Nationalization

The Countdown To The Nationalization Of Retirement Savings Has Begun

Even before the new myRA program was announced, there had been whispers about the need for the US government to assume some risk for US retirement accounts. That's code for forced conversion of private retirement assets into government bonds. As bad as it is to deceive naïve Americans into trading their hard-earned retirement savings for garbage (i.e., Treasury securities), the myRA program potentially represents something far worse... the first step toward the nationalization of existing private retirement accounts.

Rolling Stone Resurrects Karl Marx (And No - It Was Not Satire)

The fact that economic ignorance is widespread is really a big problem in our view. Unfortunately even what is broadly considered the economic mainstream thought is riddled with stuff that we think just doesn't represent good economics. Partly it is actually furthered by statist propaganda and obfuscation. For instance, the average citizen is not supposed to question the centrally planned monetary system, and neither is he supposed to actually understand how it works. Another glaring example is the still widespread idea that socialism – or rather, communism (i.e., full-scale socialism as opposed to its milder 'democratic' version) – would be "the best possible system of social and economic organization if only it were implemented correctly", or the variant "...if only human nature were different and we were morally more advanced than we actually are". The main problem with this train of thought is that it is actually completely wrong...

And The Best Stock Market Of 2013 Is...

With the world watching mouth open at the 30% gains in the US equity market (and 57% gains in Japan), the Venezuelans are cock-a-hoop at their wealth-generation this year... a sprinkling of totalitarianism, nationalization, toilet-paper shortages, and hyperinflation and, drum roll please... the Caracas Stock Index is up a disappointed-not-to-make-it-to-500%, 480% in 2013... (time to greatly rotate and chase that momentum)...

Bailout Of World's Oldest Bank In Jeopardy, Rests On Hope That "Ship Does Not Sink"

The ongoing debacle of Italy's Banca Monte dei Paschi (BMPS) took a turn for the worst today. The bank's largest shareholders (MPS Foundation) approved (read - forced through) a delay in a EUR 3 billion capital raise, which the bank needs to avoid nationalization, until May. The delay (which will cost the bank EUR 120 million in interest) allows MPS more time to liquidate their 33.5% holding before their stake is massively diluted. Management is 'considering' resignation and is "very annoyed," but the city Mayor is going Nationalist with his delay-supporting comments that "we cannot let the third biggest bank in this country fall prey to foreign interests." So Europe is recovering but they can't even raise a day's worth of POMO to save the oldest bank in the world?

Guest Post: Inflation, Shortages, And Social Democracy In Venezuela

The economic turmoil in Venezuela has received increasing international media attention over the past few months. Earlier this month, in another attempt to ensure “happiness for all people,” Maduro began to hand out Christmas bonuses, in preparation for the coming elections in December. Although not yet officially in hyperinflation, monetary expansion is pushing Venezuela toward the brink. In such an environment, paychecks need to be distributed quickly, before prices have time to rise; hence, early bonuses. This kind of policy is nothing new in economic history: Venezuela’s hyperinflationary episode is unfolding in much the same way Germany’s did nearly a century ago. Consequently, Venezuela’s economic policy is proving to be another example of Ludwig von Mises’s argument that economic intervention, if left unchecked, leads to complete socialism. As disturbing as the thought is, the difference between the U.S. and other Western economies and Venezuela is merely one of degree, not of kind.

Venezuela Jails Over 100 "Bourgeois, Barbaric, Capitalist Parasites"

"It's time to deepen the offensive, go to the bone in this economic war," warned Venezuelan President Maduro - echoing Hugo Chavez's iron fist of socialism (and nationalization) before him - as his decision to jail over 100 businessmen is "defending the poor." As Reuters reports, plenty of Venezuelans have applauded his measures, saying price hikes were out of control, while others have expressed fears that Maduro could be uncorking dangerous forces as opposition forces note Maduro's economic policies were "chillingly similar" to those of Zimbabwean President Robert Mugabe. Officials say unscrupulous companies have been hiking prices of electronics and other goods more than 1,000 percent. Critics say failed socialist economic policies and restricted access to foreign currency are behind Venezuela's runaway inflation. No matter which, Maduro thundered "They are barbaric, these capitalist parasites!"

Venezuela Government "Occupies" Electronics Retail Chain, Enforces "Fair" Prices

Venezuela's relatively new government has adopted arguably the best and brightest socialist policy wielded by both Hollande and Obama, namely the "fairness doctrine." However, in this case it is not about what is a "fair" tax for the wealthy (as taxes in Venezuela's socialist paradise will hardly do much to build up the desperately needed foreign currency reserves), but what is a "fair" price for electronic appliances like flat screen TVs, toasters, and ACs. The result is that Maduro's government now determines what equilibrium pricing should be. The reason for this latest socialist victory over the tyranny of supply and demand is that overnight Venezuela's President Nicolas Maduro ordered the "occupation" of a chain of electronic goods stores in a crackdown on what the socialist government views as price-gouging hobbling the country's economy. Various managers of the five-store, 500-employee Daka chain have been arrested, and the company will now be forced to sell products at "fair prices," Maduro said late on Friday.

Guest Post: 5 Ways To Create A Monopoly

It’s hard to maintain monopoly status in a free market when you have to deal with all that competition and whatnot. Between other companies’ low prices and new, updated products entering the market each day, it’s almost like Rich Uncle Pennybags is a thing of the past. But fret not! The politicians of the world would like to offer anyone dead set on controlling an entire industry the chance to shine. So come one, come all — government agencies, cronies, and all their friends — as we present the five best ways to create a monopoly and to ensure you never have to compete again.

It Begins: Monte Paschi "Bails In" Bondholders, Halts $650 Million In Coupon Payments

Recall that three weeks ago we warned that "Monti Paschi Faces Bail-In As Capital Needs Point To Nationalization" although we left open the question of "who will get the haircut including senior bondholders and depositors.... given the small size of sub-debt in the capital structures." Today, as many expected on the day following the German elections, the dominos are finally starting to wobble, and as we predicted, Monte Paschi, Italy's oldest and according to many, most insolvent bank, quietly commenced a bondholder "bail in" after it said that it suspended interest payments on three hybrid notes following demands by European authorities that bondholders contribute to the restructuring of the bailed out Italian lender. Remember what Diesel-BOOM said about Cyprus - that it is a template? He wasn't joking.

Venezuela Seizes Toilet Paper Factory Amid Fears Of US Sabotage

The Venezuelan government is in a bind. They realize that 'the people' will stand-by idly as the nation's currency is devalued, as inflation soars, and blackouts continue as food shortages grow...(and the stock market soars) but take away a critical personal care item and the riots will begin. As Yahoo Maktoob reports, Venezuela's leftist government said Saturday it temporarily seized a major toilet paper factory hoping that it can end troublesome shortages of the staple personal care item. "The temporary occupation of [the toilet-paper manufacturing plant] is aimed at verifying that toilet paper industry production, marketing and distribution" are all in line with state policies, Vice President Jorge Arreaza said on Twitter, without indicating how long the takeover would last. This action follows 'nationalization' of large farms amid President Maduro's claims that the White House is plotting the "collapse" of his government next month by sabotaging food, electricity and fuel supplies.

China Flies Bombers And Drone Near Japanese Skies

The Japanese Self-Defense Forces were on a high state of alert on September 9 ahead of the first anniversary of Japan’s controversial purchase of islets in the disputed Senkaku/Diaoyu archipelago, particularly after a pair of Chinese bombers flew near Okinawa the previous day. Japanese Defense Minister Itsunori Onodera has ordered military personnel to strengthen their surveillance around the Senkakus, which are also claimed by China and Taiwan. A source in the Japanese government indicated that the People’s Liberation Army (PLA) and Chinese maritime enforcement could take “outstanding” action in the area on September 11, the first anniversary of the purchase.

Monti Paschi Faces Bail-In As Capital Needs Point To Nationalization

Just as we warned 4 months ago, the oldest bank in the world now faces a critical need to raise EUR2.5 billion in fresh capital - more than double its original plan. "There is no chance on the planet that they can raise [this] in 12 months... they are heading towards nationalization," exclaimed one investment banker, confirmed by another who added via Reuters, "it will be difficult to find someone to shell out all that money." The capital raise is equivalent to the entire market cap of the bank currently and it is becoming increasingly clear that the Italian state will be forced to provide the equity. The problem (for BMPS bondholders and depositors) is that under such a scenario, as Bloomberg notes, EC State Aid rules regarding a subordinated-debt bail-in could apply. However, given the small size of sub-debt in the capital structures, it is unclear who will get the haircut including senior bondholders and depositors.