Archive - Aug 13, 2015 - Story

You can't make this stuff up!!!

In a culture where vigilance is encouraged rather than labeled paranoia, in a culture where productivity is enabled rather than obstructed, in a culture where free thought is treated with interest rather than disdain, government holds no value. The only people who understand the true nature of government and still value the existence of an overreaching state are the people who would like to take advantage of the unchecked power such a state affords. We often call these people “elitists.” They often call themselves elitists. Big government serves only the interests of these elites. Everyone else is either a hapless victim of it, a useful idiot in service of it, or a revolutionary opposed to it.

"It’s not how I want my epitaph to read, but it’s not a shameful thing helping people finance themselves. It’s not a bad thing."

Heading into the China session, offshore Yuan signaled a 1% devaluation was on the cards. Of course, all media eyes were focused on the disaster in Tianjin but after 3 days of what was supposed to a 'one-off' adjustment, The PBOC has in fact surprised with a modestly stronger fix at 6.3975 from yesterday's 6.4010 Fix. That leaves the CNY Fix devaluation to a 4.60% loss in 4 day. Of course, its a bit hypocritical of Americans or Europeans to regard the Chinese as mean and nasty and currency warriors because they're letting their currency adjust against a constantly-devaluing dollar and euro. The US has been devaluing the dollar for years, but that's a-ok for Western commentators, apparently. It appears - judging by the opening devaluation and closing intervention - that China is as set on crushing the herd of one-way carry traders as any export-enhancing currency debasement.

"...Given that “transparency” has such positive connotations, it is hard to imagine a reversal of these measures. But the public interest would not be served if the internal deliberations of the US Federal Reserve or the Supreme Court were put on CSPAN, as some have demanded."

On Monday, we got some color on Hillary Clinton’s $350 billion plan to make college more affordable.  As we recently noted, students and former students across the country owe more than $1.2 trillion in college loans - doled out by our government in the name of helping high school graduates further their education, and as Bill Ackman so eloquently put it earlier this year, "there’s no way they’re going to pay it back." But at this point, extra funding is backfiring. Half of young graduates are either unemployed or only working part-time, which is a startling sign that the jig is up. In conjunction with the poor economy, new technology, developing markets killing jobs, and the massive increase in applicants with degrees, the value of college degrees is drastically falling in the economy of today. College is in a bubble, and it is going to pop soon...

Greek lawmakers are now set to vote on the final draft of the country's third bailout program. If the proposal doesn't clear parliament, eurozone finance ministers will likely delay implementation of the ESM program, setting up the possibility that Athens will be forced to tap the remaining funds in the EFSM for a bridge loan in order to make a €3.2 billion payment to the ECB next week.

"Losses on car loans taken out by bad-credit borrowers are continuing to climb. What's driving the rise? Nomura has an idea."

"John and Volcker discussed all the pitfalls of Keynesian and monetarism and Volcker didn’t rule out an eventual collapse of the dollar and second deflationary depression. I remember Volcker asking John when he would begin dropping short term rates and John commented that rates would have to drop soon or else the economy would fall off a cliff. It’s interesting that it wasn’t long after our session that rates started to come down. John Exter spelled out his scenario for Volcker and warned him of how badly the Keynesian experiment would end if it went on for an extended period of time. Volcker just sat there and listened and showed his concern."

Inventories of US autos in China recently exploded, as sales collapsed, leaving 1000s of vehicles gathering dust in Chinese ports... such as Tianjin. With credit collapsing - except for buying stocks on margin - it appears the Chinese have found an alternative way to drawdown that inventory...

Forced liquidation... capitulation ... contract roll... or "liquidity provision" gone awry? You decide.

The last three times Asian currencies collapsed against the US Dollar at this rate, the global financial system was shaken to the core. With China piling on this time, we wonder - what happens next, as a tsunami of deflation is exported towards the shores of the "we'll hike no matter what" Fed's American shores...

All of this raises an interesting question about the future of the US dollar. Because if an economy as large and powerful as China’s has had to concede defeat, does this mean that “King Dollar” will rule forever? No chance.