intellectual division of labor by providing software and open access posting. It is self-policed. This lets decentralization find a central location on the Web. Type in any topic and the type "Wiki." Click. You will find it on Google instantly.
Where did the creator of Wiki get this idea on the intellectual division of labor? From a dead economist, F. A. Hayek, who write a 1945 article on "The Use of Knowledge in Society," one of the most important articles in the history of economics. Who told him about Hayek? Mark Thornton, staff economist at the Mises Institute. What organization makes spectacular use of the Web through posting free books in PDF? The Mises Institute.
Neither Google nor Wikipedia existed a decade ago.
Then there is the sheer volume of local historical materials. Think of American Civil War history if every small-town newspaper were on-line. Researchers could compare accounts of battles. The same goes for archives of letters.
On the top floor of the library at Louisiana State University at Shreveport, there is an astounding collection of antiquarian books. It was assembled by an eccentric millionaire. There is a full-time curator. I have seen this collection. It is mind-boggling. There is a large section on Civil War memorial books written by specific army units. Yet almost no one knows of this collection. In effect, it is closed to the general public because of a lack of publicity.
Let me provide another example. A prominent university in the South has the largest collection of Ku Klux Klan material anywhere. I was informed by a far-left Ph.D. historian whose grandfather was the first professor of psychology at that university in 1918 that if you were not a Klan member, you were not hired to be on the faculty. This is hearsay. I happen to believe it. He told me about the KKK collection. Almost no one knows it is there, except for Klan members who are interested in historical scholarship. This is a limited audience. The library does not publicize its existence. Why not? Because questions might be raised about the origin of the collection. Political incorrectness affects libraries.
ON-LINE LIBRARIES
Collection by collection, Google will scan tens of millions of books and post them. Probably 80% of the world's pre-1923 books will be online in 50 years – maybe less. All it will take is manpower and cheap scanning machines, which keep getting cheaper.
It is possible to have a book scanned and converted to a Google-searchable PDF file for 16 cents a page if you allow the outfit to cut the spine of the book. It's 36 cents if you don't allow this. You can set up a website for $10 a year for domain name hosting, plus an extra $10 if you want your identity as the owner concealed from snoopers. Use Hostgator or Hostmonster to host an unlimited number of domains for $8 a month. You can post PDFs.
In every language these books will be online. They will eventually be translated digitally "on the fly."
Then will come archive collections of letters. They will take longer to convert to searchable typeset words. But that day will come.
The cost of writing history will fall. It is costly to do research in a major research library. You must pay for the plane fair, overnight housing, and a rental car. This can easily cost $300 a day – or three times that in cities like London or Berlin. Only a few people can afford this, and only for short visits.
If the library's pre-1923 books and archive materials were online, anyone could do it at home. The little guy would be able to compete.
Say that you want access to all academic journals. These are all on-line. It is expensive to access them. You must be an enrolled student or a faculty member to access them. Solution? Hire a student intern who has on-line access to the library. Then have the student look up the articles you want to read and send PDFs to you. Or just use his access code to do your own research. "That's cheating," says the librarian. But taxpayers pay for the library. I suffer little guilt.
Every time you find a Google link to a locked article on JSTOR, you contact your intern. Presto. Unlocked!
Some interns work for free to gain college credit. Do I have access to such an intern? To ask this question is to answer it.
Soon, brains and insight will rule, not bank accounts and official accreditation by state licensing bureaus. The Establishments will all be in defensive mode.
It is happening today. This is going to increase.
Truth will fragment. New paradigms will emerge from the competition. The quality of thought will improve when bank accounts are not major barriers to entry.
THE GATEKEEPERS' DILEMMA
The gatekeepers can no longer control the flow of information. This has never happened in man's history. Gatekeepers still control the gates. But the walls have holes in them. These holes are widening.
The gatekeepers control accreditation. They no longer control content except where it is very expensive to do primary research, such as nuclear physics. In the social sciences and humanities, it's just about over.
When I think "Establishment," my mind goes back to Rocky III. Mr. T's character tells Apollo Creed, "you're going down."
If you find something worth posting, post it. Call this "post-it notes." It beats armed revolution every time.
Make a free online YouTube or Blip.tv course out of your favorite controversial topic. Imitate Salman Khan: www.KhanAcademy.org. (Note: Khan graduated from MIT and the Harvard Business School.) He did it with these low-cost or free tools.
In short, if you find something evil that wobbles, push it.
August 18, 2009
Gary North [send him mail] is the author of Mises on Money. Visit http://www.garynorth.com. He is also the author of a free 20-volume series, An Economic Commentary on the Bible.
Copyright © 2009 Gary North
Reflation Contemplation ~ Nolan
Stock prices traditionally lead economic recoveries. Securities markets tend to react swiftly to loosened monetary conditions, while it takes some time for loose Credit to work its way through to the bowels of the real economy. Highly speculative markets react haphazardly, sloshing liquidity out and about. As is commonly understood, employment conditions are a somewhat lagging economic indicator. Most analysts have been content to read nothing of significance from ongoing poor jobs and housing data. Overwhelmingly, the bulls rely on faith - and history - that surging stock prices are discounting the usual “V” rebound.
Data this week should have those of the bullish persuasion on edge. July retail sales were much weaker-than-expected (down 0.1% vs. expectations of a rise of 0.8%). Retail Sales excluding auto sales were down 0.6% for the month (down 8.1% y-o-y), the largest drop since March’s 1.1% fall. Looking back, there was no mystery surrounding first quarter consumer weakness. But even after a dramatic stock market recovery, July’s Department store sales were down a dismal 1.6% for the month (down 9.6% y-o-y). Even Wal-mart management commented that their customers were “selective” and remained keenly focused on value.
Today’s preliminary report on August University of Michigan Consumer Confidence was also a big disappointment. The consensus called for this confidence reading to jump three points to 69. The actual report came in down to 63 - to the lowest level since those dark days of March. Readings on both “Economic Conditions” and “Economic Outlook” dropped to five-month lows.
Yesterday, RealtyTrac reported that U.S. foreclosures jumped to a record 360,149 in July. This was up almost 7% from June and 32% higher than the year ago level. And there’s no relief in sight. American Bankruptcy Institute data had 126,000 Americans filing for bankruptcy in July, up 34% from a year earlier. It is now expected that 1.4 million will file for bankruptcy this year.
Meanwhile, the economic optimists take comfort from this week’s readings on Non-farm Productivity, Wholesale Inventories, Industrial Production, and Capacity Utilization. Positive data out of Europe and Asia also seem to confirm that some type of global economic recovery has taken hold.
From my perspective, this week’s data confirm important aspects of Credit Bubble analysis. First, ongoing headwinds will restrain rebounds in U.S. housing markets and household consumption - for an extended period. Second, the overall U.S. consumption-based economy will lag those of most of our more manufacturing-oriented trading partners. In short, we are witnessing anything but typical reflation dynamics, and those expecting a typical U.S. recovery will be disappointed. Our economy remains overly exposed to U.S. consumption, while having insufficient manufacturing capacity (and resources) of the type to benefit significantly from heightened global demand.
Returning to the stock market, I see nothing typical going on there either. With the Morgan Stanley Retail Index and the Morgan Stanley Cyclical Index up 56% and 49%, respectively, the marketplace apparently has no issue with the recovery. I suspect these gains have been inflated by short covering. Indeed, market dynamics likely explain much of the divergence between ongoing weak underlying economic fundamentals and robust stock prices (especially in the consumer arena).
Unusually large bearish hedges and bets had been placed against the (consumer-driven) U.S. economy. Unprecedented fiscal and monetary policy crisis response stabilized the Credit system, setting in motion a self-reinforcing unwind of “bearish” positions. In the past, such a reflationary dynamic would have seen stock prices for the most part accurately discount the future direction of economic activity. Stated differently, the reversal of bearish positions (and resulting short “squeeze”) would traditionally have (reflating) stock prices portending recovery and a return to the previous trajectory of economic performance. In general, a rejuvenated Credit system - and the resulting recovery of financial flows - would ensure that the “bear” case was proved wrong.
This time may be different. I would not be surprised if the confluence of unusually large bearish positions, unprecedented policy response, and a resulting major “squeeze” created a backdrop where the stock market was turned into a rather poor foreteller of future prospects. From my vantage point, I certainly don’t believe stock prices today generally provide an accurate reflection of underlying company fundamentals. And from an economic perspective, I suspect the stock market is missing some key underlying dynamics that will shape future economic performance.
In particular, equities seem to be discounting a return to business as usual when it comes to the U.S. economy. Retail and the “consumer discretionary” sectors have been among this year’s stellar performers. And, yes, this does fly in the face of my analysis of new economic realities and a permanently downsized role for household consumption in the U.S. economy. At this point, I view this as an anomaly at least partially explained by the hastened reversal of bearish positions. But I also recognize that massive fiscal and monetary stimulus has been implemented with the policy goal of sustaining the existing economic structure. The market has been content to play this dynamic expecting policymaker success.
As I attempted to explain last week, I view the impairment of the stock market discounting mechanism as a key facet of Monetary Disorder. The reversal of bearish plays not only created huge buying power throughout the markets, it decisively reversed The Greed and Fear Factor. Notwithstanding today’s sell-off, the bulls are greedy and the bears are on the run. And the more that inflated stock prices entice shorting, the more games that can be played to “squeeze” the timid bears.
The end result is a highly speculative stock market increasingly detached from reality and vulnerable to wild swings in sentiment. Yet I don’t expect the emerging global reflation to this time disprove the U.S. bearish thesis, although it will no doubt be a wild market ride.
The bond market was happy with this week’s developments. The Fed confirmed it will be especially unhurried in raising rates and ending quantitative easing. Weak U.S. economic data was seen as confirming the bullish bond view. To be sure, low market yields at home and abroad are imperative for global reflation to gain a head of steam. And I would argue that (over-liquefied) bond markets are subject to their own pricing anomalies. In contrast to stocks, bonds have been fixated on U.S. economic vulnerabilities and the Fed, while content to downplay reflation risks. This week’s data doesn’t have me second-guessing the thesis of bond market vulnerability to global reflation dynamics. For bonds as well, the backdrop is set for a wild, speculative market ride.
http://www.prudentbear.com/index.php/creditbubblebulletinview?art_id=10259
Data this week should have those of the bullish persuasion on edge. July retail sales were much weaker-than-expected (down 0.1% vs. expectations of a rise of 0.8%). Retail Sales excluding auto sales were down 0.6% for the month (down 8.1% y-o-y), the largest drop since March’s 1.1% fall. Looking back, there was no mystery surrounding first quarter consumer weakness. But even after a dramatic stock market recovery, July’s Department store sales were down a dismal 1.6% for the month (down 9.6% y-o-y). Even Wal-mart management commented that their customers were “selective” and remained keenly focused on value.
Today’s preliminary report on August University of Michigan Consumer Confidence was also a big disappointment. The consensus called for this confidence reading to jump three points to 69. The actual report came in down to 63 - to the lowest level since those dark days of March. Readings on both “Economic Conditions” and “Economic Outlook” dropped to five-month lows.
Yesterday, RealtyTrac reported that U.S. foreclosures jumped to a record 360,149 in July. This was up almost 7% from June and 32% higher than the year ago level. And there’s no relief in sight. American Bankruptcy Institute data had 126,000 Americans filing for bankruptcy in July, up 34% from a year earlier. It is now expected that 1.4 million will file for bankruptcy this year.
Meanwhile, the economic optimists take comfort from this week’s readings on Non-farm Productivity, Wholesale Inventories, Industrial Production, and Capacity Utilization. Positive data out of Europe and Asia also seem to confirm that some type of global economic recovery has taken hold.
From my perspective, this week’s data confirm important aspects of Credit Bubble analysis. First, ongoing headwinds will restrain rebounds in U.S. housing markets and household consumption - for an extended period. Second, the overall U.S. consumption-based economy will lag those of most of our more manufacturing-oriented trading partners. In short, we are witnessing anything but typical reflation dynamics, and those expecting a typical U.S. recovery will be disappointed. Our economy remains overly exposed to U.S. consumption, while having insufficient manufacturing capacity (and resources) of the type to benefit significantly from heightened global demand.
Returning to the stock market, I see nothing typical going on there either. With the Morgan Stanley Retail Index and the Morgan Stanley Cyclical Index up 56% and 49%, respectively, the marketplace apparently has no issue with the recovery. I suspect these gains have been inflated by short covering. Indeed, market dynamics likely explain much of the divergence between ongoing weak underlying economic fundamentals and robust stock prices (especially in the consumer arena).
Unusually large bearish hedges and bets had been placed against the (consumer-driven) U.S. economy. Unprecedented fiscal and monetary policy crisis response stabilized the Credit system, setting in motion a self-reinforcing unwind of “bearish” positions. In the past, such a reflationary dynamic would have seen stock prices for the most part accurately discount the future direction of economic activity. Stated differently, the reversal of bearish positions (and resulting short “squeeze”) would traditionally have (reflating) stock prices portending recovery and a return to the previous trajectory of economic performance. In general, a rejuvenated Credit system - and the resulting recovery of financial flows - would ensure that the “bear” case was proved wrong.
This time may be different. I would not be surprised if the confluence of unusually large bearish positions, unprecedented policy response, and a resulting major “squeeze” created a backdrop where the stock market was turned into a rather poor foreteller of future prospects. From my vantage point, I certainly don’t believe stock prices today generally provide an accurate reflection of underlying company fundamentals. And from an economic perspective, I suspect the stock market is missing some key underlying dynamics that will shape future economic performance.
In particular, equities seem to be discounting a return to business as usual when it comes to the U.S. economy. Retail and the “consumer discretionary” sectors have been among this year’s stellar performers. And, yes, this does fly in the face of my analysis of new economic realities and a permanently downsized role for household consumption in the U.S. economy. At this point, I view this as an anomaly at least partially explained by the hastened reversal of bearish positions. But I also recognize that massive fiscal and monetary stimulus has been implemented with the policy goal of sustaining the existing economic structure. The market has been content to play this dynamic expecting policymaker success.
As I attempted to explain last week, I view the impairment of the stock market discounting mechanism as a key facet of Monetary Disorder. The reversal of bearish plays not only created huge buying power throughout the markets, it decisively reversed The Greed and Fear Factor. Notwithstanding today’s sell-off, the bulls are greedy and the bears are on the run. And the more that inflated stock prices entice shorting, the more games that can be played to “squeeze” the timid bears.
The end result is a highly speculative stock market increasingly detached from reality and vulnerable to wild swings in sentiment. Yet I don’t expect the emerging global reflation to this time disprove the U.S. bearish thesis, although it will no doubt be a wild market ride.
The bond market was happy with this week’s developments. The Fed confirmed it will be especially unhurried in raising rates and ending quantitative easing. Weak U.S. economic data was seen as confirming the bullish bond view. To be sure, low market yields at home and abroad are imperative for global reflation to gain a head of steam. And I would argue that (over-liquefied) bond markets are subject to their own pricing anomalies. In contrast to stocks, bonds have been fixated on U.S. economic vulnerabilities and the Fed, while content to downplay reflation risks. This week’s data doesn’t have me second-guessing the thesis of bond market vulnerability to global reflation dynamics. For bonds as well, the backdrop is set for a wild, speculative market ride.
http://www.prudentbear.com/index.php/creditbubblebulletinview?art_id=10259
18 August 2009
Newcrest posts 85% profit jump on higher prices
JOHANNESBURG (miningweekly.com) – Australian gold and copper producer Newcrest Mining has continued to deliver a strong operational and financial performance, despite the “turbulent” market conditions in the past year, the company said on Monday.
Newcrest posted an 85% increase in profit, increasing to A$248,1-million in the year ended June 30, 2009, compared with A$134,3-million in 2008.
The group’s sales revenues increased by 7% to A$2,5-billion in the year, compared with A$2,4-billion the year before, as the realised gold price increased by 28% to A$1 169/oz and copper sales volumes increased by 11% to 93 077 t.
This was partially offset by a 26% decline in the realised copper price to A$2,89/lb and a 7% decline in gold sales volumes to 1,64-million ounces, the company said in a statement.
Gold production was down by 8,4% to 1,6-million ounces, compared with the 1,78-million ounces produced the year before, in line with the company’s forecasts.
The decline in production was caused by lower planned grades and associated recoveries from the Cadia Valley mines.
Copper production had, however, exceeded the group’s expectations, increasing by 3% to 89 877 t, compared with the 87 458 t produced in the 2008 financial year.
Newcrest was aiming to increase gold production to between 1,81-million and 1,91-million ounces in the 2010 financial year while its copper production was forecast to fall to between 83 000 t and 87 000 t in the same financial year.
The group was planning to spend between $808-million and $855-million in capital expenditure in the 2010 financial year, down from the $1,27-billion spent in the 2009 financial year.
http://www.miningweekly.com/article/newcrest-posts-85-profit-jump-on-higher-prices-2009-08-17
Newcrest posted an 85% increase in profit, increasing to A$248,1-million in the year ended June 30, 2009, compared with A$134,3-million in 2008.
The group’s sales revenues increased by 7% to A$2,5-billion in the year, compared with A$2,4-billion the year before, as the realised gold price increased by 28% to A$1 169/oz and copper sales volumes increased by 11% to 93 077 t.
This was partially offset by a 26% decline in the realised copper price to A$2,89/lb and a 7% decline in gold sales volumes to 1,64-million ounces, the company said in a statement.
Gold production was down by 8,4% to 1,6-million ounces, compared with the 1,78-million ounces produced the year before, in line with the company’s forecasts.
The decline in production was caused by lower planned grades and associated recoveries from the Cadia Valley mines.
Copper production had, however, exceeded the group’s expectations, increasing by 3% to 89 877 t, compared with the 87 458 t produced in the 2008 financial year.
Newcrest was aiming to increase gold production to between 1,81-million and 1,91-million ounces in the 2010 financial year while its copper production was forecast to fall to between 83 000 t and 87 000 t in the same financial year.
The group was planning to spend between $808-million and $855-million in capital expenditure in the 2010 financial year, down from the $1,27-billion spent in the 2009 financial year.
http://www.miningweekly.com/article/newcrest-posts-85-profit-jump-on-higher-prices-2009-08-17
The New Silk Road ~ China-Arab Trade
Title: The New Silk Road: How a Rising Arab World is Turning away from the West and Rediscovering China
Author: Ben Simpfendorfer
Publisher: Palgrave Macmillan
The old dichotomy between East and West has shaped the strategic balance of the world for years: it's the relationship between China and the US, or the US and the Middle East that grabs headlines. But we rarely hear about the relationship between the East and the East. Economist Ben Simpendorfer argues that the Arab world is turning away from the West and embracing China.
Chinese exports to the 22 members of the Arab League jumped to $62.3 billion last year from just $7.2 billion in 2001, the year China joined the World Trade Organization. The share in total Chinese exports rose to 4.4 percent from 2.7 percent.
Imports from the Arab world over the same period grew to $70.3 billion from $7.5 billion, doubling the share in total imports to 6.2 percent, according to official Chinese data.
With markets and the media riveted by China’s hunt for natural resources in Australia, Africa and Latin America, the Middle East story has perhaps been underplayed.
That’s the view of Ben Simpfendorfer, an economist in Hong Kong for Royal Bank of Scotland, who seeks to redress the balance in his new book, “The New Silk Road: How a Rising Arab World is Turning Away from the West and Rediscovering China.”
For Mr. Simpfendorfer, who speaks Arabic and Chinese, the world is witnessing nothing less than two historical powers simultaneously reclaiming their economic and cultural primacy in the world. “The stories often appear unrelated, but they are in fact part of a larger global rebalancing that represents the rise of the East after centuries of Western dominance,” he writes.
These are grand claims. Do they stack up? Xu Changwen, a researcher at the Chinese Ministry of Commerce, said a complementary trade structure had fueled the boom: China needs oil from the Middle East, which is an avid buyer of Chinese clothes and other consumer goods. Talks on a free-trade deal with the Gulf Cooperation Council underlined the scope to develop ties, but one should keep a sense of proportion, Mr. Xu said.
“Market demand from the United States and Europe is huge and will recover when the financial crisis is over, so it’s still too early to say anything like ‘The Middle East will replace the U.S. and Europe,”’ he said.
Trade will ebb and flow with the price of crude oil, Mr. Simpfendorfer acknowledges. Oil makes up 40 percent of their two-way trade. China imported more than a fifth of its crude last year from Saudi Arabia; Oman, Kuwait, the United Arab Emirates and Yemen were also among its 10 biggest suppliers. Yet even if oil traded at just $30 a barrel, Mr. Simpfendorfer believes Chinese-Arab relations would continue to flourish because of three deep currents.
The appeal to the Arab world of China’s economic model, with its emphasis on rapid growth and political stability. You will not hear Beijing demanding regime change.
The clout of Arab sovereign wealth funds, which have been diversifying their investments away from the United States since the terror attacks of Sept. 11, 2001.
The revival of a string of historic trade routes stretching from Africa through the Middle East and into Asia. Embracing the majority of the world’s Islamic population, this corridor is comfortable territory for Arab investors, Mr. Simpfendorfer argues.
Trade along the original Silk Road collapsed in the 1600s with the decline of China. New European sea powers switched most of their Asian trade to the African Cape route, delivering a knockout blow to the Arab economies.
In Damascus, one of the terminuses of the old Silk Road, there are plenty of Chinese shoes and such on sale in the souks, and inexpensive Chinese cars are making inroads into the Syrian market.
In Syria, Haier, the appliance maker, has captured 20 percent of the market for washing machines and microwave ovens; Huawei has grabbed a big chunk of the local telecommunications market; and Chinese construction companies are building hydroelectric plants and other infrastructure.
A survey by Global Sources, which matches buyers and sellers of Chinese goods, found that 52 percent of Middle Eastern buyers plan to increase their purchases from China in 2009, according to Bill Janeri, general manager of the company’s Dubai office.
Chinese exports to the United States and European Union slumped in the first quarter, but shipments to Saudi Arabia slipped a bit more than 1 percent, while those to Jordan shot up 32 percent.
Despite his optimism, Mr. Simpfendorfer injects a few notes of caution: politically, other parts of Asia have stronger Islamic ties with the Arab world than China does. And Beijing must ensure that its “Go Global” policy of encouraging local companies to venture abroad does not swamp Arab markets with imported goods, destroying jobs and goodwill.
He also acknowledges that ties are flourishing but have yet to be seriously tested. “It is still too early to judge the outcome,” he writes. “Tensions between the China growth model and Go Global are a useful reminder that relations between the Arab world and China are still delicately poised.”
AUDIO
Author: Ben Simpfendorfer
Publisher: Palgrave Macmillan
The old dichotomy between East and West has shaped the strategic balance of the world for years: it's the relationship between China and the US, or the US and the Middle East that grabs headlines. But we rarely hear about the relationship between the East and the East. Economist Ben Simpendorfer argues that the Arab world is turning away from the West and embracing China.
Chinese exports to the 22 members of the Arab League jumped to $62.3 billion last year from just $7.2 billion in 2001, the year China joined the World Trade Organization. The share in total Chinese exports rose to 4.4 percent from 2.7 percent.
Imports from the Arab world over the same period grew to $70.3 billion from $7.5 billion, doubling the share in total imports to 6.2 percent, according to official Chinese data.
With markets and the media riveted by China’s hunt for natural resources in Australia, Africa and Latin America, the Middle East story has perhaps been underplayed.
That’s the view of Ben Simpfendorfer, an economist in Hong Kong for Royal Bank of Scotland, who seeks to redress the balance in his new book, “The New Silk Road: How a Rising Arab World is Turning Away from the West and Rediscovering China.”
For Mr. Simpfendorfer, who speaks Arabic and Chinese, the world is witnessing nothing less than two historical powers simultaneously reclaiming their economic and cultural primacy in the world. “The stories often appear unrelated, but they are in fact part of a larger global rebalancing that represents the rise of the East after centuries of Western dominance,” he writes.
These are grand claims. Do they stack up? Xu Changwen, a researcher at the Chinese Ministry of Commerce, said a complementary trade structure had fueled the boom: China needs oil from the Middle East, which is an avid buyer of Chinese clothes and other consumer goods. Talks on a free-trade deal with the Gulf Cooperation Council underlined the scope to develop ties, but one should keep a sense of proportion, Mr. Xu said.
“Market demand from the United States and Europe is huge and will recover when the financial crisis is over, so it’s still too early to say anything like ‘The Middle East will replace the U.S. and Europe,”’ he said.
Trade will ebb and flow with the price of crude oil, Mr. Simpfendorfer acknowledges. Oil makes up 40 percent of their two-way trade. China imported more than a fifth of its crude last year from Saudi Arabia; Oman, Kuwait, the United Arab Emirates and Yemen were also among its 10 biggest suppliers. Yet even if oil traded at just $30 a barrel, Mr. Simpfendorfer believes Chinese-Arab relations would continue to flourish because of three deep currents.
The appeal to the Arab world of China’s economic model, with its emphasis on rapid growth and political stability. You will not hear Beijing demanding regime change.
The clout of Arab sovereign wealth funds, which have been diversifying their investments away from the United States since the terror attacks of Sept. 11, 2001.
The revival of a string of historic trade routes stretching from Africa through the Middle East and into Asia. Embracing the majority of the world’s Islamic population, this corridor is comfortable territory for Arab investors, Mr. Simpfendorfer argues.
Trade along the original Silk Road collapsed in the 1600s with the decline of China. New European sea powers switched most of their Asian trade to the African Cape route, delivering a knockout blow to the Arab economies.
In Damascus, one of the terminuses of the old Silk Road, there are plenty of Chinese shoes and such on sale in the souks, and inexpensive Chinese cars are making inroads into the Syrian market.
In Syria, Haier, the appliance maker, has captured 20 percent of the market for washing machines and microwave ovens; Huawei has grabbed a big chunk of the local telecommunications market; and Chinese construction companies are building hydroelectric plants and other infrastructure.
A survey by Global Sources, which matches buyers and sellers of Chinese goods, found that 52 percent of Middle Eastern buyers plan to increase their purchases from China in 2009, according to Bill Janeri, general manager of the company’s Dubai office.
Chinese exports to the United States and European Union slumped in the first quarter, but shipments to Saudi Arabia slipped a bit more than 1 percent, while those to Jordan shot up 32 percent.
Despite his optimism, Mr. Simpfendorfer injects a few notes of caution: politically, other parts of Asia have stronger Islamic ties with the Arab world than China does. And Beijing must ensure that its “Go Global” policy of encouraging local companies to venture abroad does not swamp Arab markets with imported goods, destroying jobs and goodwill.
He also acknowledges that ties are flourishing but have yet to be seriously tested. “It is still too early to judge the outcome,” he writes. “Tensions between the China growth model and Go Global are a useful reminder that relations between the Arab world and China are still delicately poised.”
AUDIO
17 August 2009
Simulating the GFC ~ Steve Keen presents
My presentation includes simulations of two dynamic models that are the core of my analysis of the financial crisis:
The Minsky Model simulates a cyclical economy with debt in the form of both productive borrowing–where the money borrowed finances increases in productive capacity–and “Ponzi” borrowing–which gambles on asset prices (which are not explicitly modelled here as yet) and therefore adds to debt without increasing productive capacity;
The Circuit Model models the endogenous creation of credit in a pure credit economy, and also simulates a crisis caused by a sudden shift in the willingness to lend and to take on debt–a “credit crunch”. I also model an “exogenous” government rescue one year into the crisis in one of two ways:
By injecting a $100 billion sum into banks unlent reserves over a one year period; and
By injecting the same sum into the bank accounts of the debtors (firms in this model) over the same period
The simulations are run in the visual simulation program Vissim; I have embedded a link to download the free Vissim Viewer into the presentation; that embedded link may no longer work, but the one given here should do so after a registration process (I use Vissim mainly to showcase the models; I develop them in the mathematical program Mathcad).
My main research objective for the next year is to combine these two models to develop an explicitly monetary model of financial instability. This will be the bedrock of the book Finance and Economic Breakdown that will be published by Edward Elgar Publishers.
http://www.debtdeflation.com/blogs/2009/08/15/video-of-whitlam-institute-talk/
The Minsky Model simulates a cyclical economy with debt in the form of both productive borrowing–where the money borrowed finances increases in productive capacity–and “Ponzi” borrowing–which gambles on asset prices (which are not explicitly modelled here as yet) and therefore adds to debt without increasing productive capacity;
The Circuit Model models the endogenous creation of credit in a pure credit economy, and also simulates a crisis caused by a sudden shift in the willingness to lend and to take on debt–a “credit crunch”. I also model an “exogenous” government rescue one year into the crisis in one of two ways:
By injecting a $100 billion sum into banks unlent reserves over a one year period; and
By injecting the same sum into the bank accounts of the debtors (firms in this model) over the same period
The simulations are run in the visual simulation program Vissim; I have embedded a link to download the free Vissim Viewer into the presentation; that embedded link may no longer work, but the one given here should do so after a registration process (I use Vissim mainly to showcase the models; I develop them in the mathematical program Mathcad).
My main research objective for the next year is to combine these two models to develop an explicitly monetary model of financial instability. This will be the bedrock of the book Finance and Economic Breakdown that will be published by Edward Elgar Publishers.
http://www.debtdeflation.com/blogs/2009/08/15/video-of-whitlam-institute-talk/
, Social networking, IT and its implications for stock markets
The integrity of the market is as safe as copyright materials in this day and age..
Zero Hedge Has the Proof...
GLG Cuomo
Zero Hedge Has the Proof...
GLG Cuomo
Morgan on the Gold & Silver ratio
THE FOLLOWING is an interview I recently did discussing the Gold/Silver Ratio with Tom Jeffries at Howe Street, writes David Morgan of Silver-Investor.
Tom Jeffries: You talk many times in your lectures, and you've talked in The Morgan Report recently, about something called the Gold/Silver Ratio and where it's going. Can you talk a little bit about that?
David Morgan: It is a controversial subject. There are a lot of people who don't put any credence into the ratio of silver prices to Gold Prices, there are some people who put a whole lot of credence into it, and then there are people, like me, who absolutely put some credence into the Gold/Silver ratio.
The basics of it are this – and I like to go for the long-term version, so – starting at the 12th century or so and going to present time, if you looked at every one foot in length being 100 years (or one century), you would see throughout the entire timeframe that you would have several feet in length and it would only be in the last 19 inches of that chart where the ratio of gold to silver prices got above 16 to 1.
In fact, the ratio from the 12th century to roughly the 17th century was about 12 to 1, which is what I call the "natural ratio" at that time, and I define the natural ratio as the amount of silver to gold in the earth's surface. Right now it's less than 12 to 1, having dropped down to about 8 to 1, which means that there's about eight ounces of silver in the earth's surface for every ounce of gold.
So that's the natural ratio, and that ratio held for hundreds and hundreds of years with the free market making the determination – amazing! Then, Sir Isaac Newton monetized it at a ratio of 15.5 to 1 after England was having a terrible time with their fiat money system. Newton came in and put them on a gold standard and then, with his brilliance, he picked a number basically based on the marketplace (at that time), which determined that the correct ratio of silver to gold was 15½ ounces of silver to 1 ounce of gold.
And that's what we called the monetary of the classic ratio, and that held roughly from the 17th century for hundreds of years through about the 1873 timeframe. Then there was The Crime of 1873, which we don't have time to go into, but that was roughly where silver was demonetized in the United States, and after that, you've seen the ratio undergo some really wide swings.
It's gone up as far as 100-to-1 a couple of times – with one ounce of gold costing the same as 100 ounces of silver – and we've seen it just kiss the classic ratio of 16 to 1 for a day. In modern times, meaning during the last big run-up in January of 1980, it got back to classic ratio, but again, it was only for a day or two at the most. And then the Gold/Silver Ratio dropped off.
So having given you all that background, what does it mean? For some it means you can trade the ratio, which is something that I do personally. Secondly it's a good indicator for the overall direction of the market as far as I'm concerned. When silver's leading gold – and the ratio is falling – we've got more momentum in the metals than when it's not, and silver has basically outperformed gold since 2003 until recently.
In other words, in the ratio from 2003, the bottom of the silver market, and when gold was at $252 in 2000, silver went from an 80-to-1 ratio down to about 55. Currently it is around the 65-to-1 level. And it was working its way even lower when we had this credit crisis surface, which didn't surprise me. We got a big spike on the ratio and actually it got to around 90-to-1 – again, very temporarily, maybe for a day or two.
I think it shows that silver is still undervalued to gold, but I'm open-minded enough to think that maybe something else is going on. In an absolute all-out deflation, which would be the better – gold or silver? The preponderance of evidence is that gold does better. I wrote a paper on this; it was in The Morgan Report, and I also did a couple of speeches on this subject. The record is mixed as far as how silver does in a deflation.
Gold is pretty much known to do well in deflations, and this is all history. And because it is history, it doesn't absolutely guarantee you that the next time around gold will do great in a deflation, but it certainly implies that it will.
As far as silver is concerned, there have been times that silver did better than Gold Prices in a deflation, and many times where it did not. But overall it's done fairly well and it held its purchasing power, so even in a deflationary scenario I wouldn't give up on silver. But as far as what will it do, if we look at it today we would say gold has actually done better than silver here in the last several months, because the ratio has gone from the 55 to 1 back to around the current 65 level.
Regardless, the overall perspective would be, how is silver doing against all other financial assets, including gold? And the answer to that is, essentially, gold has done best against all other financial assets, the general equities, the mining stocks, housing sector, bonds; and silver has done better than the base metals and most other sectors.
Silver is partly industrial and partly monetary and you can argue all day if it's both or not. I'm absolutely convinced that it's both. I've never argued that silver is just money. I have argued very strongly that silver is money but it's not only money; it's certainly an industrial metal as well.
In summary, if [our readers] think – as I do – that the main problem ahead is a currency crisis with the US Dollar, then I would urge you to study what silver did during the last period (most recent) during a prelude to a currency crisis. Basically, it outshone almost everything! The problem is people are too shortsighted and look out only so far, not realizing that once everyone understands that the death of the Dollar is imminent, there will be a mad rush for the precious metals both gold and silver!
Mr. Jeffries: David, always a pleasure to have some time with you. We really get a kick out of talking with you, but also I also commend you, too, for the learning. We always have some great information.
http://goldnews.bullionvault.com/gold_silver_ratio_081420092
David Morgan, 14 Aug '09
Tom Jeffries: You talk many times in your lectures, and you've talked in The Morgan Report recently, about something called the Gold/Silver Ratio and where it's going. Can you talk a little bit about that?
David Morgan: It is a controversial subject. There are a lot of people who don't put any credence into the ratio of silver prices to Gold Prices, there are some people who put a whole lot of credence into it, and then there are people, like me, who absolutely put some credence into the Gold/Silver ratio.
The basics of it are this – and I like to go for the long-term version, so – starting at the 12th century or so and going to present time, if you looked at every one foot in length being 100 years (or one century), you would see throughout the entire timeframe that you would have several feet in length and it would only be in the last 19 inches of that chart where the ratio of gold to silver prices got above 16 to 1.
In fact, the ratio from the 12th century to roughly the 17th century was about 12 to 1, which is what I call the "natural ratio" at that time, and I define the natural ratio as the amount of silver to gold in the earth's surface. Right now it's less than 12 to 1, having dropped down to about 8 to 1, which means that there's about eight ounces of silver in the earth's surface for every ounce of gold.
So that's the natural ratio, and that ratio held for hundreds and hundreds of years with the free market making the determination – amazing! Then, Sir Isaac Newton monetized it at a ratio of 15.5 to 1 after England was having a terrible time with their fiat money system. Newton came in and put them on a gold standard and then, with his brilliance, he picked a number basically based on the marketplace (at that time), which determined that the correct ratio of silver to gold was 15½ ounces of silver to 1 ounce of gold.
And that's what we called the monetary of the classic ratio, and that held roughly from the 17th century for hundreds of years through about the 1873 timeframe. Then there was The Crime of 1873, which we don't have time to go into, but that was roughly where silver was demonetized in the United States, and after that, you've seen the ratio undergo some really wide swings.
It's gone up as far as 100-to-1 a couple of times – with one ounce of gold costing the same as 100 ounces of silver – and we've seen it just kiss the classic ratio of 16 to 1 for a day. In modern times, meaning during the last big run-up in January of 1980, it got back to classic ratio, but again, it was only for a day or two at the most. And then the Gold/Silver Ratio dropped off.
So having given you all that background, what does it mean? For some it means you can trade the ratio, which is something that I do personally. Secondly it's a good indicator for the overall direction of the market as far as I'm concerned. When silver's leading gold – and the ratio is falling – we've got more momentum in the metals than when it's not, and silver has basically outperformed gold since 2003 until recently.
In other words, in the ratio from 2003, the bottom of the silver market, and when gold was at $252 in 2000, silver went from an 80-to-1 ratio down to about 55. Currently it is around the 65-to-1 level. And it was working its way even lower when we had this credit crisis surface, which didn't surprise me. We got a big spike on the ratio and actually it got to around 90-to-1 – again, very temporarily, maybe for a day or two.
I think it shows that silver is still undervalued to gold, but I'm open-minded enough to think that maybe something else is going on. In an absolute all-out deflation, which would be the better – gold or silver? The preponderance of evidence is that gold does better. I wrote a paper on this; it was in The Morgan Report, and I also did a couple of speeches on this subject. The record is mixed as far as how silver does in a deflation.
Gold is pretty much known to do well in deflations, and this is all history. And because it is history, it doesn't absolutely guarantee you that the next time around gold will do great in a deflation, but it certainly implies that it will.
As far as silver is concerned, there have been times that silver did better than Gold Prices in a deflation, and many times where it did not. But overall it's done fairly well and it held its purchasing power, so even in a deflationary scenario I wouldn't give up on silver. But as far as what will it do, if we look at it today we would say gold has actually done better than silver here in the last several months, because the ratio has gone from the 55 to 1 back to around the current 65 level.
Regardless, the overall perspective would be, how is silver doing against all other financial assets, including gold? And the answer to that is, essentially, gold has done best against all other financial assets, the general equities, the mining stocks, housing sector, bonds; and silver has done better than the base metals and most other sectors.
Silver is partly industrial and partly monetary and you can argue all day if it's both or not. I'm absolutely convinced that it's both. I've never argued that silver is just money. I have argued very strongly that silver is money but it's not only money; it's certainly an industrial metal as well.
In summary, if [our readers] think – as I do – that the main problem ahead is a currency crisis with the US Dollar, then I would urge you to study what silver did during the last period (most recent) during a prelude to a currency crisis. Basically, it outshone almost everything! The problem is people are too shortsighted and look out only so far, not realizing that once everyone understands that the death of the Dollar is imminent, there will be a mad rush for the precious metals both gold and silver!
Mr. Jeffries: David, always a pleasure to have some time with you. We really get a kick out of talking with you, but also I also commend you, too, for the learning. We always have some great information.
http://goldnews.bullionvault.com/gold_silver_ratio_081420092
David Morgan, 14 Aug '09
13 August 2009
Gold pays off bigtime.
"Only gold can protect simultaneously against inflation, deflation, stagflation and hyperinflation, and no matter in which order they arrive. That latitude and versatility have made it a magnet for contemporary portfolio planners looking to hedge economic uncertainty -- a circumstance likely to secure gold a prominent place in our survey rankings for many years to come."
http://www.financialsense.com/editorials/kosares/2009/0811.html
12 August 2009
StrangeCapitalist, or how I learned to stop worrying and love Zombies
Reprising the dude's work which addresses why a nations dreams and goals must exist apart from its means. Money is mere means and in a perfect world finance would be boring and invisible and apparent only in the enabled ends...
Making money can no more be the authentic central goal of capitalism than the search for pleasure can be the goal of life. The pursuit of pleasure for its own sake is ultimately self defeating because the real purpose of pleasure is to modulate action....
During his campaign for President in 1980, George Bush famously dubbed Ronald Reagan's platform "voodoo economics." He must have been on the right track for in its wake we now see the mythic creations of voodoo doctors walking among us- Zombies.
We have Zombie Banks, Zombie Corporations, a Zombie currency and, if I may go so far, Zombie Economics.
There is, of course, nothing new in this observation. Others have beaten me to the punch. Banks and other corporations which should be dead are still walking, ergo, they are Zombies- blindingly obvious. Yet, just as a miner skilled in deep extraction might buy a vein most think of as "played out" I'm going to deep mine this well used metaphor.
There are many aspects of Zombie lore, from the aforementioned voodoo doctors to the film genre inspired by George Romero's Night of the Living Dead. In Romero's Mythos, Zombies don't do the bidding of their voodoo masters. Instead, they shuffle around in search of the living- to eat. Further, the living bitten by a Zombie become Zombies themselves.
Combining the two mythic strands, Reagan's Voodoo Economics, which manifested in the mind of Dick Cheney as "deficits don't matter" created, by allowing debt levels to rise beyond that which which could easily be extinguished in a normal bankruptcy, the Zombie Banks and other corporations which don't serve their creators but instead feed, not on people, but capital, creating more Zombies in the process.
Unlike those in Romero's films, however, we are not trying to rid ourselves of these Zombies. We are incorporating them in our economic policies. Thus we have Zombie Economics.
In a recent round table discussion, George Soros opined: There are two features that I think deserve to be pointed out. One is that the financial system as we know it actually collapsed. After the bankruptcy of Lehman Brothers on September 15, the financial system really ceased to function. It had to be put on artificial life support.
The problem with the "artificial life support" of the financial system is that the voodoo doctors (government regulators) decided to play Frankenstein- a violation of the laws of capitalism as profound as re-animating dead flesh is to the laws of biology- instead of transplanting the dead banks' useful parts into living organisms.
In a sense, the problem begins at birth. To incorporate is to embody, or give substance to. Nature both incorporates the living and ensures that they die. Modern Man, however, at least the American variant thereof, seems loathe to allow its creations to follow suit.
The "creative destruction" aspect of Capitalism has been aptly described as an evolutionary process- the strong procreate and the weak are culled. Within a Capitalist framework, then, zombie corporations have as little place as zombie humans would in real life.
In Romero's films the living are eventually consumed by the zombies and if we are not careful the same could happen to us. Financially mediated trade has risen, flourished, and died many times in human history- e.g. Roman commerce gave way to Dark Age feudalism. I often wonder if the much more recent experience of Mao-ism (a taste, if you will, of feudalism) informs the Chinese perspective of the virtues of financially mediated trade. They seem amazed that we would flirt with such an outcome.
American leadership, reminiscent of Kubrick's Dr. Strangelove- perhaps Dr. StrangeCapitalist, or how I learned to stop worrying and love Zombies, would be more apt- now faces the daunting tasks of rewriting the rules of Capitalism and convincing our creditors that Zombies are normal. Most recently, Treasury Secretary Geithner visited China and assured them our Zombie currency (the US$) wouldn't consume the capital they create and store therein.
On the home front, Zombies are not just consuming capital, they are, in a sense, consuming Capitalism.
In an ironic twist worthy of Greek Tragedy, the supposed proponents of free markets who refuse to let bankrupt corporations die are engendering the very regulations they worked so hard to remove. They have forgotten one of the essential aspects of capitalism- free markets cut both ways. You are free to succeed AND free to fail.
Complaints over executive compensation, or even transportation weren't credible until those executives decided to turn their corporations into Zombies instead of letting them die. Bankruptcy and dismemberment are the check and balance of Capitalism. Without that check and balance we are left with Zombie Economics and, apparently ever-increasing regulations. The longer we allow Zombies to walk among us the more intrusive will state regulations become.
There is another, more mundane sense of the word Zombie which also seems to apply to the current situation- a person without an animating force, just going through habitual motions.
This last sense seems to aptly describe the US economy in in the 21st Century. While the Clinton years were not without problems, there was an animating force driving the economy beyond the desire to just "make money"- we were getting on the "information super-highway." Yes, it's a cliché, but it worked. Economic growth was, in a sense, a function of, inter alia, getting the country "wired." While the guys doing the "wiring" were getting rich in the process it, at least to me, seemed as if people were excited about more than just money- they had a dream of a wired world in their minds and they manifested it in the real world.
Could it be that Capitalism which aims solely to make money is indeed soul-less?
I believe so.
This isn't a knock on Capitalism, but rather a recognition that the system is a means to an end, not an end in itself. Policies that aim to re-invigorate growth by re-invigorating growth will likely fail. It seems to me that there needs to be a greater goal to engender durable economic growth, be it the desire to save ourselves from Nazi-ism, pave the country for our new cars or wire it up.
Let me try to explain this view from a different perspective. Finance, per se, creates nothing. Finance used in pursuit of a goal can be extremely helpful so long as the goal is not merely making money (at which point the financial system, as seems obvious, becomes parasitic). Finance, in a sense, is a Zombie requiring an animating force, be it the desire to "go green" (by retooling our transportation and energy production sectors), make America beautiful (by rebuilding infrastructure), or some other desire.
We need, it seems to me, a goal, a dream, or we're just going to keep shuffling around like a Zombie.
http://dharmajoint.blogspot.com/2009/06/zombie-economics.html
Making money can no more be the authentic central goal of capitalism than the search for pleasure can be the goal of life. The pursuit of pleasure for its own sake is ultimately self defeating because the real purpose of pleasure is to modulate action....
During his campaign for President in 1980, George Bush famously dubbed Ronald Reagan's platform "voodoo economics." He must have been on the right track for in its wake we now see the mythic creations of voodoo doctors walking among us- Zombies.
We have Zombie Banks, Zombie Corporations, a Zombie currency and, if I may go so far, Zombie Economics.
There is, of course, nothing new in this observation. Others have beaten me to the punch. Banks and other corporations which should be dead are still walking, ergo, they are Zombies- blindingly obvious. Yet, just as a miner skilled in deep extraction might buy a vein most think of as "played out" I'm going to deep mine this well used metaphor.
There are many aspects of Zombie lore, from the aforementioned voodoo doctors to the film genre inspired by George Romero's Night of the Living Dead. In Romero's Mythos, Zombies don't do the bidding of their voodoo masters. Instead, they shuffle around in search of the living- to eat. Further, the living bitten by a Zombie become Zombies themselves.
Combining the two mythic strands, Reagan's Voodoo Economics, which manifested in the mind of Dick Cheney as "deficits don't matter" created, by allowing debt levels to rise beyond that which which could easily be extinguished in a normal bankruptcy, the Zombie Banks and other corporations which don't serve their creators but instead feed, not on people, but capital, creating more Zombies in the process.
Unlike those in Romero's films, however, we are not trying to rid ourselves of these Zombies. We are incorporating them in our economic policies. Thus we have Zombie Economics.
In a recent round table discussion, George Soros opined: There are two features that I think deserve to be pointed out. One is that the financial system as we know it actually collapsed. After the bankruptcy of Lehman Brothers on September 15, the financial system really ceased to function. It had to be put on artificial life support.
The problem with the "artificial life support" of the financial system is that the voodoo doctors (government regulators) decided to play Frankenstein- a violation of the laws of capitalism as profound as re-animating dead flesh is to the laws of biology- instead of transplanting the dead banks' useful parts into living organisms.
In a sense, the problem begins at birth. To incorporate is to embody, or give substance to. Nature both incorporates the living and ensures that they die. Modern Man, however, at least the American variant thereof, seems loathe to allow its creations to follow suit.
The "creative destruction" aspect of Capitalism has been aptly described as an evolutionary process- the strong procreate and the weak are culled. Within a Capitalist framework, then, zombie corporations have as little place as zombie humans would in real life.
In Romero's films the living are eventually consumed by the zombies and if we are not careful the same could happen to us. Financially mediated trade has risen, flourished, and died many times in human history- e.g. Roman commerce gave way to Dark Age feudalism. I often wonder if the much more recent experience of Mao-ism (a taste, if you will, of feudalism) informs the Chinese perspective of the virtues of financially mediated trade. They seem amazed that we would flirt with such an outcome.
American leadership, reminiscent of Kubrick's Dr. Strangelove- perhaps Dr. StrangeCapitalist, or how I learned to stop worrying and love Zombies, would be more apt- now faces the daunting tasks of rewriting the rules of Capitalism and convincing our creditors that Zombies are normal. Most recently, Treasury Secretary Geithner visited China and assured them our Zombie currency (the US$) wouldn't consume the capital they create and store therein.
On the home front, Zombies are not just consuming capital, they are, in a sense, consuming Capitalism.
In an ironic twist worthy of Greek Tragedy, the supposed proponents of free markets who refuse to let bankrupt corporations die are engendering the very regulations they worked so hard to remove. They have forgotten one of the essential aspects of capitalism- free markets cut both ways. You are free to succeed AND free to fail.
Complaints over executive compensation, or even transportation weren't credible until those executives decided to turn their corporations into Zombies instead of letting them die. Bankruptcy and dismemberment are the check and balance of Capitalism. Without that check and balance we are left with Zombie Economics and, apparently ever-increasing regulations. The longer we allow Zombies to walk among us the more intrusive will state regulations become.
There is another, more mundane sense of the word Zombie which also seems to apply to the current situation- a person without an animating force, just going through habitual motions.
This last sense seems to aptly describe the US economy in in the 21st Century. While the Clinton years were not without problems, there was an animating force driving the economy beyond the desire to just "make money"- we were getting on the "information super-highway." Yes, it's a cliché, but it worked. Economic growth was, in a sense, a function of, inter alia, getting the country "wired." While the guys doing the "wiring" were getting rich in the process it, at least to me, seemed as if people were excited about more than just money- they had a dream of a wired world in their minds and they manifested it in the real world.
Could it be that Capitalism which aims solely to make money is indeed soul-less?
I believe so.
This isn't a knock on Capitalism, but rather a recognition that the system is a means to an end, not an end in itself. Policies that aim to re-invigorate growth by re-invigorating growth will likely fail. It seems to me that there needs to be a greater goal to engender durable economic growth, be it the desire to save ourselves from Nazi-ism, pave the country for our new cars or wire it up.
Let me try to explain this view from a different perspective. Finance, per se, creates nothing. Finance used in pursuit of a goal can be extremely helpful so long as the goal is not merely making money (at which point the financial system, as seems obvious, becomes parasitic). Finance, in a sense, is a Zombie requiring an animating force, be it the desire to "go green" (by retooling our transportation and energy production sectors), make America beautiful (by rebuilding infrastructure), or some other desire.
We need, it seems to me, a goal, a dream, or we're just going to keep shuffling around like a Zombie.
http://dharmajoint.blogspot.com/2009/06/zombie-economics.html
So your a swing trader who wants sage advice?
I've thrown a ton of money at the problem and have seen some remarkable work. The idea that you can't get good trading advice on the net is a myth but there does seem to be a inverse relationship between size and sense.
Gary is no socialist (not that I am, so much, but I do think elites have overworked the folly of helping people meme, they have had no problem helping themselves and I think the US must have universal health care....I have enjoyed our discussions,but we disagree, thats all I'm really saying..) and he doesn't buy hype and honours his methods.....
NFTRH is geared toward seasoned investors and traders as well as novice investors in the learning stages. Be aware that the very origins of Biiwii.com are rooted in hype aversion and anti-convention. I believe that 'in the box' thinking has caused many people to get in trouble as of this writing (NFTRH official launch 10/1/08). This view is evidenced by the fact that Biiwii.com (but it is what it is) was launched in 2004 with its very first commentary warning of the dangers so outwardly apparent now. Do not expect the usual stock pick touts and chirping about performance. Risk management plays as important a role as capital appreciation over the long term.
http://www.biiwii.com/
sample letter
Futures, options, CFD and forex playas with experience and sound with risk management will find that the incredible claims of the "Daniel Code" website are amazingly, justified by past performance. The proprietor is a man of talent, charm and wisdom; his methods are gaining him a following.
http://www.thedanielcode.com/display.php?nav=articles
Taking responsibility for your life, your health and your wealth is a very serious business. Never imagine that you can, for example, as a newbie, trade yourself out of a financial jam, because your emotional stake in the outcome will guarantee failure. Be wary of beginners luck; so often confused with native genius. Never imagine you can day trade to victory, because the shorter time scales only offer rewards to those with big edges and vast experience. Finally, No "black box" will ever make you money. Only always knowing what your doing and why at all times can do that. Engagement in online argument about the market or a particular stocks chart direction, btw, are not signifiers of maturity or future success. If you debate method, however, your on stronger ground.
Finding your own pace and style as a trader is important and that can only occour as part of the broarder goal of finding your own true nature and your own "Right Livelihood" and where forgetting ends and surrendering to "process" and "flow" in your life will point the way.
The "Trading Tribe" is massive for me. Read and explore the site.
Often the best returns rest on simple conviction, rather than put money in a lot of baskets, you find the basket you think best, put all your eggs in it and then watch that basket!
Honourable mentions with regards to the strategy of balancing fundamentals, paradigm building and medium long term swing trades...and good sense.. Jesse, Duncan,
I like this guy as well.
For the rest, look here....
Individual Mastery of the infospheres and interwebs is possible but don't fall for simple causalities or conspiracies or moral fables, the truth is messy and coming to terms with your own heart and true nature will be as much as part of making any sense of the world and your way in the world as any "facts".
So says I, anyway.
Gary is no socialist (not that I am, so much, but I do think elites have overworked the folly of helping people meme, they have had no problem helping themselves and I think the US must have universal health care....I have enjoyed our discussions,but we disagree, thats all I'm really saying..) and he doesn't buy hype and honours his methods.....
NFTRH is geared toward seasoned investors and traders as well as novice investors in the learning stages. Be aware that the very origins of Biiwii.com are rooted in hype aversion and anti-convention. I believe that 'in the box' thinking has caused many people to get in trouble as of this writing (NFTRH official launch 10/1/08). This view is evidenced by the fact that Biiwii.com (but it is what it is) was launched in 2004 with its very first commentary warning of the dangers so outwardly apparent now. Do not expect the usual stock pick touts and chirping about performance. Risk management plays as important a role as capital appreciation over the long term.
http://www.biiwii.com/
sample letter
Futures, options, CFD and forex playas with experience and sound with risk management will find that the incredible claims of the "Daniel Code" website are amazingly, justified by past performance. The proprietor is a man of talent, charm and wisdom; his methods are gaining him a following.
http://www.thedanielcode.com/display.php?nav=articles
Taking responsibility for your life, your health and your wealth is a very serious business. Never imagine that you can, for example, as a newbie, trade yourself out of a financial jam, because your emotional stake in the outcome will guarantee failure. Be wary of beginners luck; so often confused with native genius. Never imagine you can day trade to victory, because the shorter time scales only offer rewards to those with big edges and vast experience. Finally, No "black box" will ever make you money. Only always knowing what your doing and why at all times can do that. Engagement in online argument about the market or a particular stocks chart direction, btw, are not signifiers of maturity or future success. If you debate method, however, your on stronger ground.
Finding your own pace and style as a trader is important and that can only occour as part of the broarder goal of finding your own true nature and your own "Right Livelihood" and where forgetting ends and surrendering to "process" and "flow" in your life will point the way.
The "Trading Tribe" is massive for me. Read and explore the site.
Often the best returns rest on simple conviction, rather than put money in a lot of baskets, you find the basket you think best, put all your eggs in it and then watch that basket!
Honourable mentions with regards to the strategy of balancing fundamentals, paradigm building and medium long term swing trades...and good sense.. Jesse, Duncan,
I like this guy as well.
For the rest, look here....
Individual Mastery of the infospheres and interwebs is possible but don't fall for simple causalities or conspiracies or moral fables, the truth is messy and coming to terms with your own heart and true nature will be as much as part of making any sense of the world and your way in the world as any "facts".
So says I, anyway.
Buy Gold & Stay Strong!
1. Fund manager Paul Tudor is not human. He's superhuman. He's the greatest money manager in the history of the world, and in my opinion, nobody is even close to him. The man uses massive leverage, yet he's never had a losing year since he started his fund 20 years ago. His biggest drawdown, ever, was only 13%. Massive performance combined with microscopic drawdowns is what defines the greatest fund managers.
2. Paul was quoted by Bloomberg yesterday in a rare public statement. He says the stock market advance since March is a "bear-market rally We are not inclined to aggressively chase the market here." [emphasis mine]
3. I translate that statement as "We're going to new lows, and the public should prepare for their financial deaths". The Dow longs are in the banksters' toaster. And one of their kids is just now making his way to the kitchen. Question: What happens when the kid presses the start button on the toaster? I hope none of you get to find out. Here's the Dow chart. I've layered in the RSI and MACD. What I see here is fund manager Wile Coyote smoking a big dynamite stick, that he thinks is a cigar:
Charts
2. Paul was quoted by Bloomberg yesterday in a rare public statement. He says the stock market advance since March is a "bear-market rally We are not inclined to aggressively chase the market here." [emphasis mine]
3. I translate that statement as "We're going to new lows, and the public should prepare for their financial deaths". The Dow longs are in the banksters' toaster. And one of their kids is just now making his way to the kitchen. Question: What happens when the kid presses the start button on the toaster? I hope none of you get to find out. Here's the Dow chart. I've layered in the RSI and MACD. What I see here is fund manager Wile Coyote smoking a big dynamite stick, that he thinks is a cigar:
Charts
11 August 2009
The next Japanese Prime Minister's plans a rational retreat from neoliberalism
“Under the principle of fraternity, we will not implement policies that leave economic activities in areas relating to human lives and safety, such as agriculture, the environment and medicine, at the mercy of the tides of globalism,” Mr Hatoyama wrote.
Analysts say that wide policy differences within the often fractious DPJ make it difficult to predict how such statements of principle might be put into practice. Mr Hatoyama highlighted the need for better welfare, more child support and wealth redistribution.
He made clear that while security ties with the US would remain a “diplomatic cornerstone”, Japan must do much more to tighten links with Asian neighbours such as China and South Korea.
“As a result of the failure of the Iraq war and the financial crisis, the era of the US-led globalism is coming to an end and …we are moving away from a unipolar world led by the US towards an era of multipolarity,” the DPJ leader said, adding that fears about China's military rise were a big factor in “accelerating regional integration”.
Japan should "aspire to the move towards regional currency integration" and "spare no effort" in building the security frameworks needed to make union possible, he wrote, adding that the example of European Union showed that integration itself could be the best way of defusing territorial disputes often seen as an impediment to closer ties.
Mr Hatoyama also emphasised the DPJ's campaign pledge to push devolution of power to local governments within Japan as embodying his fraternal values, again approvingly citing European examples.Dismissing the “Ministry of Finance-led theory” of trying to rebuild Japan's state finances through welfare cuts and tax rises, he said he would aim to reform bureaucracy, regain trust in the pension system and give regions fiscal autonomy.
“Resolving our fiscal problems is impossible without comprehensively rebuilding Japan's political systems,” Mr Hatoyama wrote.
http://forums.wallstreetexaminer.com/index.php?showtopic=831802
http://www.ft.com/cms/s/0/e041b3e6-85d8-11de-98de-00144feabdc0.html
Don't ditch that baby! In praise of western civilisation
The West in a Nutshell is a collection of essays that ranges widely from sport to geopolitics. Essayist Paul Monk applauds western literary and philosophical traditions and the encouragement of creativity and conceptual thinking they enabled.
Download audio
Jessica Stern is an expert on terrorism. In this conversation, first broadcast in 2003/4, Jessica talks about her book which is the result of 4 years research, interviewing a range of Jewish, Christian and Muslim terrorists.
Download
I've got to agree with Sheehan in the SMH on the weekend, here, while I think that US policy in the Middle East is flakey and counterproductive and the hardball of the last century left the Arab world with nothing but profound and chauvanistic extremisms to defend their sense of self, I really wonder how the enlightenment project can work in a nation indifferent to the classic social virtue of religious tolerance. In the middle ages Jews and Christian dissidents fled to the safety and tolerance of classic Islamic civilisation, without which the heritage of the Greeks would never have made it to Europe. The Mongols, colonialism, the triumph of the science and the technological revolution the mastery of nature spawned smashed that classic Muslim liberalism. The Americans enabled the rabid antiwestern fundamentalism of the Saudi's and funded a coalition of ratbags to defeat the USSR in Afghanistan.
The last gasp of an unreconstructed tribalism? A reaction to the suppression of political moderation in the arab world? Time will tell.
All five of those arrested on terrorism charges were treated with great generosity by Australia as they set up new lives here. But their behaviour in court has been an exemplar of the problem of reconciling sharia with civil law. One of the accused, Wissam Fattal, refused to stand as the magistrate read out the charges and followed this with a torrent of abuse as he was led out of the court. Another of those charged, Nayef El Sayed, informed the court he would stand for no man, only for his God.
In other words, they accept only sharia, the rest is a charade.
Even the family and supporters of the accused went out of their way to express contempt for the legal system and, by extension, the society it represents. Reporters were called ''faggots'' and ''dickheads'' amid a general attitude of animus recorded by the journalists covering the proceedings.
I have observed the same thing first-hand numerous times during criminal trials involving Muslim defendants, families and supporters.
In every case, the idea that Muslims are in trouble because they have been ''marginalised'' by society is reality turned on its head. They are the ones who have marginalised a society they are happy to exploit but not respect.
http://www.smh.com.au/opinion/ideological-passion-sells-us-short-20090809-ee65.html?page=-1
Download audio
Jessica Stern is an expert on terrorism. In this conversation, first broadcast in 2003/4, Jessica talks about her book which is the result of 4 years research, interviewing a range of Jewish, Christian and Muslim terrorists.
Download
I've got to agree with Sheehan in the SMH on the weekend, here, while I think that US policy in the Middle East is flakey and counterproductive and the hardball of the last century left the Arab world with nothing but profound and chauvanistic extremisms to defend their sense of self, I really wonder how the enlightenment project can work in a nation indifferent to the classic social virtue of religious tolerance. In the middle ages Jews and Christian dissidents fled to the safety and tolerance of classic Islamic civilisation, without which the heritage of the Greeks would never have made it to Europe. The Mongols, colonialism, the triumph of the science and the technological revolution the mastery of nature spawned smashed that classic Muslim liberalism. The Americans enabled the rabid antiwestern fundamentalism of the Saudi's and funded a coalition of ratbags to defeat the USSR in Afghanistan.
The last gasp of an unreconstructed tribalism? A reaction to the suppression of political moderation in the arab world? Time will tell.
All five of those arrested on terrorism charges were treated with great generosity by Australia as they set up new lives here. But their behaviour in court has been an exemplar of the problem of reconciling sharia with civil law. One of the accused, Wissam Fattal, refused to stand as the magistrate read out the charges and followed this with a torrent of abuse as he was led out of the court. Another of those charged, Nayef El Sayed, informed the court he would stand for no man, only for his God.
In other words, they accept only sharia, the rest is a charade.
Even the family and supporters of the accused went out of their way to express contempt for the legal system and, by extension, the society it represents. Reporters were called ''faggots'' and ''dickheads'' amid a general attitude of animus recorded by the journalists covering the proceedings.
I have observed the same thing first-hand numerous times during criminal trials involving Muslim defendants, families and supporters.
In every case, the idea that Muslims are in trouble because they have been ''marginalised'' by society is reality turned on its head. They are the ones who have marginalised a society they are happy to exploit but not respect.
http://www.smh.com.au/opinion/ideological-passion-sells-us-short-20090809-ee65.html?page=-1
"Silver has been undervalued in recent years" ~ China encourages Silver Bullion for investment
China has introduced its first-ever investment opportunity for silver bullion. The bars are available in 500 grams, 1 kilogram, 2 kilograms and 5 kilograms with a purity of 99.9 percent.
9 August 2009
The Fog of Numbers ~ James Howard Kunstler
In fine form as usual...
There's something happenin' here
What it is ain't exactly clear....
-- Buffalo Springfield
One of main reasons behind the vast confusion now reigning in the USA, our failure to construct a coherent consensus about what is happening to us (or what to do about it), is our foolish obsession with econometrics -- viewing the world solely through the "lens" of mathematical models. We think that just because we can measure things in numbers, we can make sense of them.
For decades we measured the health of our economy (and therefore of our society) by the number of "housing starts" recorded month-to-month. For decades, this translated into the number of suburban tract houses being built in the asteroid belts of our towns and cities. When housing starts were up, the simple-minded declared that things were good; when down, bad. What this view failed to consider was that all these suburban houses added up to a living arrangement with no future. That's what we were so busy actually doing. Which is why I refer to this monumentally unwise investment as the greatest misallocation of resources in the history of the world.
Even this interpretation -- severe as it is -- does not encompass the sheer damage done by the act itself, on-the-ground and to our social and cultural relations. Suburbia destroyed the magnificent American landscape as effectively as it destroyed the social development of children, the worth of public space, the quality of civic life, and each person's ability to really care about the place they called home.
It's especially ironic that given our preoccupation with numbers, we have arrived at the point where numbers just can't be comprehended anymore. This week, outstanding world derivatives were declared to have reached the 1 quadrillion mark. Commentators lately -- e.g. NPR's "Planet Money" broadcast -- have struggled to explain to listeners exactly what a trillion is in images such as the number of dollar bills stacked up to the planet Venus or the number of seconds that add up to three ice ages plus two warmings. A quadrillion is just off the charts, out of this world, not really subject to reality-based interpretation. You might as well say "infinity." We have flown up our own collective numeric bung-hole.
The number problems we face are now hopeless. America will never be able to cover its current outstanding debt. We're effectively finished at all three levels: household, corporate, and government. Who, for instance, can really comprehend what to do about the number problems infesting Fannie Mae and the mortgages associated with her? There's really only one way out of this predicament: to get ready for a much lower standard of living and much different daily living arrangements. We can't wrap our minds around this, so the exercise du jour is to play games with numbers to persuade ourselves that we don't have to face reality. We're entertaining ourselves with shell games, musical chairs, Chinese fire drills, Ponzi schemes, and Polish blanket tricks (where, to make your blanket longer, you cut twelve inches off the top and sew it onto the bottom).
Now that Newsweek Magazine -- along with the mendacious cretins at CNBC -- have declared the "recession" officially over, it's a sure thing that we are entering the zone of greatest danger. Some foul odor rides the late summer wind, as of a rough beast slouching toward the US Treasury. The stock markets have gathered in the critical mass of suckers needed to flush all remaining hope out of the system. The foreign holders of US promissory notes are sharpening their long knives in the humid darkness. The suburban householders are watching sharks swim in their driveways. The REIT executives are getting ready to gargle with Gillette blue blades. The Goldman Sachs bonus babies are trying to imagine the good life in Paraguay or the archepelego of Tristan da Cunha.
While extremely allergic to paranoid memes and conspiracy theories, I begin to wonder about the impressive volume of World Wide Web chatter about an upcoming bank holiday -- meaning that the US government might find itself constrained to shut down the banking system for a period of time to deal with a rapidly developing emergency that might prompt the public to make a run on reserves. God knows, there are enough black swans crowding the skies these days to blot out the sun. I hesitate to suggest that readers who are able to should consider stealthily withdrawing a month's worth of walking-around money from their accounts.
The week past, some so-called "conservative" political action groups (read: brownshirts pimped by corporate medical interests) trumped up a few incidents of civil unrest at "town meetings" around the country, ostensibly to counter health care reform ideas. The people behind these capers may be playing with dynamite. It's one thing to yell at a congressman over "single payer" abstractions. It'll be another thing when the dispossessed and repossessed Palin worshippers, Nascar morons, and Jesus Jokers haul the ordnance out of their closets and start tossing Molotov cocktails into the First National Bank of Chiggerville.
http://kunstler.com/blog/2009/08/the-fog-of-numbers.html
There's something happenin' here
What it is ain't exactly clear....
-- Buffalo Springfield
One of main reasons behind the vast confusion now reigning in the USA, our failure to construct a coherent consensus about what is happening to us (or what to do about it), is our foolish obsession with econometrics -- viewing the world solely through the "lens" of mathematical models. We think that just because we can measure things in numbers, we can make sense of them.
For decades we measured the health of our economy (and therefore of our society) by the number of "housing starts" recorded month-to-month. For decades, this translated into the number of suburban tract houses being built in the asteroid belts of our towns and cities. When housing starts were up, the simple-minded declared that things were good; when down, bad. What this view failed to consider was that all these suburban houses added up to a living arrangement with no future. That's what we were so busy actually doing. Which is why I refer to this monumentally unwise investment as the greatest misallocation of resources in the history of the world.
Even this interpretation -- severe as it is -- does not encompass the sheer damage done by the act itself, on-the-ground and to our social and cultural relations. Suburbia destroyed the magnificent American landscape as effectively as it destroyed the social development of children, the worth of public space, the quality of civic life, and each person's ability to really care about the place they called home.
It's especially ironic that given our preoccupation with numbers, we have arrived at the point where numbers just can't be comprehended anymore. This week, outstanding world derivatives were declared to have reached the 1 quadrillion mark. Commentators lately -- e.g. NPR's "Planet Money" broadcast -- have struggled to explain to listeners exactly what a trillion is in images such as the number of dollar bills stacked up to the planet Venus or the number of seconds that add up to three ice ages plus two warmings. A quadrillion is just off the charts, out of this world, not really subject to reality-based interpretation. You might as well say "infinity." We have flown up our own collective numeric bung-hole.
The number problems we face are now hopeless. America will never be able to cover its current outstanding debt. We're effectively finished at all three levels: household, corporate, and government. Who, for instance, can really comprehend what to do about the number problems infesting Fannie Mae and the mortgages associated with her? There's really only one way out of this predicament: to get ready for a much lower standard of living and much different daily living arrangements. We can't wrap our minds around this, so the exercise du jour is to play games with numbers to persuade ourselves that we don't have to face reality. We're entertaining ourselves with shell games, musical chairs, Chinese fire drills, Ponzi schemes, and Polish blanket tricks (where, to make your blanket longer, you cut twelve inches off the top and sew it onto the bottom).
Now that Newsweek Magazine -- along with the mendacious cretins at CNBC -- have declared the "recession" officially over, it's a sure thing that we are entering the zone of greatest danger. Some foul odor rides the late summer wind, as of a rough beast slouching toward the US Treasury. The stock markets have gathered in the critical mass of suckers needed to flush all remaining hope out of the system. The foreign holders of US promissory notes are sharpening their long knives in the humid darkness. The suburban householders are watching sharks swim in their driveways. The REIT executives are getting ready to gargle with Gillette blue blades. The Goldman Sachs bonus babies are trying to imagine the good life in Paraguay or the archepelego of Tristan da Cunha.
While extremely allergic to paranoid memes and conspiracy theories, I begin to wonder about the impressive volume of World Wide Web chatter about an upcoming bank holiday -- meaning that the US government might find itself constrained to shut down the banking system for a period of time to deal with a rapidly developing emergency that might prompt the public to make a run on reserves. God knows, there are enough black swans crowding the skies these days to blot out the sun. I hesitate to suggest that readers who are able to should consider stealthily withdrawing a month's worth of walking-around money from their accounts.
The week past, some so-called "conservative" political action groups (read: brownshirts pimped by corporate medical interests) trumped up a few incidents of civil unrest at "town meetings" around the country, ostensibly to counter health care reform ideas. The people behind these capers may be playing with dynamite. It's one thing to yell at a congressman over "single payer" abstractions. It'll be another thing when the dispossessed and repossessed Palin worshippers, Nascar morons, and Jesus Jokers haul the ordnance out of their closets and start tossing Molotov cocktails into the First National Bank of Chiggerville.
http://kunstler.com/blog/2009/08/the-fog-of-numbers.html
Timing withdrawals is always tricky....
Zero Hedge looks at the "monitisation debate", the key question who is actually buying the treasuries? You can be sure that the US government is..thats what QE is all about. The question is this; can Ben keep pumping the stimulus until it works and yet still "pull out" before hyperinflation and a reserve currency credibility crisis is well and truly conceived.
As a strategy it has all the same failings of the contraception technique: skewed incentives and an "agency problem" of deep discontinuities in the costs and benefits.
Hmmm.....
A bigger question is the degree to which the US stimulus is working, it looks like it probably; its enabling massive credit creation in China.....
The startling conclusion: $32 billion of Treasury Bonds spread across 7 CUSIPs, were purchased by the FED within 10 days of their initial auction and allocation to primary dealers. The amount purchased by OMOs represents an average of 32.4% of the total allocated to primary dealers in the respective auctions. Furthermore, almost two third of total OMO Operations for bonds issued in 2009, or $62 billion, affects Bonds issued within 30 days of the OMO purchase. These purchases account for a total average of 29% of the total amount allocated to primary dealers. While one may make the argument that on the run bonds are preferred on average by the Fed for purchasing and by the primary dealer community for selling, the data presents a marked skew in the Fed's desire to monetize very recently issued Treasuries.
The key questions remain: allocations to primary dealers in 2009 Bond auctions is an undisputed majority (55%) of all auctions - this is troubling due to the the recent change in the definition of indirect purchasers as well as the markedly reduced interest of foreign buyers such as China and other indirects, for US Treasuries. Could a reason for the Chinese lack of appetite be due to the fact that while primary dealers represent not just a majority of all Treasury purchases, that these dealers may also have an implicit understanding that come hell or high water for auctions that lack indirect interest, the Fed could potentially make any dealers whole on purchases and subsequent sales at a loss such as the highlighted CUSIP 91282LD0 example (explicitly, at a loss for taxpayers who have to fund the primary dealers shortfall, in this case the difference between 99-26 and 99-07)? Would the Chinese be interested in playing in a rigged playing field when indirects are potentially impaired vis-a-vis direct purchasers? Furthermore, is Bernanke pulling a Clinton and while claiming under oath the he is not monetizing debt, he is effectively doing just that on well over $30 billion in Treasuries, which the Fed acquires within 10 days of issuance? And lastly, is the rapid uptake by the Fed a means to goose up auctions which have a potential likelihood of failure: the 7 Year in question came hot on the heels of a 5 Year that for all intents and purposes was quite close to a failed auction? Absent an implicit backstop, which everyone knows the Fed is very keen on making these days: as the SigTarp demonstrated, to the tune of tens of trillions of dollars, what is the likelihood the 7 Year would have fared as well as it did, had not the primary dealers really stepped up, for reasons known and unknown.
Zero Hedge is not making any claims, but merely asking questions. And while we appreciate the opinions of self-professed experts such as John Jansen, these answers should really come from the proper authorities - the US Treasury and the Federal Reserve of the US.
As time allows, Zero Hedge will next conduct a comparable study on Agency and MBS debt repurchases by the Federeal Reserve.
http://www.zerohedge.com/article/open-market-operations-and-statistics
As a strategy it has all the same failings of the contraception technique: skewed incentives and an "agency problem" of deep discontinuities in the costs and benefits.
Hmmm.....
A bigger question is the degree to which the US stimulus is working, it looks like it probably; its enabling massive credit creation in China.....
The startling conclusion: $32 billion of Treasury Bonds spread across 7 CUSIPs, were purchased by the FED within 10 days of their initial auction and allocation to primary dealers. The amount purchased by OMOs represents an average of 32.4% of the total allocated to primary dealers in the respective auctions. Furthermore, almost two third of total OMO Operations for bonds issued in 2009, or $62 billion, affects Bonds issued within 30 days of the OMO purchase. These purchases account for a total average of 29% of the total amount allocated to primary dealers. While one may make the argument that on the run bonds are preferred on average by the Fed for purchasing and by the primary dealer community for selling, the data presents a marked skew in the Fed's desire to monetize very recently issued Treasuries.
The key questions remain: allocations to primary dealers in 2009 Bond auctions is an undisputed majority (55%) of all auctions - this is troubling due to the the recent change in the definition of indirect purchasers as well as the markedly reduced interest of foreign buyers such as China and other indirects, for US Treasuries. Could a reason for the Chinese lack of appetite be due to the fact that while primary dealers represent not just a majority of all Treasury purchases, that these dealers may also have an implicit understanding that come hell or high water for auctions that lack indirect interest, the Fed could potentially make any dealers whole on purchases and subsequent sales at a loss such as the highlighted CUSIP 91282LD0 example (explicitly, at a loss for taxpayers who have to fund the primary dealers shortfall, in this case the difference between 99-26 and 99-07)? Would the Chinese be interested in playing in a rigged playing field when indirects are potentially impaired vis-a-vis direct purchasers? Furthermore, is Bernanke pulling a Clinton and while claiming under oath the he is not monetizing debt, he is effectively doing just that on well over $30 billion in Treasuries, which the Fed acquires within 10 days of issuance? And lastly, is the rapid uptake by the Fed a means to goose up auctions which have a potential likelihood of failure: the 7 Year in question came hot on the heels of a 5 Year that for all intents and purposes was quite close to a failed auction? Absent an implicit backstop, which everyone knows the Fed is very keen on making these days: as the SigTarp demonstrated, to the tune of tens of trillions of dollars, what is the likelihood the 7 Year would have fared as well as it did, had not the primary dealers really stepped up, for reasons known and unknown.
Zero Hedge is not making any claims, but merely asking questions. And while we appreciate the opinions of self-professed experts such as John Jansen, these answers should really come from the proper authorities - the US Treasury and the Federal Reserve of the US.
As time allows, Zero Hedge will next conduct a comparable study on Agency and MBS debt repurchases by the Federeal Reserve.
http://www.zerohedge.com/article/open-market-operations-and-statistics
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