Economic Debunker Steve Keen is interviewed by outspoken Irish journalist Vincent Browne and no holds are barred as he describes the Maastricht Treaty as a suicide pact of critically poor central-planning design of a supposed market-economy, based on financial crises never occurring, locking European governments into an austere path when stimulus is required. "Ultimately the Euro has to fail and the longer we continue the farce of believing we can make it function the larger the ultimate crash will be" is how Keen portrays the situation and describes the foreign-exchange, fiscal policy, and monetary policy shackles that have created and exaggerated the situation. This leads into a longer discussion of the state of the World and its inability to 'export into the ponzi' like Japan could from 1990 to 2010 since the entire developed world is trying to do the same thing and "there is no ponzi scheme on Mars that we can export to" leaving the globe without Japan's initial way out. The must-watch 10 minute interview goes on to discuss the endgame (a break in the political compact based on austerity pressures and military or political coups) as Keen sums up "it's amazing to see us repeating the same mistakes that were made during the 1930s but we are doing just that." ending with some potential solutions noting that there is no easy way out of this.
Draining your banking system dry of deposits and loans is no easy task (just see chart below), and yet the Greeks sure have succeeded. There was only one open question: where did all this money go. Now we know.
While gold demand from the western investors and store of wealth buyers has fallen in recent months, central bank demand continues to be very robust and this is providing strong support to gold above the $1,600/oz level. IMF data released overnight shows that Mexico added 16.8 metric tons of gold valued at about $906.4 million to its reserves in March. Russia continued to diversify its foreign exchange reserves and increased its gold reserves by about 16.5 tons according to a statement by its central bank on April 20. Other creditor nations with large foreign exchange reserves and exposure to the dollar and the euro including Turkey and Kazakhstan also increased their holdings of gold according to the International Monetary Fund data.Mexico raised its reserves to 122.6 tons last month when gold averaged $1,676.67 an ounce.Turkey added 11.5 tons, Kazakhstan 4.3 tons, Ukraine 1.2 tons, Tajikistan 0.4 ton, and Belarus 0.1 tonnes, according to the IMF. Ukraine, Czech Republic and Belarus also had modest increases in their gold reserves. Central banks are expanding reserves due to concerns about the dollar, euro, sterling and all fiat currencies.
The thing about GDP, is that it doesn’t really measure wealth creation, or the size of the economy. It measures a derivative of that: money circulation. If Congress passed a law saying that everyone in America had to smoke meth (hey, if you can mandate the purchase of health insurance, why not mandate drug consumption in the name of increasing GDP?) and gamble all their disposable income on horse racing, GDP would almost certainly improve. And that’s growth, right? Except it isn’t. Real growth comes from innovation, productivity, imagination, and hard work. You can attempt to quantify it, but there is no easy catch-all number that will give you a quick and simple insight.
There are those who think that Currency Wars are a brand new thing. They are not. More importantly, we now have finally moved on to the real deal:
- EU SAID TO PLAN WTO COMPLAINT AGAINST ARGENTINE IMPORT CURBS - BBG
This perfectly objective and otherwise impartial decision has nothing to do with recent collectivist decisions of what is for the greater good... At least one's greater good that is, which just happens to be the biggest problem with central planning at the global level.
All you need to read and some more.
The IMF meeting ended yesterday and leading world economies agreed to more than double the lending power of the IMF in an effort to protect the global economy from the euro zone contagion. This was still short of Lagarde’s $600 billion goal. The Netherlands was drawn into the spotlight over the weekend when the government failed to agree on budget cuts, making elections nearly unavoidable and casting doubt on its support from future euro zone aid. Investors will watch the China HSBC manufacturing survey at 1430 GMT as a measure of the conditions of the world’s 2nd largest economy. The Federal Reserve meets on Tuesday and Wednesday, and its statement on monetary policy is given on April 25th. The Bank of Japan meets on Friday and is expected to ease again. Trading is sluggish as the market waits for clues.
All morning we have been blasted with 2011 deja vu stories how the IMF panhandling effort has finally succeeded, and how Lagarde's Louis Vuitton bag is now full to the brim with $400 billion in fresh crisp US Dollars bills courtesy of BRIC nations, and other countries such as South Korea, Australia, Singapore, Japan (adding $60 billion to its total debt of Y1 quadrillion - at that point who counts) and, uhh, Poland. From Reuters: "The Group of 20 nations on Friday were poised to commit at least $400 billion to bulk up the International Monetary Fund's war chest to fight any widening of Europe's debt crisis." We say deja vu because it is a carbon copy of headlines from EcoFin meetings from the fall of 2011 in which we were "assured", "guaranteed" and presented other lies that the EFSF would surpass $1 trillion, even $1.5 trillion on occasion, any minute now. Alas, that never happened, and while we are eagerly waiting to find out just what the contribution of Argentina will be to bail out Spanish banks (just so it can expropriate even more assets from the country that rhymes with Pain), we have one simple question: does the I in the IMF stand for Idiots? Why? Because this is merely yet another example of forced capital misallocation, only this time at a global scale.
Is this the company to dominate mobile computing for the next decade? Either it's drastically misunderstood and insanely underpriced, or its a massive bubble. Here's the fundamental take...
Over the past month, the world has finally awakened to the reality that when it comes to easing, there is more than just one central bank (i.e., the Fed). in fact, as we have been showing since early this year, the bulk of the easing over the past 5 months has happened elsewhere, primarily in Europe with LTRO 1+2, and subsequently at the BOE, and more recently at India and Brazil. Yet some holdouts still remain. One of these naturally is China, which everyone would love to see cut RRR or even the benchmark rate, yet which as recent CPI data has shown still has lingering packets of inflation precisely where it hurts: food (and of course recall China's Schrodinger economy). Which leaves Japan, which already eased more a few months back when it expanded its LSAP program... but it is never enough. Needless to say strategists, in their quest to shake any and every central banker here or there for some free money, have been seeing imminent BOJ easing in the form of yet another Y5 trillion LSAP any second now. Yet it is one thing for bankers to do what they are programmed to do, which is demand more free money, it is something very different when politicians step in and defuse the myth that any central bank is even remotely independent, especially when reelection is at stake. As Bloomberg points out this morning, the fight for the BOJ's "independent" balance sheet is starting to get lethal.
In simple terms, Spain is like Greece, only bigger and worse. According to the Bank of International Settlements worldwide exposure to Spain is north of $1 TRILLION with Great Britain on the hook for $51 billion, the US on the hook for $187 billion, France on the hook for $224 billion and Germany on the hook for a whopping $244 billion.
Ideological deflationists and inflationists alike find themselves both facing the same problem. The former still carry the torch for a vicious deflationary juggernaut sure to overpower the actions of the mightiest central banks on the planet. The latter keep expecting not merely a strong inflation but a breakout of hyperinflation. Neither has occurred, and the question is, why not? The answer is a 'cold' inflation, marked by a steady loss of purchasing power that has progressed through Western economies, not merely over the past few years but over the past decade. Moreover, perhaps it’s also the case that complacency in the face of empirical data (heavily-manipulated, many would argue), support has grown up around ongoing “benign” inflation. If so, Western economies face an unpriced risk now, not from spiraling deflation, nor hyperinflation, but rather from the breakout of a (merely) strong inflation. Surely, this is an outcome that sovereign bond markets and stock markets are completely unprepared for. Indeed, by continually framing the inflation vs. deflation debate in extreme terms, market participants have created a blind spot: the risk of a conventional, but 'hot,' inflation.
The states of America are, truly, children of the Constitution. The legal framework that is the foundation of state sovereignty and internal administration is unique for perhaps any country in history up to the moment the U.S. won its independence. States were designed to decentralize and keep in check the power of a subservient Federal Government. They were meant to be the guardians at the gate, the barrier to the formation of oligarchy or outright dictatorship. This, of course, has changed drastically. The battle over centralized verses decentralized authority and economy has been going on for quite some time, and is undeniably critical in our climate of crisis now, under a government which is bankrupt in every sense and a currency which is on the verge of calamity... The following is a step by step method that states could use to accomplish the task of insulation from financial crisis and federal control. Much of it hinges on a willingness by state governments to actually pursue independence, which might seem like a naïve dream to most of us. But, in the wake of a major breakdown, and the fall of the greenback, I believe many states will be seeking a way to weather the storm, if only out of a desire to survive, and this includes walking away from their ties to Washington.
"You apparently can survive betting against bull market irrationality if you meet three conditions. First, you must allow a generous Ben Graham-like “margin of safety” and wait for a real outlier before you make a big bet. Second, you must try to stay reasonably diversified. Third, you must never use leverage."...It is the classic failing of value managers (and poker players for that matter) to get impatient and bet too hard too soon. In addition, GMO was not always optimally diversified. We are generally more cautious (or, if you prefer, “more experienced”) now than in 1998 with respect to, for example, both patience and diversification, and at least we in asset allocation always stayed away from leverage. The U.S. growth and technology bubble of 2000 was by far the biggest market outlier event in U.S. market history; we had previously survived the 65 P/E market in Japan, which was perhaps the greatest outlier in all important equity markets anywhere and at any time. These were the most stringent tests for managers, and we were 2 to 3 years early in our calls in both cases. Yet we survived, although not without some battle scars, with the great help that we did, in the end, win these bets and by a lot. Hypothetically, resisting the temptation to invest too soon in 1931 may have been a tougher test of survival in bucking the market. Luckily we, and all value managers, were not around to be tempted by that one.