Tuesday, June 07, 2005


Hallmark's "Animal Farm"
A thoughtful piece about the euro in the Guardian:
Europe is down but by no means out. It faces a formidable test of statesmanship after the French and Dutch referendums, and it is not entirely clear who will be the statesmen - or women - to sort the mess out.
One way or another, however, Chancellor Gerhard Schröder of Germany, President Jacques Chirac of France and Prime Ministers Silvio Berlusconi of Italy and Tony Blair of the UK are perceived as being on their way out. In the past week I have heard this phrase used by observers high and low about these leaders, and they have always been bracketed together.
Nothing much is happening in the world yet country after country is badly unstable, the population divided, tension rising, a great deal of domestic anger is building. My grandfather told me years ago, "Look at the ground. If you suddenly seem to see ants scrurrying all over the place, this means a thunderstorm will come later in the day."

The ants are scurrying madly about these days.
Great efforts are being made in London to suggest Mr Blair may be the man to sort out the mess, but I am not sure these sentiments are echoed in Berlin or Paris. It is not difficult to see why.
Fifty years ago this spring, the Messina conference in Sicily secured the agreement that led to the treaty of Rome and the formation of the common market. Yet throughout that time Britain has been considered a suspicious outsider.
No soon did the mighty British empire collapse into dust did they annex themselves firmly and totally to the mighty American empire. The pound continued to be the major world currency all the way up to 1948! Astonishing, no? Even though all business was calculated via dollars after WWI. This is why the American dollar imploded last when the world banking system collapsed.
The biggest shock comes from the fact that it is the French themselves - the prime movers behind the EU from its inception and the nation of its founding father Jean Monnet - who have decisively rejected the treaty.

The second shock is that, although there was not much speculation about such a reaction beforehand, the future of the euro itself has come into question.

I myself found no sign, during a week in Italy, of a great desire to bring back the lira. On the contrary, the call that was publicised was from a rightwing minister whose party, I believe, would like to detach the north of Italy from the south.

The report that Germany's Bundesbank may have been considering what to do if the eurozone breaks up should surprise no one: the Bundesbank was always against the euro. Indeed, one of the eurozone's problems is that the German central bank insisted on a very deflationary brief for the European Central Bank.
Germans are very allergic to inflation thanks to the massive Weimar Republik currency debacle. To this day, the Italians found inflation to be perfectly fine which is why the Lira which was once worth a great deal, had become a joke. The Italians don't mind being annexed to the German currency controls, this takes temptation out of their hands. The Germans are like the Horse in Orwell's "Animal Farm," faithful and doggedly toiling away trying to make everything work. But it is collapsing.

Meanwhile, Napoleon the Pig, aka Greenspan, tries to explain why four loans are better than two bank savings accounts:

Speaking at an American Bankers Association conference in Beijing, Greenspan said the decline of long-term interest rates over the past year despite the Fed's steady tightening cycle remains a conundrum.

"I think he's saying the economy is not going to weaken and he's not going to halt raising interest rates -- that's an indication to me that the Fed feels very strongly about a solid economic performance," said Peter Cardillo, chief market analyst and strategist at S.W. Bach.

That, Cardillo said, "is giving a bit of a green light here."
More free loans, squeal all the pigs at the table! A little bit of green light, eh? The green light at the end of the debt tunnel?

It is an oncoming train, the Iron Rooster of China.

This announcement from our Brave New World Order chiefs promising everyone a solid economic performance is undercut by the dreadful news that 25,000 well paid union workers are going to be terminated! Like the melting glaciers thanks to global warming, dropping off whole ice shelves into the sea, this giant hunk of humanity means another 5% of our industrial workforce will disappear forever. It is already low as it can go and still call this nation a first world industrial nation, no?
Twenty-nine of the Dow's 30 components were moving higher in the early going led by gains in General Motors Corp. and Home Depot Inc. . Only McDonald's Corp. printed red.
Home Depot is up because they are handing out loans like candy to home owners who are up to their eyeballs in debt. Exxonmobile oil crowed that they sold over 50,000 debt instruments this last month. What a...huh? They are a bank now?

Everyone is a bank now and not a soul is saving in a bank. This is very odd not to mention disasterous if indeed, a historic nightmare can even begin to describe the disaster this represents.
"We've never run into anything like this before," Greenspan said at an American Bankers Association conference in Beijing Tuesday.

In his remarks, Greenspan dismissed the four leading Wall Street theories of why global long-term interest rates are so low.

"The economic and financial world is changing in ways that we still do not fully comprehend," Greenspan said.
Sigh. And people listen to Greenspan/Napoleon the Pig. The economic world has not changed in theory, namely, all the previous models we have seen in history in the last 500 years are not suspended or changed at all. They are there, easy to read and obvious to any alarmed observer who has any inkling about these matters.

Every empire has gone down this road before us and the signs are not only obvious but in great volume, too. There is no excuse not being able to read them unless Greenspan is an illiterate buffoon.
But Greenspan said that this argument didn't hold water because "periodic signs of buoyancy in some areas of the global economy have not arrested the fall in rates."

Other analysts have argued that the low rates are a function of an aging global population and the investment behavior of pension funds and insurance companies struggling with under-funded retirement plans.
The Japanese are aging fast and declining as a nation into dotage. They will have to call in all their chips really soon unless they cement their control of American currency/military in Asia, locking the bigger empire into a death grip so they can milk us by making us fund them forever as they draw down their savings.
Another popular theory has been that foreign central banks, in particular China, have been heavy buyers of U.S. Treasuries, thus driving down rates.

Greenspan said these purchases have lowered rates, but said Fed staff studies have estimated the effect has only been "modest."

"Furthermore, such purchases seem an implausible explanation of why yields on long-term non-U.S sovereign debt instruments are so low," he said.

Finally, some economists have pointed to globalization as having a disinflationary effect on the economy with new low-cost producers in China and India and the breakup of the Soviet Union.

The Fed chairman said this might explain some of the lower inflation-premiums in long-term rates over the past decade, but doesn't address the decline over the past year.
Note that Napoleon the Pig won't mention huge budget deficits of the imperial American nation nor does this very clever pig mention the trillion dollars the world spent on arms this year, half of that being American spending.

Half a trillion dollars flowing into the American economy, every penny of which was printed up for nearly nothing by Uncle Sam's printing presses is the cause of this anomaly. This money hasn't inflated America like a balloon because it is "cleaned up" by circulating it first through Europe, Iraq, China and Japan. They either absorb it or blow it up, at least the Iraqis are blowing it all up.

This same toxic money stream was tapped from 1964 to 1974 in Vietnam. We know what happened next only this time it won't be a small political oil delivery interruption but the Great Destruction of the Hubbert Oil Peak.
Greenspan repeated his misgivings about hedge funds, saying that much of the easy profits from the sophisticated trading strategies from market inefficiencies may be over.

"For the time being, most of the low-hanging fruit of readily available profits has already been picked by the managers of the massive influx of hedge fund capital," he said.

As a result, hedge funds may stray into more risky investments as they strive to seek above-average returns.

"Significant numbers of trading strategies are already destined to prove disappointing, a point that recent data on the distribution of hedge fund returns seem to be confirming," he said.

"Consequently, after its recent very rapid advance, the hedge fund industry could temporarily shrink, and many wealthy fund managers and investors could become less wealthy," Greenspan said.

But governments should not rush to restrict the hedge fund industry, he said. Overall, the funds and their innovative strategies have increased economic flexibility by spreading risk.
What a bland way to talk about the coming Great Depression! Anyone who has read any books about the launching of the previous Great Depression knows all the warning signs, all of which are code red now. The whole effort to feed Social Security money in the money stream is because all the "low lying fruit" (ie, chumps outside of the people with the know) have been plucked like a Sunday chicken and the bones have been gnawed bare.

Zhao, the Chinese banking minister, controlled his face as he stood next to Greenspan. We are lucky he didn't burst out laughing outright like he did last week.

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