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Napoleon, Central Banks And The Cost Of Boredom
Another week of central bank watching ahead, and markets will play their customary game of chicken with the U.S. Federal Reserve and the European Central Bank. Both central banks have policy meetings this week – the Fed’s concludes on Wednesday, the ECB’s on Thursday – and capital markets have been moving higher in recent days on the hope of coordinated action. For investors and traders, this sets up a classic “Buy the rumor, sell the news” pattern for the week ahead. But Nic Colas of ConvergEx asks the deeper question, and the one that will retard any lasting move to the upside, is how much central banks can do without help from fiscal policymakers.
Nic Colas, ConvergEx...
One of the overarching themes of these notes is that human history repeats because human nature does not change. We learn, yes… But the genetic coding that allowed the species to survive through the millennia is still hardwired into our decision-making processes. The best example for investors is that humans run away from danger and cluster together for safety. Great if you are facing a hungry animal, but problematic if you get scared out of a volatile market or think buying a hot new social networking company is the path to outperformance.
Boredom doesn’t get its fair share of the press as a dangerous human characteristic, and I know of no better example of this than Napoleon – Bonaparte, not Dynamite – to highlight this failing. Two hundred years ago to the day, the self-crowned French emperor was sitting in the little town of Vitebsk, in what is now Belarus. He had just pushed the Russian Army out of the town and decided to camp there for the winter and continue his invasion of Russia in the spring. But after just a few days in this sleepy hamlet, he grew bored. One of his aides, Philippe-Paul de Segur, later wrote that Napoleon’s fateful decision to immediately advance onto Moscow came from this logic:
“How can I bear the boredom of seven months of winter in this place? Am I to be reduced to defending myself – I who have always attacked? Such a role is unworthy of me… I am not used to playing it… It is not in keeping with my genius.”
The rest, as they say, is history. Advance he did, with his army of 600,000 men under arms, reaching Moscow on September 14, 1812. The Russians never gave him the decisive battle he desired, preferring to burn their capital to the ground and move further east. Winter, famine and disease did the rest, and the Grand Armee left Russian later that year with less than 120,000 soldiers. It was the greatest military defeat until the German Army replicated the effort in World War II, to similarly disastrous effect.
Such is the price of boredom, and exactly 200 years later the U.S. and European central banks are sitting in their own virtual Vitebsk. Both organizations have meetings this week, and both are clearly at the decisive moments of further action. They do not want to stop and rest for the winter, and capital markets are restless for further action. In a nutshell, here is the battlefield each sees:
- In the United States, the rush of better economic news during the first quarter of 2012 has slowed to a trickle. Employment gains have slowed to levels below demographic growth. The first look at Q2 Growth Domestic Product logged a measly 1.5% growth rate, down from 2.4% in the first. Long-term interest rates hover at or below century-low averages, signaling the threat of deflation - the greatest fear of any central banker.
- In Europe, it is a story of the haves and have-nots. German bond rates are even lower than those in the U.S., but the Spanish and Italian governments must pay 6-7% for their incremental borrowings. Unsustainable levels, those, for countries where tax receipts are insufficient to cover expenditures.
Capital markets in recent days have sniffed out the inevitable truth – that both the ECB and the Fed feel they have to act. The timing and scope of their announcements is a wild card, to be sure. Both central banks have already exhausted their arsenals of traditional weapons such as short-term interest rate policy, with only modest effect. Their next steps with unconventional measures such as further bond purchases (QE III in the U.S. and targeted purchases of periphery sovereign debt in Europe) have the feel of stopgap moves rather than time-proven steps.
Like Napoleon’s invasion of Russia, however, the enemy of economic downturn is not giving the Fed and ECB a decisive battle. By way of contrast, the Fed’s first round of Quantitative Easing in 2008 was successful in stabilizing the financial system and pumping liquidity into the stock market. This bought some time for corporate profits in the U.S. to rebound and opened capital markets so companies could refinance debt at ever-more attractive rates. Now, the battlefield is different. Some points here:
- In the U.S., we face the need to resolve the “Fiscal Cliff,” that combination of tax increases and reduced government spending that all come due between October 2012 and January of next year. The Presidential election process means little will be done to resolve this overhang until November, and even then a lame duck Congress will have little incentive to craft a lasting resolution.
- In Europe, the cost of holding together the euro currency continues to climb. The Greek and Spanish economies continue to struggle, limiting tax receipts needed to fund the countries’ ongoing spending needs. Italian bond yields, even after the end-of-week rally, still hover at an unsustainable 6%. At the other end of the quality spectrum, Moody’s downgraded the outlook for German debt last week. As we recently noted, consumer confidence across the Eurozone is now more varied than at any time since before the 1992 Maastricht Treaty that began the road to monetary unification. All this means that politicians may want the euro to succeed, but they face local electorates that have their own parochial concerns over the long-term costs of that goal.
In short, the Federal Reserve and European Central Bank know they face a difficult battle since their natural allies – democratically elected governments – are not yet on the field. Capital markets know this as well. But the temptation to do something – anything, really – is simply too strong for both central bankers and markets to resist. All this limits the effectiveness of any central bank action and similarly consigns any market rally to a short life.
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Love the analogy! Peace is a good thing, but it gives politicians the need to do something crazy like SPEND, BORROW, SPEND, BORROW, etc.
http://confoundedinterest.wordpress.com/2012/07/30/sovereign-debt-rollov...
This is when someone shoots themselves in the foot even worse then we have seen. "Idle hands are the devils playthings"...
“humans run away from danger and cluster together for safety”
Yes, but there can be a little problem with that kind of behavior..
http://i48.tinypic.com/ajowuo.jpg
But, "The road to hell is paved with good intentions."
The currency is the cannon fodder,expendable,always willing to make that sacrifice .............until finally we get that good ol' Napalm-oleon Blown-apart(Hyperinflation).......kaboom!....and its all over.
Sun Tzu -Fatal Terrain
Battle cry:"Charge!, IT!!!!"
Fuck my aviatrix got hacked. !!!! 8 ball?
More like: "Ready, Fire! Aim!"
http://www.freefdawatchlist.com/2012/07/stock-chart-analysis-of-dow-jones.html The easiest way for FED and ECB to tackle this algos market is talk without printing
Have always appreciated the Russians "come and get it mother fucker" strategy. The is all useless mental masterbation in a world with tatical nuclear weapons. Boring world indeed.
"If you wish to be a success in the world, promise everything, deliver nothing."
- Napoleon Bonaparte
"Heaven and earth were created in 6 days. Ask me for anything but time." N.B.
"Do the chickens have sharp talons?"
~Napoleon Dynamite
"history is a set of lies, agreed upon"
napolean b.
"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes... Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."
- Napoleon Bonaparte, 1815
"When a government is dependent upon bankers for money, they and not the leaders of the government control the situation, since the hand that gives is above the hand that takes. Money has no motherland; financiers are without patriotism and without decency; their sole object is gain."
quit repeating, please, the caricature, echolalia and re-Dun
dun
dun
dun
Dun-cy, of yer HS history texts. please: in the name of agnosis . . .
If one picture is worth a thousand words, then one example surely must be worth a dozen explanations. There is no better example than the economic war waged by the financiers of nineteenth-century Europe against Napoleon Bonaparte. It is an easily forgotten fact of history that Napoleon had restored law and order to a chaotic, post-revolutionary France and had turned his attention, not to war, but to establishing peace and improving economic conditions at home. He was particularly anxious to get his country and his people out of debt and out of the control of bankers . . .
. . . It was ordained by him that money should not be exported from France on any pretext whatever except with the consent of the Government, and that in no circumstance should loans be employed to meet current expenditure whether civil or military.... "One has only to consider," Napoleon remarked, "what loans can lead to in order to realize their danger. Therefore, I would never have anything to do with them and have always striven against them."...
. . . When a Government, Bonaparte declared, is dependent for money upon bankers, they and not the leaders of that Government control the situation, since "the hand that gives is above the hand that takes ...... "Money," he declared, "has no motherland; financiers are without patriotism and without decency: their sole object is gain."
One of Napoleon's first blows against the bankers was to establish an independent Bank of France with himself as president . . . It was his refusal to borrow, however, that caused the most concern among the financiers.
Actually, to them this was a mixture of both bad and good news. The bad news was that they were denied the benefit of royalty payments on fractional money. The good news was that, without resorting to debt, they were confident Napoleon could not militarily defend himself. Thus, he easily could be toppled and replaced by Louis XVI of the old monarchic dynasty who was receptive to banker influence . . .
They had good hope of compassing his downfall. None believed that he could finance war on a great scale now that the resource of paper money had been denied him by the destruction of the Assignat. Where would he obtain the indispensable gold and silver to feed and equip a great army? Pitt [the Prime Minister of England] counted already on a coalition of England, Austria, Prussia, Russia, Spain, Sweden, and numerous small states. Some 600,000 men would be put into the field. All the resources of England's wealth-that is to say, of the world's wealth-would be placed at the disposal of this overwhelming force. Could the Corsican muster 200,000? Could he arm them? Could he feed them? If the lead bullets did not destroy him, the gold bullets would soon make an end. He would be forced, like his neighbors, to come, hat in hand, for loans and, like them, to accept the banker's terms....
He could not put his hands on 2,000,000, so empty was the Treasury and so depleted the nation's stock of metallic money. London waited with interest to see how the puzzle would be solved. Napoleon solved the puzzle quite simply by selling off some real estate. Those crazy Americans gave him E3,000,000 for a vast swamp called Louisiana.
http://www.network54.com/Forum/155335/thread/1122399716/last-1122399716/Rothschild+Banking+Empire
Seems Hitler was raised by the financiers, then sought to overpower them once he saw world domination within his reach, what with his Jewish engravers and the counterfeiting that trashed (among others) England's currency. Seems also, the Catholic Church is always lurking in the background, and via the Ruskies, shut down both Hitler and Nappy?
no
Be The Opposition
.
ruskies? abramovich berezovsky khodorkovsky gusinsky fridman leviev like dese schiffskies?
or dose trotskies anvelt apfelbaum babtchinski goukovski ganzburg joffe lourie lander landauer kaganovitch etc... kamaniev kauffman kaprik kronberg weinberg steinberg schlichter sosnovsky oukovski sverdlov steklof skrytnik savitch spitzberg smidovitch etc etc . . . uritski volodarski ulyanov zinoviev and their massmurderedmillions . . .
.
CC ?
really
no cc. vatican,inc. since 1823
which's now the inter-alpha&omega
Got it - thank you. Still can't help but think the Khazar run global central bankster mafia cartel, via jesuit vat inc., would be at the helm, steering all toward the one/new/fourth reich-world order and also financing/empowering both sides? Regards.
A leader is a dealer in hope.
Napoleon Bonaparte
The latest Venus Project management farse. Watch the entire clip. Pause @ 28.43 to see grant money contributors. Quite an alignment of different monetary policy styles.
http://www.youtube.com/watch?feature=player_embedded&v=bTbLslkIR2k#!
If you can't baffle them with brilliance, baffle them with bullshit.
top 40 of the richest possess $1.04 trillions
U.S. and West Europe are no longer democracy – we are slaves of the richest and that is why the so called Western Civilizations is doomed
Everything the richest do by their puppets (the governments and the central banks) is aimed to preserve their power, not to fix the economy
And finally the analogy is inappropriate – Napoleon was a great man of honour and proud ambition to make France great power – the central banks are just a bunch of miserable rats obsessed by their greed and inferiority
"we are slaves"
This is an important and unfortunately minimized point in a lot of discussion around the wealth class. Since it's convenient to use and a widely known quote, I always use "The borrower is slave to the lender." If you borrow money, or, if money is borrowed on your behalf, you are a slave.
http://www.usdebtclock.org
Even if you are "debt free" (ie., no personal debt, including your mortgage), you are not actually debt free, because your friendly neighborhood government (at every level, local, state, and federal) is borrowing money on your behalf. You, personally, have to help pay that money back, by coercive force of law (ie., if you don't pay your tax bill, they appropriate/liquidate your assets and throw you in prison). Every citizen currently owes about $181K. That amount is pennies to some, but a tremendous amount of money to most.
So the question is, how pissed off are you that $181K was borrowed on your behalf (that is rising every single second of every single day), with your consent implied in our lovely voting system? Do you feel like you've gained at least $181K worth of goods and services in exchange for this no-recourse loan? How does it feel, knowing that your kids are on the hook for that too? Even your newborns? Does it feel good, knowing that they are born into slavery? What steps are you willing to take to free them from this slavery? How far are you willing to go on your own behalf to be free from this slavery? Again, you, personally, are their slave. Will you rise up? Or will you continue to serve your masters? It really is that simple of a choice, and the consequences of continuing your service are probably easier in the short run, and much, much harder in the long run. Please also note that the short run is rapidly approaching it's end point.
No no.. Napoleon was just that - a man called Napoleon
No no...He was just a midget with a complex.
The fed has put itself in a box. The market knows the fed has to act ,but once the fed does act if the printing is not big enough the market will sell off. If the printing is too big commodities wil go through he roof, what is left of the economy will be destroyed, and the market will sell off. A false flag is imminent.
Unfortunately, I have to agree with your thoughts on this. Baring a massive central or "state" banking move that also includes the BRIC states, of course.
You've mentioned a false flag before, and I find myself agreeing with you more and more.
Israel/Iran....
False flags are popping up already. Look for more mass shootings in the US, and maybe a "terror" attack soon.
There are a lot of machinations going on right now at the UN for an intervention in Syria to "prevent the use of chemical weapons".
"May you live in interesting times."
Meeting request : ASAP
Location : Waterloo
Meeting happened today in Sylt, Germany between Geithner and Schauble. I imagine Geithner's overlord (GS) sent him and told him to tell Schauble to get with the program. Next stop for Geithner is meeting with Draghi.
A grenade thrown into a kitchen in France would result in Linoleum Blownapart.
good morning!
just woke up here in CA, its 0746 local time (or10:46 EST)...no i don't wake up early to watch casino!! as of now EUR @ 1.225 and spx @ 1388...LAST FRI i said to short EUR @ 1.232 after tanking from 1.24 = yes i missed the top @ 1.24 was doing something...but I did short spx @ 1386.....
from this high point on = JUST RIDE BABY !! til spx sub 1100 and EUR to 1.10
RIDE = don't watch casino every minute...maybe 2 minutes/day = ok.
"In short, the Federal Reserve and European Central Bank know they face a difficult battle since their natural allies – democratically elected governments – are not yet on the field."
What is this crap? They're always on the field and they've got the FED's back. "Get to work, Mr. Chairman" Congress has always had the power to disolve the FED, but the FED is their out, their fall guy. Kanjorski and his demand that mark to market be ignored or congress will do it for them? This is all a joint effort with many many mirrors and lots of smoke.
It is not boredom that moves them, but Spanish bond yields racing past 7% last week, imo.
Not precise enough. It was proven through experiments that reactions of newborns are conditioned by environment. Small children (on their own) are not afraid of fire, dark or even animals. So, what you describe as hardwired is indeed hardwired but in culture which is passed from generation to generation. Culture restrained by demo-economic reality. Thus we can hardly blame human nature (hardly existing, favorite scapegoat of marketeers) for our current and past woes but quite easily on ossified, inertial culture and intentionally perpetuated scarcity of means to satisfy even basic human needs (water, food, shelter...)
Blaming human nature for all idiotisms of today is equaly absurd as declaring war on terror (what a cop-out)
What did Josephine say to napolean when he was leaving for the Battle of Waterloo?
Don't get blown apart Bonaparte!
A Snoopy Classic
http://edgeperspectives.typepad.com/edge_perspectives/2012/06/the-rise-of-vendor-relationship-management.html
Not sure what this has to do with Napoleon, but went and skimmed the linked article anyway. I think the good Dr. is making an assumption that the vast majority of consumers will do the research necessary to make informed decisions- clearly they will not. They'll let Madison Ave. tell them what they want. Alternatively, they'll follow the herd (a' la i-phone users).
Think for themselves? Not so much.