How does Government Debt go negative?

Today came the news that short-term German government paper was following the Swiss example and turning negative, not only that but its expected that it won't be very long until the 10-year Bund follows suit.

Quizzical isn't it? Why would anyone pay for the privilege of lending someone money?

Friends and colleagues of mine, having a hunch that I know a little more about finance than they do have been asking me about this quite a bit recently and to be honest I have struggled to give them an answer they could happily digest. Well it certainly is a "new normal" and set to spread throughout the developed world as things get worse but how and why is it happening?

In short this is what Quantitative Easing has wrought. Institutions paying for the privilege of lending their money to insolvent governments. Not because those borrowers are such low risk counterparties, but rather because now real investors must compete with totally price-insensitive Central Banks hoovering up sovereign debt with freshly 'Printed' money.

If you want to understand this mechanism in a little more detail here is an excellent blog post by David Stockman who is examining a fascinating new blog by none other than the architect of this mess, Ben Shalom Bernanke.

This is the crux of his conceit:

A similarly confused criticism often heard is that the Fed is somehow distorting financial markets and investment decisions by keeping interest rates “artificially low.” Contrary to what sometimes seems to be alleged, the Fed cannot somehow withdraw and leave interest rates to be determined by “the markets.” The Fed’s actions determine the money supply and thus short-term interest rates; it has no choice but to set the short-term interest rate somewhere.

He doesn't even know what this mythical rate should be, but whatever figure he comes up with I'm sure it will be agreeable to the bankrupt sovereign states of the West.


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Democracy Online

I suppose it's reasonable to believe that when you're browsing the comment sections of blogs, interactive media or Facebook that you are reading the thoughts and opinions of genuine readers. Naturally some of them may work for the state or be functionaries of political parties but would you actually expect them to be paid expressly with taxpayers money to post messages of a particular nature?

Welcome to the rise of the professional, tax-funded internet Troll.

Here's the job advert : http://www.w4mpjobs.org/JobDetails.aspx?jobid=45223

45223

10 April 2014

21 April 2014

Job Title:

Social Media Coordinator

Working For:

International Alert

Location:

London

Salary:

Negotiable

Job Details:

This is a short-term consultancy contract until the end of May 2014, with an immediate start. Job share or part-time considered.

Are you a social media enthusiast? Do you engage on a variety of different social channels? We’re looking for someone creative and dynamic that has a natural flair for social media engagement. You will work closely with International Alert’s Communications and Europe Teams, and be responsible for running a short-term social media campaign (#EUnify) to counter racist and xenophobic discourse in the UK in the run-up to the European elections.

You will be responsible for building and engaging with audiences on the project’s social media channels, which includes coming up with content ideas, creating new content, amplifying messages online, managing and starting community conversations and making sure the social campaign is in line with the project's goals.

Tasks include:

• Building and amplifying campaign messages online
• Updating the project’s social media platforms - publishing daily posts on Facebook, Twitter, blogs and any other relevant social media channels
• Increasing networks and expanding our reach across all social media channels
• Managing and moderating user generated content and posting responses including on-going conversations and private messages
• Working closely with internal teams and partners to respond to issues and co-ordinate content activity
• Disseminating messages and materials to partner networks and channels
• Setting appropriate targets on engagement and activity
• Compiling statistics and monitoring engagement on a regular basis

Skills required:

• Ability to create engaging and compelling written and visual content
• Proven ability to conceive, implement, and manage cutting-edge online strategies, including mobilisation campaigns
• Proficient in using and managing Twitter, Facebook, YouTube, Google+, LinkedIn and blogs for marketing/campaigning purposes
• Ability to work to tight deadlines with a ‘can do’ attitude towards managing multiple tasks
• Expertise with online analytics
• Demonstrated ability to understand complex public policy and translate it into compelling digital content

For the full details please see the advertised post on our website: http://international-alert.org/jobs/social-media-coordinator.

Closing Date:

21 April 2014

I bring your attention to this section :

You will work closely with International Alert’s Communications and Europe Teams, and be responsible for running a short-term social media campaign (#EUnify) to counter racist and xenophobic discourse in the UK in the run-up to the European elections.

I think it's clear that they mean to target UKIP.

International Alert is an NGO, that means in reality a taxpayer funded, un-elected and permanent wing of the Labour Party.

This is the new face of democracy.

That's my vote decided. 

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All original material is copyright of its author. Fair use permitted. Contact via comment. Unless indicated otherwise, all internet links accessed at time of writing. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Default Risk Zero

So the US government is having a little argument about the debt ceiling again. China and Japan have warned that a US default might be a little nasty and even the President himself has warned of financial Armageddon.

So why are the markets so sanguine? Where's the panic?

Well we all know there will be a last-minute deal, it's like those clichéd  cop dramas where you know the protagonist is in no real danger. If there was any doubt in your mind take a look at the appointment of über dove Janet Yellen to the chair of the Federal Reserve. A sure signal that they plan to print to infinity.

Back to sleep everyone, no story here.

However…

The US government have no option but default, the only question is when, but that my friend is another story.

All original material is copyright of its author. Fair use permitted. Contact via comment. Unless indicated otherwise, all internet links accessed at time of writing. Nothing here should be taken as personal advice, financial or otherwise. No liability is accepted for third-party content, whether incorporated in or linked to this blog; or for unintentional error and inaccuracy. The blog author may have, or intend to change, a personal position in any stock or other kind of investment mentioned.

Guessing the low points

I looked at trends in the Dow earlier this year and guessed that the Dow's low might be 7,000. Now, Mish reports that Nouriel Roubini is saying the same.

The FTSE is currently hovering around 4,000, which is lower than the line I drew in June. But then, the line passed through, not under, the lowest negative spike in 2003. I seem to recall Wolfie predicting 4,000 in one of his comments here recently; well done, old chap.

The "All Clear" sounds on Google Chrome

It seems that Google has amended the User License Agreement on its new Chrome web browser (htps: James Higham, Wolfie). And City Unslicker likes it because it's "open source".

Should we let Africa starve?

Wofie's post on the futility of charity in Africa, a rider to Kevin Myers' article in the Irish Independent, gave me pause for thought. Are we wasting our money keeping poor children alive, so that they can grow up to be gangster-soldiers? If abortion is the answer to the criminal classes (not actually advocated as such by the authors of "Freakonomics"), is starvation the solution to civil war in Africa?

"Africa’s peoples are outstripping their resources, and causing catastrophic ecological degradation," says Myers. Perhaps, if they do things as they have done before. But on that basis, one would never have predicted the growth of Europe's population to its current size.

One of my relations by marriage went to Kenya to try his fortune some years ago, and having married a local girl from the Kikuyu tribe, bought a farm. His new wife is clever and sent off for pamphlets on farming, from which she learned that you can multiply the productivity of your land by companion-planting several crops. I wonder how much more food Africa could produce if agricultural skills there were better developed and disseminated.

Even in Europe, there are disparities in efficiency. Up to the end of World War 2, my grandfather had a farm in East Prussia. His 600 acres produced at least as much as the 2,000-acre farms of his neighbours. He compounded this advantage by diddling the taxman, telling the latter that as a simple farmer, he didn't understand finance and would the taxman please assess him on what his land could be judged to yield. You may be sure that he paid his tax bill without argument.

And what about modernising energy supplies, too? As a child, I saw a map of the Congo Basin and fantasised about damming the encircling ring of mountain ranges to make the world's greatest hydro-electric project, supplying the electricity needs for the whole of Africa. Of course, I hadn't considered ecological consequences; but in the Sixties, all I ever (over)heard of "ecology" was an brief, excited discussion between two of my teachers. This doesn't vitiate the argument for looking for efficient energy production that doesn't require chopping down all the forests to cook on wood fires like traditional tribespeople, or middle-class hippies.

Yes, some African countries are spectacularly badly governed; but I don't think we should rush to a money-saving despair for their peoples.