It all boils down to the fact that if a lot of people are getting rich and are not producing anything then the production economy MUST be paying some how. Lets count the ways.. no lets not there are too many.
This is the failure of capitalism. It has put the ability to destroy productivity and get rich at the same time into the hands of the finance industry. Is this good? not really. What can be done? I don't know. But if someone comes up with a way to defeat them and improve the lot of the productive sector they will deserve to get very rich indeed.
Thursday, October 15, 2009
Thursday, July 23, 2009
Back to Reality
In my opinion the latest rally is very much unlike previous rallies. I agree that a correction is certain but an off the cliff correction? That outcome is losing credibility. Now I might be the perfect contrary indicator but then again I might not. The chances may be exactly 50:50.
However I am beginning to think that something has fundimentally changed. The change in my view is at the Fed. I am beginning to think that the smile on Bernanki's face may have to do with things he knows and the rest of us don't. After all we do not really know what he has been doing except in a general way do we?
For example take the 500 Billion in currency swaps that the Fed has on it's balance sheet. Where exactly did that money come from? The US was not exactly replete with liquidity at the time those facilities were arranged. OK there was a flood of money returning to the US in the "flight to safety" hence the need for the swaps.
Anyway by making those swaps the Fed has demonstrated that without a doubt it is the central bank and lender of last resort to the entire world. Or at least potentially so, certainly with regard to the 14 nations that were the lucky recipients.
The point of the swaps was to improve global liquidity. Is it possible that this and other actions have actually improved global solvency by currency debasement on a truly magnificent scale? Worth thinking about in view of supposedly irrational market action around the world. Is it possible that the market is actually being quite rational on this occasion. Is it possible that some sophisticated recipients of massive liquidity from the Fed are better informed about this process than the rest of us? Endless questions.
Audit the fed. Actually abolish the fed it sucks that action on wall street can cause the world to spin.
However I am beginning to think that something has fundimentally changed. The change in my view is at the Fed. I am beginning to think that the smile on Bernanki's face may have to do with things he knows and the rest of us don't. After all we do not really know what he has been doing except in a general way do we?
For example take the 500 Billion in currency swaps that the Fed has on it's balance sheet. Where exactly did that money come from? The US was not exactly replete with liquidity at the time those facilities were arranged. OK there was a flood of money returning to the US in the "flight to safety" hence the need for the swaps.
Anyway by making those swaps the Fed has demonstrated that without a doubt it is the central bank and lender of last resort to the entire world. Or at least potentially so, certainly with regard to the 14 nations that were the lucky recipients.
The point of the swaps was to improve global liquidity. Is it possible that this and other actions have actually improved global solvency by currency debasement on a truly magnificent scale? Worth thinking about in view of supposedly irrational market action around the world. Is it possible that the market is actually being quite rational on this occasion. Is it possible that some sophisticated recipients of massive liquidity from the Fed are better informed about this process than the rest of us? Endless questions.
Audit the fed. Actually abolish the fed it sucks that action on wall street can cause the world to spin.
Thursday, May 21, 2009
My Very First Simple Solution, I call it Simon's Simple Sock
See previous post as to why this is the first.
Last night I observed my wife browsing images of shoes sold on line and I thought who on earth would order a shoe they could not be sure would fit. And I wondered if there was not a way to match foot to shoe without foot and shoe being in contact. Viola! the solution appeared in my mind. Simon's Simple Sock!
What you need is a tight stretchy lycra sock with small sensors closely spaced all over it. The sensors triangulate their position from three reference points. For example the toe, some where up the ankle, and somewhere half way in between the the first two. The sensors are all hooked up to a long cable leading to a USB port on your computer. Software generates and analyses the contours of your foot. A dynamic sequence of shapes may be generated by walking around in the sock or even inside similar shoe that is comfortable.
The data is stored in a file and compared with the data generated by a person or machine that wore the sock and fit the shoe generating a similar file which would be stored on the website of the shoe vendor.
A shopper determined to purchase a shoe that did not fit or would be uncomfortable could be warned where pain was likely to start and accept that they were purchasing a shoe with a low comfort rating for them.
There you go! Simon's simple sock for on line shoe shopping. You heard it here first.
My sympathies to the partners of compulsive shoe buyers.
Last night I observed my wife browsing images of shoes sold on line and I thought who on earth would order a shoe they could not be sure would fit. And I wondered if there was not a way to match foot to shoe without foot and shoe being in contact. Viola! the solution appeared in my mind. Simon's Simple Sock!
What you need is a tight stretchy lycra sock with small sensors closely spaced all over it. The sensors triangulate their position from three reference points. For example the toe, some where up the ankle, and somewhere half way in between the the first two. The sensors are all hooked up to a long cable leading to a USB port on your computer. Software generates and analyses the contours of your foot. A dynamic sequence of shapes may be generated by walking around in the sock or even inside similar shoe that is comfortable.
The data is stored in a file and compared with the data generated by a person or machine that wore the sock and fit the shoe generating a similar file which would be stored on the website of the shoe vendor.
A shopper determined to purchase a shoe that did not fit or would be uncomfortable could be warned where pain was likely to start and accept that they were purchasing a shoe with a low comfort rating for them.
There you go! Simon's simple sock for on line shoe shopping. You heard it here first.
My sympathies to the partners of compulsive shoe buyers.
Summary
I started this blog because I wanted to record all the "silly" ideas I get somewhere. The trouble is I got seriously side tracked by the emerging financial crises and my interest became understanding macro economics finance and trading.
My feeling is that the new global trends have now emerged so its less difficult to understand what's going on. In a nutshell in my opinion so called decoupling is now occurring in earnest. The US economy will follow a trajectory similar to Japan's lost decade and the BRICS led by China will emerge as the new economic power houses. I don't know what will happen in Europe.
This does not mean the end of my inquiry into the markets and economics.
My feeling is that the new global trends have now emerged so its less difficult to understand what's going on. In a nutshell in my opinion so called decoupling is now occurring in earnest. The US economy will follow a trajectory similar to Japan's lost decade and the BRICS led by China will emerge as the new economic power houses. I don't know what will happen in Europe.
This does not mean the end of my inquiry into the markets and economics.
Sunday, May 3, 2009
Where to now?
Just eyeballing the charts shows that there is a huge space between where an orderly bear market would have gone and where this one went. In other words symmetry seems to imply that this short covering rally could go on a lot longer. Also the impetus for the down legs has been coming from the banks and the banks can now hide there losses for a good bit longer.
I see this rally continuing as the real economy improves and then deteriorates again in a less steep downward direction. After last years massive moves and the recent rally the market could just consolidate in this area gradually working higher in small steps causing more and more pain to the bears.
I think the thing that could cause the next leg down might be accelerating unemployment figures and social welfare costs. Increasing government cost and decreasing tax receipts will cause the administration to turn on the banks and say no more. A look at seasonal charts to see when this might occur could give a handle on timing for the next leg down.
I see this rally continuing as the real economy improves and then deteriorates again in a less steep downward direction. After last years massive moves and the recent rally the market could just consolidate in this area gradually working higher in small steps causing more and more pain to the bears.
I think the thing that could cause the next leg down might be accelerating unemployment figures and social welfare costs. Increasing government cost and decreasing tax receipts will cause the administration to turn on the banks and say no more. A look at seasonal charts to see when this might occur could give a handle on timing for the next leg down.
Tuesday, April 14, 2009
International Reserve Currency
My feeling is that People’s Bank of China Governor Zhou understands what as happened and believes that China’s export growth model is unsustainable, as it clearly is given it’s target markets no longer exist. That is why he has suggested a managed international currency such as the SDR. He is looking forward not backward.
Governor Zhou writes;
“And when a country’s currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability.”
This may have no relevance but here in New Zealand our central bank was concerned about inflation and the high rate of growth in house prices. It tied to slow these down by increasing interest rates which just didn’t work. All it did was encourage currency speculators to buy our dollars and push our currency value up. The banks never had any trouble lending the money out although they are probably having second thoughts now.
The high interest rate - high currency problem caused our exporters major pain at the same time. So the hopeless situation arose where the most worth while investments were unproductive ones like housing loans and auto loans etc.
The central banks monetary polices were ineffective and in many ways exacerbated the problem. rising interest rates encouraged currency inflows and reckless lending.
If a controlled international reserve currency allowed exchange rate policy (read interest rates) to be more effective in adjusting economic imbalances this would be a terribly good thing in my opinion.
Governor Zhou writes;
“And when a country’s currency is no longer used as the yardstick for global trade and as the benchmark for other currencies, the exchange rate policy of the country would be far more effective in adjusting economic imbalances. This will significantly reduce the risks of a future crisis and enhance crisis management capability.”
This may have no relevance but here in New Zealand our central bank was concerned about inflation and the high rate of growth in house prices. It tied to slow these down by increasing interest rates which just didn’t work. All it did was encourage currency speculators to buy our dollars and push our currency value up. The banks never had any trouble lending the money out although they are probably having second thoughts now.
The high interest rate - high currency problem caused our exporters major pain at the same time. So the hopeless situation arose where the most worth while investments were unproductive ones like housing loans and auto loans etc.
The central banks monetary polices were ineffective and in many ways exacerbated the problem. rising interest rates encouraged currency inflows and reckless lending.
If a controlled international reserve currency allowed exchange rate policy (read interest rates) to be more effective in adjusting economic imbalances this would be a terribly good thing in my opinion.
Tuesday, March 31, 2009
Magnificent Screw Ups
In my view if you want a truly magnificent screw up hand a job over to the “smartest men in the room”. The truly smart would say no to the job understanding its responsibilities. The “smart ones” will figure out how much they can extract and walk away from an unimaginable mess.
I do believe that engineering inflation may prove to be a somewhat difficult task, simply because of the rate of credit destruction and the lack of opportunity for credit creation.
I’m sure some means will emerge but I think we may have to see some truly spectacular efforts first. Of course the spectacular efforts will need dire reasons. Therein lies the rub.
I do believe that engineering inflation may prove to be a somewhat difficult task, simply because of the rate of credit destruction and the lack of opportunity for credit creation.
I’m sure some means will emerge but I think we may have to see some truly spectacular efforts first. Of course the spectacular efforts will need dire reasons. Therein lies the rub.
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