Tuesday, May 22, 2012

Enter the SinoDollar: China and reserve currencies.



Given %60 of China's (~$3trn) reserves are held in US treasuries and USD denominated securities, at what point will Beijing decouple itself from a dependency on a deflating dollar, and what will decoupling mean?

Wednesday, May 9, 2012

What if you saw it coming?


There is some very serious anxiety about the rise of ultra-populist parties in Greece and France. When coupled with the %50 unemployment rate for Spanish and Greek youth, with another %30 to %40 in Spain and Portugal, and uncertainty about the established political order of western dominance, it would seem irrational not to consider that the clouds are gathering.

European parliament member Nigel Farage makes some very bold statements about these concerns in the video below. Notably, that Europe may face another rise of "national socialism." ...

Friday, May 4, 2012

Buffet's Dad wrote this whole blog 65 years ago.


Zero hedge had a link to a 5-page speech given in the year 1948 by Howard Buffet, father of Warren "Sage of Omaha" Buffet that neatly summarizes most of what I've been going on about, and then some. Not that I expected my views to be new, but wow, this guy knew what was going on.

From the abstract:


"Congressman Buffet stresses relation between money and freedom and contends without a redeemable currency , individual's freedom to sustain himself or move his property is dependent on the goodwill of politicians. Says paper money systems generally collapse and result in economic chaos. Points out gold standard would restrict government spending and give people greater power over public purse. Holds present is propitious time to restore gold standard..."

Wednesday, May 2, 2012

Politicians can stay irrational longer than you can be right.


Market player/commentators like Charles Biderman, Hugh Hendry, and Kyle Bass have each at different times made rational, clear assessments of the solvency problems facing Europe. Each essentially agree that Eurozone governments, in particular the PIIGS, will not be able to balance their books or grow sufficiently to pay down their debts. Nor will they be able to maintain stable market prices for their populations, their levels of welfare spending, or in some cases, their social order while remaining in the common currency.

To use one of Hendry's elegant oversimplifications, the Euro is akin to the gold standard because Germany will not allow member countries to inflate away their debts by debasing the Euro currency. This makes debt payment and deficit reduction zero-sum for Euro economies, as compared to the US (and Canada), who can literally increase the money supply though printing, and then pay with that.

Keynes is said to have uttered the maxim, "Markets can remain irrational longer than you can remain solvent." This meant that even if you had a sound investment system that must inevitably succeed at some point, there was no way of knowing precisely when that point might occur, and you would likely go bankrupt if you waited for your circumstances to transpire. 

However, I would adapt this to say that, "politicians can stay irrational longer than you can stay  right."