The Bitcoin phenomenon has now reached the mainstream media where it met with a reception that ranged from sceptical to outright hostile. The recent volatility in the price of bitcoins and the issues surrounding Bitcoin-exchange Mt. Gox have led to additional negative publicity. It is clear that on a conceptual level, Bitcoin has much more in common with a gold and silver as monetary assets than with state fiat money. The supply of gold, silver and Bitcoin, is not under the control of any issuing authority. It is money of no authority – and this is precisely why such assets were chosen as money for thousands of years. Gold, silver and Bitcoin do not require trust and faith in a powerful and privileged institution, such as a central bank bureaucracy. Under a gold standard you have to trust Mother Nature and the spontaneous market order that employs gold as money. Under Bitcoin you have to trust the algorithm and the spontaneous market order that employs bitcoins as money (if the public so chooses). Under the fiat money system you have to trust Ben Bernanke, Janet Yellen, and their hordes of economics PhDs and statisticians.
Why is the periphery crumbling? It's simple: the conditions that enabled rising national surpluses and the distribution of spoils is breaking down for three reasons:
- Energy is no longer cheap (compared to past prices)
- The low-hanging fruit of higher productivity has all been plucked
- The free-money flood of cheap, limitless credit is drying up
As regimes find surplus and credit are both contracting, their ability to placate every key group with spoils is also declining, and the conflicts between them can no longer be patched over with bribery or brutality. Instability starts on the periphery and moves into the core.
In investing you have opportunities that open up because dogmatic investors say “I don’t do ... ”
The mainstream financial media nearly wet its collective pants with excitement in reporting that the planet's corporations paid $1 trillion in dividends in 2013. What they didn't report is that clearing billions in profit is about to get much harder. The point is this: technology lowers margins, and credit bubbles inevitably pop. Any company or nation that depends on maintaining high margins in credit-bubble-based "growth" is about to find that it's much harder to net $1 billion, much less $1 trillion.
Retirement funds, home equity, family assets--these are the financial equivalent of seed corn. Once they're cashed out and spent, they cannot be replaced. So how much of the recent "growth" in GDP results from our consumption of seed corn? It is difficult to find any data on this, something which is unsurprising as the data would reveal the entire "recovery" story as a grandiose illusion: we as a nation are consuming our seed corn in great gulps, and there will be precious little left in a decade to pass down to the next generation. We face not just an impoverishment in consumption but in expectations and generational assets.
If the economy is really "getting better", then why have millions upon millions of formerly middle class Americans been pushed to the point of utter despair? The stories that you are about to read are absolutely heartbreaking. But if you listen to the mainstream media, you would think that happy days are here again for America. Just check out some of the bizarre headlines that I have collected in recent weeks... CNBC: "Stop whining! The US economy is in good shape" USA Today: "Economists: U.S. will see better growth in '14" Newsday: "Why the economy isn't doomed" Most Americans will buy into this propaganda and will never see the next major economic crisis coming until it is too late to do anything about it.
Civil rights are often lost in societies by politicians scapegoating unpopular minorities. This happened with jews, gypsies, etc in Nazi Germany and we must be very careful the same does not happen here. One human being should be able to voluntarily give food to another in all cases, without exception. The concept of a permit needed that costs $120 per week is fascist, anti-human and downright evil. Gandhi famously noted that: The greatness of a society and its moral progress can be judged by the way it treats its animals.
It’s like 34 drunken sailors holding each other up. That’s the best way I can think of to describe the latest product from the good idea factory that is the OECD. Over the weekend in yet another cushy five-star hotel, representatives from this unelected supranational bureaucracy announced plans for world governments to exchange all their citizens’ tax and financial data with one another. It’s a pathetic display of exactly the sort of tactics that governments embrace when they go broke. And most of these OECD countries ARE broke – Italy, Japan, the US, Spain, Greece, etc.
What others describe as the Deep State we term the National Security State which enables the American Empire, a vast structure that incorporates hard and soft power--military, diplomatic, intelligence, finance, commercial, energy, media, higher education--in a system of global domination and influence. One key feature of the Deep State is that it makes decisions behind closed doors and the surface government simply ratifies or approves the decisions. A second key feature is that the Deep State decision-makers have access to an entire world of secret intelligence. What would best serve the Deep State is a dollar that increases in purchasing power and extends the Deep State's power.
The tyranny of models is rampant in almost every aspect of our investment lives, from every central bank in the world to every giant asset manager in the world to the largest hedge funds in the world. There are very good reasons why we live in a model-driven world, and there are very good reasons why model-driven institutions tend to dominate their non-modeling competitors. The use of models is wonderfully comforting to the human animal because it’s what we do in our own minds and our own groups and tribes all the time. We can’t help ourselves from applying simplifying models in our lives because we are evolved and trained to do just that. But models are most useful in normal times, where the inherent informational trade-off between modeling power and modeling comprehensiveness isn’t a big concern and where historical patterns don’t break. Unfortunately we are living in decidedly abnormal times, a time where simplifications can blind us to structural change and where models create a risk that cannot be resolved by more or better modeling! It’s not a matter of using a different model or improving the model that we have. It’s the risk that ALL economic models pose when a bedrock assumption about politics or society shifts.
The divergence between the NAHB index and other housing indicators has continued to suggest that sentiment was “getting ahead of itself" and as Citi's Tom Fitzpatrick warns would suggest that the qualitative nature of the overall housing recovery is less robust than one would like. Housing should pause/consolidate possibly even for most of this year as the weather argument that is trotted out by so many commentators does not seem to hold up to even a basic examination with the worst data coming from the West Coast. Simply put, Citi warns, we think housing sentiment got carried away as it did into 1994 and 1998 post the housing/savings and loan crisis of 1989-1991.
Current events are frequently viewed through the prism of analogies. Words become shorthand for a particular type of situation. “Munich” equals the danger of appeasing bloodthirsty dictators, “Vietnam,” and now “Iraq/Afghanistan” means the folly of getting involved in (or, in the case of Iraq, starting) civil wars in countries whose societies the outsiders neither understand nor can effectively influence. In some cases, acting on these parallels turns out to be wise. The analogy that is currently in vogue in Asia is “1914.”
Listening to the media gleefully hype the numerous construction flaws and rumors of corruption at the Sochi Olympics, we couldn't help thinking that Americans in general have no clue about Russia. Here are some of the similarities and differences... "Russia is rising. Maybe we can give her a high five on our way down. Instead of criticizing others, look in the mirror America."
The entire banking sector is based on two illusions: 1) Thanks to modern portfolio management, bank debt is now riskless; and 2) Technology only enhances banks' tools to skim profits; it does not undermine the fundamental role of banks. The global financial meltdown of 2008-09 definitively proved riskless bank debt is an illusion. It's not just that banks are no longer needed - they pose a needless and potentially catastrophic risk to the nation. To understand why, we need to understand the key characteristics of risk.