Orban Comes Riding Into Town

For many years Hungarian president Viktor Orban has been a thorn in the side of the EU for his, let us say, idiosyncratic insistence to ignore its diktats at every opportunity. This is not to say that we are particularly fond of Orban’s policies or political style, although the mere fact that he goes on the nerves of the bureaucrats in Brussels is of course a major plus.

In one respect Orban proved especially irksome to the ruling classes in Brussels and the rest of Europe: he interfered in the formal “independence” of Hungary’s central bank, and he actually made the banks pay up for the mortgage lending disaster. The latter move was clearly populist and has the obvious drawback of giving people the impression that they bear no personal responsibility for their actions. On the other hand, the banks did make it appear to their customers that taking out Swiss franc denominated mortgage and consumer loans was a virtually risk-free affair, and many financially not overly sophisticated people fell into the trap thus laid for them. Consider the following sub-prime mortgage loan ad Austria’s Raiffeisenbank ran in Hungary in 2007:

 

We don’t care about your income! NINJA loans, Hungarian style.

 

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… Troubles Our Sleep …

It is the vision of what the United States will be like when the authorities have obliterated almost three millennia of monetary progress and have their boots on our necks.

Here’s Peter Bofinger, a leading German Keynesian economist, in Der Spiegel magazine:

 

“With today’s technical possibilities, coins and notes are in fact an anachronism. They made payments incredibly difficult, with people wasting all sorts of time at the cashier as they wait for the person ahead of them to dig through their belongings to find some cash, and for the cashier to render change (rather than, for example, waiting for someone to find the right credit card, complete the transaction, and wait for approval).

[…]

But the additional time is not the largest benefit of the elimination of cash. It dries out the markets for moonlighting and drug trafficking. Almost a third of the euro cash in circulation consists of 500-euro notes. No one needs those for shopping; light-shy figures use them for their activities. [Also] it would be easier for central banks to impose their monetary policies. At this time, they cannot push interest rates appreciably below zero because the savers would hoard cash. If there is no cash, the zero bound is eliminated.”

 

vision_of_hell_11They said they were going to make me an advisor ... Bofinger discovers they lied to him.

Painting by Zdzislaw Beksinski

 

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A Big Dow Theory Divergence

We briefly want to show a few charts that have caught our eye recently. This is by no means a comprehensive market update (we plan to provide one soon). Here is something though one doesn’t see all too often: the Dow Industrials and Transportation averages have diverged from each other for about six months running. To be sure, no valid Dow theory sell signal has been given yet. For that to happen both averages need to break their previous reaction lows in concert. However, divergences at peaks are a “heads up” signal. Charles Dow would probably at least raise one eyebrow and frown a little.

 

IA_0314_ETFAdvisor_MI600Image via cnbc.com

 

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The New Land of Opportunity

“This city is great. It’s beautiful. It’s cheap. The climate is agreeable. And it’s becoming a haven for Internet savvy marketers.

“I think they’re coming partly because it’s a great place to live. And I think young people want to get away from the U.S., too. It’s just not the land of opportunity that it used to be.”

So sayeth our dinner companion last night. He was the second young man in the last 24 hours to make the case that Medellín is a “buy.”

“It just seems to be catching on with people who work on the Internet. I guess because it is such a great place to live. People are helpful and nice here. And everything is unbelievably cheap.”

We can back him up on both points: Our taxi driver went far out of his way to help us find our hotel. (We had the wrong name.) And after driving us around for a half an hour, he was delighted to take the equivalent of $8 for the fare.

 

MedellinMedellín – city of the future

Photo via turismoenmedellin.com

 

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You May No Longer Think Wrong Thoughts, Citizen

Shortly after the election victory that probably surprised no-one more than himself, David Cameron launched into explaining to the hoi-polloi what further transmogrification of the State is in store now that he’s got a free hand. He inter alia elated the audience with the following zinger:

 

“For too long, we have been a passively tolerant society, saying to our citizens: as long as you obey the law, we will leave you alone. It’s often meant we have stood neutral between different values. And that’s helped foster a narrative of extremism and grievance. This government will conclusively turn the page on this failed approach.”

 

In other words, dear citizen, mafia uncle State will no longer leave you alone if you merely “obey the law”. Your “narratives of grievance” henceforth won’t be tolerated anymore!

 

sun shineAs one reader remarked, all that’s missing now is Frau Bluecher making her entrance …

Cartoon by Steve Bell

 

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Kingpin-Free Colombia

This is the first time we’ve been in Colombia. Greener, more mountainous, richer, newer, and more flowery – it is many things we didn’t expect.

We’ve seen a lot of press on Medellín. It is supposed to be lively. It is “springtime all year round.” It is beautiful. And it is a lot safer now than when drug kingpin Pablo Escobar called it home.

We haven’t been here long enough to know if those things are true. All we know so far is that it is so modern, so big, and so wealthy that we are a bit disappointed.

We’d expected a bit more charm and authentic poverty. Maybe they are on the other side of town… we don’t know. We’ll let you know if we find out anything more…

 

pablo-escobarA mugshot of former Colombian drug lord Pablo Escobar Gaviria – at the time he still seemed fairly confident. It is no exaggeration to say that he once owned Medellín lock, stock and barrel – but a great many things have changed in Colombia since his heyday. Notorious kingpin Pablo is no longer among the quick, but at the height of his power he was without a doubt the richest criminal ever, worth an estimated $30 billion. There is broad agreement that Medellín is a nicer place without him.

 

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The Interest Rate Guessing Game

Seldom does a day go by without some guru offering his or her prediction on when the Fed is going to raise rates.  They all come with scholarly theories supporting their prediction.  It sounds like a fun game.  I want to play, but I’m not sure what the object of the game is.

 

sparschwein

 

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Dangerous Freedom versus Peaceful Slavery

At Global Gold, I am often asked what we would do if, for example, the US were to come out with a confiscation order. My reply is: We would do nothing whatsoever! Why? Quite simply, because no one in Switzerland has the political power to execute such an order! Even if Swiss politicians were to support such a confiscation order, the Swiss people would likely have the final vote. I am confident that any such confiscation order wouldn’t have any chance to be supported by a majority in Switzerland, especially one concerning assets held outside the banking system such as physical precious metals.

Even in the highly unlikely case that it would be accepted, the vote would take at least twelve months, thereby giving the persons affected enough time to move their assets elsewhere. In my view this is the main advantage of a direct democracy, it ensures that the people rather than the politicians in power have sovereignty. The federalist structure of Switzerland moreover guarantees that political power is reduced to a minimum. “Confederation Helvetica” might be the old name for Switzerland, but it is just as valid today as it was in the past.

 

Burma opposition leader Aung San SuuInside the Curia Confedarationis Helveticae (Swiss Parliament building) in Bern

Photo credit: Sébastien Feval – AFP

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Bonds: A Crowded Trade

In the financial markets, we have been waiting for a crash of U.S. stock prices. And waiting. And waiting. It still hasn’t come.

Last week the spectacular bull market in U.S. stocks that began in March 2009 continued with even more gains. On Friday, the S&P 500 hit another all-time high.

But the real action was in the bond market. Over the last three weeks, about half a trillion dollars has been wiped off the value of global bonds … despite lower than normal trading volumes.

According to Citigroup strategist Mark Schofield, the sell-off is a “stark reminder of just how congested a lot of market positioning has become.” This makes it “increasingly difficult for investors to exit those positions when the time comes to do so.”

 

piggy bank

 

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Another Keynesian Voodoo Economist Wants to See Cash Abolished

We have a few more bad news and for a change also some good news with respect to the ongoing attempt to prepare the ground for a ban of cash currency. By now everybody should know how this works: Whenever another step to curtail individual liberty further is in the preparatory stage, the ruling class starts trial balloons in the mainstream media, flanked by “expert” opinion pieces, to see how people react. If there is an uproar, they will pull back and wait for a better opportunity. If there is no uproar, you simply wake up one morning with yet more of your personal freedom taken away for the “collective good”.

This is why contrary to what some people seem to think, it is not a good idea to ignore what superficially appear to be outlandish notions. After all, as current EU commission president Jean Claude “we lie if we have to” Juncker once explained, this is precisely how the EU’s centralizers go about imposing policies which they suspect might be unpopular with voters.

 

big brotherA cash ban would bring about even more thorough surveillance and be one step closer to total bureaucratic control

 

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