The topic of "minimum wage" had been a hot one recently until Obama's red line and Syria stole the front pages. However, no matter how much one explains the dilemma of 'who, eventually,' pays for the increases in minimum wage that will, supposedly, bring a livable wage to all, everyone still wants more - for less. So we looked around the world to see - on a real purchasing power parity basis - just how 'tough' America's minimum wage earners have it. Turns out, only 9 nations in the world have a higher real minimum wage than the US.
The Old Continent: Europe. They have always liked to pride themselves on the fact that they were quaint guys living in leafy suburbs and going to work along cobbled streets.
Wealth has besotted people since time immemorial. It’s accrued, amassed, hidden, stolen and we would even die sometimes for it, or at least knock someone off more than likely to get what they have.
With the value of the rupee plunging to new lows, the current account deficit at an all-time high and inflation running at nearly a ten-percent annual clip, India is in serious economic trouble. Indeed many are beginning to wonder whether the country is edging toward a replay of the events in the summer of 1991. Back then, an acute balance of payments crisis forced New Delhi into the indignity of pawning its gold reserves in order to secure desperately needed international financing. At a small public event the other week, Duvvuri Subbarao, the outgoing head of the central bank conceded that policymakers rarely learn from their mistakes: "...in matters of economics and finance, history repeats itself, not because it is an inherent trait of history, but because we don’t learn from history and let the repeat occur."
Gold Confisaction Imminent? Or Does India Simply Have An Offer For Its Citizens They Can't Refuse...Submitted by Tyler Durden on 08/29/2013 09:08 -0500
Even as the Indian capital outflows and current account exodus may be threatening to shut down the economy altogether (except for the three oil companies that received a last ditch USD infusion from the RBI yesterday), the central bank is planning and strategizing. And it appears to have come up with more of precisely the same that has led it to its current unprecedented predicament: prevent the population from converting their wealth into hard money, i.e., gold. But while the government's attempts to impose capital controls on gold purchases have been well documented, the latest foray is just a headspinner. Reuters reports that India is now considering a "radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency." Here we can safely assume that the commercial banks will pay for the gold in... Rupees which just hit an all time low?
This chart seems to sum up our fiscal challenges as well as anything else...
India Central Bank Scrambles With Currency Collapse Fallout: Gives USD To Oil Companies, Everyone Else Tough LuckSubmitted by Tyler Durden on 08/28/2013 10:26 -0500
The aftermath of the biggest crash in the Indian rupee in history is becoming clear: business are scrambling to refine budgets, import and export activity is disappearing as there is zero clarity what the actual transaction prices net of FX are, purchases of hard assets are exploding as people are desperate to protect what little purchasing power they have left, capital controls are being instituted virtually everywhere, and the overall economy - at least that part that is reliant on foreign trade flows - is grinding to a halt. In fact, it got so bad, that moments ago the 1 month USDINR forward hit a ridiculous 70.
UPDATE 2: It would appear Abe got a late-afternoon phone-call to sell some JPY and buy some Indian 10Y bonds... (since Traders have not seen the RBI intervene directly - or thru local banks)
UPDATE 1: Gold (in USD terms) is breaking out... $1428.47 (gold now at a three-and-a-half month high)
From a weak open, the Indian Rupee has now plunged a stunning 3.88% today. This is the largest single-day drop in the Rupee's value since March 1993. The Indian people have lost 30% of their global purchasing power since March 2013 (though those who swapped their paper wealth to gold have seen their purchasing power rise 6% in Rupee terms). With Gold in Rupees having broken to a new all-time high, it would seem the government has little choice but to lease its gold (no matter how vehemntly they deny the fact).
In Part 1 of this article we documented the insane remedies prescribed by the mad banker scientists presiding over this preposterous fiat experiment since they blew up the lab in 2008. In Part 2 we tried to articulate why the country has allowed itself to be brought to the brink of catastrophe. There is no turning back time. The choices we’ve made and avoided making over the last one hundred years are going to come home to roost over the next fifteen years. We are in the midst of a great Crisis that will not be resolved until the mid-2020s. The appearance of stability is illusory, as the civic fabric of the country continues to tear asunder. Record high stock markets do not trickle down. The masters of propaganda seem baffled that their standard operating procedures are not generating the expected response from the serfs. They have failed to take into account the generational mood changes that occur; propaganda loses its effectiveness in proportion to the pain and distress being experienced by the citizenry.
In September 2010, Guido Mantega coined the phrase "currency war" as he proclaimed the world's central bank's FX interventions were dangerous for citizens' purchasing power and would lead to a vicious circle of competitive devaluations. In March, Mantega unleashed a mini-war by taxing foreign borrowings and threatening capital controls. But this week, after the BRL devalued over 26% since March as Fed Taper talk and EM capital flight takes hold around the world, Brazil has waded into the world's currency war with the largest currency intervention the nation has ever planned. Following a dismal current account deficit print, as The FT reports, "Brazil will launch a currency intervention program worth about $60bn to ensure liquidity and reduce volatility in the nation’s foreign exchange market" - offering USD500 million per day in currency swaps to support the Real. But, as Citi warns, it does not fix any of Brzail's problems.
Presented with little comment (over our earlier detail) but just to note that around the world there are significant events occurring (even as the US equity market slumbers). So much for the gold coin ban - gold now trades at 4 month highs in Rupee terms.
How Bad Can Things Get? Nobody knows the answer, so we have to consider our responses to a spectrum of possibilities. President Calvin Coolidge famously remarked, "If you see ten troubles coming down the road, you can be sure that nine will run into the ditch before they reach you." While there is certainly much wisdom in this reassurance, that still leaves us the task of preparing for the one that doesn't run harmlessly into the ditch.
First Fiat, Now Printing Comes To Rewards Programs As Hertz Dilutes Rewards Points By "A Modest" 15%Submitted by Tyler Durden on 08/13/2013 12:29 -0500
Because diluting the paper currency through endless global central-bank printing is obviously not enough to boost corporate top and bottom lines, next up on the dilution wagon are the corporate "rewards programs" which have decided to join the fray and are kind enough to advise honored clients their point purchasing power is about to be diluted by "a modest" 10%-15%. First on deck: Hertz. To wit: "in light of rising costs, we find it necessary to implement our first reward redemption point increase since 2008. Beginning October 1, 2013, point redemption levels for Rewards will increase a modest 10-15% in the United States, Canada, Puerto Rico and U.S.V.1."
With all of the problems afflicting the world economy nowadays, inflation seems to be the least of our worries. In addressing the post-2008 economic malaise, which stems from over-indebtedness, policymakers are correct to focus on the threat of debt deflation, which can lead to depression. But dismissing inflation as “yesterday’s problem” could undermine central banks’ efforts to address today’s most pressing issues – and, ultimately, facilitate inflation’s resurgence. Understanding how the Great Inflation from the late 1960’s to the early 1980’s was tamed offers important lessons for addressing far-reaching economic problems, however different ours may be, and provides insight into the dangers that may lie ahead.
There are real-world consequences to over-issuing credit and currency. Eventually this leads to a bidding war for trust: Whose credit/cash will be trusted to retain its purchasing power? There is a grand irony here, of course; as issuers of credit/cash attempt to debase their currency to boost their exports, their debased currency buys fewer real-world resources.