Money running scared

First, everyone was so confident, even sub-prime wasn’t beneath them.  Then fear set in.  Everyone raced to T-bonds.  Yields even went negative on T-bills periodically.  Gold shot up.

Then bankers realised the US budget deficit would flood the market with bonds.  They started moving away from the US dollar, into Euros and the Aussie and other assets.  Then Greece and Dubai look shaky. 

They race back to the US dollar.

What are they going to do next?  Where can they run to?  Eventually, they’ll end up in farmland and gold.  Some in cash.

Frightened little things.  You’ve got to feel for them.

The idiocy of the “frozen smile”

For decades I would watch on in disbelief as Professors and then quant analysts would try to ram the normal distribution down my throat, as though it applied to every situation. 

It doesn’t and anyone who applies the normal distribution to financial returns is stark raving mad.

Those who were criticising Peter Schiff in 2006 for being a pessimist were themselves insanely unrealistic about the prospects of the US economy.  See how Peter Schiff was ridiculed by the “optimists” here:

Similarly, the Economist (a mere shadow of the publication it once was) speculates on the benefits and costs of pessimism.

Again, who says someone is pessimistic or just realistic?  Who decides?

I can be happy if circumstances justify it.  If I’m raped in jail by five men, I know I will be unhappy.  I’d be surprised if anyone would be happy after such an event occurring, no matter what positive-thinking feel good course was taken the day after. 

If I’m making love to the woman of my dreams I know I will be happy.  No one is going to convince me any different.  I know it will be good.  No amount of preaching about the sins of the flesh would stop me being happy the day after.

Being sad in one instance does not make me a suicidal depressive and being happy in the other doesn’t make me a naive fool. 

It depends on the circumstances.

I deal with reality as it is, not as I want it to be.  I don’t shirk from reality – no matter what it gives me.  I take the emotional responses to that reality as well – I do not shirk the emotional consequences of looking squarely at reality as I see it.  Every post on this blog is supported by facts and contains multiple links supporting my assertions which any fool can click

I’m depressed today because I see how badly screwed up all our futures will be.  If this was different, if I was living in a different time, if govts were smaller (and fairer), if gold was money, I guarantee you I would be “happy” because I would be looking forward to the future.

As an investor, look at the facts as they are.  Forget your preconceptions.  Respect those who base their conclusions on facts, not fantasy, not last year’s trends.  Ignore “authority figures” when it comes to investing.  As can be seen from the clip above, they are almost invariably wrong because they are talking their own book.

The best investment strategy when in doubt is actually to invest in last year’s worst performing asset class.  Why?  Because markets overbuy and oversell.  And because idiots like Laffer and Stein exist.

By the way, this year’s two worst peforming asset classes in Australia were foreign stocks and commercial real estate funds and commercial real estate trusts. 

We’ll see how they go in 2010 (I’m actually predicting another down year, but we’ll see!).

Japanese govt is considering putting Lithium in the water supply to lift Japanese spirits

No joke.

First Flouride.

Then Lithium.

I’m worried if the govt gets frustrated because the people aren’t happy enough it will do a  ”Jim Jones” and try to give us free Kool-Aid. 

Hopefully we’ll all act happier and it won’t have to come to that.  At least not in my lifetime.

Greenspan warns of looming US debt crisis

Greenspan warns the US to rein in spending.  Two decades too late.

Based on Greenspan’s appalling record of prediction, this means that US bond yields will remain low throughout 2010 (at least) and that demand for US bonds will remain high.

BoJ says it will not tolerate deflation

Ft.com reports that Bank of Japan will order the tide not to recede.  It will use fiat toilet paper to order the tide back.

Let’s see if it works.  If it does, the laws of financial gravity will need to be re-written.

Perhaps the Bank of Japan should not have allowed reserve ratios for Japanese banks to go as low as 3% in the first place.  Once you lower the reserve ratio, you’re on the road to Hell.

The NSW govt is riddled with corrupt links to shadowy financiers and property developers

According to an investigative piece in today’s SMH, corrupt brain-dead politicians in the NSW govt have engendered a culture where the NSW govt is riddled with links to corrupt financiers and property developers.

This story is not new.

Boorrrrrinngggg.

Example of govt as collection trough for rent-seeking number 3,294,249,238,959,390,534,821.

Visualising the deflationary denouement

We already know it’s going to be hyperinflation or deflationary depression.

The Makian Distribution predicts this: unprecedented public and private debt means unprecedented volatility.  The one absolute certainty is that you will no longer get steady 4% returns year-by-year in any asset class.  You will either double your money in a year or be wiped out completely.  Government bonds will have insanely low (even negative) yields – and then suddenly be worthless within weeks.

Now, David Calderwood imagines the deflationary scenario as vividly as anyone has this year.  As a deflationist, I’m visualising something very similar to happen, short of Bennie Boy dropping toilet paper fiat from helicopters – which ironically is unlikely given he speculated he’d do it if he had to.  Once an academic speculates on something so stupid in an academic paper, he’s highly unlikely to follow through in reality.

The only question I have for David Calderwood is the same one I have for Steve Keen: WHEN?

Dr John Hewson’s low-IQ banking rant

Dr John Hewson was the closest thing to a high IQ politician Australia has had in modern times.  That’s not saying much, but it’s saying something.

Of course, as Hans Hermann-Hoppe has conclusively established, democracy doesn’t work, so he was crucified over being honest about the need for a GST.  Howard had to get the GST through by lying – the only way any politician gets anything done in a democracy, unfortunately.

Nevertheless, Dr John Hewson does himself no favours (and brings into question his current IQ) by attacking the oligopoly of Oz banks by blindly flailing about, ranting about price gouging, exorbitant fees, anti-competitive conduct and all manner of miscellaneous sins.  In his meandering attack on Oz banks in today’s AFR, he calls for a commission of enquiry and greater participation of foreign banks in Oz.

This is low-IQ madness that a first year economics student shouldn’t be allowed to spout, let alone someone with a PhD in economics.

First, Hewson appears to equate low margins on interest rates as a “good” sign – a sign of “banking competition”. 

Err…no.

Securitisation and Freddie and Fannie generated wafer thin margins in the US and all this did was engender a housing bubble and the worst financial crisis since the Great Depression.

When foreign banks were allowed entry into Oz in the mid-late 1980s, this again engendered a massive commercial property bubble as banks tried to retain market share.   The massive 1991-1992 “great Aussie recession” was the result.

What matters is the accurate and professional assessment of borrowers’ capacity to repay by banks not pressured to lend to anyone with a pulse.  Between 2001-2007 low interest rates and securitisation created an environment where US banks were compelled to lend to anyone with a pulse.  Hence Chuck Prince’s now-infamous comment that he had to keep dancing during the bubble even though he knew the bubble had to burst at some point.

Is this US-style banking madess the kind of banking industry Hewson is calling for?  It certainly was competitive.  The US banks competing to see who could bankrupt the American people the fastest.

So there is no necessary correlation between “banking competition” and “low interest margins” and good economic outcomes.  Recent history reveals quite the reverse.

Second, Hewson focuses simplistically on “more banking competition” without seeing WHY banks are INHERENTLY anti-competitive.

Hewson doesn’t understand the embezzlement underlying fractional reserve banking, so simply asks for more banks to compete to see who can embezzle the most.  He is asking for Satan to spawn more parasites!  This is madness.   It’s like deploring the poor quality of hitmen in Sydney and asking for some “foreign” competition to come in from China and Italy and New York to make the market for hitmen more competitive.

I explain this in more detail here.

There are multiple links explaining the embezzling nature of fractional reserve banking here.

Finally, I was unimpressed by Hewson’s ranting style.  No references.  No real analysis.  It read like an article written in the back of a bus on the way to work.  Regardless of how insane the doctors say I am, at least I try to reference every single “allegation” I make on this blog.  My posts are filled with supporting links that any fool can follow.  Hewson’s empty rant left me cold.

The real solution to our banking woes is obvious.  It is for Dr John Hewson and any other person genuinely interested in free markets to call for real competition in banking: For a break up of the Big Four (perhaps into the Big Eight) and the return to free banking, which Australia did have in the 19th century before central govt sadly took over everything in the 20th.

And for a return to real competition in currencies.

Strangely, despite all of Dr John Hewson’s learnings, and despite his professed belief in competition and the efficiencies of the free market, he doesn’t understand or call for real competition in banking or in money.

I wonder why?

Check Hewson’s connections with foreign banks wanting to get a foothold in Oz.  Perhaps you’ll find the answer there?

John Quiggin on Plimer

JQ goes after Plimer.  Again.

I am no great admirer of Plimer.  Why JQ wants to lump all critics of an ETS as right-wing psychopaths robotically parroting the same point of view is beyond me.

I have the following issues to raise with JQ (of course he won’t respond, but my frustration compels me to act):

1.  George Monbiot admits he is ashamed and embarrassed as a scientist regarding Jones’ (and other climate scientists’) attempts to suppress contrary research, to “mould” the debate to suit their agenda and their cynicism regarding the whole process of science.  Is JQ equally ashamed?

2.  If scientists are willing to plunge to these depths, what integrity can we expect from the political process regarding an ETS, which is much more corrupt and is subject to rent seeking pressures?

3.  Even if Plimer is a madman financed by the mining industry (neither of which I accept) what has this got to do with the efficacy of an ETS in tackling climate change?  Satyajit Das (noted derivatives expert and trader) has come out on Phillip Adams’ LNL in support of a carbon tax NOT an ETS.  He thinks an ETS would be subject to corruption and wouldn’t achieve the goals needed on climate change.  Is he mad too?

4.  Why the focus on climate change when dry land salinity, phosphate depletion, the destruction of farm lands in WA and in central NSW, irrigation rights, the destruction of the Murray-Darling Basin are all more pressing issues?

Name one recent government innovation or policy that has “worked” regarding the environment. 

$2 billion in free insulation?  Corruption, deaths from faulty installation… requiring govt to step in and regulate the industry even more because of govt incompetence in the first place. 

Reserving land for climate change?  Farmers are protesting in NSW (one is on a hunger strike) because of the effect this policy has had on farmland.  This amounts to compulsory acquisition of land without compensation – a violation of the Constitution.  No one seems to care.  Certainly not from the NSW or Federal govts.

Everywhere govt goes, disaster, corruption, incompetence and rent-seeking parasites seem to follow.

Does anyone see a pattern here?

Duh…

“The safest (and probably only) way for a country to weather contagion in a sovereign debt crisis is to maintain low levels of debt in both the public and private sector through appropriate fiscal and monetary policy and robust macro-prudential regulation.”

Duh.

This gets today’s “blindingly obvious” insight award.

Baiji “fundamentals”

This is going to be an even ”crazier” post than usual, so please keep up with me and just go with the flow for a little while and hopefully things will make sense at the end.

Assume you’re a fan of freshwater dolphin meat.  I know you’re not, but just go with me here.  Assume you’re also an investor.

The “fundamentals” regarding freshwater dolphins from an “investor” perspective are very good.  The baiji on the Yangtze are dying due to their food source (fish) being massively overfished and appalling pollution problems contaminating the Yangtze from China’s industrialisation.  Some have declared that the baiji are “functionally extinct.”

As an investor, it would be wise to try to “invest” in baiji, wouldn’t it?  Supply down, demand either steady or up (on anticipation of limited supply).  Price should be higher.

Two points immediately need to be addressed from this hypothetical.

First, for those who think it’s “distasteful” to even consider valuing dolphins in terms of their meat, I say to you – think it through carefully.  The harsh reality of life is that animals and plants which are useful to humans are “protected” by humans and flourish. 

Those with no value to humans are vulnerable to extinction.

This has been proven time and time again throughout modern history.

I don’t like this either, and I wish the human population would not grow exponentially.  Then again, I wish I was a dictator so I could turn this loser nation of overconsuming mindless debt-drones on to a more sustainable path of development.  In both cases, I’m dreaming. 

We have to deal with reality.

And the reality is that animals that we can eat survive in this crazy world much better than animals that serve us no purpose. 

The absolutist thinking of so-called conservationists drives me crazy.  This kind of “leave alone!” thinking is naive and dangerous and infects so much of the environment movement.  I cannot believe their basic naive stupidity.

The ban on the sale of elephant tusks in my mind is crazy.  Elephants have become less valuable to local communities in Africa.  Elephants “compete” for arable land.  Guess what’s going to happen when you ban the sale of elephant products?  There’s going to be ongoing tension between local communities and international organisations who don’t have to live with the problem (and who coercively scream for a ban on the sale of anything elephant related).  Ultimately, the local communities will have even more of an incentive to kill the elephants and not help sustain the elephant population.  What do you think is going to happen over the long-run? 

Obviously, land will be taken over by local communities in need of food.  Elephants will die due to lack of natural habitat.  They will not have been “killed” literally by a gunshot, so the zealots in the international conservation organisations will be silent.  But the elephants will die just as surely as if they had been killed for their tusks.

Same with whaling.  Why we are so paranoid about Japanese whaling I will never understand.  We overfish, we pollute the waters with oilspills, chemicals, toxic sludge and refuse, we kill the natural habitat of the whales with a massive toxic plastic waste dump in the middle of the Pacific Ocean - and yet we criticise the Japanese for “hunting” the poor whales.  We kill them slowly but just as surely through starvation, through the destruction of their natural habitat, but because that’s one step removed, because it doesn’t involve a direct bullet to the head, somehow everyone is OK with that.  But when the Japanese actually kill a single whale – whoa… that’s barbaric! 

I can’t stand this hypocrisy, this stupidity, the childish incapacity to directly connect up destruction of natural habitat with the death of an animal.  As an animal I’d prefer the quick and relatively painless death of a bullet to the head (safe in the knowledge that some of my family would survive and possibly even by protected by my killers) rather than a slow and excruciating and depressing death by starvation and destruction of my whole natural habitat, grieving knowing my children will slowly but surely starve to death, perhaps be forced to eat toxic plastic… knowing that none of us will survive. 

Which would you prefer, if there was no other choice?  And don’t say there’s a third choice.  There isn’t. 

Unless humans agree TODAY to stop all human reproduction and start consuming less, there is no third option.

Given this sad reality, I have another invariable rule for environmentalists to consider:  Once an animal is valued by man, it is protected by man.

Sheep outnumber New Zealanders for a reason – sheep are valuable.  New Zealanders take care (good care) of their sheep. 

Kiwi birds can’t be eaten.  They have no direct intrinsic value.  They are difficult to spot in their natural habitat so they are not even valuable from a tourist perspective.  Guess what – they are dying and are nearly extinct.

So discussing dolphin meat for me is perfectly reasonable.  Ironically, if freshwater dolphin meat was more valuable perhaps the baiji would not be functionally extinct today.

But this is not even the main point of this post.

Let’s continue with this thought experiment. 

In a superficial sense, you would think as a naive investor (supply down, demand up) that somehow “getting into” freshwater dolphins would be a good idea.  BUT THE WHOLE HABITAT OF THE DOLPHIN IS BEING WIPED OUT.  This is not a matter of being able to “invest” in dolphins.  What we are witnessing in the case of the baiji, I’m sure you would agree, is inevitable extinction.

Similarly, Jim Rogers consistently states that the “fundamentals” for agriculture are incredibly positive.  He states that investors should get into agriculture.  Supply is down.  Demand (with population growth and rising Asian incomes) will inevitably go up.

Although I respect Jim Rogers as an investor, this shows his limited thinking, his inability to see the full implications of the trends here.  He has spent his whole life as a commercial trader and investor, not as a social scientist or economist or philosopher.  He sees the problem, thinks in terms of supply and demand and then concludes that investment in agriculture is a good idea.

I beg to differ.  Although I respect Jim Rogers as an investor, I don’t respect him as a deep thinker.

My view is that we are watching EXACTLY THE SAME PROCESS AS THE EXTINCTION OF THE FRESHWATER DOLPHIN, APPLIED TO HUMANS!

Overfarming cannot be reversed.  Topsoil is irreplaceable.  Phosphates, once lost, cannot be replaced if there is no supply.  The water table once polluted cannot ever be cleansed of chemical toxins.  Destruction of arable land is in most cases irreversible.

The price mechanism cannot transform houses into farmland, cities into arable land.  Once destroyed these things (vital for our very survival) cannot ever be put back in place. 

Similarly, once the freshwater dolphin is extinct no amount of hedge fund investment is going to get its natural habitat back.

So Jim Rogers is right to see the trend, but he hasn’t worked out the full implications. 

WE ARE ACTUALLY WATCHING THE DESTRUCTION OF OUR OWN FOOD SOURCE.  WE ARE WITNESSING BEFORE OUR VERY EYES THE DESTRUCTION OF OUR OWN HABITAT.  WE ARE INEXORABLY CAUSING OUR OWN EXTINCTION.

If you think I’m crazy, please read this article and this previous post and then tell me you’re 100% confident that governments and investors will get us through this little problem.

Sometimes the price mechanism has become so corrupted by bankers and governments that the warning bells don’t go off until it’s too late. 

I don’t believe we are watching a “bull market” in agriculture.

What we are watching is the massive extinction of our various food sources, resulting in a massive food crisis for the (much higher!) human population in a few short decades.

No amount of hedge fund money will turn Asian cities back to rice paddies, Western suburbs back into farmland, or polluted toxic African mining towns back to unspoilt Savannah.

It’s already too late, in my view.  The trends are “locked in”. 

We are the next freshwater dolphin.   We are killing ourselves.  Climate change, if it exists, will simply accelerate this process.

Those institutions supposedly designed to “forward plan” us out of this mess also happen to have control of the guns.  History records that when a crisis hits, governments turn from protector to predator, plundering the people for food.  Chile.  Zimbabwe.  Cambodia.  Talk to indigenous peoples in Australia, in New Zealand, in Hawaii, in North America, in South America, in Asia, in Africa about what elite governments do to those they supposedly have a duty to protect.

Sorry, that’s right. You can’t.

Because they’re already dead.

Austrians win

Niall Ferguson states that Ludwig von Mises and the Austrians have come out of the GFC with their reputations in tact or enhanced and they are the real winners (in an academic sense) out of the GFC.

Why then are there no Austrians in any university in Australia?  Why is there none in the UK?  Why is the Mises Institute ridiculed by the mainstream?

I don’t know why success is punished by permanent obscurity, but I’ve suffered for being right.  When do I get credit for being right?

Milton Friedman was an idiot

Friedman had some reasonable insights into the inefficiencies of government.

However he made a number of unforgivable errors, which ironically endeared him to the Establishment and enhanced his reputation.

First, he trashed Austrian Business Cycle Theory.

Second, he was a fiat money guy, supporting fiat money over gold (up until the end, when he started having doubts – too late in my view).

Third, he supported central banking.  How he could be a “free market guy” and support monopoly fiat and monopoly price fixing of interest rates is beyond me.

Fourth, he destroyed Chile by implementing policies which systematically removed social investment and safety nets that (arguably) govts should provide, whilst keeping monopoly fiat in place.  He should have advocated the elimination of monopoly fiat and allowed the continuation of social safety nets.  He was clearly a tool of the major US banks in Latin America.

Fifth, his policies destroyed New Zealand, partially destroyed Australia, and partially destroyed many other countries including the UK and the US. 

Antal E. Fekete does a wonderful job of destroying Friedman’s theories here, in a speech he delivered in late 2006, just after Friedman’s death.  He also wrote a brilliant piece critiquing both Keynesianism and monetarism here, entitled (tellingly) Götterdämmerung.

If you are shocked by the title of my post, please read these two pieces immediately.

I will never forget Friedman sitting on the edge of Victoria Harbour in the late 1970s openly admiring the “free market” of Hong Kong.  Hong Kong has the highest number of billionaires in Asia but 18% of the population live below the poverty line.  Pollution problems are very serious.  If you ask the average Hong Konger are they happy I guarantee they’ll say no.  Housing is hideously expensive and is a huge tax on the working people (despite the supposedly low rates of tax there).  Social services for the aged are extremely poor.  Worst of all no one can buy and sell in gold – the monopoly HK dollar is pegged to the US dollar.  So the economy is subject to the same mad monetary swings as the US.

It is not so much a “Free Market” as one “Trapped in a Monopoly Money Hell”.  If they could be allowed to trade in any currency they liked, I’d be more sanguine about HK.  Until that fundamental issue is addressed, the Hong Kong people will never be free.

ETS as “rent seeking”

According to Wikipedia:

In economics, rent seeking occurs when an individual, organization or firm seeks to earn income by capturing economic rent through manipulation or exploitation of the economic environment, rather than by earning profits through economic transactions and the production of added wealth.

In other words, rent seeking activity occurs when businesses try to use corrupt governments to change compulsory laws in their favour and feed off government revenue rather than try to serve individuals in the market through voluntary trade.

Banks are the biggest rent-seekers in the Western world, spend the most on lobbying governments and have the closest connections with central banks and governments.  Oil companies probably come a close second.  Third, probably the military-industrial complex.  Fourth, probably aged services and medical services providers.  Fifth, probably telcos.

The ETS is a massive rent seeking exercise with billions at stake.

When you create a honey pot of billion of dollars collected coercively by governments worldwide and concentrated in the form of an ETS, you set up a venue for around 15,000 people to discuss how to collect and dole out these billions, and then you invite 45,000 people into the venue.

And you are surprised by chaos?

This is government at work.

We are doomed.

Anarchy (decntralised local voluntary self-government and a voluntary gold standard) is way, way, better than this.

Short NAB

Why would a bank with govt guaranteed deposits (liabilities) and a simple, dumb (but profitable!) retail banking model make a $13.3 billion bid for an investment firm whose value is almost perfectly correlated with the value of the stockmarket when stocks have been artificially resuscitated in 2009 and are likely to take a dive on reality in 2010?

Why would they venture out beyond banking into an area that has proven to be so risky?  Why would they overbid in a competitive market?

Why would they want to kill themselves?

Who knows?

Perhaps they are doing it so AMP overbids and actually wins the deal?  But NAB is giving the impression the deal is done.

Whoever wins AXA Asia now will be buying a poisoned chalice.

G.D.P. is i.n.s.a.n.i.t.y

Real economics lesson for today is on GDP.

GDP stands for Gross Domestic Product.  GDP measures what?  Transactions relating to domestic producers.  Volume of transactions x price of transactions. 

Why would anyone care about this stupid measure?  Who cares what the nominal total value of all transactions is in an economy?  It doesn’t say anything about the quality, the type, the nature of those transactions.  It doesn’t say anything about whether those transactions involve sustainable consumption or investment in better technology.  It doesn’t appear to have any use at all!

If people are buying toxic plastic toys for their kids that break within a week and have to be thrown into landfill to poison the water table, then GDP would go up.  For a time.  Would people celebrate this fact?

If the porn industry is exploding and 15 year olds are buying videos of Jenna Jameson’s latest exploits, then GDP would go up.  For a time.  Would people celebrate this fact?

If a nuclear reactor exploded and required $5 billion of public money to clean up, with thousands sick with toxic cancer-causing radiation poisoning, then GDP would go up.  For a time.  Would people celebrate this fact?

If we spend another $2 billion in military expenditure to kill people in Afghanistan to take control of the opium trade there, then GDP would go up here.  For a time.  Would people celebrate this fact?

If egotistical developers build billion dollar developments in the middle of a desert where 40 degree temperatures scorch the earth, then GDP would go up.  For a time.  Would people celebrate this fact by contiuing to buy these developments for the prices being asked – forever?

So why does the government care about GDP?

GDP is essentially nothing other than a measure of the capacity of an economy to carry parasites.

It is a lagging indicator of “bank client” solvency.  That’s all.  If GDP goes up, banks can be more confident their indebted clients will pay back their loans.  If GDP goes up, tax revenues will also go up.  Banks like solvent clients.  Governments like tax revenues. 

That’s why Irving Fisher developed the GDP metric in the early 20th century -  for government and for the banks.  For thousands of years up until the early 20th century, no one had a measure of total GDP and no one cared about total GDP.  Humans got along just fine without obsessing about this pointless hypothetical: How many transactions took place in our economy and what was the total value?  The response to such a question prior to the 20th century would have been:  Who cares?

Shakespeare wrote his plays without GDP being measured.  Bach wrote is sonatas without GDP being measured.  Heck, even Napoleon conquered most of Europe with GDP being measured!  Why was such a stupid pointless metric developed at all?

It was dreamed up by bureaucrats for bureaucrats.  It’s a measure of their own solvency, their own viability.  Keynesian statisticians refined the metric after Fisher during and after the Great Depression to try to get governments and banks out of the hole they found themselves in.  Governments have obsessed about this metric ever since.

GDP is a terrible way to measure quality of life - no one should be fooled into thinking a rise in GDP is good.  It is likely to be bad.  It would be insane to think there is any correlation between quality of life and GDP.

Australia’s GDP grew by “only” 0.5% this year.  The government is concerned and hence the stimulus.  Why would it be concerned simply about the value of total transactions in the economy?  Because this is a measure of the capacity of the economy to pay taxes.

A parasite is always concerned about blood flow.  GDP measures blood flow.  It measures the ability of parasites to suck blood out of the economy.

Parasites are (generally) blind.  Hence, bureaucrats focus exclusively on numbers and cannot understand the heterogeniety of capital.  You shouldn’t be so blind.  Ignore the numbers.  They are the entrails of past events that give no sign of the future.

You should focus on the quality of investment, on the nature of economic activity in an economy and plan accordingly.  Ignore GDP.  Ask yourself:  What kinds of investments are being made right now?  Is a new casino being built in my area that will kill families, suck away local income and destroy surrounding businesses?  Is a new shopping centre being built which will suck away retail spend from small businesses?   Is farmland being destroyed for residential development?  Are small businesses suffering under exorbitant taxes?

These are signs for the future.

GDP is nothing but a sign of past domestic solvency – of the govt’s ability to parasitically feed off the blood flow of the nation.

Ignore it and prosper.

Gold is not in a bubble

Gold has been in a bizarre unnatural slump for a generation.  Gold has been money for 6000 years.  Gold is solid.  It’s not subject to wild swings in supply (subject of course to the paper machinations of the bullion banks).

Fiat paper currencies and govt bonds have been in a bubble for a generation.  That bubble burst in 2008.  The powers that be are trying to patch it up.  But like Gorbachev discovered, the most dangerous period for any oppressive regime is when it tries to reform itself.

Gold will continue to climb because it is God’s money.  God, ultimately, will not be denied.

Adrian Ash appears to agree.

Only savings can allow for sustainable economic growth

Brilliant application of ABCT to Dubai can be read here.

No one wins from a Ponzi-scheme other than Ponzi and the bankers backing him.

Bernanke named Time’s Person of the Year

Yes, that’s right, Bernanke.

I am definitely living in a Kafka novel. 

I make no other comment on this travesty other than to add Senator Bunning’s speech at Bernanke’s Senate confirmation hearing.

This conclusively proves to me that there is no God.

Dumb monopolist regulator works its magic again

The ACCC decided to kill the proposed merger between small appliance makers GUD and Breville.

This, in a market where a flood of no-name cheap imports control prices so that no Australian pays exorbitant prices for small appliances.  It would have to be one of the most competitive markets in Australia.  Even if the merger resulted in a 90% market share, the potential for import competition would be sufficient to temper any abuse of market power.

Arguably, there’s much less competition amongst the big retailers.  Companies such as David Jones, Myer and Harvey Norman dominate the retail market and their financial performance suggests the profits collect at the retail level, not the wholesale level.  Ironically, it was the submissions from the big retailers (arguing that the deal would reduce wholesale competition) that scuppered the deal.  The big retailers were arguing that couldn’t screw the wholesalers down enough after this deal and they would have had to do the hard work of bringing in foreign no-name brands to compete with the newly merged entity.  How tragic for these behemoths to have to do some market research overseas!

The monopoly market regulator has decided and its decision is final.  Unless GUD wants to spend millions of dollars it doesn’t have on a court battle with my (sorry, now the ACCC’s) tax dollars. 

You cannot believe the dollars now wasted on parasitic lawyers just to apply for approval from the God-head, Mr Graeme Samuel.  The costs of mergers have soared in recent years, with unprincipled lawyers infesting every deal with thousands of pages of submissions which make no sense in economic theory (define “market”!) but which are now required because of the Kafkaesque complexities of the ACCC approval process.

The King of Monopolies, the ACCC, always knows better than the market.

Perhaps GUD should re-apply in a couple of months.  It’s possible the outcome will be different then, given that the ACCC appears to change its mind month-to-month.