Archive - Mar 9, 2013

The US dollar rose to new multi-month highs against several of the major currencies, including the euro, Swiss franc, British pound and the Japanese yen.  The BOJ, BOE and ECB meet last week and none changed policy.  The Swiss National Bank meets on March 14 and is also unlikely to change policy.  The Federal Reserve meets the following week and is widely expected to stay its course.  It is not monetary policy then providing the new trading incentives. 

Nor can the dollar's gains be attributed to political uncertainty in Europe stemming from the inconclusive Italian elections, as was the case previously.   The immediate shock has worn off and Italian stocks and bonds have recovered the lion's share of those initial losses. 

Still confused why crony capitalist #1, the "rustic" Octogenarian of Omaha, and Obama tax advisor #1, Warren Buffett has been aggressively attempting to corner the railroad market, while the administration relentlessly refuses to allow assorted new, and very much competing petroleum pipelines from America's neighbor to the north to cross through the US (in gratitude for the former's generous "tax advice" and pedigree by association)? Hint: it's not concern about the environment. The answer is the chart below.

Mr Bernanke and his colleagues all over the central banking world are well aware of their fundamental problem. If there is one “entity” in all modern societies where the very concept of “savings” is seen as a deadly danger it is government. The act of saving (and access to something WORTH saving) makes for a nation of independent and increasingly prosperous individuals. Such individuals do not look for something for nothing. An individual who can sustain his or her life by their own effort has little need of being “governed” and will not be “ruled”. That makes the job of governance very easy, but the “job” of ruling prohibitively difficult. Since a government does not produce, it cannot “save” in the real meaning of the term. All it can do is to minimise its demand on those who DO save, those who consume LESS than they produce. That is anathema to a government intent on gaining the power necessary to “run” an economy. The purpose of a “welfare state” is to convince a majority of the people that savings are not necessary. Once a welfare state has been put into operation - as it has been all over the developed world for a century or so - those in power go further. Their new task is to convince their subjects that the act of saving is not only unnecessary, it is dangerous to their “prosperity”. This would seem at first glance to be both a ridiculous and a formidably difficult task. It is. It has taken our “powers that be” a long time to succeed.