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"It's A Man-Made Tragedy; And The Men Who Made It Won't Fix It"
Submitted by Tim Price via The Cobden Center blog,
“I don’t think there is a problem that this will fix. I think it will just continue to compress yields into negative territory. If that’s the objective it will achieve it. The question is: will we regain European growth momentum and will labour markets pick up in particular outside Germany if we have a programme that buys debt including German sovereign debt ? So the bigger issue is for me a comparison with the US programme. The US QE programme was effective because a large part of the surge of US unemployment towards 10% was cyclical and the Fed provided a federal instrument – there is no risk-sharing because it was federal debt – and intervened in the most liquid market from which everything is priced.
“In Europe we don’t have such a bond market for, say, Eurobonds because the instrument doesn’t exist. It would be a risk-sharing instrument. Europe is not at that stage of political and fiscal integration. So whatever the ECB does they will not have a big impact on unemployment because most of European unemployment, unlike in the US, is not cyclical. European unemployment is high because of structural reasons. It is high because of inflexible labour market and product market structures, of pension systems, of medi-care systems, of a huge amount of government expenditure related to an ageing population. And so the better issue for Europe is to say: ‘we can help buy time as a central bank – governments should do the right thing’. And we’re seeing too little action too late from governments; in my view we’re seeing too much action too much upfront by the central bank and I think they should really work very hard for governments to face their responsibilities rather than taking on ever larger and ever more demanding responsibilities themselves.”
– Axel Weber, former president of the Deutsche Bundesbank, interviewed on Radio 4’s ‘Today’ programme, 22 January 2015, just prior to Mario Draghi’s announcement of a €1.1 trillion ECB money-printing programme.
* * *
“The guy with the asset price bubble question.. he is not coming back.”
– Tweet from Zero Hedge during the ECB press conference.
* * *
“When you look at Mr Wolf’s background … it becomes clearer why he supports these policies. He’s never mortgaged his house to open a small business. He lives in the fairy land of academics that believe printing paper will somehow be a signal to Directors (that have a fiduciary duty to act in the best interest of shareholders) to invest in expanding capacity?! ..that only the omnipotent power of the central planners can save the private sector by artificially holding down the major price signal in a ‘market’ economy.”
– ‘Manfred’, responding to Martin Wolf’s FT piece, ‘Draghi’s bold promise to do what it takes for as long as it takes’, 22 January 2015.
* * *
“YOU KNOW THE BULL MARKET IS LONG IN THE TOOTH WHEN
“When….. Start-ups are being started and IPO’s being raised to hunt Bigfoot… Nope… this is not a joke…And nope, this is not something you would see anywhere near market lows.
From today’s WSJ:
Start-ups are famous for setting big, hairy goals. Carmine “Tom” Biscardi wants to catch Sasquatch—and is planning an initial public offering to fund the hunt.
Mr. Biscardi and his partners hope to raise as much as $3 million by selling stock in Bigfoot Project Investments. They plan to spend the money making movies and selling DVDs, but are also budgeting $113,805 a year for expeditions to find the beast. Among the company’s goals, according to its filings with the Securities and Exchange Commission: “capture the creature known as Bigfoot.”
– Hat tip to Beijing Perspective. See also ‘Species of blue-green algae announces IPO’
* * *
Well, that was worth waiting for. Not. Future generations are unlikely to ask, ‘Where were you during the ECB’s announcement of QE, daddy ?’ Primarily because
a) Much of the detail of the stimulus was leaked the day beforehand, and
b) The real event of January was the Swiss National Bank’s capitulation in capping the franc’s peg to the euro.
Axel Weber’s assessment of the futility of euro zone QE is surely sufficiently articulate: a central bank is attempting to solve problems that can only be resolved through government action. A central bank by definition is limited in scope to the monetary sphere. What is required is tough love in the economic policy sphere – in France, in Greece, and elsewhere. Europe lacks the political and fiscal unity for Mario Draghi to do anything other than play games with the printing press and with a load of poor quality debt offering dubious yields. Central banks are not magicians, even if they behave like them.
And the ECB is coming late to the party in any case. In the words of Colin McLean, “the US and UK were dealing with a cyclical downturn, not deep-seated structural failure. In the euro zone, QE might further delay the need for structural reform..”
Financial historian Russell Napier last week discussed the Swiss National Bank’s surprise decision to abandon its own currency peg:
“The Swiss National Bank (SNB) failed to ‘fix’ the exchange rate between the Swiss Franc and the Euro. The simple lesson which investors must learn from this is – central bankers cannot fix very much. The inability of the Swiss National Bank to ‘fix’ the exchange rate will come to be seen as the end of the bull market in the omnipotence of central bankers.”
He went on to highlight some of the other things that investors erroneously believe central banks to have ‘fixed’:
Central bank policy is creating liquidity.
Wrong – the growth in broad money is slowing across the world.
Central bank policy is allowing a frictionless de-gearing.
Wrong – debt to GDP levels of almost every country in the world are rising.
Central bank policy is creating inflation.
Wrong – inflation in most jurisdictions is now back to, or below, the levels recorded in late 2009.
Central bank policy is fixing key exchange rates and securing growth.
Wrong – in numerous jurisdictions, from Poland to China and beyond, this exchange rate intervention is slowing the growth in liquidity and thus the growth in the economy.
Central bank policy is keeping real interest rates low and stimulating demand.
Wrong – the decline in inflation from peak levels in 2011 means that real rates of interest are rising. The growth in demand in most jurisdictions remains very sluggish by historical standards.
Central bank policy is driving up asset prices and creating a positive wealth impact which is bolstering consumption.
Wrong – savings rates have not declined materially.
Central bank policy is creating greater financial stability.
Wrong – whatever positive impact central banks are having on bank capital etc. they have failed to prevent the biggest emerging market debt boom in history. That boom is particularly dangerous because either the borrower or lender is taking huge foreign exchange risks and because a large proportion of that debt has been provided by open-ended bond funds which can be subject to runs.”
The ongoing disaster that is the euro zone is tedious beyond words, so let’s change the subject. The Washington Post last week published a piece on Venezuela (different circus; same clowns) by Matt O’Brien. This is another cautionary tale of what happens to economies when bureaucrats insist on messing around with the price function. Having “defaulted on its people”, Venezuela may now be on the verge of defaulting on its debts.
It shouldn’t be this way. Venezuela, after all, has the largest oil reserves in the world. It should be rich. But it isn’t, and it’s getting even poorer now, because of economic mismanagement on a world-historical scale. The problem is simple: Venezuela’s government thinks it can have an economy by just pretending it does. That it can print as much money as it wants without stoking inflation by just saying it won’t. And that it can end shortages just by kicking people out of line. It’s a triumph of magical thinking that’s not much of one when it turns grocery-shopping into a days-long ordeal that may or may not actually turn up things like food or toilet paper.
This reality has been a long time coming. Venezuela, you see, has the most oil reserves, but not the most oil production. That’s, in part, because the Bolivarian regime, first under Chavez and now Maduro, has scared off foreign investment and bungled its state-owned oil company so much that production has fallen 25 percent since it took power in 1999. Even worse, oil exports have fallen by half. Why? Well, a lot of Venezuela’s crude stays home, where it’s subsidized to the you-can’t-afford-not-to-fill-up price of 1.5 U.S. cents per gallon. (Yes, really). Some of it gets sent to friendly governments, like Cuba’s,in return for medical care. And another chunk goes to China as payment in kind for the$45 billion it’s borrowed from them.
That doesn’t leave enough oil money to pay bills. Again, the Bolivarian regime is to blame. The trouble is that while it has tried to help the poor, which is commendable, it has also spent much more than it can afford, which is not. Indeed, Venezuela’s government is running a 14 percent of gross domestic product deficit right now, a fiscal hole so big that there’s only one way to fill it: the printing press. But that just traded one economic problem — too little money — for the opposite one. After all, paying people with newly printed money only makes that money lose value, and prices go parabolic. It’s no wonder then that Venezuela’s inflation rate is officially 64 percent, is really something like 179 percent, and could get up to 1,000 percent, according to Bank of America, if Venezuela doesn’t change its byzantine currency controls.
Venezuela’s government, in other words, is playing whac-a-mole with economic reality. And its exchange-rate system is the hammer. It goes something like this. The Maduro regime wants to throttle the private sector but spend money like it hasn’t. Then it wants to print what it needs, but keep prices the same like it hasn’t. And finally, it wants to keep its stores stocked, but, going back to step one, keep the private sector in check like it hasn’t. This is where its currency system comes in. The government, you see, has set up a three-tiered exchange rate to try to control everything — prices, profits, and production — in the economy. The idea, if you want to call it that, is that it can keep prices low by pretending its currency is really stronger than it is. And then it can decide who gets to make money, and how much, by doling out dollars to importers at this artificially low rate, provided they charge what the government says.
This might sound complicated, but it really isn’t. Venezuela’s government wants to wish away the inflation it’s created, so it tells stores what prices they’re allowed to sell at. These bureaucrat-approved prices, however, are too low to be profitable, which is why the government has to give companies subsidies to make them worthwhile. Now when these price controls work, the result is shortages, and when they don’t, it’s even worse ones. Think about it like this: Companies that don’t get cheap dollars at the official exchange rate would lose money selling at the official prices, so they leave their stores empty. But the ones that are lucky, or connected, enough to get cheap dollars might prefer to sell them for a quick, and maybe bigger profit, in the black currency marketthan to use them for what they’re supposed to. So, as I’ve put it before, it’s not profitable for the unsubsidized companies to stock their shelves, and not profitable enough for the subsidized ones to do so, either..
But just like Venezuela has defaulted on its most basic obligations to its people — like, say, laundry detergent — it might also default on its financial ones. It can’t afford anything, not food, not diapers, and not bond payments, if oil stays around $50 a barrel. Now, investors have assumed that they’d be able to seize Citgo, which is owned by Venezuela’s state-owned oil company, as payment if the country ever defaulted on its debt. But now it looks like that’s not true. That, together with falling oil prices, is why credit default swaps, basically debt insurance, on Venezuela’s 5-year bonds haveexploded the past few months. The fiscal situation is so dire that Citgo, which, remember, supposedly wouldn’t count as a part of the Venezuelan state, is planning on taking out $2.5 billion in debt to give to its parent company, which would presumably pass it along to the government. This makes sense, as much as anything does in Venezuela, because Citgo has a higher credit rating than the government, so it canborrow, and if it defaults, it will just be as if the country sold it.
It’s a man-made tragedy, and the men who made it won’t fix it. Maduro, for his part, blames the shortages on the “parasitic” private sector, while the food minister doesn’t get what the big deal is since he has to wait in line at soccer games.
So it turns out Lenin wasn’t just right that the best way to destroy the capitalist system is to debauch the currency. It’s also the best way, as Venezuela can tell you, to destroy the socialist one.”
At last week’s press conference to announce the ECB’s first iteration of QE (if history is any guide, there will be more), Mario Draghi claimed to see no evidence of inflation whatsoever. Perhaps Mario Draghi lets someone else manage his property, stock and bond portfolio.
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The Federal Reserve is run alomg the lines of a Thieves' Bazaar. With most of the thieves coming from Wall Street.
"...Compress yields in negative territory..."
How do you "compress" something into less than nothing?
*head asplodes*
Simple: "Anti-Matter"
Yellen: "Warp Ten lieutenant!"
...It's become such a joke.
That's why we need new leaders led by recently elected Ukranian President, Anna Kornikova, and the rest of the planet's professional female tennis stars to save Mother Earth.
How do you "compress" something into less than nothing?
ZIRP gun.
Correct. So, why are we still allowing these bankers and financiers access to FREE MONEY (ZIRP)?!?!?!?
Stupid is as stupid does I guess...
These fuckers are certainly not going to indict themselves.
"So it turns out Lenin wasn’t just right that the best way to destroy the capitalist system is to debauch the currency. It’s also the best way, as Venezuela can tell you, to destroy the socialist one.”
So can we call the Fed's currency debauchery, Yelleninism?
Are you Yellen? https://www.youtube.com/watch?v=qGErnbAVqGs
What’s wrong dude!? You Yelle!, Ahahahahaha that’s what I thought Yellen Pelly http://youtu.be/0c-UIkfsk1U?t=1m49s
We All live in a Yellen Submarine, Yellen Submarine https://www.youtube.com/watch?v=qE0B5rYdy8I
Yellen like a felon.
See this shit show will never stop....I can't take it anymore....please let it end or stop with the sky is falling articles...thanks
Indeed: "The US QE programmer was effective." Nop it wasn't! It was an ineffective bankster bail-out with a huge negative impact on world's economy.
"... most of European unemployment, unlike in the US, is not cyclical. European unemployment is high because of structural reasons." Nop, Neo-Liberal BS! U.S. Unemployment is much higher than in a lot of European countries like Germany, The Netherlands, Belgium, Luxembourg, Sweden, Norway etc. Real U.S. Unemployment according to Shadowstats is 23% but I think that even that number is conservative. I think U.S. Unemployment is between 25%-30% and growing. http://www.shadowstats.com/article/no-686-december-employment-and-unempl...
Negative interest rates is the only tool the CB's have to spur supply side for lending, as far as the demand side of the equation...well its like pushing on Yellen's limp dick.
You really don't think Yellen's sporting a chubby during all of this?
What socialist system is this moron talking about? Vene-fucking-zuela's?
You'd have to be a once-in-a-lifetime idiot to believe Venezuela's foreign debt is in any way comparable to this 'ongoing eurozone disaster'.
When will ordnary murcans ever face the truth that life is much better within that eurozone disaster, even for the Greeks, Irish and Portugese - all of them fringe fucking rogue states in third world countries before the euro - that murcans love to mailgn?
I wish you guys had the money and guts to come over here. Life's much better than the - ever growing! at 3%! cleanest shirt! laborly mobile! - fucking United States. Even in Greece.
So your advice is that more people should go to Europe (mainland) and enjoy this breathtaking period of utopian paradise.
That's exactly my advice. So glad I was clear enough to lead you to that conclusion!
Seriously, you really believe that life is better on your side of the ocean, or even (for Britons) the North Sea?
All hail the power of Murdoch.
I want some of what your drinking. Powerful shit man.
Why do you people complain when Romanian and Arabs go then?
Actually, I believe that life is what you make of it. Sure we have fucked up policy makers with their debt based fiat requiring perpetual growth in order to maintain the system, but we do live in an amazing period of time and transformation. I can communicate and share ideas with somebody I never met a half a world away. This makes me hopeful for the future as people come to realize that most of us share a lot of the same values. My biggest fear is that TPTB really fuck things up trying to maintain the status quo.
I agree. But then again the same internet gives hoi polloi unlimited free entertainment at a tip of the finger. Which is probably why there haven't been crowds in the streets so far. When bread is free, it's all about circuses. When those become free - well good luck changing the status quo. Ever.
Methinks that if you ask the millions of unemployed people across Europe and those who are now homeless in Spain/Portugal/Italy/Greece living on the streets etc etc, they might not agree with your view that Europe is the place to be. Only today, RT.com have shown footage about 40 people who are living in the Madrid Barajas airport.
Why else is Britain being inundated by migrants from Europe?, why is there a huge encampment in Calais overflowng with people from all over the place trying to get across the Channel to the UK?
Plse don't get me wrong, I am not saying the UK is better than Europe, it's little different.
Yes there are homeless in Spain, Italy etc.. Always have been, always will be. They were there before the euro, many many more of them. Before the euro, the Lire and Peseta caused the same periodic suffering through devaluations as the euro does now. Well, not entirely the same because in the euro they have a future not beholden to the markets and their corrupt elites the way their former weak third world currencies were.
Americans tend to forget Spain, Greece and Portugal were dictatorships just a few decades ago. All these countries had massive (youth) unemployment as well as huge grey and black sectors way before the euro.But suddenly, because these quasi third world fuckup countries are in the euro - i.e. the sole dollar-pound competitor - they and their unemployment figures are suddenly crucially detrimental to their currency, investment, Europe's monetary system and its social arrangements.
Pull me another one.
By the way, Britain is pulling all these migrants because of stimulated chain migration, i.e. its elites love to lower the wage tide for all boats. France and Germany just aren't ready for this neolibcon anglo-fucking-saxon dystopia. Yet.
Europeans may find themselves between a Russian Boot & a hard place soon enough....
Oh really? What are the Russians gonna do? Energy blackmail? Nukes? There is no Russian boot, there's only American fucking feet up Russia's arse. Yes, pushed by Europe. But Europe will only be pushed so far.
I'm not sure if this word 'socialist' is being bandied about in the wrong context?
http://www.merriam-webster.com/dictionary/socialism
Full Definition of SOCIALISM 1 : any of various economic and political theories advocating collective or governmental ownership and administration of the means of production and distribution of goods 2 a : a system of society or group living in which there is no private propertyb : a system or condition of society in which the means of production are owned and controlled by the state
3 : a stage of society in Marxist theory transitional between capitalism and communism and distinguished by unequal distribution of goods and pay according to work done http://en.wikipedia.org/wiki/Benito_MussoliniThe socialist political movement includes a diverse array of political philosophies.
Core dichotomies include reformism versus revolutionary socialism, and state socialism versus libertarian socialism.
State socialism calls for the nationalisation of the means of production as a strategy for implementing socialism,
while libertarian socialism calls for decentralized means of direct democracy such as libertarian municipalism, citizens' assemblies, trade unions, and workers' councils[11] coming from a general anti-authoritarian stance.[12][13][14][15][16][17][18]
Democratic socialism highlights the central role of democratic processes and political systems and is usually contrasted with non-democratic political movements that advocate socialism.[19] Some socialists have adopted the causes of other social movements, such as environmentalism, feminism and liberalism.[20]
Marx & Engels: a materialist understanding of socialism as a phase of development which will come about through social revolution instigated by escalating and conflicting class relationships within capitalism.[22] and the confluence of socialism with anti-imperialist and anti-racist struggles around the world.
Socialism became the most influential worldwide movement and political-economic world view of the 20th century.[23]
- Seems like your definition didn't cover enough ground
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After reading an article like this I think it's important that we go back to our roots and reconfirm what we know are the actual truths of the financial world:
1. Until printing money stops working money printing is what will be used to solve every problem.
2. When numbers on a computer screen are what signals imminent collapse, the numbers will be changed.
3. Everyone is broke. If you're less broke than the other guy you are rich. (One-eyed man in the land of the blind syndrome)
4. They control the money supply, guys. They can keep this shit going a lot longer than any of us think they can.
Yes. Agree.
- and in the news today and related:
- Obama Budget Creates Second Death Tax...
- Seeks largest federal workforce since Cold War...
- Gloomy view of future behind proposals...
But none of this addresses the Shadow Government Workforce/Labor Force/and Secrets Holders... the Government Contractors, Directly Employed by Government Contract, yet hide all the secrets and dirt that you are not supposed to know.
Wanna see growth? Look at the total number of federal contracts, the funding, the core government & banking & military Functions performed by Private Companies, and even the size of the contracts.
Big Story there. I wonder if Either CBO or GAO has the Data.
No. You are still believing the Fed's self-serving crap when you think they'll stop printing when it stops working. It hasn't stopped working because it can never work, and it never has worked, at least not for the Fed's 'mandate'.
The logical conclusion is that the recent Fed-assisted creation of a perpetual financial aristocracy has been the goal, not some collateral damage of a policy purportedly designed to lower unemployment (as if that, too, is a monetary phenomenon).
How even the most open, critical and inquiring minds have been and still are fooled by this trick still boggles mine.
Our Lives Have Always Been Manipulated By Money - part 1
Read more: http://www.messagetoeagle.com/monpowerpart1..php#ixzz3QhjcqV4jBefore the con was if we wanted economy to prosper, we needed to save the bankster and accept ZIRP
The new con is high fuel prices are something we should embrace, not disdain
So let's all pray for a quick return to $5 gas!!
As of today everything's fine, the bottom is in, and prices back up because in the second half of the year driving is expected to pick up.
The robots on t.v. really DO pull this stuff out their asses. Cashin calls it for what it is - a short covering rally... Either way it's spastic fucking A.D.D. and these shitstains want to call themselves 'investors'.
~~~~~~ *sigh*
With all the stealing by the Federal Reserve one can only hope the board presidents are prosecuted as traitors when the government changes.
In Weimar they bailed out for the U.S. and Pales,er, Israel, before it hit the fan.
Just like they were hoping for in Greece, but pretty much just the same old shit no matter what.
"4. They control the money supply, guys. They can keep this shit going a lot longer than any of us think they can."
Well that sucks.
I can't take credit for it. That was one of the very first comments I read that made a deep impression on me when I first started visiting ZH years back. I never forgot it becuase the awful truth of it is self-evident.
That's because it's not a tragedy for the men who made it
Yep they are up to owning 50% of everything, soon it will be 75%.
The men who made it planned it that way.
Bingo! Cui Bono.
I didn't read much past "The FED provided an instrument".
Barak Obama has already captured Bigfoot. Just spend $100k on a plate at a dinner with the Obamas and snap some pictures of Michelle, but understand that Bigfoot is a protected species at this point and capturing it is frowned upon. There, I just told that company how to save $2.9 million.
The frame around the problems and mistakes in Venezuela is the systemic attack that ALL ALTERNATIVES come under from the corporate, oligarchic class when a country tries to go its own way. The CIA is there coordinating the attack and if that's not understood then I recommend seeking psychiactric help. That Venezuela is a key energy producer just adds to the case.
"That's because it's not a tragedy for the men who made it." -- Budd....., above
Huh?
Let's change that to "It's a man made tragedy and the men profiting from it won't fix it".
"Because it tried to help the poor."
I have a bridge I think you might be interested in.
Excellent way to frame the argument - 'those that made the probblem won't fix it.' As it applies so nicely to USSA, it should be taken ahold of and spread - almost like Clinton's mantra "it's the economy, stupid."
Spread it wide and repeat it often "Those that made the problem won't fix it!"
As a Goebellian tactic, it isn't even necessary to offer a solution. Just point the blame where it belongs.
"$113,805 a year for expeditions" to catch Bigfoot? Sit in the woods and drink beer, what does the rest go to?
Nice breakdown of Venezuela.
Right, I think the Trailer Park Boys already did that. Chances of success go up with the addition of weed.
"Oh the thinks you can think!"
Hmmmm ... I guess this one wasn't because of those 'greedy' banksters!
Viva La Revolucione!
if the fed and eurozone want inflation so badly they have plenty of examples to follow in south america. brazil is the king of inflation creation. the place is loaded with experts looking for a job.
So, how does this Socialist country (Venezuala) compare to the bad outputs of Socialist Norway or Sweden?
Norway used their North Sea oil more prudently than did "Finance Capitalist" Britain.
Are you comparing Norway's oil reserves:population with the UK's? Seriously?