Ganging up on the Donald
PARIS – Poor Donald Trump. Everybody’s against him.
Jeb Bush says he’s “unhinged”…
…Chris Christie says he has “no idea what [he’s] talking about”…
…John Kasich accuses him of “outrageous divisiveness”…
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.
Rudely Interrupted Swagger
An article at Reuters on this year's Davos meeting is telling us that in spite of all the problems created by central bank policies, we shall prevail (presumably with the help of even more problems to be created by central bank policies).
Apparently there was a reasonably good mood, which the brewing EM currency crisis rudely interrupted, leading some of those present (the 'veterans' we are told) to warn of complacency:
“Just as they were getting their swagger back, the global elite stumbled last week on an emerging market sell-off that served as a reminder of the risks the global economy still faces.
Veterans of the annual World Economic Forum in Davos seized on the wobble as a warning that expectations for a smooth upswing were misplaced, and that recovery would likely be volatile and uneven.
The euro zone crisis is out of its acute phase and growth is returning across the developed world but a revival fueled largely by vast amounts of new central bank money is a capricious one.
The prospect of the U.S. Federal Reserve turning off its money taps this year, combined with political troubles in several emerging markets, drove last week's sell-off and exposed some of the unresolved problems in both developing and advanced economies.
"I hear way too much optimism now," Larry Fink, CEO of investment group BlackRock, told the forum. "I think the experience of the marketplace this week is going to be indicative of this entire year. We are going to be in a world of much greater volatility."
The return of growth in the United States, Japan and Europe masks festering problems from chronic youth unemployment to skills shortages and rising inequality that dampened any hubris in Davos. Tech executives were exuberant about breakthroughs that are revolutionising production, healthcare and communication but others warned those advances may kill jobs.
CEOs in Davos complained more vociferously than ever about a lack of talent for hire despite sky-high unemployment in rich and poor countries alike. In the West, too many young people are graduating from expensive colleges with high debts and the wrong skills, while in developing countries a big majority are not achieving their economic potential.”
Argentina – Another Default Looming?
Argentina has been frequently in the headlines of late, as it attempts to fend off the court challenges by the so-called 'hold-outs', i.e., investors who have not participated in the rather undignified 'debt restructuring' following the 2001 default. Most of the investors currently holding these bonds are activist 'vulture' funds, who are doing the world a great service by trying to prove that governments are not necessarily above the law when it comes to servicing and repaying their debt. At one point Elliott Capital Management even had an Argentine navy ship confiscated in Ghanaian waters, much to the chagrin of the Kirchner government. Normally, governments will quietly buy these 'pests' off, so as not to damage their standing with current lenders. However, Argentina with its crypto-fascist government and forever ruined reputation seems not to mind the risk.
Another brief collection of tidbits we have come across recently.
Corzine Lifetime Trading Ban? Say It Ain't So …
The NY Post reports that futures market regulators are considering whether to ban John Corzine from futures trading – forever. That would undoubtedly lower the probability of customer funds vaporization incidents somewhat, but aren't they forgetting something? The man is a valuable campaign funds magnet, and a regular economic guru, quizzed for droplets of his economic wisdom by the highest strata of the administration! The 'go-to' man in fact, according to VP Joe Biden himself.
“The future is murky for former NJ governor and fallen financial titan Jon Corzine.
Two directors of the National Futures Association will move tomorrow to ban Corzine from the multibillion-dollar futures trading industry in light of the scandalous collapse of MF Global — the commodity futures brokerage firm Corzine once headed.
If the motion is approved, NFA would hold hearings to determine whether Corzine, MF’s former CEO, deserves a “lifetime ban” from the industry. Such a ban could hinder his reported plans to launch a hedge fund.
“He [Corzine] doesn’t need to be near anyone’s money ever again in the futures space, and we want to make sure of it,” John Roe, an author of the proposed ban, told The Post.
Roe and James Koutoulas, who helped recover money for MF’s jilted customers, plan to present the proposed ban as their first action as NFA directors. Both were elected in January. MF’s 2011 downfall led to regulatory probes and hearings on Capitol Hill after it was discovered that Corzine’s company improperly tapped $1.6 billion in customers’ funds leading up to its bankruptcy filing. The shortfall also triggered a Justice Department probe — although no charges have been brought.
Roe and Koutoulas’ five-page proposal asks that the board, which meets in Chicago tomorrow afternoon, direct NFA to set up a panel to evaluate whether Corzine violated the agency’s rules by failing to supervise MF employees and through sloppy record-keeping, sources said. The bankruptcy trustee empowered to recover the missing loot has cited “lack of sufficient monitoring and systems” for the shortfall. As the industry’s self-regulatory agency, NFA controls which individuals and firms can deal in futures.”
They Just Hate Berlusconi
Ahead of Italy's election, an ever longer list of eurocratic indignants is heard condemning the possibility of Silvio Berlusconi receiving the support of voters. That by itself already speaks strongly in the man's favor of course. The latest example is provided by Martin Schulz, the socialist president of the European parliament, and one of the chief 'centralizers' and 'harmonizers' in the EU.
“European Parliamentary President Martin Schulz has warned Italians against voting for Silvio Berlusconi in upcoming elections. He joins a growing list of leaders who are wary of the return of "Il Cavaliere." The worry is particularly pronounced in the financial world.
Back in 2004, Silvio Berlusconi was seen as something of a salve for political wounds that had been plaguing Italy for decades. On May 5 of that year, a slew of newspaper articles pointed to the fact that, having been in office for 1,060 days, Berlusconi had become the longest serving postwar Italian prime minister — beating out the 59 previous governments that had ruled from Rome since 1946.
Even then, of course, he was a divisive figure. His own comparison of his longevity with that of World War II-era dictator Benito Mussolini certainly didn't help. And now, after three terms as prime minister and a fourth looming should he be able to pull out a surprise victory in the election on Sunday and Monday, top German politicians have had enough.
Germany's Martin Schulz, the president of European Parliament, became the latest on Wednesday to warn Italians against casting their ballots for Il Cavaliere. Berlusconi, he said, "has previously sent Italy into a tailspin with his irresponsible actions as head of government and his personal escapades." He said that a lot was riding on the upcoming vote "including the avoidance of gambling away trust."
It is, of course, hardly news that Schulz is no great fan of Berlusconi. In 2003, when Schulz was a rank-and-file European parliamentarian and Berlusconi occupied the position of European Council president, the Italian prime minister took umbrage at critical comments made by Schulz. In response, Berlusconi said: "I know that in Italy there is a man producing a film on Nazi concentration camps. I shall put you forward for the part of guard." The comment unleashed a brief but intense diplomatic tiff between Rome and Berlin.”
So apparently Schulz has not forgotten the slightly tasteless remark by Uncle Silvio that provided us onlookers with so much entertainment. It is possible that Italy's voters actually won't like these threats of an 'imminent tailspin' for Italy if they vote for the 'Cavaliere'. Many may well vote for him in a show of defiance. The FT meanwhile reports that 'investors are rattled' by Berlsuconi's good showing in the polls. We will know more on Monday.
Europe: New Thinkers Required
German magazine 'Der Spiegel' recently reported on a 'mini-summit' if you will, of 'leading European intellectuals' in Paris, who were discussing Europe's future – just before another one of those 'crucial' EU summits was taking place (this time on the bloated EU budget, see further below). One of the intellectuals in attendance was Bernard-Henri Levy, known among other things for:
“Early essays, such as Le Testament de Dieu or L'Idéologie française faced strong rebuttals, from noted intellectuals such as historian Pierre Vidal-Naquet and philosophers Cornelius Castoriadis, Raymond Aron and Gilles Deleuze, who called Lévy's methods "vile". Their most common accusation towards Lévy is of him being one-sided and, ultimately, shallow as a thinker. Vidal-Naquet went as far as saying: "BHL's intellectual dishonesty is properly unfathomable".
More recently, in the essay De la guerre en philosophie (2010), Lévy was publicly embarrassed when he used, as a central point of his refutation of Kant, the writings of French "philosopher" Jean-Baptiste Botul. Botul's writings are actually well-known spoofs, and Botul himself is the fictional creation of a French living journalist and philosopher, Frédéric Pagès, as is easily guessed from his thought-system being botulism.”
Inn attendance was also Italian writer Umberto Eco, who apparently veered off into a rambling, “baroque” speech that was received with “thin and somewhat distracted applause”.
In summary, :
Buy the Ruble!
In our last tidbits edition we said the following in connection with Russia's conservative central bank:
“Back in 1998, Jim Rogers would regularly appear as a guest on CNBC's 'squawk box'; when asked about his best investment idea for the year he kept repeating “sell the ruble”. He was right, it was one of the best investment ideas of that fateful year.
Depending on whom Putin appoints, it could well be that it is time for a different slogan: buy the ruble.”
Believe it or not, only a day later we came across this interview with Jim Rogers. Apart from recommending that people should hold on to their gold and silver and invest in agriculture (his old stand-by), he also replied to the question which currency he would recommend to buy, if he were to pick only one. His answer: “Buy the Ruble!”
That's what's known as 'synchronicity' – it probably is a really good omen for the ruble.
Legendary investor Jim Rogers: hang on to your gold and buy the ruble!
(Photo via: jimrogers1.blogspot.co.at)
Tidbits, February 2, 2013.
In order to ensure that a number of interesting smaller items that we have come across in recent days don't get swallowed up by the memory-hole, we have collected those in another tidbits edition.
The 'Resilient Earth' reports that “Climatologists Retrench As Climate Refuses To Warm”. This is very inconsiderate of the climate. Doesn't it realize that a $60 billion per year gravy train is at stake? No wonder that one of the most striking finds of the 'Climategate' e-mails was the one in which the topic of discussion was how to best 'hide the decline' (referring to a decline in temperatures). According to the Resilient Earth:
Updates on Greece
The English language version of the report in German news magazine Der Spiegel which we mentioned yesterday has now become available:
Der Spiegel: 'EU Should Admit that Greece Will Need Debt Cut'
The Wall Street Journal also reports that the German government is slowly but surely moving toward 'Greek bailout number three'.
As everybody knows, 'more time means more money' in this case. The opponents seem already resigned to where all of this is inexorably going. A quote:
“Bundestag members might not be happy about bigger loans for Greece, but "nobody wants to endanger the current calm in financial markets," said Tilman Mayer, a political scientist at Bonn University. The stalwarts against aid for Greece within the coalition have been unable to attract new recruits, he says.
"I'm not going to vote for it," said Frank Schäffler, a Free Democrat lawmaker who has voted against every previous Greek aid measure. But he is resigned to other coalition members, including the chancellor, granting Greece more money despite their past promises. "That's how politics works. People say pretty things," he says.”
We could think of a slightly harsher way of putting it: you immediately know when a politician is lying – his lips are moving.
Angela Merkel has a razor-thin majority in parliament – requests for more Greek aid usually require opposition support.
What is Behind the New Buzzword
Economists, market analysts, journalists and investors alike are all talking about it quite openly, generally in a calm and reserved tone that suggests that – to borrow a phrase from Bill Gross – it represents the 'new normal'. Something that simply needs to be acknowledged and analyzed in the same way we e.g. analyze the supply/demand balance of the copper market. It is the new buzzword du jour: 'Financial Repression'.
The term certainly sounds ominous, but it is always mentioned in an off-hand manner that seems to say: 'yes, it is bad, but what can you do? We've got to live with it.'
But what does it actually mean? The simplest, most encompassing explanation is this: it describes various insidious and underhanded methods by which the State intends to rob its citizens of their wealth and income over the coming years (and perhaps even decades) above and beyond the already onerous burden of taxation and regulatory costs that is crushing them at present.
Renamed Again …
Upon the suggestion of one of our readers, we have renamed the 'aggregated news' page a second time, this time from 'Odds & Ends' to 'Tidbits'. Per definition, 'odds and ends' are 'miscellaneous items' (trivia: the term originated in sawmills and lumberyards, describing irregularly cut pieces of board and end pieces trimmed from boards cut to specific length), while 'tidbits' are 'choice morsels'.
So here we go.
Most read in the last 20 days:
- Strange Moves in Gold, Federal Reserve Policy and Fundamentals
Counterintuitive Moves Something odd happened late in the day in Wednesday's trading session, which prompted a number of people to mail in comments or ask a question or two. Since we have discussed this issue previously, we decided this was a good opportunity to briefly elaborate on the topic again in these pages. A strong ADP jobs report for March was released on Wednesday, and the gold price dutifully declined ahead of it already, while the stock market surged concurrently. Later in...
- Gold – An Overview of Macroeconomic Price Drivers
Fundamental Analysis of Gold As we often point out in these pages, even though gold is currently not the generally used medium of exchange, its monetary characteristics continue to be the main basis for its valuation. Thus, analysis of the gold market requires a different approach from that employed in the analysis of industrial commodities (or more generally, goods that are primarily bought and sold for their use value). Gold's extremely high stock-to-flow ratio and the main source of...
- Doomsday Device
Disappearing Credit All across the banking world – from commercial loans to leases and real estate – credit is collapsing. Ambrose Evans-Pritchard writing for British newspaper The Telegraph: Credit strategists are increasingly disturbed by a sudden and rare contraction of U.S. bank lending, fearing a synchronized slowdown in the U.S. and China this year that could catch euphoric markets badly off guard. Data from the U.S. Federal Reserve shows that the $2 trillion market...
- The Balance of Gold and Silver – Precious Metals Supply and Demand
Orders of Preference Last week, we discussed the growing stress in the credit markets. We noted this is a reason to buy gold, and likely the reason why gold buying has ticked up since just before Christmas. Many people live in countries where another paper scrip is declared to be money — to picture the absurdity, just imagine a king declaring that the tide must roll back and not get his feet wet when his throne is placed on the beach — not real money like the US...
- The American Empire and Economic Collapse
Dashed Hopes Despite widespread optimism among libertarians, classical liberals, non-interventionists, progressive peaceniks and everybody else opposed to the US Empire that some of its murderous reins may finally be pulled in with the election of Donald Trump, it appears that these hopes have now been dashed. Liberty... some of it is still above water, but definitely not as much as there could or should be.* While the hope for a less meddlesome US foreign policy...
- Pulling Levers to Steer the Machine
Ticks on a Dog A brief comment on Fed chief Janet Yellen’s revealing speech at the University of Michigan. Bloomberg: “Before, we had to press down on the gas pedal trying to give the economy all of the oomph that we possibly could,” Yellen said Monday in Ann Arbor, Michigan. The Fed is now trying to “give it some gas, but not so much that we’re pushing down hard on the accelerator.” […] “The appropriate stance of policy now is closer to, let me call it...
- Credit Contraction Episodes
Approaching a Tipping Point Taking the path of least resistance doesn’t always lead to places worth going. In fact, it often leads to places that are better to avoid. Repeatedly skipping work to sleep in and living off credit cards will eventually lead to the poorhouse. Sometimes the path of least resistance turns out to be problematic The same holds true for monetary policy. In particular, cheap credit policies that favor short-term expediency have the...
- The Empire Needs an Emperor
Unknown (sort of) Head of State BUENOS AIRES – Type Swiss President “Doris Leuthard” into Google. You will get about 450,000 results. Do the same with Donald Trump, and the number is closer to 396 million. That’s 87,900% more references. The world’s press is as fascinated by President Trump as it is indifferent to President Leuthard. Doris Leuthard, President and energy minister of Switzerland. She has won her second presidential term this year. It basically...
- Mea Culpa – Precious Metals Supply and Demand
Input Data Errors Dear Readers, I owe you an apology. I made a mistake. I am writing this letter in the first person, because I made the mistake. Let me explain what happened. The wrong stuff went into the funnel in the upper left-hand corner... I wrote software to calculate the gold basis and co-basis (and of course silver too). The app does not just calculate the near contract. It calculates the basis for many contracts out in the distance, so I can see the...
- The Cost of a Trump Presidency
Opportunity Cost Rears its Head Last Thursday’s wanton attack on a Syrian air field by the US and its bellicose actions toward North Korea have brought the real cost of candidate Trump’s landslide victory last November to the forefront. It didn't take long for Donald Trump to drop his non-interventionist mask. The decision was likely driven by Machiavellian considerations with respect to domestic conditions, but that doesn't make it any better. Unlike...
- India – Is Kashmir Gone?
Everything Gets Worse (Part XII) - Pakistan vs. India After 70 years of so-called independence, one has to be a professional victim not to look within oneself for the reasons for starvation, unnatural deaths, utter backwardness, drudgery, disease, and misery in India. Intellectual capital accumulated in the West over the last 2,500 years — available for free in real-time via the internet — can be downloaded by a passionate learner. In the age of modern technology, another mostly...
- French Election – Bad Dream Intrusion
The “Nightmare Option” The French presidential election was temporarily relegated to the back-pages following the US strike on Syria, but a few days ago, the Economist Magazine returned to the topic, noting that a potential “nightmare option” has suddenly come into view. In recent months certainty had increased that once the election moved into its second round, it would be plain sailing for whichever establishment candidate Ms. Le Pen was going to face. That certainty has been...