Wednesday, June 29, 2011

Euro-zone Change of Debt /Gdp ratio 2005 to 2011

Euro-zone economic growth (change of gdp 2005 to 2011)

Euro-zone change in industrial production 2005 to 2010

IMF wants more debt for the US

The International Monetary Fund said today global markets will suffer if the U.S. Congress fails to approve an increase in the $14.3 trillion debt ceiling and cautioned about the risk of a downgrade in the country’s credit rating.
“The federal debt ceiling should be raised expeditiously to avoid a severe shock to the economy and world financial markets,” the IMF said in a report on the U.S. economy. The report said a failure to reach a budget and debt compromise could result in a “sudden increase in interest rates and/or a sovereign downgrade.”
The IMF, in releasing a statement on the annual report, said that risks to the U.S. include housing market weakness and the European debt crisis.
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Comment: One Greece is not enought, the IMF wants more than peanurs. The IMF wants a big fish go into the net of debt from which there is no escape.

Greece escapes default

Greek Prime Minister George Papandreou clinched enough votes to pass the first part of an austerity plan aimed at meeting European Union aid requirements and staving off default for his debt-laden nation.
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Comment: Let's hope that Greece has set an example that debt accumulation can't go on forever - a lesson that many more nations still have to learn.

Monday, June 27, 2011

The truth behind Greece' debt misery

Greece is effectively bust — relying on EU cash from richer northern European countries, but this has been the case ever since the country finally joined the euro in 2001.
Two years earlier, the country was barred from entering because it did not meet the financial criteria. 
No matter: the Greeks simply cooked the books. Two years later, having falsely claimed to have met standards relating to manufacturing and industrial production and low inflation, the Greeks were allowed in.
Funds poured into the country from across Europe and the Greeks started spending like there was no tomorrow.
Money flowed into all areas of public life. As a result, for example, the Greek school system is now an over-staffed shambles, employing four times more teachers per pupil than Finland, the country with the highest-rated education system in Europe. ‘But we still have to pay for tutors for our two children,’ says Helena, an Athens mother. ‘The teachers are hopeless — they seem to spend their time off sick.’
Although Brussels has now agreed to provide the next stage of its debt payment programme to safeguard the count ry’s immediate economic future, the Greek media still carries ominous warnings that the military may be forced to step in should the country’s foray into Europe end in ignominy, bankruptcy and rising violence.
Read more:

Ron Paul

Ron Paul’s Anti-Fed Message Gains Respect

FED will continue with monetization of debt

Fed May Buy $300 Billion in Treasuries After QE2
The Federal Reserve will remain the biggest buyer of Treasuries, even after the second round of quantitative easing ends this week, as the central bank uses its $2.86 trillion balance sheet to keep interest rates low. While the $600 billion purchase program, known as QE2, winds down, the Fed said June 22 that it will continue to buy Treasuries with proceeds from the maturing debt it currently owns. That could mean purchases of as much as $300 billion of government debt over the next 12 months without adding money to the financial system.
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Comment: The surest way to destroy civilization is the destruction of the nation's monetary system. In earlier times this has often happened incidentally, now, we see it done systematically.

Sunday, June 26, 2011

China diggs the gold mine

China Is Long-Term Investor in EU Bonds: Wen

Premier Wen Jiabao said China will keep investing in Europe’s sovereign bond market, providing a vote of confidence in the region roiled by the debt crisis.
“China has actually increased the purchase of government bonds of some European countries, and we haven’t cut back on our euro holdings,” Wen told the British Broadcasting Corp. yesterday in an interview. “I think these show our confidence in the economies of Europe and the euro-zone.”
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Time to raise rates, says BIS

Central Banks Need to Raise Rates: BIS

Central banks need to start raising interest rates to control inflation and may have to act faster than in the past, the Bank for International Settlements said.
“Tighter global monetary policy is needed in order to contain inflation pressures and ward off financial stability risks,” the BIS said in its annual report published yesterday in Basel, Switzerland. “Central banks may have to be prepared to raise policy rates at a faster pace than in previous tightening episodes.”
Comment: The BIS has always been relatively sound in its advice - particularly in comparison with its peers such as the IMF whose "recommendations" have been mostly outright silly.

Main creditors of Greece

Griechenlands größte Gläubiger
RangInstitution/BankAnleihen und andere Wertpapiere (in Mrd. €)Kredite (in Mrd. €)
1Europäische Zentralbank (EZB)49,0-
3Öffentliche griechische Kassen30,0-
4Ausländische Staatsfonds25,0-
5Internationaler Währungsfond (IWF)-15,0
6National Bank of Greece13,25,4
7Nationalbanken der Euro-Zone13,1-
8Piraeus Bank (Griechenland)8,0-
9EFG Bank (Griechenland)9,0-
10FMS (Bad Bank der Hypo Real Estate)6,3-
11Griechische Nationalbank-6,0
12BNP Paribas (Frankreich)5,0-
13ATE Bank (Griechenland)4,6-
14AlphaBank (Griechenland)3,7-
15Dexia (Belgien, Luxemburg, Frankreich)3,5-
16Hellenic Postbank3,1-
17Generali (Italien)3,0-
19Societe Generale (Frankreich)2,9-
20Marfin (Griechenland)2,3-
21Groupama (Frankreich)2,0-
22CNP (Frankreich)2,0-
23AXA (Frankreich)1,9-
24Bank of Cyprus (Griechland)1,8-
25Deutsche Bank / Deutsche Postbank1,6-
26LBBW (Deutschland)1,4-
27ING (Niederlande)1,4-
28Allianz (Deutschland)1,3-
29BPCE (Frankreich)1,2-
30Ageas (Belgien)1,2-
31RBS (Großbritannien)1,1-
32DZ Bank (Deutschland)1,0-
33Unicredito (Italien)0,9-
34Intesa San Paolo (Italien)0,8-
35HSBC (Großbritannien)0,8-
36Erste Bank (Österreich)0,7-
37Munich Re (Deutschland)0,7-
38Rabobank (Niederlande)0,6-
39Credit Agricole (Frankreich)0,6-
40KBC (Belgien)0,6-
Quelle: Barclays Capital   

Tuesday, June 21, 2011

Brazilians come to the rescue

Brazilians Buy Miami Condos as Real Gains

June 21 (Bloomberg) -- Surging real estate prices in Brazil and the real's 45 percent gain against the U.S. dollar since 2008 are sending Brazilians to South Florida in search of bargain vacation homes and property investments. That’s helping bolster Miami’s condo market, with total sales increasing 92 percent in the first four months of 2011 from a year earlier, according to data from the Florida Association of Realtors. Gigi Stone reports on Bloomberg Television's "In the Loop." (Source: Bloomberg) 
Comment:  A change of tides. Instead of coming as maids and waiters, Brazilians now enter the US as investors with full pockets.

Monday, June 20, 2011

How Goldman bombed Libya

Libya's Goldman Dalliance Ends in Losses, Acrimony  WSJ 


In early 2008, Libya's sovereign-wealth fund controlled by Col. Moammar Gadhafi gave $1.3 billion to Goldman Sachs Group to sink into a currency bet and other complicated trades. The investments lost 98% of their value, internal Goldman documents show.

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Comment: My advice: put your trust in God and gold, but never in Goldman.

A farewell from Russia

Russia to Lower U.S. Debt Holdings 


ST. PETERSBURG, Russia—Russia will likely continue lowering its U.S. debt holdings as Washington struggles to contain a budget deficit and bolster a tepid economic recovery, a top aide to President Dmitry Medvedev said Saturday.
"The share of our portfolio in U.S. instruments has gone down and probably will go down further," said Arkady Dvorkovich, chief economic aide to the president, told Dow Jones in an interview on the sidelines of the St. Petersburg International Economic Forum.
Russian holdings of U.S. Treasury securities fell to $125.4 billion in April 2011 from $176.3 billion in October 2010, Treasury Department data showed.
Asked if U.S. debt was as solid an investment now as it was 10 years ago, Mr. Dvorkovich said: "On an absolute basis, yes. On a relative basis, compared to other investments, of course not."
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Comment: Let the Fed hold the bag.

Yen rising

As the yen rallies to levels that prompted the Group of Seven to weaken the currency in March, traders are forecasting more gains, even as Japan falls into its third recession in a decade.
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Comment: Let's ride this train from the beginning to its end. Get ready for a long trip.

Monetary policy paralized

Bernanke May Face ’Self-Induced Paralysis’

As a Princeton University professor,Ben Bernanke castigated the Bank of Japan in 2000 for a “case of self-induced paralysis” that led to a decade of stagnation. Now, the Federal Reserve chairman may be allowing the U.S. central bank to fall into the same trap after its second round of quantitative easing ends this month.
By all but ruling out another cycle of bond purchases, Fed officials have left themselves with little in the way of policy options to respond to slowing growth and rising unemployment. This raises the risk that the U.S. will remain saddled with what Bernanke himself has called a “frustratingly” sluggish recovery that leaves millions of Americans out of work.
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Comment: While China is about to hit the wall, the US is paralized and Europe drowning - it couldn't be worse. Incompetence all over the place: blockheaded Chinese communists, cowardly presidents and central bankers who follow a wrong map.

Saturday, June 18, 2011

An Italian nightmare

Silvio Berlusconi's record

The man who screwed an entire country

The Berlusconi era will haunt Italy for years to come

SILVIO BERLUSCONI has a lot to smile about. In his 74 years, he has created a media empire that made him Italy’s richest man. He has dominated politics since 1994 and is now Italy’s longest-serving prime minister since Mussolini. He has survived countless forecasts of his imminent departure. Yet despite his personal successes, he has been a disaster as a national leader—in three ways.
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Highway to hell

The Federal Debt Elevator: Going Up

If you think the Federal debt ceiling is anything but an elevator, I've got news for you.
Maybe you saw the story about the Air Force airlift of $12 billion in unmarked bills that landed in Iraq sometime between 2003 and 2004 – no one seems sure just when. The story was written by a Los Angeles Times reporter and published on January 13.
Pentagon officials determined that one giant C-130 Hercules cargo plane could carry $2.4 billion in shrink-wrapped bricks of $100 bills. They sent an initial full planeload of cash, followed by 20 other flights to Iraq by May 2004 in a $12-billion haul that U.S. officials believe to be the biggest international cash airlift of all time.
There was a slight glitch in the execution of the plan. Some $6.6 billion of this – three fully loaded planes full – has gone missing.
The story was picked up by the Web, but got little play in the mainstream media. The Huffington Post and Fox News reported it, but not the other major media. The fact that several plane loads of shrink-wrapped $100 bills are unaccounted for is not big news in the minds of America's mainstream editors. A search on Google reveals how little mainstream media interest there was.
There was a modification published by Fox. The auditor in charge said that he never used the figure $6.6 billion. He claimed that only $2.8 billion are unaccounted for. This story was also not picked up by the media.
My point is not that the Pentagon cannot account for either $6.6 billion in missing currency or only $2.8 billion. That is hardly news. My point is that the conflicting sums are so miniscule in comparison with what the U.S. government wastes every day that the story is not considered media worthy when any agency loses this much. The public is so used to stories of wasted billions that this story is a curiosity at best. 
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Comment: Like the dog that did not bark in Sherlock Holmes' investigation, what is not in the mainstream media (or for that matter in mainstream economics) is often the most significant and most important thing to note.

Thursday, June 16, 2011

Markets get it wrong on Greece

Rehn Sees Markets Misreading EU Resolve

European Union Economic and Monetary Affairs Commissioner Olli Rehn said financial markets have made “certain misreadings” on EU leaders’ intentions in the Greek debt crisis.
“There is a certain misreading of the intentions and future actions of the European leaders,” Rehn said today in a Bloomberg Television interview in Brussels. “We will not let the euro area face any kind of catastrophe.”
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Comment: Sorry, chaps, but Rehm is right.

Tuesday, June 14, 2011

Greece - bailout of the bailout

European finance chiefs begin the final stage of hammering out a Greek rescue to prevent the euro area’s first sovereign default after the country was slapped with the world’s lowest credit rating by Standard & Poor’s.
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Comment: I doubt that Greece will default - albeit it should.

Government shutdown about to start - Greece or Minnesota?

Minnesota shutdown looming

, On Tuesday June 14, 2011, 5:23 am EDT
Time is running out for Minnesota's parks, highway rest stops and public universities, not to mention 36,000 state employees.
If Gov. Mark Dayton and lawmakers don't agree on a budget by June 30, the state government is expected to shut down. The state moved one step closer to this outcome on Friday by sending layoff notices to much of the state workforce.
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Comment: Actually Greece were the better candidate, yet what still isn't may well come. Anyway, the largest shutdown of all lies still ahead: Washington, DC, probably in August with a mega crash of bonds and stocks to follow in September.

Monday, June 13, 2011

More than $6 billion in Iraq reconstruction funds lost

The Iraqi and U.S. governments have been unable to account for a substantial chunk of the billions of dollars in reconstruction aid the Bush administration literally airlifted into the country. If the cash proves to have been stolen, the heist could represent "the largest theft of funds in national history," according to a report in the Los Angeles Times.
The Times' description of how the billions of dollars entered the country is a must-read
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There was a time when I was young and still suffering from the brainwash that I thought government is more or less OK. Then my doubts grew the older I got. Now, approaching old age I'm fully sure that government is not only a fraud, but that it is also a criminal gang. We won't get liberty until we'll get rid of the state. What we see these days is the suicide of the state. Let's not worry, all we have to do for the years to come is not to resurrect this monster which has passed away through its own maliciousness.

Old age

Why Working Longer Won't Close Retirement Shortfalls
by Philip Moeller
Friday, June 10, 2011

provided by
Deferring retirement, even for several years, won't guarantee even a bare-bones retirement for millions of older Americans, according to a detailed study by the Employee Benefit and Research Institute (EBRI).
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Comment: This seems to be the fate of the baby boomers: high life as teens, poverty in old age, little in between other than mostly silly jobs (because real jobs went overseas or were held by immigrants).

Thursday, June 9, 2011

Doug Casey says it like it is

The World According to Doug Casey

Classic quotations from Doug Casey
[Editor’s Note: Doug is out of range, traveling at present. Not to leave you without your weekly dose of Doug, here’s a collection of some classic quotations from him. We’ll be back with fresh Doug soon.]
“Foreign aid might be defined as a transfer of money from poor people in rich countries to rich people in poor countries.”
“[What politicians are doing] is not only the wrong thing, it is the exact opposite of the right thing.”
“Chances are slim to none, and Slim is out of town.”
“The average entrepreneur in China is better off than the average entrepreneur in the U.S.A. or Canada.”
“The Constitution in the U.S. is a dead letter. It has been parsed and interpreted out of existence.”
“Things are going to be so bad, they’re going to be even worse than I think they’ll be.”
“America doesn’t exist anymore. It’s the United States. America, which was basically an idea, a concept, is dead and gone. The United States is just another of 200 awful little nation-states that have spread across the face of the earth like a skin disease. There’s no longer any difference that I can tell between the U.S. and any other country.”
“I am more than a libertarian; I don’t believe in the right of the state to exist. The state is unnecessary for society to exist. Everything that needs to be done can be done by the market.”
“The U.S. dollar will eventually reach its intrinsic value.”
“Remember that through most of U.S. history, residential real estate was not viewed as an investment. You didn’t buy a house to make yourself wealthy selling it to someone else. It was viewed as an expensive consumer good that depreciated – you bought or built a house to live in it, just as you bought clothes to wear or a horse to ride. It was just a part of life – a necessity, a convenience, but an expense.”
“One of the reasons I’ve done well in real estate is that I tend to buy things that I like personally and can see using myself. Why? Because I understand these things, and you shouldn’t invest in things you don’t understand.”
“You don’t own your property. Try not paying your real estate taxes for a year or two, you’ll find out who really owns your property.”
“Gold will not just go through the roof, it will go to the moon. The gold mania has not even started.”
“Historically, junior resource stocks are the most volatile class of securities in existence.”
“I have very little doubt that we will see some form of currency control within the U.S. and some other countries, because one thing you can count on is that the government never controls itself. What it does is control its subjects.”
“Anyone who doesn’t transfer significant assets outside of the country they live in will get exactly what they deserve: being led to a lobster trap and cooked.”
“Your biggest risk today is not an investment risk – it is a political risk. So you’ve got to diversify politically. This is absolutely critical.”
“Increasingly desperate states will be the greatest risk to your wealth.”
“Alcohol, tobacco, and firearms – the three things you need for a decent hunting expedition. Or a Class One party. A Class Two party would also include sex, drugs, and rock-n-roll.”
“That’s the problem with America today. You all do as you’re told. It is the law and you accept it.”
“American spirit is dead – except on cigarette packs, which is rather ironic.”
“One of the definitions of stupidity is an inability to correlate cause and effect.”
“For discretionary travel, my first choice is always some place on the U.S. State Department’s “stay away” list. I hate crowds, and due to the hysteria, the hotels, restaurants, attractions, and taxis are empty. So they appreciate your business, and prices are low. And, if you’re actually concerned about that stuff, security is usually much improved after an ‘event’.”
“My mantra: liquidate, consolidate, speculate, and create. To which I add and must emphasize again: diversify your political risk.”
“When the food riots start in New York, LA, London, Paris, etc., I want to be good and far away.”
“The U.S. dollar is an ‘I owe you nothing’ and the euro is a ‘Who owes you nothing?’”
“I only like to do something when the odds are stacked heavily in my favor.”
“Currencies are artificial abstracts created out of thin air by the governments.”
[If you like Doug’s no-holds-barred opinions and market insights, feel free to forwardConversations with Casey to a friend or family member. They’ll thank you later, for making them a smarter investor.]

Greek debt escalation


Greek options


An economic interventionist's critique of the Obama interventionism

The policies of the Obama administration have led to the weak condition of the American economy. Growth during the coming year will be subpar at best, leaving high or rising levels of unemployment and underemployment.

Wednesday, June 8, 2011

US debt default

By Walter Brandimarte

NEW YORK (Reuters) – A default would have severe reverberations in global markets, a top Federal Reserve official said just hours after Fitch Ratings warned it could slash credit ratings if the government misses bond payments.
St. Louis Federal Reserve Bank President James Bullard told Reuters on Wednesday "the U.S. fiscal situation, if not handled correctly, could turn into a global macro shock."
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Comment: We live in the age of infantilization. When baby government doesn't get her candy, she begins to cry out loud and louder and louder. And all the blame is put on the adult, who must bear all the guilt because those with reason and experience are nowadays called heartless misers and outright brutal for not caring for the sweet baby's deep need for more and more candies.

Coutdown to implosion

“The U.S. Treasury next month will go back to relying on the kindness of strangers like never before to purchase the nation’s burgeoning debts — and taxpayers may have to pay higher interest rates to attract enough foreign investors, analysts say. Though a significant rise in interest rates could be toxic for a softening U.S. economy, the Federal Reserve has said it will end its program of purchasing $600 billion in U.S. Treasury bonds as planned on June 30. The Fed is estimated to have bought about 85 percent of Treasury’s securities offerings in the past eight months. That leaves the Treasury, which is slated to sell near-record amounts of new debt of about $1.4 trillion this year, without its main suitor and recent source of support, and forces it back into the vagaries of global markets.” (Washington Times)

China wants more debt for the US

China warns U.S. debt-default idea is "playing with fire"

By Emily Kaiser
SINGAPORE (Reuters) – Republican lawmakers are "playing with fire" by contemplating even a brief debt default as a means to force deeper government spending cuts, an adviser to China's central bank said on Wednesday.
The idea of a technical default -- essentially delaying interest payments for a few days -- has gained backing from a growing number of mainstream Republicans who see it as a price worth paying if it forces the White House to slash spending, Reuters reported on Tuesday.
But any form of default could destabilize the global economy and sour already tense relations with big U.S. creditors such as China, government officials and investors warn.
Li Daokui, an adviser to the People's Bank of China, said a default could undermine the U.S. dollar, and Beijing needed to dissuade Washington from pursuing this course of action.
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Comment: The adviser to the the central bank of China gets something wrong here. He should know that increasing debt is playing with fire, while holding the debt ceiling in place means putting out the fire.

Regime uncertainty

Bloomberg: Put Higgs’s Name on That Nobel

share48 06 42
In a Bloomberg report today, “Economic Recovery Is Languishing as Americans Await Signal of Better Times,” Peter Coy casts about for explanations for why the economy is not in recovery, and ends with this offer:
A Nobel prize goes to whoever can end this routine and get America growing again.
OK, Mr. Coy, send the Nobel to Robert Higgs. Your story is a case-study outline of the phenomenon Dr. Higgs dubbed “Regime Uncertainty”. The prescription is straight-forward: get rid of the rash of thousand-page legislation being passed, containing no one knows what or at what cost (e.g., ObamaCare), and stop all bail-outs, “stimulus,” and further diversions of resources from the private sector to the public.
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Comment: Robert Higg's analysis of "regime uncertainty" is probably the best theory brought forth in order to explain the length and depth of the Great Depression. It is a scandal that many economists ignore Higgs' approach. It seems indeed that for many economists ignorance is really bliss.

Tuesday, June 7, 2011

More stimulus scam in the making

‘Uneven’ Recovery Still Needs Stimulus: Bernanke
Federal Reserve Chairman Ben S. Bernanke said record monetary stimulus is still needed to boost a “frustratingly slow” recovery and repeated that a rise in inflation is likely to prove temporary.
“The economy is still producing at levels well below its potential; consequently, accommodative monetary policies are still needed,” Bernanke said today in a speech to a conference in Atlanta. At the same time, the Fed “will take whatever actions are necessary to keep inflation well controlled,” he said.
Recent data showing weakness in the economy, including a rise in the unemployment rate to 9.1 percent in May, have increased the odds the Fed will hold the benchmark interest rate near zero into next year.
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Comment: Madness with method.

More unfunded liabilities

U.S. funding for future promises lags by trillions By Dennis Cauchon, USA TODAY  
The federal government's financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis shows. The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security. That brings to a record $61.6 trillion the total of financial promises not paid for.
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Comment: Don't worry. It will all get paid - with worthless money.

Monday, June 6, 2011

WASHINGTON – An index of home prices in big metro areas has reached its lowest level since 2002, driven down by foreclosures, a glut of unsold homes and the reluctance or inability of many to buy.
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Comment: Next time you invest, better consult your Austrian economist.

The ultimate Keynesian solution

“If we had the threat of war, had a military buildup, you’d be amazed at how fast this economy would recover.”
Paul Krugman 
Comment:  World War II ended the Great Depression, didn't it? Too bad, we didn't get the war earlier. No depression if we had managed World War I to continue right into World War II and WW II right into the Cold War. What we need is not just another war, but a really big one. How about China?

Saturday, June 4, 2011

Nor more gold in Fort Knox or anywhere else, Goldfinger

Russia Says IMF Chief Jailed For Discovering All US Gold Is Gone 

Posted by EU Times 

Comment: Draw your own conclusions

Civis romanus sum

The Danger of Living on Bread and Circuses: Alice Schroeder
Rome in the first two centuries A.D. faced a yawning gulf between rich and poor. The mighty empire built on tribute reached its geographic limits. Its economy created few exportable goods. Slaves acquired by conquest built most of its bridges, roads and aqueducts and took jobs in farming, mining and construction. As this cheaper labor replaced Roman citizens, idle, unemployed, hungry people filled the capital.
The Caesars created make-work and part-time jobs, subsidized housing and doled out grain. Even more, they found, was needed. “A people that yawns is ripe for revolt,” wrote Jerome Carcopino in “Daily Life in Ancient Rome.”
The emperors added holidays until, eventually, the Romans spent half their days attending gladiator games, public executions and chariot races. Disgusted, the satirist Juvenal accused his fellow citizens of selling out for bribes of “bread and circuses.” The Romans did nothing to prove him wrong, until two centuries later the empire was divided forever and Rome was sacked by Visigoths.
The complicated causes of Rome’s decline have long fascinated historians, and provide a lens through which to examine the vulnerability of other dominant cultures. Americans’addiction to entertainment has been compared to the circuses of ancient Rome. We can, and do, spend much of our free time watching dreck on TV like “Half Pint Brawlers,” about a company of self-styled “midget wrestlers” who attack each other with staple guns and broken bottles. In fact, in 2009, people over age 15 spent an average of 58 percent of their leisure time watching television, playing games and using the Internet -- an increase of 16 percent from 2003.

Digital Age

When entertainment dominates a society, it changes more than the culture; it also reshapes the economy. You can see that circuses are where the money is from the rise of digital entertainment, which has steered enormous amounts of discretionary income toward digital content and the devices that run it: laptops, televisions, gaming consoles, smart phones. In the decade leading up to the 2008 financial crisis, the only major industry other than health care that consistently showed strong real growth was consumer electronics.
Although hit hard by the recession, spending on digital media has now begun to rebound. The question is who benefits. We produce a lot of content, yet most of the devices it comes on are not made in the U.S.

Trade Imbalances

This exemplifies another problem that vexed the Romans and faces us today: Dominant economies tend to import more than they export, creating trade imbalances. The manufactured stuff of life, basic items such as food, clothing, cars, phones and furniture -- the bread, as opposed to the circuses -- costs less to buy if produced elsewhere than if made by a highly developed country’s own citizens. The result is a loss of jobs at home.
The conquest-driven Romans stand out in history as an extreme example. They brought home their imports, including slave labor, as plunder. This made the “bread” as cheap as it could be, and put the Romans themselves out of work.
We merely face a situation in which our labor costs, laws and regulations make U.S. business less competitive than that of other countries. In the 1990s, manufacturing workers went through a draconian loss of employment as work was sent offshore. The very thing that drove the jobs overseas made the bread cheap. During the high-growth bubble decade that culminated in 2008, the sales growth rates of basic consumer goods such as apparel, cars and sporting goods averaged less than 2 percent, so low as to be deflationary in real terms.

‘Service Economy’

Offsetting the loss of manufacturing work, the leverage-happy bubble era created so many jobs for bankers, hairstylists, airline ticket agents and home health aides that we began to describe ourselves as a “service economy.” But service businesses are vulnerable to the very same forces that drove the fat out of manufacturing. Take retailing. Since the 1990s, businesses that helped make the bread cheaper, such as superstores and warehouse clubs, were the only major category of retailers to show strong growth. Now these businesses, too, are severely pressured by more efficient online sellers, which are growing twice as fast as their offline counterparts.
The proportion of our total population that is currently working has fallen to 58.4 percent, the level it was in 1983, when far fewer women were in the job market.

Consumers and Workers

It’s true that this percentage should improve as the economy moves past the lingering effects of the financial crisis, but recovery won’t alter the fundamental trend. Structural forces are creating some very serious employment headwinds, faced especially by younger, less educated men.
Simply put, what has been good for American consumers hasn’t been good for workers.
Look at the big picture, and you also see how, unlike Rome, whose armies looted the lands they conquered, the underemployed U.S. must borrow money to pay for our bread and circuses. Rome was so rich that it took hundreds of years for the empire to crumble. We’re broke, which accelerates the day of reckoning. Reform of U.S. entitlement spending would buy us time, but wouldn’t fix the employment situation.
On a positive note, this bread-and-circuses economy does offer new opportunities. People who can help make things cheaper will do well. They can use digital technology to build businesses of truly global scale. Lastly, anyone who can satisfy the public’s lust for mind-rotting drivel has a viable career ahead in a growth industry.
Drowning a country in vicarious debauchery may be a lousy way to sustain a civilization. Still, there is something to be said for “Half Pint Brawlers” and its ilk. TV-watching keeps people at home, instead of marching in the streets.

Heading towards depression

May job growth falls off cliff

By Zachary RothThe economy added just 54,000 jobs in May, far fewer than economists-- who were already pessimistic about the labor market--had expected. That's the fewest new jobs added in eight months, and it's the latest sign that the fragile recovery may have ground almost to a halt.
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Friday, June 3, 2011

Greece - bailout of the bailout

Greece to Get Next Aid Payment in New Bailout

European Union and International Monetary Fund officials agreed to pay the next installment toGreece under last year’s 110 billion-euro ($161 billion) bailout, paving the way for an upgraded aid package that includes a “voluntary” role for investors.
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Comment: The political logic says: give me enough money, and I'll prove you that I'm right.

High time to quit stocks

U.S. Stocks Drop on Employment Growth Data

U.S. stocks extended a fifth straight weekly drop, the longest slump for the Dow Jones Industrial Average since 2004, as slower-than-estimated growth in jobs fueled concern that earnings forecasts are too optimistic.
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Comment: Seems as if one of the rare ocassions is coming up when it is worthwhile to place some aggressive puts.

Thursday, June 2, 2011

High time to quit bonds

Treasuries Drop Amid Debt Rating Concern; 10-Year Yield Is Back Above 3%

Treasuries fell as Moody’s Investors Service said it expects to place the U.S. government’s Aaa rating under review for possible downgrade if there is no progress on increasing the statutory debt limit in coming weeks.
Most of the losses occurred earlier as 10-year note yields at almost the lowest level in 2011 discouraged demand before the Labor Department’s payrolls report tomorrow. Yields rose back above 3 percent after tumbling yesterday the most in more than two months as hiring and manufacturing growth slowed.
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Comment: This probably the last call to get out of US bonds before it is too late. For aggressive traders the chance comes up to go heavily short on bonds

A warning that shouldn't be ignored

Gross Says Treasury Investors Face Similar Fate as Boiling Frog

Pacific Investment Management Co.’sBill Gross said investors in U.S. Treasuries are being lulled into a false sense of security by positive returns this year because yields aren’t high enough relative to inflation.
Gross, who oversees the world’s biggest bond fund, said bond investors face a similar fate as a frog that remains in a pot of water while the temperature is gradually increased until the amphibian is cooked. Inflation erodes the value of the fixed payments of bonds over time.
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Comment: The longer it take for price inflation to show up, the more drastic it will show up finally. We may well move quickly like never before from a state of relatively low price inflation into hyperinflation.

Moody's raises Greek default risk

Greek Default Risk Raised by Moody’s as Bond Aid Readied

Greece’s risk of default was raised to 50 percent by Moody’s Investors Service as European officials rushed to put together the second bailout plan in two years to stave off renewed financial turmoil in the region.
Moody’s downgraded Greece to Caa1 from B1, putting it on a par with Cuba, according to a report published late yesterday. The move came after policy makers considered asking investors to reinvest in new Greek debt when existing bonds mature.
Twelve years after the currency was started, European leaders are trying to prevent the euro area’s first sovereign default. A 110 billion-euro ($158 billion) rescue in 2010 failed to prevent an investor exodus from Greece, and the country now faces a funding gap of 30 billion euros of bonds next year with its 10-year borrowing cost above 16 percent.
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Comment: I recommend to ignore the agency's "rating". The record of these rating agencies has been abysmal. I wouldn't dare to say that they are actually corrupt from head to toe.

Wednesday, June 1, 2011

Brothers in arms

Strauss-Kahn ally is accused of 'orgy with little boys' in Morocco

By Peter AllenOne of the closest supporters of scandal hit French politician Dominique Strauss-Kahn was today linked with 'an orgy with little boys' in Morocco.
Jack Lang, the former Socialist culture and education secretary, was fighting to save his reputation after Luc Ferry, another ex-minister, revealed the crime on TV.
Breaking a code of silence which traditionally allows such offences to be kept a secret, Mr Ferry said: 'All of us here probably all know who I'm talking about.'
Mr Ferry claimed the man's sex attack on the boys - which was said to have taken place in the tourist city of Marrakech and was uncovered by police who raided a 'palm grove' - was an open secret which had been discussed openly by a former Prime Minister.
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Comment:  When I recently wrote that government is the home of criminals and clowns, I didn't know how right I was about the French socialists.

Debt limit in jeopardy

 WASHINGTON (Reuters) – President Barack Obama told Republicans that there could be dire consequences of a failure to increase the debt limit, White House spokesman Jay Carney said on Wednesday.
"The president made clear that he believes there is no margin here for in any way casting doubt on the possibility that the debt ceiling would be raised, that the effect of even suggesting that it won't happen could be highly negative and could have dire consequences for our economy and the global economy," Carney told reporters in a briefing.
Obama met Republicans from the House of Representatives at the White House, a day after they defeated their own bill to raise the debt limit. The vote was staged to strengthen their demand for huge cuts in federal spending.
The U.S. deficit is expected to reach $1.4 trillion this year.
Comment:Why such a fuss about the $1.4 trillion deficit of this year when it will be much bigger next year anyway?

The great union

Anthony Gregory explains: "Wall Street, money-center banks, and government have worked together for more than a century. The worst manifestation has been the rise of imperialist foreign policy..."
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