Archive - Jan 15, 2015 - Story

Today, the "developed nation" hecklers are deathly silent after what may be the biggest western central bank faux pas in recent history, and which has - perhaps for the first time in history - manifested in lines of people in front of currency exchange bureaus nowhere else but in that bastion of capitalism: Geneva.

If 2014 was the year of militarized police, armored tanks, and stop-and-frisk searches, 2015 may well be the year of technologized police, surveillance blimps and scan-and-frisk searches. Just as we witnessed neighborhood cops being transformed into soldier cops, we’re about to see them shapeshift once again, this time into robocops, complete with robotic exoskeletons, super-vision contact lenses, computer-linked visors, and mind-reading helmets. Similarly, just as military equipment created for the battlefield has been deployed on American soil against American citizens, we’re about to see military technology employed here at home in a manner sure to annihilate what’s left of our privacy and Fourth Amendment rights.

This is the real deal, and not any of this wimpy economic collapse stuff. We’re talking planets and stars exploding, near-extinction, and Bruce Willis coming to the rescue type of stuff.

By ending its three year currency peg to the weakening euro Switzerland has become the first major economy to surrender in the international currency war, and in so doing has given a long-delayed victory to the Swiss people. Contrary to the indignant reaction by the media and financial establishment, the decision is not a disaster for Switzerland, but may be looked at in the future as the first significant counter-attack against our current global system of monetary insanity.

And with a stroke of his pen, Ukraine's President Petro Poroshenko signs a decree that mobilizes up to 50,000 "health men and women" aged 25 to 60 to the frontlines in Eastern Ukraine...

Success, we’re constantly told, breeds success. And success breeds stability. The way to avoid failure is to copy successful people and strategies. The way to continue succeeding is to do more of what has been successful. This line of thinking is so intuitively compelling that we wonder what other basis for success can there be other than 'success'? As counter-intuitive as it may sound, success rather reliably leads to failure and destabilization. Instead, it’s the close study of failure and the role of luck that leads to success. In the macro-economic arena, we think it highly likely that the monetary and fiscal policies of the past six years that are conventionally viewed as successful will lead to spectacular political and financial failures in 2015 and 2016. How can success breed failure? It turns out there are a number of dynamics at work.

On the heels of Russia's decision, as we reported here, to "increase [their] combat units in accordance with the new military doctrine," particularly focused on Crimea, NATO responded with threats/promises of more military drills and patrols. Having used their airspace but condescended their perspective as "hysterical," Estonian President Toomas Hendrik Ilves is calling for much stronger NATO presence as he rages that "the world order found after the Cold War has been destroyed," by Putin.

As oil prices continue to fall, flirting with the US$40/bbl floor, there has been much talk of cheap oil’s winners and losers. The discussion has focused on big producer and consumer countries, but there may be another contender in the loser category – namely, the Islamic State (IS). In its gambit to become a state, it unwittingly became a hydrocarbon state, and as such has exposed itself to the same economic volatility that plagues other rentier states.

Like her or hate her, Elizabeth Warren this week unequivocally told Fortune's Sheila Bair "No," she would not run for President, reflecting that for a Democratic nominee to win, "they need to speak to America’s families about the economic crisis in this country. It starts with the recognition that Washington works for the rich and powerful and not for America’s families." We bring this up, since, as OpenSecrets reports, despite her reputation as an anti-Wall Street populist, Warren would have been the wealthiest of the potential 2016 presidential candidates currently serving in Congress.

"we venture that the SNB will sooner or later be forced to permit the franc to appreciate and thus to enrich the holders of low-priced, three-year call options on the Swiss/euro exchange rate. It's a long shot, to be sure--the options are cheap for a reason--but we judge that the prospective reward is worth the obvious risk." - Jim Grant, Sept 14th, 2014

When fiat currencies fail, one of the only things of value left standing will be hard assets that are needed by individuals for everyday needs. The paper promises will dissolve along with the public confidence in the banking system. Everything works until it doesn’t. This is especially true for ponzi schemes and fiat currencies. Don’t be the last one holding paper when chaos strikes. You may live to regret it.

This is what US$2 looks like in Belarusian Rubles...

Well at least someone finally had the candor to just come out and say it. In the wake of recent terror attacks in Europe, British Prime Minister David Cameron has called for an end to secure communications technology. In other words, he wants to ensure that you will never again be able to use encryption technology to maintain privacy. Nothing should be safe from government’s prying eyes. Nothing. This is the same sad cycle repeating itself yet again: something terrible happens, and government reacts by awarding themselves even more power and taking away even more freedom.