Archive - Jul 2011 - Blog entry

But we didn't listen ...

Manufacturing is stagnating because of a lack of "real" investment. Which means manufacturing growth is not so organic as it is export related, which is entirely based on the "advantage" of a cheap dollar. This would help explain why industrial production is declining.

A look at one of those "new ideas" to resolve the debt limit impasse. I think it is a No Sale.

Is this time different?

Not only is the financial system more leveraged than during the Tech bubble, but mutual funds are more heavily invested than at any time in the last 40+ years. To say that the potential for a full-scale market collapse is high would be a gross understatement. Should the market begin to crater, the margin calls (when an investor has to put up more capital to cover a losing position that was bought using borrowed money) could be absolutely enormous.

No matter what financial engineering scheme you attempt to wrap around it, no matter what socio-political financial nomenclature you attempt to drape it in, and no matter how far you attempt to kick said can down the road in a "delay and pray" tactic of pushing the inevitable collapse past your particular tenure at the helm, the only way out of this is the recognition of capital destruction, AKA Default!

We cannot bail out Earth unless...

While train wrecks make great movie scenes, in the real world, there isn't going to be a massive debt derailment unless you give speculators and ratings agencies free reign...

All you need to know.

What do Hu Jintao, David Cameron, Warren Buffett, Dominique Strauss-Kahn, Alan Greenspan, Robert Shiller, Joseph Stiglitz, Robert Reich and Mark Thoma - and both conservatives and liberals - all agree on?

What one shipper thinks might happen next.

Who Framed Greece?

According to Oxford Analytica, there are fifteen "Global Stress Points" ranging from medium to extreme high impact to the entire world. And hate to disappoint China Bears, it seems whatever problems China has, it is not the one that'll tank the world like the Dollar and Euro.

Consider that $10 billion of Fed money today is worth just over half (62%) the market gains of $10 billion in Fed money back in 2009. Put another way, every new injection of $10 billion from the Fed is producing less and less results. If we step back and look at this plainly, we will see that reality does not in any way match the view that the Fed’s liquidity will solve the financial world’s problems. In fact, we see that each Fed move is having a smaller and smaller impact on the financial markets. Extend this idea out a bit further and you find that we will reach a point at which the Fed will no longer have any control over the financial markets.

In the last 100 years we’ve seen the US Dollar lose well over 95% of its purchasing power. However, once the world collectively dropped the Gold standard (the last hold out, Switzerland, officially went off it in 2000) permitting the creation of endless credit and money printing, the financial system entered a period of relative value. That is, all currencies (which are used to denominate other asset classes) are entirely paper-based and consequently trade relative to each other based on the money printing each central bank engages in.