Friday, 31 January 2014

Deflationary shock

The Telegraph have a nice piece that is suitably catastrophic. Reading between the lines is right up the conspiracy economist's street.

Contagion is kicking in.  Argentina, Turkey, South Africa.  Currencies are being defending, reserves are falling, interest rates are rising to defend a currency in a war that will be hard to win. Increased interest rates choke of any recovery which could set back the global recovery.

Things are looking bleak but gold and productive land might appear to be safe havens but that is for another day.  Deflation is not a gold bug positive. #

Next stage - currency wars (that have already been running pretty hot for the last couple of years).  Once China pile in they things will really heat up.

World risks deflationary shock as BRICS puncture credit bubbles [Telegraph]

Half the world economy is one accident away from a deflation trap. The International Monetary Fund says the probability may now be as high as 20pc.

It is a remarkable state of affairs that the G2 monetary superpowers - the US and China - should both be tightening into such a 20pc risk, though no doubt they have concluded that asset bubbles are becoming an even bigger danger.


Moreover, China is struggling to keep its industries humming at the current exchange rate. Patrick Artus, from Natixis, says surging wages - and falling productivity - mean that it now costs 10pc more to produce the Airbus A320 in Tianjing than it does in Toulouse.

The implications are obvious. China may at some stage try to steer down the yuan to hold on to market share, whatever they say in the US Congress, partly to stop Japan stealing a march with its 30pc devaluation under Abenomics. Albert Edwards from Societe Generale say this may prove the ultimate deflationary shock, dwarfing the 1998 Asia crisis.


Tuesday, 28 January 2014

Quote of the day "Have an exit plan"

Drudge report.

Put your shorts on and get the bug out bag ready

From Russia without love for Bitcoins

Breaking news:  Bitcoin use discouraged by the Russian central bank.  Of course they would say that as Russians salt away millions in bitcoin related investments.

Central Bank of the Russian Federation Discourages Use of Bitcoin [crytocoins news]

The Central Bank of Russia has released their view on cryptocurrencies like Bitcoin. We have earlier argued that Russia may outlaw the use of Bitcoin due to its strict monetary policy. It seems our presumption was correct as the press release from the Central Bank of Russia is hostile against the use of Bitcoin and other digital currencies.

A Russian source has told us that the Central Bank’s new stance on virtual currencies means that they have banned the use of it, affecting both their partners and customers. This will make it hard to operate both Bitcoin-exchanges and Bitcoin-businesses in Russia.
A link to the full press release in Russian is provided in the link.

Book of the day: "HAYEK: Road to Surfdom"

The Road of Surfdom. [PDF]

Happy reading.

Friedrich A. Hayek 

Friedrich A. Hayek (1899–1992) was born in Vienna and obtained two doctorates from the University of Vienna, in law and political economy. He worked under Ludwig von Mises at the Austrian Institute for Business Cycle Research, and from 1929 to 1931 was a lecturer in economics at the University of Vienna. His first book, Monetary Theory and the Trade Cycle, was published in 1929. In 1931 Hayek was made Tooke Professor of Economic Science and Statistics at the London School of Economics, and in 1950 he was appointed Professor of Social and Moral Sciences at the University of Chicago. In 1962 he was appointed Professor of Political Economy at the University of Freiburg where he became Professor Emeritus in 1967. Hayek was elected a Fellow of the British Academy in 1944, and in 1947 he organised the conference in Switzerland which resulted in the creation of the Mont PĂ©lerin Society. He was awarded the Nobel Prize in Economics in 1974 and was created a Companion of Honour in 1984. In 1991 George Bush awarded Hayek the Presidential Medal of Freedom. His books include The Pure Theory of Capital, 1941, The Road to Serfdom,1944,The Counter-Revolution of Science, 1952, The Constitution of Liberty, 1960, Law, Legislation and Liberty, 1973–9, and The Fatal Conceit, 1988.

Government going bankrupt? No bailout but citizen bail in (Reuters)

The Bundesbank calls on countries to "bail in" from citizens before calling on Germany to help.  No reader of this blog should be surprised at this recommendation. 

Although difficult to implement it would certainly raise the required funds.  This might explain why the wealthy of those countries in risk and buying bitcoins and property in London.  The wealthy will have their escape routes planned already.

Bundesbank calls for capital levy to avert government bankruptcies [Reuters]

"(Reuters) - Germany's Bundesbank said on Monday that countries about to go bankrupt should draw on the private wealth of their citizens through a one-off capital levy before asking other states for help.

The Bundesbank's tough stance comes after years of euro zone crisis that saw five government bailouts. There have also bond market interventions by the European Central Bank in, for example, Italy where households' average net wealth is higher than in Germany.

"(A capital levy) corresponds to the principle of national responsibility, according to which tax payers are responsible for their government's obligations before solidarity of other states is required," the Bundesbank said in its monthly report.

It warned that such a levy carried significant risks and its implementation would not be easy, adding it should only be considered in absolute exceptional cases, for example to avert a looming sovereign insolvency."

Sunday, 26 January 2014

Mauldineconomics does "the history of gold manipulation"

A fairly long but amusing and well written acticle.  The Brown sell-off in the 1990s explained.  Great read and of course this is "gold bug" conspiracy related there is enough to get your teeth into.  

Nice quote:

"It was probably a mistake to allow gold to rise so high."

That Was The Weak That Worked: Part 3

The concluison of the article - classic gold bug but they might just be right.

"Gold is a manipulated market. Period.

2013 was the year that manipulation finally began to unravel.

2014? Well now, THIS could be the year that true price discovery begins in the gold market. If that turns out to be the case, it will be driven by a scramble to perfect ownership of physical gold; and to do that you will be forced to pay a lot more than $1247/oz.

Count on it."

Tuesday, 21 January 2014

Conspiracy blog of the day: "The economic Collapse"

The Economic Collapse.

A cheery title for a blog with the byline "Are you prepared for the Coming Economic Collapse and the Next Great Depression".

The website is selling books, military surplus, emergency food, survival supplies and of course gold and silver coins.  The staples for the budding prepper.

I think we know where this is going.

The articles are much as you would expect.  Inequality,  financial crisis predictions, Goldman and Sachs and economic freedom.

Worth keeping an eye on.

Friday, 17 January 2014

Academic Paper: Is Bitcoin a Real Currency?

Now an acacdemic view on the bitcoin debate.    Is Bitcoin a real (whatever that means) currency?  Quick answer - no.  It behaves like a speculative investment.  I say, "give it time".  It will settle down, stablise and does work.

Is Bitcoin a Real Currency?" 

NBER Working Paper No. w19747
DAVID YERMACK, NYU Stern School of Business

Motivated by Bitcoin’s rapid appreciation in recent weeks, I examine its historical trading behavior to see whether it behaves like a traditional sovereign currency. Bitcoin has exchange rate volatility an order of magnitude higher than the volatilities of widely used currencies, undermining Bitcoin’s usefulness as a unit of account or a store of value. Bitcoin’s daily exchange rates exhibit virtually zero correlation with bona fide currencies, making Bitcoin useless for risk management purposes and exceedingly difficult for its owners to hedge. Bitcoin also lacks access to a banking system with deposit insurance, and it is not used to denominate consumer credit or loan contracts. Bitcoin appears to behave more like a speculative investment than like a currency.

Why stopping the next financial crash is an impossible dream

Good "The Week" reading.  Why stopping the next financial crash is an impossible dream.

This is basic economics written from a populist stance but interesting nonetheless.  It is an impossible dream of course otherwise people would make millions from knowing when a crash was coming and then we get into the murky areas of self full fulling prophesies.

America’s Secret War in 134 Countries

Interesting  article from

America’s Secret War in 134 Countries
"In 2013, elite U.S. forces were deployed in 134 countries around the globe, according to Major Matthew Robert Bockholt of SOCOM Public Affairs.  This 123% increase during the Obama years demonstrates how, in addition to conventional wars and a CIA drone campaign, public diplomacy and extensive electronic spying, the U.S. has engaged in still another significant and growing form of overseas power projection.  Conducted largely in the shadows by America’s most elite troops, the vast majority of these missions take place far from prying eyes, media scrutiny, or any type of outside oversight, increasing the chances of unforeseen blowback and catastrophic consequences."  

Wednesday, 8 January 2014

Japan's radioactive cars not allowed into Russia

Radiation Fears Prompt Russia To Bar More Than 100 Used Cars From Japan [International Business Times]

Russia has barred some 132 used Japanese cars from entering the country due to radioactive pollution concerns.
Rospotrebnadzor, the country's consumer watchdog agency, said it is very much concerned about the unsettled contaminated water leaks that continue to spring out from Japan's crippled Fukushima nuclear power plant.

The 132 used cars were part of 165 batches of contaminated goods that were denied to enter Russia. Aside from the cars, there were also vehicle spare parts.