Monday, March 02, 2015

Debasement of Money
Is Not Progress
"I think it’s become apparent and it’s becoming more apparent to more people almost by the day that this system doesn’t work anymore. And it doesn’t work anymore because of the level of debt that’s been loaded up over the last 40 odd years since the end of the gold standard. And it’s interesting because humans are a very progressive species and we look at the advancements that we’ve made in technology.
We look at the motorcar and the airplane and the computer and all these things that have progressed mankind forward. And so the people assume that that translates to every facet of human existence.
But unfortunately human nature is not necessarily progressive, it’s cyclical.
And so we see these turns where we see monetary debasement as far as back as the Romans. Since the dawn of money there's been monetary debasement. Back then it was all physical. It didn’t have computer generated money; they would clip silver out of the coins. So monetary debasement, extended credit, over extension, rises and falls of empires—these things happen much more regularly than people believe .. You look at hard money standards; in the last 200 years the world has been on and off some kind of metallic standard and has in fact been on some kind of hard money standard more than it’s been off in the last 200 years. It just so happens that we have all coincided with the period in the last 40 years where it’s been off. So it seems almost impossible for people to grasp the idea that we could go back that way, but humans are cyclical in nature. And again, we are getting to that point where what’s happened, what’s been allowed to build up is unsustainable and historically when we've reached those points, you tend to have rather violent outcomes as widespread changes are forced onto a system that no longer works. And when I say violent I mean volatile."
- Grant Williams*
[Once again, Grant Williams makes one of our 5* theme points: Everyone wants to believe that we are better, smarter & more progressive than people of the past. The founding fathers of the United States understood the importance of keeping the dollar honest. 'Tricky Dick' Nixon removed the one remaining restraint to keep the dollar honest. That wasn't progress. It was a move backward.]
LINK HERE to our weekend post

The Next Empire
International Man's Jeff Thomas sees an emerging superpower emerging in the world - a collection of fast-growing economies in Latin America, Asia, Africa & Asia, predominantly led by Russia & China .. Thomas describes recent developments in the world's payment systems, currency reserves, & development banks all pointing to a this big change .. these developments collecting are creating a complete second economic world to which the U.S. is not part of .. "In the latter days of the British Empire, we Brits seemed to be under the illusion that, even as our power base crumbled, we might somehow retain control by threats and bluster. The UK was utterly wrong in this and only succeeded in alienating trading partners, colonies, and allies by doing so. The same is happening again today. China, Russia, and the rest of the world, when faced with American threats and bluster, will not simply fold their tents and accept that the U.S. must be obeyed. They will, instead, create alternatives. And they are doing so exceedingly well and quickly. At this point, the overreach of the US is not only enabling other powers to rise, it is forcing their hand to literally create the next full-blown empire."
LINK HERE to the essay
El-Erian*: 
Value Liquidity in 2015
Mohammed El Erian*, chief economic advisor at Allianz says investors should value liquidity in 2015.

Greek Politics 
Becoming Complicated
Mohammed El Erian* says politics in Greece is becoming far more complicated. He also discussed the European Central Bank (ECB)'s quantitative easing (QE) program.

China Plans Yuan-denominated 
Gold Fix this year
CNBC posted article on reports that China plans to launch a gold fix in its own currency this year .. "The Chinese benchmark would be derived from a new 1 kg contract to be launched on the state-run Shanghai Gold Exchange .. The contract for the Chinese fix would be traded for a few minutes each day to make the process transparent - addressing one of the big complaints about the London fix." .. [Cliff Note: Another step closer towards a Chinese-based gold-backed currency?]
Jim Rickards*: "China links yuan to gold after buying a mountain of gold .. I warned the Pentagon in 2009 .. Let's say you had a lot of gold. And let's say you print yuan. Next you link yuan to gold. Now, who wants dollars?"
LINK HERE to the article
Banker Lynn Forester 
de Rothschild comes out
against Crony Capitalism
Lynn Forester de Rothschild is married to Sir Evelyn Robert de Rothschild, she is a banker who tells the London Evening Standard that: "Money in politics is very corrosive. Quite clearly, the laws have to change. I think one reason we’ve got into trouble is because of the influence of money in politics — there is way too much 'crony capitalism' in the U.S. and the UK. We can’t condemn the politicians who go out and raise money because if they didn’t they wouldn’t be in the game. This comes back to changing the law. And the Brits are much better on this than the Americans. We have to change the rules of the game."
LINK HERE to the article
Eric Sprott* Weekly Call
Listen to Eric Sprott share his views on new U.S. economic data, the chaos in the foreign exchange market .. 8 minutes
LINK HERE to get the podcast or listen below
click to enlarge

"One of the Scariest 
Moments in History"
"It's one of the scariest moments I think in our history, but also we need to recognize we're in uncharted waters. No central bank has ever printed this much money this long, kept interest rates at zero, fueled so much speculation. Not just here, but worldwide. Not just in the normal stocks and bonds, but the whole shale boom, for instance, in the United States was massively funded by cheap debt based on oil prices that weren't sustainable, and now that's all coming unwound. We have never had deficits of ten percent of GDP back to back, or even still four or five percent four or five years into a recovery .. In The Great Deformation, I said 'We're heading towards a day of reckoning. This isn't sustainable.' It's happening in real time .. Japan's central bank is out of control. I watch that. It's important to know what happens there because if the great money printing debt experience in Japan finally fails, it's going to be noted in markets all around the world. I watch the ECB, European Central Bank. It is divided between Germans who want to try to maintain some semblance of some money and the rest of Europe that would like to print and drown themselves in debt as far as the eye can see. It's important to watch China, which is a giant house of cards, that's on the verge of collapse, and that will ricochet around the world in terms of the countries that supply it. Australia, Korea, the so-called emerging markets, and what it'll do to the theory, which I think is false that China is the engine of growth in the world, it is not. It is the biggest speculative disaster in human history."
- David Stockman*
LINK HERE to a partial transcript
LINK HERE to our post from this morning
Baltic Dry Index
Indicating Global
Economic Slowdown
The index above is the Baltic Dry Index - this is an assessment of the price of moving the major raw materials by sea - it takes in 23 shipping routes measured on a timecharter basis & covers a range of commodities including coal, iron ore & grain .. so if it is crashing, it is generally a good indicator that the world economy is significantly slowing down - that's happening now .. ship supplies are going higher - this means shipping costs will likely plummet .. "With global demand lower as a result of slowing trade, and with Maersk about to boost ship supply even more, the result will be an even more aggressive drop in cargo and haulage prices as the deflationary wave hits yet another industry, in the process forcing seaborne transportation to be the latest to succumb to deflation, which for the highly levered sector means even more defaults are imminent now that China no longer is pumping nearly $4 trilion in total new credit every year."
LINK HERE to the articles & commentary
OUTSIDE OUR BOX
The Fight To Save
The Mighty Honeybee
7 minute video, recommended viewing by Barry Ritholtz* .. emphasizes the link of bees to agriculture ..
The Negative Way to Growth?
Economist Nouriel Roubini sees the goal of negative interest rates as an attempt by governments to encourage/force savers to save less & to spend more .. thinks this may help foster economic growth, but also suggests governments to implement fiscal stimulus in public investment projects to fuel economic growth. [Cliff Note: Negative interest rates are manifestations of financial repression. Financial repression is 'obfuscating magniloquence' (euphemism) for taking money away from the public for the benefit of those with control of the public's money. It is a modern day version of the Aristocracy taking rent from Serfs to live on their land.]
LINK HERE to the essay
Jim Puplava’s Big Picture: 
Popular Delusions & 
the Madness of Bankers
Jim’s first Big Picture topic this week is Popular Delusions and the Madness of Bankers. This deals with the so-called New Normal world of extremely low interest rates. Jim notes we are truly in a special time in history, with interest rates at 300 year lows .. The Fed is clearly moving with great caution in raising rates, it may take many years to fully normalize interest rates .. also a discusson on the stock market & valuations .. about 1 hour
LINK HERE to the podcast
European Sovereign Bonds: 
The Negative Yield Club
http://www.bloomberg.com/news/videos/2015-02-27/european-sovereign-bonds-the-negative-yield-club
Bloomberg's Scarlet Fu takes a look at European sovereign bonds with negative yields .. it's financial repression.
LINK on image to go to video
click to enlarge
John Hussman Says
Do You Plan to Exit Stocks Within 
The Next 8 Years? ..Exit Now 
In his latest essay, John Hussman thinks now is the best time to get out of the stock market, given his analysis & market tools: "Unless we observe a rather swift improvement in market internals and a further, material easing in credit spreads – neither which would relieve the present overvaluation of the market, but both which would defer our immediate concerns about downside risk – the present moment likely represents the best opportunity to reduce exposure to stock market risk that investors are likely to encounter in the coming 8 years."
Hussman further advises: "The fact that the financial markets feel wonderful right now is precisely because yield-seeking speculation and monetary distortions have raised security prices today to levels where they are likely to stand years from today – with steep roller-coaster rides in the interim."
LINK HERE to the essay
http://pro.dentresearch.com/BNBSTOCK/PBNBR204?h=true
David Stockman* & Harry Dent
on "Sundown in America"
5* Essential Message Inside A 'Sales Piece'
David Stockman*, architect of President Reagan's economic turnaround known as 'Morning in America', warns of the looming collapse of free market prosperity & the destruction of American wealth .. Wall Street has become a "huge casino" .. recommended watching by Stockman, though a warning: this is a marketing introduction to services by Harry Dent .. we trust our readers to separate substance vs. marketing. CLICK on the U.S. Flag to go to the video.
Austrian Government
Says NO BAILOUT,
Austrian Bank Will
Confiscate Depositor Assets
Report that there will likely be a bail-in of Hypo Alpe Adria Bank in Austria .. Zero Hedge: "Austria just cut off state support of what was until this moment a state-backed, wind-down vehicle and a key pillar of trust in what was already a shaky financial system .. While the world was waiting for Greece to announce capital controls, or a bail-in over the past week, it was none other than one of the Europe's most pristeen credits (one which until recently was rated AAA/Aaa) that informed creditors a bail-in is imminent .. Bloomberg confirms that the ministry announced that under new EU rules means creditors can be forced to share losses .. Of course, this being Austria, and the Creditanstalt, aka the bank which failed in 1931 under almost identical circumstances and set off the dominos that led to a global financial crisis which in turn fanned the flames of the Great Depression, also being Austrian, suddenly everyone is asking: 'what just happened and what happens next?'"
LINK HERE to the article 
LINK HERE to Bloomberg article