Money and life

The previous post is a summary of Brad Setser's views on China and the dollar. What with the oil price coming down and the trade deficit reducing because of declining demand, it seems reassuring for Americans. But Michael Panzner also returns to one of his themes, the inflationary phase that he (and many others) fear may succeed the recession-depression.

Marc Faber has observed that this is the first time in history that economies around the world are affected simultaneously, since we are now much more inter-connected. So if inflation should take hold, perhaps it will not be fully reflected in the exchange rates - it might be that the dollar remains relatively buoyant against the pound, Euro, renminbi etc.

So maybe the real victims of global inflation, or hyperinflation, will not be this nation or that, but cash savers as a class. They have set aside some of the rewards of work, instead of spending it, and will come back to the cupboard to find it turned half-rotten, as happened in the 70s (if they'd put it in the stockmarket instead, it would only have been a bit mouldy).

How is it that China can award death sentences to those who adulterate milk with melamine, but adulterating the currency - the accumulation of millions of years of human labour - is not even punishable by loss of office? In the year George Washington took Presidential Office, "coining" in England was treason, and perpetrators were accordingly hanged, drawn and quartered (or, in the case of women, burned).

Money is stored life, and devaluing money is stealing life. Next month will be the 20th anniversary of my becoming a financial adviser, and the people I have advised would mostly not bother with investments if only their cash savings could hold their real value. What a scam this all is.

The Greenback is Red-backed

Brad Setser returns to a favourite theme, China's investment in the US. If I can summarise:

1. China buys American bonds directly, but also via the UK. Practically all the UK's purchases are on behalf of China.

2. American government bonds are either Treasuries (debts of the government of the USA) or Agencies (debts of US States and local government). Concerned about risk, China has recently been selling Agencies to buy Treasuries, because the latter are backed by the Federal Government.

3. China will continue to invest in the US, because this keeps up demand for the dollar and so keeps down the Chinese currency, the Renminbi. This means that Chinese exports to America will remain very competitive in terms of price.

4. China's continuing support will stop the US dollar from collapsing in the world currency market, as many have feared. Other countries who are also running a trade deficit and need financing, have much more reason to worry.

Dow 2,000: confessions of an optimist

Karl Denninger looks at one of the shapes chartists use to guess market movements, and concludes that a Dow fall to 2,000 points is one possible outcome.

Back in November, I did my own work on the "in-real-terms" Dow (i.e. adjusted for CPI), and if history repeats itself, a fall to below the equivalent of 2,000 points would merely be a repetition of what happened twice in the 20th century. But the second low (1982) was not so deep as in 1932, and in December I re-drew the graph with (sort of) reassuring curvy lines, which suggested that maybe the low point next time might only be c. 4,000 points.

This latter attempt of mine sturdily ignored two facts: debt, and its recent monetization (look at Tim Iacono's second graph here) have gone far past all previous levels; and so did the Dow in its "twin peaks" episode of years 2000 and 2007. Maybe the next low will be as devastatingly deep as the last peaks were dizzyingly high.

I will comfort myself with the illusion that the Dow will merely halve, until reality proves me wrong.

An answer to global warming

Grow Azolla.

Preparing for the Abolition of Freedom in the USA

How many Americans are aware of this?:-

Establishing Martial Law in the United States

(htp: Global Research; referred to me by Paddington)

UPDATE: see this from Jesse re New Hampshire's Resolution HCR 6! Freedom is in the air again!

New Market Terms

[Making the rounds]
CEO --Chief Embezzlement Officer.
CFO-- Corporate Fraud Officer.
BULL MARKET -- A random market movement causing an investor to mistake himself for a financial genius.
BEAR MARKET -- A 6 to 18 month period when the kids get no allowance, the wife gets no jewelry, and the husband gets no sex.
VALUE INVESTING -- The art of buying low and selling lower.
P/E RATIO -- The percentage of investors wetting their pants as the market keeps crashing.
BROKER -- What my broker has made me.
STANDARD & POOR -- Your life in a nutshell.
STOCK ANALYST -- Idiot who just downgraded your stock.
STOCK SPLIT -- When your ex-wife and her lawyer split your assets equally between themselves.
FINANCIAL PLANNER -- A guy whose phone has been disconnected.
MARKET CORRECTION -- The day after you buy stocks.
CASH FLOW-- The movement your money makes as it disappears down the toilet.
YAHOO -- What you yell after selling it to some poor sucker for $240 per share.
WINDOWS -- What you jump out of when you're the sucker who bought Yahoo @ $240 per share.
INSTITUTIONAL INVESTOR -- Past year investor who's now locked up in a nuthouse. PROFIT -- An archaic word, no longer used.

Radical chic

(Pic left: Ken Kesey's bus)

QandO has a good go at Bill Ayers, an education prof who once led the violent radical underground Weathermen movement (and is married to a former member). For those who want to know about one strand of the Baby Boomers, Ayers (born 1944) may be a touchstone.

The connection between radicalism and education is a very old one; modern mass communications also come under this category of vectors of revolution. Readers might like to consider how many other Ayerses there are, not actually getting their hands dirty anymore but getting well-paid and respected for influencing the agenda in classrooms, TV and the print media.

I'm not quite going to take the simplistic guntoting redneck line on them. People like this meant well, but they thought in abstracts, always dangerous with earthbound Man. If there is one thing we must learn from the past 40 years, it's that meaning well isn't enough. But they always wanted to do well for themselves out of doing good to others, and have fun doing it - isn't that human.