Gonzalo Lira

Me on Max Keiser

2012-01-21T12:06:00.001-05:00

This was taped this past Tuesday, and just went on the air: A lively conversation with Max Keiser.

Apparently, I’ve been banned in the UK because of some of the things I said here—which is pretty cool: I’ve never been banned before.

Enjoy!

This Is America Today, Part II

2012-01-21T11:22:00.000-05:00

These facts are from the CIA—and they are undisputed:

• Infant mortality rate in the United States: 6.06 per 1,000 live births.

• Infant mortality rate in France: 3.29 per 1,000 live births.

• Average life expectancy in the United States: 78.37 years (75.92 for men, 80.93 for women).

• Average life expectancy in France: 81.19 years (78.20 for men, 84.54 for women).

• Total expenditure on health care in the United States: 16.2% of GDP (2009).

• Total expenditure on health care in France: 3.5% of GDP (2009).

• Expenditure on health care in the United States per capita: $7,517 per year (2009).

• Expenditure on health care in France per capita: $1,148 per year (2009).

So . . . to make it clear: France has a Socialist-Commie health care system, while the United States has “the best health care system in the world”—

—and yet the French live longer, have an infant mortality rate roughly half the United States’, and yet still manage to spend less than Americans on health care.

A lot less—in fact, the Socialist-Commie Frogs spend less than a quarter of what the United States does, as a proportion of GDP.

And when you break it down per person per year? The French spend less than one-sixth what the United States spends—yet live longer, and have a lower infant mortality rate

These are the facts—and they are undisputed.

So! One of two things is going on: Either the French—as a people—are simply better than Americans; made of finer stuff; simply superior physical specimens.

Or . . .
Read more »

This Is America Today, Part I

2012-01-18T03:30:00.000-05:00

A true story: A fifty-ish woman I know was diagnosed with breast cancer. Dutifully, she and her husband contacted their insurance company to start the process of paying for her medical bills.

But lo and behold, the insurance company started dragging its feet—then tried to claim the woman’s breast cancer was a “pre-existing condition”.

That she had breasts in fact was a “pre-existing condition”—a “pre-existing condition” she had had since she was fourteen.

But the cancer? That was brand new.

The woman and her husband started the usual, insurance company-designated complaint process—which they quickly realized was a deliberate rigamarole, designed to get them spinning their wheels without receiving any money from the insurance company.

So they did the smart thing: They contacted lawyers. Not “a” lawyer, but a team of lawyers—four in fact, including a partner in a name law firm in her city.

This squad of lawyers had a morning meeting with the insurance company people.

In less than a single business day, the insurance company started paying up. In the two years since this little “episode”, as the cancer stricken woman calls it, she and her husband haven’t had a single problem with their insurance company.

This is America today.

The insurance company didn’t act im-morally so much as a-morally: They made the cold-hearted calculation that it wasn’t worth their while to pay off the woman’s justifiable claim—until she showed up with a squad of lawyers. Then the insurance company made another cold-hearted calculation: That it was cheaper to pay off her legitimate claim than to fight her lawyers.

So they paid: Not because they were contractually obliged to—as they were—or because it was the right thing to do—as it was. No: They paid off her claims because it was cheaper than trying to wriggle out of their obligation.

This is America today.

What If The Government Takes Over Wikipedia?

2012-01-17T02:25:00.000-05:00

A quick post.

As most people know, Wikipedia will go offline on Wednesday—in protest over the Stop Online Piracy Act (SOPA) and the Protect Intellectual Property Act (PIPA). The Financial Times has a brief but fairly comprehensive overview of what’s going on here.

A lot of people online—myself included—are against both SOPA and PIPA. And for one, I fully support what Wikipedia is trying to do: Shut itself down—the sixth most visited website on the planet—and thereby get those 234 million daily users to read its statement opposing SOPA and PIPA.

Knowing the editorial judiciousness of Jimmy Wales and the Wikipedia team, I have no doubt that, one, their opposition has been carefully thought through; and two, this unprecedented step of shutting down the site is extraordinarily serious—and thus emphasizes how seriously Wales and his team take the measures in SOPA and PIPA.

In other words, Wales and his team aren’t fucking around—this is a big deal.

But I couldn’t help wondering: The U.S. government must also recognize that this isn’t a temperamental teenager throwing hissy-fit—Wikipedia is seriously respected in the online community. Wikipedia’s shut-down is a big black eye to SOPA and PIPA—and to the people who are pushing it, especially Barack Obama’s White House.

So what if the U.S. government were to decide to take over Wikipedia? Prevent it from going offline? With the excuse that they’re taking it over and keeping it online “for the good of the American people”?

Let’s face it, Wikipedia is incredibly important to the Internet. Most of us go to Wikipedia first, if a quick Google search doesn’t get us the info that we need. And whenever we want to get the skinny on something complicated, Wikipedia is often the only place we go to.

Thus we are all particularly dependent on Wikipedia: It shapes our knowledge base much more profoundly than we either realize, or would probably like to admit. The fact that it doesn’t advertise, and depends instead on donations alone, gives it even more credibility, and to our eyes makes it that much more trustworthy.

But Wikipedia is an incredibly small, incredibly fragile operation. It’s yearly budget is less than $20 million per year—nothing, when compared to, say, the bailout of Citi.

Just as it declared Citi, BofA, Goldman and JPMorgan “Systemically Important Financial Institutions”, what’s to stop the U.S. government from declaring Wikipedia a “Systemically Important Website”?

And rather than throwing money at them, what’s to stop the government from revoking Wikipedia’s non-profit status? Declaring it a for-profit—and then using the IRS, say, to take it over? Or better yet, prevent it from shutting down by delaring it “Educationally Essential Website”—and putting it under the aegis of the Education Department? Take it over “for the good of the country”? And then maybe start shading and editing the various Wikipedia entries in order to give a “more balanced version of events”?

“Paranoid”, you say? Well, it’s not paranoia if they’re really coming after you.

Famously, Senator Joe Lieberman brought out security, terrorism, and all the other bugaboos when he argued for the U.S. government to have the ability to shut down the Internet—infamously concluding with the line that, “China, the government, can disconnect its Internet—we need to have that here too.”

State control of the Internet: That’s what Sen. Lieberman meant when he said, We need to have that here too. There’s really no other way to interpret what he said.

What if Lieberman or someone of his delicate sensibilities were to say something like, “Wikipedia is a Systemically Important Website. So we need to be able to take it over—for the protection of the American people and to stop them from being ‘misinformed’.”

Don’t think it can happen? Paranoid, am I?

Then why are Jimmy Wales and his team at Wikipedia shutting themselves down for a day? For kicks?

Or because they think that this is real?

Join Me As I Say: No.

2012-01-07T02:19:00.000-05:00

When I was about 15 or 16, I read Solzhenitsyn’s The Gulag Archipelago. The book is a history of the Soviet concentration camp system between 1918 and 1956, based on the testimony of actual prison inmates, of which Solzhenitsyn was one—and it had a profound effect on me, both politically and as a future writer.

But most of all, it taught me something crucial: What is legal is not necessarily the same as what is just.

Because you see, the Gulag system of forced-labor and concentration camps was completely legal: Proper laws had been properly passed, which allowed innocent people to be shipped off to their doom in a properly legal process. Even before the Nazis came up with the Wannsee Protocol, Lenin and his Soviets had perfected the idea of using the law to rape justice and the rights of human beings.

We today look at such abuses of the law as perversions typical of authoritarian and totalitarian regimes—

—but what about in a democracy? What about in our democracy? What about in America?

Recently, the United States’ Congress duly and democratically passed the National Defense Authorization Act (NDAA), which President Obama duly and democratically signed into law.

The NDAA makes it legal for the executive branch to unilaterally declare anyone, including an American citizen, a terrorist suspect. And on merely the strength of this suspicion—not an act, not even a plan, but merely on a suspicion—an accused person can be “detained” indefinitely.

So imagine this: Read more »

A Run On The Global Banking System—How Close Are We?

2011-12-27T09:11:00.000-05:00

Nine weeks after its bankruptcy, the general public still hasn’t quite realized the implications of the MF Global scandal.

Once he looks down, then he’ll begin to fall.

My own sense is, this is the first tremor of the earthquake that’s coming to the global financial system. And how the central banks and financial regulators treated the “Systemically Important Financial Institutions” that had exposure to MF Global—to the detriment of the ordinary, blameless customer who got royally ripped off in its bankruptcy—is both the template of how the next financial crisis will be handled, and an accelerator that will make the next crisis happen that much sooner.

So first off, what happened with MF Global?

Simple: It went bankrupt—because it made bad bets on European sovereign debt, by way of leveraging positions 100-to-1. Yeah, I know: Stupid. Anyway, they went bankrupt—which in and of itself is no big deal. It’s not as if it’s the first time in history that a brokerage firm has gone bust. But to me, the big deal in this case was the way the bankruptcy was handled.

Now there are several extremely serious aspects to the MF Global case: Specifically, how their customers were shut out of their brokerage accounts for over a week following the bankruptcy, which made it impossible for those customers to sell out of their positions, and thus caused them to lose serious money; and of course how MF Global was more adept than Mandrake the Magician at making money disappear—about $1 billion, in fact, which still hasn’t turned up. These are quite serious issues which merit prolonged discussion, investigation, prosecution, and ultimately jailtime.

But for now, I want to discuss one narrow aspect of the MF Global bankruptcy: How authorities (mis)handled the bankruptcy—either willfully or out of incompetence—which allowed customer’s money to be stolen so as to make JPMorgan whole.

From this one issue, it seems clear to me that we can infer what will happen when the next financial crisis hits in the nearterm future.

Read more »

The European Central Bank Loses Its Virginity

2011-12-23T05:21:00.000-05:00

And it means more than is apparent.

This post is adapted from analysis which appeared in The Strategic Planning Group.

Mario, relax . . .

So yesterday, the European Central Bank (ECB) doled out €489 ($639) billion in loans to the European banking sector.

Why’d they do it? ‘Cause Europe’s banks are broke: That is, if all the crap they collectively hold on their books were marked to market, their liabilities would be greater than their assets. American banks shouldn’t smirk: The only reason they aren’t declared bankrupt for the same reason is because of the suspension of FASB 157 back in March 2009.

The ECB lent out the €489 billion against any and all collateral the European banks would put up. In exchange for this collateral—no matter how damaged—the banks got 1% loans, which is not merely free money but essentially subsidized money: Eurozone inflation is around 3%, and except for German and Dutch debt, all sovereign bonds are yielding more than 3%. Thus a 1%-interest loan from the ECB is like being paid to take out a loan—and who wouldn’t want that deal?

Ordinarily, no bank wants to be seen to be taking money from the central bank, because it makes the bank look weak, and therefore hurts its reputation on the markets. But in this case, 523 banks—count ‘em, 523—took the ECB money: Which proves both how fragile the situation really is, and how generalized that fragility really is. European banks no longer care what it looks like, as survival has trumped appearances.

Be that as it may, the banks took the money. And like their American counterparts, who took the Federal Reserve’s $7.7 trillion of free money and used it to buy Treasury bonds, the European banks are likely to plow this ECB largesse into sovereign debt: Thus they will make risk-free profits. And what bank doesn’t want that.

This was a major move, by the way: The ECB—after protesting for months that it was not and would never be the lender of last resort—has become . . . the lender of last resort: It has finally lost its virginity. Not only that, the ECB—like every recently deflowered naïf—will find it next to impossible to say “No” the next time the European banks come looking for nookie.

There are three aspects to this situation that I want to look at here:

Read more »

About Gold: Don’t Panic!!!

2011-12-17T12:36:00.000-05:00

It’s momentary—and it’s because of the euro.

This post is adapted from analysis which appeared last week in The Strategic Planning Group.

For those of us watching the gold markets—that is, those of us anticipating the collapse of the euro and the eventual collapse of the dollar—the last week has been a scary ride: Gold has fallen over 8.6%, from a high of $1,730 on December 7 to $1,580 on December 14.

WTF???, I can practically hear everyone say. The fundamentals would point to gold being a safe haven play—it should not be falling: If anything, it ought to be rising.

But a fall of 8.6%? In a week?

The first thing that pops into my head is, Don’t Panic!!

The second thing that pops into my head is, This is to be expected—and is only a temporary pullback.

Let’s take the second notion first: The reason the fall in gold is to be expected—and the reason it might well fall further—is because of the euro.

Read more »

Why Gay Marriage Doesn’t Make Sense—and Isn’t Fair

2011-12-11T14:49:00.000-05:00

I took a lot of slack recently, for saying I’m against gay rights. In a 2,000 word piece, my disagreement with the concept of gay rights was a passing reference of all of three words—exactly three words.

A slogan on a t-shirt
is not a reasoned argument.

The extent of my “homophobic rant”?

“Gay rights—no.”

From the reaction of a surprisingly large number of people, you’d think I’d called for every homosexual to be rounded up and put into Black Marias with no tailpipes. And since I have identified myself philosophically as a conservative Catholic (though not spiritually, as I do not believe in God), a lot of people took my objection to gay rights to mean that I was some close-minded Bible-thumping bigot who hates all gays for the mere fact of being gay.

Amazing, what people will infer out of thin air.

I don’t have an issue with homosexuals or homosexuality. My own sense—which seems to be confirmed by science—is that homosexuality is an inborn predisposition, no different than, say, alcoholism or left-handedness: There isn’t much a person born with the characteristic can do about it.

Those with an inborn predisposition—any inborn predisposition—can choose to not carry out the urgings of their predisposition: That is, they can choose to repress their predisposition. Alcoholics go to AA meetings precisely so as to repress the urge of their predisposition to drink themselves to death; my grandmother (born a lefty) had her left hand tied to her belt when she was taught to write in the 1930’s.

But though people can repress their predisposition—whatsoever that predisposition might be, be it positive, negative or neutral—they can’t choose to have or not to have their particular predisposition. As Lady Gaga says, they were born this way.

As an inborn predisposition which I do not share, I am indifferent to homosexuality, to the same degree that I am indifferent to left-handedness or alcoholism: Two other traits which I do not share. (Parenthetically, I’ve always suspected that those who belligerently “hate the gays” are secretly afraid that they themselves might be gay; but that’s for another post.) And just as I think that people who are left-handed or alcoholic should not be discriminated against, I think it’s wrong to discriminate against homosexuals qua homosexuals.

But what I am saying is that homosexuals should not receive certain privileges that society has deemed befit some citizens and not others.

Like the benefits of marriage.

Our society grants married people certain rights and privileges—certain benefits—which homosexual couples believe they ought to receive as well. Read more »

Why I Support The Occupy Movement

2011-11-20T05:30:00.001-05:00

I am a Conservative—and proud of it.

I am against abortion, including in the case of rape or incest. I don’t believe in any form of entitlement program, much less the concept of a welfare state. I am opposed to progressive income taxes—and in fact am against using the tax code as a vehicle to foment or discourage any social goal, as I think it inevitably leads to the tax code being gamed by interested parties (as has indeed happened with the U.S. tax code, beholden to paid lobbyists who have carved out so many loopholes that it looks more like a sieve than a tax code). Thus I’m in favor of a flat tax: Zero-percent for citizens, 20% for corporations.

I am in favor of a reduced government, a reduced military presence, compulsory military service, and a compulsory national guard system requiring 100% citizen participation, similar to the Swiss model. I am completely against foreign military adventurism, foreign military bases, and foreign military aid.

I believe that the government should be the enforcer of the law, and of a regulatory framework which—when it comes to issues affecting the common good—is strict to the point of anal.

For instance, food regulation, financial regulation, building code regulation—all of these regulations obviously serve the common good, and protect us all from unscrupulous people seeking to get an advantage by poisoning or otherwise hurting us all. Thus the government should have a tough regulatory framework—think of it like traffic laws: Tough government regulations that are simple, transparent, and which protect us all from each other, while making our interactions smooth, convenient and graceful.

I don’t have a problem with some people making boatloads of money, while others are homeless. I don’t believe it is the State’s or society’s or the government’s responsibility to take care of you in your old age—it is your responsibility.

Gun rights—yes. Gay rights—no. States’ rights—yes. Affirmative Action—no.

There are only three issues on which I don’t toe the Hard Right line: The death penalty, the war on drugs, and health care.

I am against the death penalty—not because I think that the State and society do not have the right to execute one of its members: They do, to my way of thinking, if the citizen has committed an especially heinous act. But the death penalty is permanent: You can’t take it back if you screw up. And since no justice system made by fallible men is infallible, mistakes are inevitable. So I am of the opinion that it’s better to have 1,000 murderers sit in jail at society’s expense, than allow one innocent man be put to death. Because you can free an innocent man after twenty years in jail for a crime he didn’t commit—but you can’t bring back the dead.

I am against the War On Drugs: First of all because it doesn’t stop the consumption (and thus flow) of illegal recreational drugs; second because I believe recreational drugs (up to and including cocaine, heroin, meth and acid) ought to be legalized and taxed, like booze, and its production regulated for safety standards, again like booze; third, because the “War On Drugs” has created a huge penal class—citizens who have spent time in jail for non-violent offenses, and thus are marginalized from general society because of this stigma on their record—which hurts people who have committed non-violent infractions, and enriches people who thrive on building and staffing more and more needless prisons.

I am in favor of trashing the current American health care system, and making it either entirely private, or entirely socialist: This hybrid system the United States has not only does not work, it is extraordinarily expensive. The fact that the French of all people spend less of their gross domestic product on their socialist health care system, yet have a lower infant mortality rate and a longer median and average lifespan than people in America, is a wake-up call: If the full-Commie Frenchie system is better and cheaper than the American one, then literally any health care system is better than the one that exists in the United States.

But all in all, I’m a good Conservative. (Though certainly not a Republican—a political party dominated by Neo-Conservatives, who are not Conservative at all, but rather, Corporatists.)

I believe that America should be the land of opportunity and risk: You can fly high—but you can also crash and burn. A society that eliminates risk—that tries to somehow torque risk down with “safety nets” and “systemic protections”—is begging for a Mommy Dictatorship when all is said and done.

Now, why do I go into all this detail about my political beliefs and ideas? Because I want to make clear where I stand, before I come out and say that I am in favor of, and fully support, the Occupy Movement.

The Occupy Movement is inarticulate—but not because of it nonsensical: The protestors are against the travesty that has become the American Republic. And though its origins are on the political Left, it should not be considered a “Leftist” movement.

Rather, it is an anti-Corporatist movement.

Read more »

We’re In The Middle Of A Run On Europe—And It’s Gonna Get Worse

2011-11-16T07:35:00.001-05:00

Specifically, a run on European debt.

So this morning, I woke up—hung over and alone, except of course for the Nympho Twins and the Thai hooker they insisted we hire last night—and was confronted with some bond market action that was . . . absurd.

Yeah, I know: A spread like that
doesn’t seem humanly possible.

Actually, kind of scary.

Yeah, Italian bonds are back to yielding over 7%, Greek debt is ludicrous (28.85%? Really?) as it has been for the last year, Portuguese 10-years are at 11.29%, the Irish at 8.20%, Spain at 6.33%—numbers that more or less fit where we are supposed to be insofar as the PIIGS are concerned, following the whole Greek Drama and Italian Farce, right?

So what’s up with Austria’s debt? Nevermind France’s debt, which is of course higher because of the whole Italy thing—what about Holland’s debt? Finland’s debt? In short, what’s going with the debt of the non-PIIGS who are not Germany?

Take Austria: Read more »

SPG Sampler

2011-11-13T22:09:00.000-05:00

Here’s a sample of the latest Week In Words—a weekly broadcast where we analyze what has happened, and what it means. A regular feature of my Strategic Planning Group:

The live broadcast took place on Nov. 13, at 7pm EST. It ran 80 minutes. The full recording is available on the Strategic Planning Group site, exclusively for SPG Members.

If you are interested, visit the site—or better yet, check out our preview page.

GL

A Beginner’s Guide to the European Debt Crisis

2011-11-10T08:36:00.001-05:00

For ordinary, non-specialist people just tuning in to the horror-show which is the European crisis, the whole mess can seem daunting and almost hermetic—almost like a secret language, or a really complicated code.

Euro-this and euro-that and euro-the-other—that’s all everyone seems to be talking about. That, and words like troika, haircuts, bailouts, yields, not to mention an alphabet-soup’s worth of acronyms like EC, ECB (they’re different), EFSF, PIIGS, IMF, EMU—

—OMFG!

For us dweebs neck deep in this stuff, it’s all mother’s milk. At my Strategic Planning Group, we’ve been game-playing what do when the eurozone breaks up since May—but for people who’ve just realized, “Hey! Something’s going on over there in Europe!”, it can be a bit much, like tuning in to a soap opera five minutes before the end of the episode: Everything seems terribly portentous and important and shocking . . . but basically incomprehensible.

Which wouldn’t matter if this was a soap-opera—but this is real life. This European crisis will affect your financial future, no matter if it’s happening on another continent. This is major—

—which is why so many ordinary people are confused and frightened: Because it seems terribly complicated.

But like all things which seem complicated at first glance, when you break it down, it’s simple.

This is what happened:

Read more »

Waiting for Lehman

2011-10-25T08:45:00.000-04:00

This is an adapted version of a post which appeared in my Strategic Planning Group. Adapted how? Well, the full argument is reprinted below—but the ugly money-grubbing stuff about what to do and what investment opportunities are good have been cut. After all, readers of the free version of my blog aren’t interested in such base dealings, right? GL

In Samuel Beckett’s play Waiting for Godot, the four main characters wait in vain—Godot never arrives.

In the financial markets, the same thing is happening now—we are all waiting for Lehman: That sudden bankruptcy-crisis-calamity which sets off a whole series of credit events, which in turn causes massive sell-offs, plunging markets, collapsing confidence, and ultimately—just like the bankruptcy of Lehman Brothers did back in 2008—shoves the entire global financial edifice right up to the very edge of the cliff.

To the edge—and perhaps this time over it.

We have good reason to be waiting for Lehman—our current situation is simple and stark: Sovereign nations and individual citizens are over-indebted—to the point where they cannot pay back what they owe. We all know that this overindebtedness at the sovereign and individual level is going to end, and end badly: Worse than 2008.

So along with everyone else, I’ve been waiting for Lehman—and fruitlessly trying to guess which will be the Lehman-like event this time around. Will it be the bankruptcy of Dexia? BofA? UniCredit or SocGen or one of the Spanish banks? Will it be a war in the Middle East? Bad producer index numbers from China? A fart by a day-trader in Uzbekistan?

When will Lehman arrive!?!?

But lately, my thinking has changed: Like the characters in Godot, I think that we’re waiting in vain. The Lehman-like event will never arrive because it won’t be allowed to arrive. So this miserable slog we are going through will continue—indefinitely. (Yeah, I know: Sucks to be us.)

My thinking is based on two assumptions: One, that the central banks and government financial authorities and regulators around the globe are absolutely terrified of a repeat of a Lehman-type bankruptcy or trigger event. And two, that those self-same central banksters and government drones will do absolutely anything to prevent another Lehman-like credit event from setting off another cascade of consequences.

And when I say “absolutely anything”, I’m not using hyperbole: Fuck principles, fuck the law, fuck legal constraints, fuck even basic long-term economic and fiscal health—or sanity. The clowns running the circus were so freaked out by the effects of the 2008 Lehman bankruptcy and the domino-effect that it triggered, that they will not let it happen again—ever. Come what may.

Hence, this endless Waiting for Lehman: This endless slog of ad hoc solutions and fiscal half-measures that brings us only tension and misery—and erodes our economy even further.

But this certainty that the bureaucrats in Washington and the eurocrats in Brussels and Frankfurt will do absolutely anything to avoid a Lehman-like event adds something key to the equation:

Predictability.

Since we know how the central banks and economic leadership will react—that is, if we start from the assumption that the political/economic leadership will do absolutely anything to prevent a major credit event from taking place—then we can predict what they will do in the three main areas of weakness:

Sovereign debt and the possibility of default.

Financial sector weakness and the possibility of insolvency.

Geopolitical crisis and the possibility of another Oil Shock.

What follows is a discussion of those three areas of weakness—and what the central banks and economic leadership will do about each of them.

Read more »

Germany Will NEVER Leave the Eurozone—Because It Can’t

2011-10-03T08:29:00.000-04:00

There’s No Upside, Only Downside

Late last week, there was a spike in random speculation that the German government was preparing to exit the eurozone—and that in fact, the Germans had gone so far as to print new Deutsche mark bills and mint new Deutsche mark coins.

Several alternative news sites, including Zero Hedge and others, gave serious credence to this rumor—enough credence that the euro took a hit against the dollar and gold.

But at the end of the day, it was just random speculation from one Dr. Philippa Malmgren, who was interviewed by a Swedish newspaper as saying “My impression is that the German Government sent us a number of signals that, from their perspective there is no other solution [than for them to leave the euro].”

This random speculation—coupled with last year’s random speculation from Hartgeld.com, a German fringe site that claimed with absolute certainty that on May 12, 2010, the Germans would for sure go back to the Deutsche mark, having already printed and minted the new bills and coins—gave the Malmgren nonsense some legs.

The fact of the rumor is no big deal—there are always rumors.

The fact that the financial community took such nonsense so seriously points to the big deal in this situation—the underlying worry that a lot of market participants are fearing: What if the Germans all of a sudden cry, “Fuckit!”, and let slip the bonds of the eurozone?

Can they leave the eurozone?

Read more »

Our Affirmative Action President

2011-09-29T12:20:00.001-04:00

If I wrote a piece arguing that Barack Obama is our first Affirmative Action President, would I be put down as a racist? Or a realist?

Most people under fifty who went to academically competitive universities in the United States saw what has come to be known as Affirmative Action babies: Minority students, mostly black, who simply could not cut the work at the competitive college level.

Forget bringing up some Herrnstein & Murray Bell Curve arguments about “racial differences in intelligence” or some such: A lot of the minority students simply did not have the cultural and educational background to cut it.

In my own case in the early ’90’s, I remember quite clearly talking to an African American student who had no idea who Napoleon III was. The first Napoleon—Napoleon Bonaparte? Sure, he’d seen the movie. But Napoleon III? President of the Second Republic, ruler of the Second Empire, the Revolution of 1848? Not a clue. In fact at first, I think he thought I was pulling his leg about there being a “Napoleon the Third”.

This young man was smart—smart enough to realize that he had been accepted to Dartmouth because he happened to be black. He struggled academically all the while—because he was simply unprepared for the exigencies of a place like Hanover. His high-school had not equipped him with the tools needed to succeed—

—which was of course the tragedy of Affirmative Action:
Read more »

Forget Gold—What Matters Is Copper

2011-09-24T07:19:00.001-04:00

People are freaking out that gold has fallen to $1,650, from its lofty highs above $1,800—they are freaking out something awful. “Gold has fallen 10%! The world is coming to an end!!!” I myself took a shellacking in gold—

—but copper is what has me worried.

Copper fell from $4.20 to $3.25—close to 25%—in about three weeks. Most of that tumble has happened in the last ten days, and what’s worrisome is that, as I write these words over the weekend, there is every indication that copper will continue its free fall come Monday.

From the numbers that I’m seeing—and from the historical fact that copper tends to fall roughly 40% from peak to trough during an American recession—there is every indication that copper could reach $2.67 in short order. And even bottom out below that—say at $2.20—before stabilizing around the $2.67 level.

But we’ll see. The price of copper is not the point of this discussion. The point of this discussion is what the price of copper means.

What it means for monetary policy.

We all know the old saying: “Copper is the only commodity with a Ph.D. in economics”, or words to the effect.

Read more »

What I Learned At Dartmouth

2011-09-17T21:20:00.000-04:00

Update below.

“The more you understand, the less you forgive.”

—Terrorism Expert

In the Fall of 1991, shortly after the Clarence Thomas nomination and the Anita Hill hearings, the Class of ‘95 matriculated at Dartmouth College.

Dartmouth Hall, by Stephanie Gagnon.

One of the freshmen—or “first years”, as they were beginning to be known—was accused by another first year of sexual assault and harassment. In the hot-house political environment at the time—product of the Thomas/Hill hearings, which revolved around workplace sexual harassment—these were serious allegations.

The young woman making the claim against the freshman said that he had visited her in her dorm-room around lunchtime one day during Orientation Week, and had “forcibly tried to kiss” her. She had rebuffed him, told him he was being “selfish”, after which he had left, without further incident.

This was the sexual assault allegation.

The young woman also claimed that the freshman had then started to harass her via electronic mail, in the days and weeks after. She claimed he had sent her “obscene messages”, which she had purged from her e-mail account, as she hadn’t wanted any of that “filth” on her computer.

This was the sexual harassment allegation.

The young woman said she wanted to “protect” the Dartmouth campus—and the other women at Dartmouth College—from the danger that the freshman represented. This was why she was reporting this incident three weeks after it allegedly took place.

The accused freshman, being unsophisticated, went through the disciplinary channels of Dartmouth College without contacting attorneys or even his parents. He was confident that the allegations would be shown to be lies—because he knew they were lies.

More to the point, he could prove that they were lies.

They Didn’t Win—We Lost

2011-09-11T10:22:00.000-04:00

America will never be destroyed from the outside. If we falter, and lose our freedoms, it will be because we destroyed ourselves.

—Abraham Lincoln

Mr. Cheney’s Victory Lap

2011-08-30T00:10:00.001-04:00

Dick Cheney is taking a lap around all the talk shows, peddling his memoir while giving his reputation one final spit-shine before he dies and goes straight to hell.

Dick Cheney

Oh—so you actually doubt he’ll go to hell? With the shit he’s pulled? Cabrón, please . . .

It is remarkable that relatively few people seem outraged by Mr. Cheney. Here is the man who, as Vice-President of the United States, violated some of the most important rights, freedoms and liberties that America has defended for over two-hundred years. Not only did he commit what in other times would have been considered war crimes and crimes against humanity—he is proud of having done so!

He boasts about the torture he ordered, he defends the wars of aggression that he fomented, and he is silent about the sweetheart deals he gave his former employer, Halliburton, in the “reconstruction” of countries that he helped destroy.

In short, he violated every rule in the book—yet no one is throwing the book at him. There are no Congressional hearings into his violation of the Constitution. There are no prosecutors sharpening their chops, getting ready to indict him on charges of corruption.

Most of all, there is no public outrage at him.

Sure, some loony Lefties and some old-style hard-ass Conservatives such as myself bitch and moan about him—but no one is seriously arguing for his arrest, indictment and prosecution for the despicable things he did while in office. Or if they are advocating his arrest and prosecution—like me, and perhaps you—then they are on the extreme fringes of the political discourse—like me, and perhaps you: Marginal, and inconsequential.

Read more »

110

2011-08-26T18:27:00.000-04:00

How easy would it be, to distill a point into 110 words or less? I got the idea from J.D. Considine’s blog, where he talks about his time as the reviews editor at Blender magazine: The rule was, any review had to be no more than 110 words. So far, I’m about halfway there—now.

The beauty of enforced brevity is that you have to focus your thinking on just the one thing. My particular situation—too many thoughts, coupled with limitless space, thanks to Blogger—means that my pieces have been too long and too digressive, yet also too infrequent.

So let’s see if the 110 word rule helps.

What Distinguishes the Rich from the Poor Today, Part I

2011-08-22T09:07:00.000-04:00

In Part II of this series, I’ll be covering education. In Part III, I’ll be covering something I call “structural pliancy”. —GL

One of my brothers-in-law, C., is moving from Chile to America to take over a fairly large corporation. He is a highly educated, highly successful guy in his late-thirties—a big strapping guy of about 6’3”, a former rugby player, big on golf, with four small kids and a tall willowy wife who looks like a model.

[Originally a picture of a two-headed chicken.
I didn’t have the ©, so Blogger blocked it.]
Yeah, it has two heads—but it was
raised organically. So it’s safer
than your lunchtime Chicken McNugget.

Though he’s been to the United States many times, for business and pleasure, he’s never actually lived there. So over a Sunday lunch, we talked about his first impressions about daily life in America—and what struck him was the food:

“It has no taste,” C. told me. “Or rather, supermarket food has no taste: Beef, fish, chicken—it all tastes bland and watery.”

He told me how vegetables too tasted oddly bland, and on top of that, he and his wife were worried about what is actually in the food.

The reason they’re worried about American food is because of the size of American children in his kids’ new schools:

“Our kids were among the tallest in their class in Chile—but they’re among the smaller kids in their U.S. classroom. On top of that, the girls in my older daughter’s class are starting to menstruate—and they are nine years-old! That’s not normal.”

C.’s conclusion: “It’s the industrially processed foods—God knows what they’re sticking in it. But we’ve got four children—and we want them to be healthy. So that’s why we started buying all our food at organic markets. The food bill is triple what it would be, but I don’t care, I can afford it: I want my family healthy.”

That—in a nutshell—is what will begin to distinguish rich people from poor people in the XXI century, as it has for millenia before: Diet.

But what kind of diet is the issue.

If in ages past, the diets of the wealthy had more calories, in this century and the future, the diets of the wealthy will have less chemicals and hormones.

And as in the past, we will see the difference in their children.

Read more »

Letter to George Washington, Regarding Paul Krugman

2011-08-16T08:40:00.001-04:00

I wrote a letter to George Washington, the pseudonym for a well-known finance and economics blogger, with regards to a blog post he wrote on August 15.

The letter might sound a bit like score-settling—but there is a serious point to it, a point that applies to both the Left and the Right. So be patient.

Here is my letter to him in full, with a few light editorial touch-ups:

Hi GW,

It’s been so long!

I’ve been skiing like a madman down here in Chile—but I did catch something you wrote, which I’d like to comment on, now that a blizzard has hit the slopes and I’m stuck inside with not much to do.

Paul Krugman

You wrote a post yesterday, picked up by Zero Hedge and others, pointing out that Paul Krugman is advocating war as a fiscal stimulus solution.

You pointed out that this position he holds is not only blatantly immoral, it is a position Krugman seems to have no problem openly pushing—your unspoken implication being that this is disastrous, considering how influential Krugman is in major policy circles.

With regards to K. pushing for war as the ultimate Keynesian economic solution: I hate to say “I told you so”—but in this case—

I told you so!

(Cheers, mate.)

I pointed out the exact same thing almost a year ago: That once you strip away all the B.S., it turns out that Nobel Laureate Paul Krugman, Keynesian par excellence and darling of the Wonk Left, is essentially pushing for war as the ultimate Keynesian stimulus solution.

For pointing this out, I got slimed by the Krugman Defense Industry (KDI).

Read more »

“The Sequel”: How 2011 Is A Repeat of 2008—Only Bigger, Longer, and Uncut by Bailouts

2011-08-15T07:56:00.000-04:00

I might have missed it, but I don’t think anyone has noticed this simple truism:

The structural causes that led to the Global Financial Crisis of 2008 are identical to the structural causes that are leading us to another systemic financial crisis in 2011.

You saw this one already?

The only difference is the kind of debt at the core of the looming crisis: Mortgage-backed securities in 2008, as opposed to European sovereign debt in 2011.

And of course, the debt hole in 2011 is bigger than in 2008—a lot bigger.

That’s why I am confident in predicting we are about to have another Global Financial Crisis—I’m calling it The Sequel: Same movie, same players, same story. Only this time around—like all good sequels—the financial crisis we are about to experience is going to be bigger, longer, and uncut by bailouts.

By the way, that is the key difference between 2008 and 2011: We’re not going to have a Hollywood Ending this time around. The governments of Europe and the United States, as well as their respective central banks, do not have any weapons to fight off this 2011 financial crisis, as they did in 2008, for the simple reason that they used them all up—they’re out of bullets, both monetarily and politically.

So when The Sequel hits the big screen, there won’t be a Big Daddy Government deus ex machina to come save the day in the third act twist. When The Sequel hits, we’re on our own.

Let’s discuss the structural similarities between the original and The Sequel:

In both 2008 and now 2011, you had unpayable debts at the center of a fragile financial system. In 2008, it was mortgage backed securities and collateralized debt obligations—the so-called “toxic assets”. I think we all know that story pretty well.

In 2011, we have European sovereign debt. And just like the toxic assets of 2008, the Euro-bonds might have been rated AAA, but they certainly aren’t blue-chip—they are more like brown-chip: That deep brown color peculiar to fast-sinking dog-turds.

Read more »

The Week in Words #4

2011-07-27T07:25:00.000-04:00

To my Gentle Readers and Kind Fans,

This Thursday, July 28, at 9:00pm EST, we are having:

The Week in Words #4
A web seminar where we will be discussing the most important news items currently affecting the markets.

And remember: It’s free.

This week:

Charles Hugh Smith will be joining me, to discuss . . .

. . . guess.

Here is the link to register.

Do check it out—and remember to have a microphone plugged into your computer, as attendees will be able to ask questions, live.

Until this Thursday at 9pm EST, all the best,

GL

If you are interested, do check out the preview page of The Strategic Planning Group, and see what it’s about.

Your Humble Blogger on Max Keiser

2011-07-24T13:38:00.001-04:00

Enjoy my crazed ramblings:

Source.

The Week in Words #3

2011-07-20T09:47:00.002-04:00

To my Gentle Readers and Kind Fans,

This Thursday, July 21, at 9:00pm EST, we are having:

The Week in Words #3
A web seminar where we will be discussing the most important news items currently affecting the markets.

And remember: It’s free.

This week:

• The UK's Phone Hacking Scandal: It's turning ugly, even after the Murdochs’ generally favorable appearance before Parliament. The important developing issues are the Cameron government’s reaction, and the possible prosecution of the Murdochs under the American Corrupt Foreign Practices Act.

• European Debt Crisis: It is spreading like a red tide—and the likelihood of a break-up of the European Monetary Union is all but a certainty. The issue now is, What will be the shape of this break-up?

• The Field of Republican Candidates, Oh My!: A discussion of America’s Republican Party presidential candidates: Which ones are the best, and which one looks to be the likely winner.

Here is the link to register.

Do check it out—and remember to have a microphone plugged into your computer, as attendees will be able to ask questions, live.

Until Thursday at 9pm EST, all the best,

GL

If you are interested, do check out the preview page of The Strategic Planning Group, and see what it’s about.

Full Spectrum Decay

2011-07-15T11:06:00.000-04:00

The Pentagon has a policy which can only be called the zenith of militaristic arrogance and stupidity: “Full Spectrum Dominance”.

As the name implies, the policy’s aim is for the United States’ military to control all aspects of a battlefield—or as proponents of the doctrine call it, the “battlespace”: Air, land, sea, space and cyberspace.

The doctrine’s concept, in its essence, is for the American military to be “better” than anyone else at everything else: The most carrier groups, the biggest nuclear subs, the latest military technology, etc., etc., etc., all of these pieces fitting together to overwhelm—and not merely defeat—any enemy or any threat, be they real or unlikely, or even imaginary. (For the American military’s hunt for imaginary threats, look up Iraqi WMD.)

Read more »

The Beginning of the End of Europe

2011-07-12T16:38:00.002-04:00

Reminder: The second Week in Words web seminar is this Thursday, at 9:00pm EST. It is of course free to all. The registration link is here. Hope to see you there! —GL

Yesterday, the European contagion spread to Italy and Spain. The sovereign debt of those two countries swooned—for no discernible reason.

No discernible reason whatsoever: The Italian and Spanish bond markets just sort of . . . plopped, like when a learning-to-walk toddler suddenly plops on his behind? Exactly like that: For no reason whatsoever.

Please select the straw you think
broke the back of the eurobond markets.

The only conclusion that I can draw from this Monday swoon is that we’ve hit the tipping point: This is the start of the eurozone endgame. It is now only a matter of time before the eurozone breaks apart. Therefore, get back in your seats, buckle up, and brace yourselves good—‘cause it’s gonna be a bumpy ride.

Let me explain my thinking:

For those of you who somehow have missed out on this movie: Europe has been in trouble because the nations of the periphery—Portugal, Ireland, Italy, Greece and Spain, the so-called PIIGS—have massive sovereign debts which they simply cannot pay.

Read more »

The First Week in Words

2011-07-05T20:00:00.033-04:00

To my Gentle Readers
and Kind Fans,

Technology is a wonderful thing.

Because of the web seminar technology—and because of the support of the Strategic Planning Group Members—I'm starting a new regular feature today:

The Week in Words
The concept is simplicity itself: Every week, I'll have a free, live web seminar, where I’ll discuss the major news events—and what they mean.

What’s more, I'll be able to take questions from the audience—live.

This Thursday, I’ll be discussing the turn in the Dominique Strauss-Kahn case, and what it might mean for French politics; the Mulligan Mortgages that the banks are quickly, quietly trying to push through—and the reasons why; and finally, the Greek bailout, the ratings agencies, and what it all means for the European situation.

In the future, I’ll be having guests and open discussions in The Week in Words. The show will last 90 minutes, including question-time, and it will be every Thursday, at 9:00 pm EST. The registration link for this Thursday’s broadcast is here.

Do check it out—I hope you enjoy it, and if you do, I do hope you’ll become a regular attendee.

Until then, all the best,

GL

If you are interested, do check out The Strategic Planning Group, and see what it’s about.

“Dream A Little Dream”: How Long Would It Take To Pay Off The U.S. Federal Government Debt?

2011-06-27T18:15:00.000-04:00

Let’s dream: Let’s imagine that the American political leadership decides to get serious about U.S. Federal government debt reduction—crazy as it may sound.

“Porcus Washingtonianus”:
Recently discovered new species,
native to the District of Columbia.

Actually, that’s too crazy. The American political leadership will never “do the right thing” with regards the deficit. After all, last spring, the American political leadership couldn’t agree on a measly $50 billion worth of cuts—a mere 1.4% of the total Federal government budget.

Okay, so in order to give our daydream a veneer of verisimilitude, let’s pretend instead that the members of Congress and the president are the victims of a cunning biological terrorist attack—they are infected with truly massive doses of both the Responsibility Bug and the Austerity Virus.

And then—under the unnatural effects of these sneaky terrorist pathogens—the American political leadership decides to cut the deficit outright, and start retiring the national debt.

Yeah: That’s much more realistic.

How much would they have to cut, in order to pay off the national debt? And how long would it take, to retire that national debt in its entirety?

Well, in order to figure this out, first they’d have to get honest about exactly how much is the U.S. Federal government’s debt. (Honesty is a perverse side-effect of the Responsibility Bug and the Austerity Virus. Scientists are working feverishly to try to stop this honesty stuff.)

Total outstanding Treasury debt is $9.7 trillion—but that’s not the entire Federal government debt. To those $9.7 trillion, you have to add another $4.6 trillion, which corresponds to “intragovernmental holdings”—basically IOU’s or markers the Federal government has put in the famed “Social Security lockbox”.

Thus the total Federal government debt: $14.35 trillion.

Read more »

IBG–YBG: Owning vs. Managing—Democracy vs. Kleptocracy

2011-06-24T10:45:00.001-04:00

There’s a saying in Chile: “La vaca engorda bajo el ojo del amo”—“The cow grows fat under the watchful eye of the owner.”

Are you keeping an eye on her?

I bring up this saying because of a financial scandal we’re having down here: There’s a retail chain called La Polar—fairly big, catering to lower-middle- and lower-income consumers—that’s been caught cooking the books.

Ordinarily, a financial scandal in a second-tier retailer in an out-of-the-way Latin American country doesn’t rate much of a reaction. A shrug, maybe, but that’s about it.

However, it seems to me that the La Polar scandal illustrates something not just about corporate governance, but about political governance as well. And not just in Chile—more to the point, it reflects corporate and political governance in the United States and Europe today.

This trivial financial scandal reflects why the political and economic leadership of both Europe and the U.S. are not acting in the long-term best interests of their countries. Rather, they are acting in the short-term best interests of themselves—to the detriment of the nations they are responsible for.

The reason is simple: IBG–YBG.

Let me recap the scandal first.

Read more »

If Greece Defaults, What Happens to Portugal and Ireland—and Spain?

2011-06-20T14:00:00.001-04:00

So it looks like Greece is about to go down the toilet.

What the Eurocrats Think of Greece

Last year, Greece got a bailout—so this year (wouldn’t you know it), they want another.

But it’s looking like France, Germany, Holland and the UK are all balking at the reality of having to save the Greek’s hide once again. Boris Johnson, the flamboyant Mayor of London, openly called for Greece to exit the euro in an op-ed in the Telegraph. Several of the participants in the negotiations are asking for Greece to make deeper austerity cuts first, before getting more bailout money—

—and of course, the Greeks won’t do that: Their population won’t stand for any more austerity measures, as they believe (correctly) that the reason Greece is in the hole it’s in is because rich people shirk their obligation to pay taxes. Also, the Greek people are getting handouts left and right from their government—paid for with deficits and debt.

So no European bailout, no money for Greece to continue funding its government.

So like I said, Greece is about to go down the toilet.

So now that we can, we have to step back, look up, and figure out what’s coming up next on the horizon, once Greece defaults.

The answer is obvious: Portugal, Ireland and Spain are coming up—and coming up fast.

Specifically, Portuguese and Irish debt: As of this writing, the 10-year Greek bond is yielding a staggering 17.34%. But the Irish 10-year bond? Safe as houses, you ask?

Read more »

I’m Back

2011-06-20T13:55:00.000-04:00

Ignore her innocent look: It was all Claire's fault.

Dear Gentle Readers and Kind Fans,

Due to circumstances beyond my control, I’ve had to lay off the writing of the blog for the last couple of weeks.

Some people have complained that, now that I’m running The Strategic Planning Group, I don’t have time for my regular blog.

Au contraire. SPG had nothing to do with my forced absence from the blogosphere.

The reason I was out? Personal stuff . . . mostly having to do with girlfriends and bitches. Literal bitches: My dog Claire has had cancer. I’ll post about her over the weekend.

But I’m back—and will be posting regularly for the foreseeable future.

Thanks for your patience.

GL

Europhrenia

2011-06-01T13:24:00.000-04:00

According to the dictionary, schizophrenia is “a long-term mental disorder of a type involving a breakdown in the relation between thought, emotion, and behavior, leading to faulty perception, inappropriate actions and feelings, withdrawal from reality and personal relationships into fantasy and delusion, and a sense of mental fragmentation.”

Read up on it.

In Europe, they’re having the same thing—only writ large: It’s not that the political/financial leadership of Europe is at odds with the people—it’s that they’re two minds locked in a single body, struggling for control.

In the one hemisphere of this divided brain, the political/financial leadership is convinced the European union is something devoutly to be wished—no matter what the costs, no matter what fortune and the people throw up in opposition.

In the other hemisphere of the europhrenic brain, the people of Europe overwhelmingly do not want integretation “at all costs”. In some parts (a lot of parts) of Europe, they don’t want integration at all.

Now, like a lot of schizophrenics, europhrenia has been latent over the past dozen years—since the 1999 monetary union, as a matter of fact—because everything’s been going great guns.

This is natural—and completely predictable: You ever see a schiphrenic have a break-down when he’s happy, high, and just got laid? No you do not—he only has his little “episode” when he’s stressed.

Same with europhrenia: Everything was copacetic between 1999 and 2008—though there were signs of the disease. In fact, lots of unmistakable signs of europhrenia:

Read more »

SPG Supplement: Is Farmland A Smart Hedge Against Inflation?

2011-05-25T17:38:00.003-04:00

This piece originally appeared in the Strategic Planning Group, as a Supplement exclusively for Members. It has been edited for content.

So recently, the New York Observer ran one of its snooty, fawning pieces about hedgies in New York.

“So you’ll give me 2% of your money up front,
then 20% of any winnings,
plus you’ll eat all the losses on my bad bets:
Isn’t that a great deal I’m giving you?”

Hedgies—hedge fund drones, essentially used car salesmen dolled up in Paul Stewart suits—are morons, for the most part; though they do display a certain rat-like cunning of the low-IQ variety.

That sharp-toothed rodent cunning was on display in the Observer story: These hedgies were boasting about buying farmland left and right, as a hedge against inflation.

So: Is farmland worth buying as a hedge against inflation?

This is a reasonable question.

Bottom line, the answer is: No.

The reason, however, is worth examining in some detail, because insofar as farmland is concerned, there would be a period of time when it is a clever investment, and then a point after which it would be a terrible investment. And as with everything in life, the dividing line between the terribly clever and the terribly stupid is as smeared and undefined as roadkill on an Interstate.

Read more »

The Money In Blogging

2011-05-23T12:50:00.005-04:00

Some readers have criticized me for starting up The Strategic Planning Group.

They object to the fact that it’s a paid site, closed to non-members. One reader wrote, “It's a pity you did not find a way to finance it using advertising—I think you would have retained a larger readership, which in the long run keeps your profile higher.”

Not exactly a $ sign.

Well, see, at the end of the day, it’s not about keeping a high profile—for me, the motivation is to write whatever I want, and earn enough from it so that I can continue.

And that just doesn’t happen through advertising alone.

Let me make an example out of my own situation: My site is one of the more popular economics and finance sites on the web. To put numbers to that claim: In April, I had an average of 13,760 pageviews per day, and an average of 7,167 unique visitors. In May so far, I’ve had 12,850 pageviews per day, and 6,970 unique visitors per day. (At the bottom of this page, there’s a link so that you can verify my stats.)

According to Gongol’s EconDirectory, those figures put me in the Top 10 of econ and finance blogs—very impressive, you would think.

However, the advertising income I have earned from these numbers is nowhere near what would be commensurate with that readership.

Read more »

“It’s On Like Donkey Kong!”—SPG Is Here

2011-05-21T22:39:00.003-04:00

To all my Kind Readers & Wonderful Fans:

We call him Fred, by the way.

This past Wednesday, I launched my new website:

The Strategic Planning Group.

It was not a full-on, wall-to-wall, mass-market, throw-everything-at-it-including-the-kitchen-sink sort launch—quite the opposite, SPG’s launch was more on the QT than the rah-rah!

But even so, the response has been overwhelmingly positive, which is both thrilling, and tremendously satisfying—satisfying in the exact sense of the word: Of achieving what I had set out to do.

SPG isn’t a Blogger Blogspot, thrown together casually, as shaggy as an English sheepdog—on the contrary: The Strategic Planning Group is a polished, carefully built site, the product of several months of work and research, quite a bit of money, and conversations with dozens of experts, both in computing and in economics.

In short, I wanted to put together a tight, polished site—and judging from the Members’ reactions, I think I succeeded.

So to everyone who has joined this exciting new project, I just want to say: Thank you, and enjoy the adventure.

To those who are thinking about joining, I say: Good—better to overthink a decision than to not think about it at all.

And to those who didn’t know about SPG but want to find out more, then go check out the Membership Preview Page and FAQ.

Like Pynchon says: Keep cool, but care.

GL

SPG Supplement: Is the Gold/Copper Ratio Predicting A Drop In the S&P?

2011-05-17T21:53:00.004-04:00

To give my regular readers a taste of what’s on my Strategic Planning Group site, here's this week’s Supplement—though a few days after SPG members got it:

People are always talking about the silver/gold ratio—but the copper/gold ratio seems to be much more predictive of market trends.

My friend Michael Hampton has this very interesting chart—check it out:

The top chart is a ratio of copper-to-gold prices. The bottom chart is of the S&P index. If you notice the timeline, you’ll see the chart covers the last three years.

Read more »

What Do You Think?

2011-05-11T08:07:00.005-04:00

Here’s a presentation video for my new site, the Strategic Planning Group, which will be launching (if all goes well) around next Monday.

What do you all think?

So is it— smart? stupid? agree? disagree? definitely would join? wouldn’t join on my life?

Be as frank as you’d like—I want your honest opinion.

GL

P.S.: Oops! Forgot to make the video public—now it is. Enjoy!

Best Description of the Mortgage Mess EVER

2011-05-05T08:00:00.001-04:00

Check out this hour-long interview with William Black—in fact, listen to it twice. He explains simply and straightforwardly how the mortgage fraud was carried out:

Fiscal Spending—The Steroids of GDP

2011-05-04T08:17:00.002-04:00

Last week, first quarter GDP numbers came out—they weren’t pretty: GDP grew at a pace of 1.8% per year, during January through March. These figures are supposed to be adjusted for inflation. But if you think as I do that the Bureau of Labor Statistics is off in its inflation estimates, then at this pace, the American economy is probably contracting.

Body-builder, after a round of
Keynesian steroids—
I mean, “stimulus”.

Apropos of the announcement, Brad DeLong said, “Contractionary fiscal policy is contractionary.” Andrew Leonard at Salon added, “When you cut government spending in a slack economy, you practically guarantee a slowdown.”

DeLong and Leonard presuppose several things by these statements. One, of course, is that there have actually been cuts in government spending. Two, that the GDP number would have been better if there had simply been more government spending—so therefore, anyone opposed to increasing government spending is also against increasing the GDP.

But the third assumption they make is the assumption I’m interested in discussing: The notion that the GDP number is something we always want growing. The notion that a positively growing GDP number is always and with absolute certainty the thing we want most, as a society.

First off, let’s put away DeLong and Leonard:

Read more »

Sorry, But I Don’t Believe This

2011-05-02T13:38:00.006-04:00

(Before I begin, I just have to say: Oh boy—here I go really stepping away from the shores of the mainstream.)

When the Bolivian Army killed Che Guevara in October 1967, they displayed his body as proof that he was indeed dead. The Bolivians in fact staged the body so that ordinary people—and the world’s journalists—could get a good view of the corpse, up close and personal.

Ernesto “Che” Guevara’s body on display,
October 1967.

The attached photograph, grisly though it may be, is one of hundreds taken of Che’s body. It—along with the pictures and testimony of hundreds of journalists and ordinary people who saw his corpse—puts to rest any notion that Guevara somehow survived—which of course was the whole point: The Bolivian Army wanted there to be no doubts that El Che was really dead.

My readers know I don’t truck in conspiracy theories. I believe Elvis is dead, I believe Paul never died, I believe 9/11 was a terrorist incident, and I believe Neil Armstrong did in fact land on the moon.

But I don’t believe Osama Bin Laden was killed over the weekend.

The story goes this morning that Bin Laden was tracked down to a multi-storey compound in the middle of the Pakistani hinterlands, where he was shot twice in the head by American Special Forces. These soldiers then took his body, and buried it at sea.

That’s the story. But I don’t buy it.

Just to be clear, I do not believe Bin Laden is still alive. I believe what a lot of intelligence analysts have been privately saying for a long time now: That Bin Laden died of kidney failure in December 2001, and that he was buried by his followers in an unmarked grave in the mountains between Afghanistan and Pakistan.

The Strategic Planning Group

2011-04-28T13:05:00.001-04:00

Sorry for the drought of posts.

I’ve been going a little crazy—but good crazy—prepping for the launch of my new site:

It’ll be a place where I’ll be analyzing black swan events.

The basic question we’ll be asking is, What happens if ______? [Fill in the blank with something the mainstream says is totally unlikely and indeed, impossible—but which just might come true.]

What happens if China’s debt bubble blows up, and the country sinks into a revolution. What happens if the eurozone breaks down, and member states begin to leave the monetary union. What happens if the Federal government starts forcible conversion of retirement accounts into Treasury bonds.

These are some of the questions we’ll be discussing at the Strategic Planning Group, in the coming weeks.

But it won’t just be a place to daydream about scary/cool possibilities—it’ll be a place where there’ll be practical, actionable ideas as to what to do during these potential crises. Ideas you can use. Members will not only get a précis of potential crises—they’ll also get clear indications of the tell-tale signs that the crisis is coming, and what to do to prepare, if and when the crisis hits.

Think of it as your own private contingency planning group—hence the name: The Strategic Planning Group.

The site will be launching the week of May 6—I'll give you all a heads-up when it’s online. At the launch of the site, there’ll be two complete Scenarios: “Hyperinflation in America”, and something I’m calling “Exit America”.

I’m very excited about “Exit America”. In this Scenario, I discuss what happens if the United States becomes unlivable.

What would happen if—because of environmental, social or economic reasons—it became impossible to remain in America. What would you do? How would you protect your family, and your assets? Where would you go? How would you get there?

In “Exit America”, we first analyze the various reasons that would make life in America intolerable, and then analyze the best places to move to—as well as how to get there. Hint: Most tropical islands don’t fit the bill. In “Exit America”, I’ll explain why.

“Exit America”—like all the Scenarios at SPG—is a combination of written analysis and audio-visual material, as well as web-seminars and audience interaction: A full-spectrum learning unit.

New Scenarios will appear every six weeks or so. Between each Scenario launch, SPG will present featured guests, Scenario updates, and live web discussions about relevant topics—content that will be exclusive to members.

Coach Wooden said, Confidence comes from being prepared. That’s the whole idea behind the Strategic Planning Group:

Being prepared.

I think this is not only a cool project, but a worthwhile project as well—and I do hope that some of you, Dear Readers & Kind Fans, will join me in this exciting new adventure.

All the best,

GL

Shakedown Nation

2011-04-22T10:11:00.001-04:00

True story: Harold & Maude are a forty-something couple with two teenaged kids. Both are educated, both work in IT, both are fairly sophisticated, financially speaking.

The Road to Hell, by Paul Stevenson.

Back in 2003, they bought a vacation condo, in Mono County, California—you know, where Mammoth Lake and the Mammoth ski resort are located, right next to Yosemite National Park. They bought the condo in mid 2003, then flipped it later that same year—they closed escrow the first week of 2004, with every t crossed, with every i dotted.

They went on with their lives: Work, vacations, kids, school, job, carpool—same-old-same-old, just like millions of other ordinary citizens.

Then one day in March of this year, they get a letter—a pretty frightening letter, actually.

Max & Stacy: Guerrilla Fimmaking In Ireland

2011-04-20T10:05:00.001-04:00

Max Keiser and Stacy Herbert were in Ireland recently—and did a little guerrilla filmmaking. I think it’s outstanding—and definitely worth watching.

I told Stacy so, and she wrote back:

[W]e totally did this on our own. Self-financed, shot and edited. I wanted to see if we could do it and we gave ourselves only 24 hours in Dublin as we wanted to see if we could do something akin to war reporting, just parachute into a city and get an impression of the battle lines from the actual people. So, from our hotel, we announced via twitter that we were in town and within half an hour about 15 people had showed up and another 30 within the hour. It was fun making, but I was very nervous waiting for the response . . . !

No need to be nervous—their little film is powerful and memorable, and not because it’s bombastic or over-the-top. On the contrary, their piece is low-key, low-to-the-ground—human.

I wish they’d do more of these.

Here’s part i. After the jump, part ii:

Read more »

What’s Really Worrisome About Treasury Debt: Not Its Rating—Its Interest

2011-04-19T17:21:00.001-04:00

So on Monday, Standard & Poor’s cut its ratings outlook for U.S. sovereign debt—and the markets had what can only be described as a tizzy.

Stocks fell—commodities rose—I noticed things were off when my gold ticker shot up a full percentage point in under sixty seconds. Yikes! (Well, actually, as far as my own portfolio goes, it was more like, Yeay!)

“Not as sexy as a naked chick, I know, I know!”
The Fed Funds Rate, 2001–2011.
(click to enlarge)

Tons of people started scratching their heads, stroking their chins, and pompously wondering What It All Means.

Oh brother. Like Capt. Willard said: The bullshit piles up so fast, you need wings to stay above it. Most of the navel gazing was a waste of time—the lone discussion that I’d recommend was the New York Times’ “Room for Debate”, which more or less summed up smart-money thinking on the S&P announcement. (Paywall, but if you really want to read it, refresh the page, then stop the refresh before the page fully reloads.)

My own thinking is that the whole S&P announcement is meaningless—literally a non-event.

What really matters is something people are starting to consider, as inflation begins to rise, and which the S&P announcement alludes to: The colossal interest payments on the U.S. fiscal debt.

First, let’s put away the S&P nonsensical non-event:

A Break In Our Regularly Scheduled Programming: A True Story

2011-04-18T10:58:00.004-04:00

This is a true story that happened to a friend of mine. I’ll let you guess which one is my friend:

“Excuse me!” said the driver to the pedestrian. “I promised to give a speech at 2pm—but I’m an hour late, and completely lost! Could you help me?”

Gratuitous picture of a gorgeous woman.
“It’s all about the SEO . . .”

“Sure,” said the pedestrian. “You’re 1.3 miles from the exact center of The City. Your exact latitude is 51.50 degrees north, longitude 0.11 degrees west.”

“You’re an engineer, aren’t you?” said the driver.

“Why, yes I am!” said the pedestrian, amazed. “How did you know?”

“Very simple,” said the driver. “Because everything you’ve told me is technically correct—but I’m still lost, I’m still late, and I can’t do anything with the information you’ve given me!”

The pedestrian looks at the driver. “You’re a politician, aren’t you,” he says with a shrewd look.

The driver perks up, thinking he’s been recognized. “Why, yes I am,” he says proudly. “How did you know?”

“Very simple,” says the pedestrian. “Because you don’t know where you are or where you’re going, you’ve made a promise you can’t keep, and you expect someone else to solve your problems. In fact, you’re in exactly the same situation you were in before you asked for my help—yet somehow, it’s now all my fault.”

Burning The Candle At Both Ends: Raising the Debt Ceiling, and Extending QE-2 Indefinitely

2011-04-14T07:09:00.002-04:00

This coming May 16, the U.S. Federal government debt ceiling will be breached; that is, the national credit card—currently topped at $14,294,000,000,000—will be maxed out. (Yeah, I know: It’s one thing to read “$14 trillion” and quite another to see the actual number, written out with all those zeroes.)

It’s not like lighting farts . . .

Shortly thereafter, the Federal Reserve’s policy colloquially known as Quantitative Easing-2 (QE-2)—whereby the Fed created $600,000,000,000 of new money, and used it to purchase Treasury bonds—will end.

These two issues seem to be miles apart—notice, seem to be. But they are as intimately related as yin and yang—Mickey and Minnie—Ritz crackers and cheese.

Both policies aim to prop up the sliding U.S. economy, each of them coming at this effort from different directions—one from the demand side, one from the supply side. And the suspension of either policy will result in the exact same thing—government shutdown, and default on the U.S. sovereign debt.

Don’t believe me? Let’s look at them each in turn:

Relying On The Gods From The Machinery: The Weird and Disturbing Teleological Approach to Discussing Macro-Economics

2011-04-07T11:50:00.001-04:00

It’s funny how, in the middle of a street fight, you can come across a diamond.

“Please, O Great God of the Golden Calf!
Please don’t take away my 401(k)!”

Last Monday, Rick Ackerman wrote a fairly fatuous deflationary rant which caught my eye, obliging me to respond on Tuesday with a dissection of Ackerman’s . . . “argument”.

Actually, I didn’t so much dissect it as give it an autopsy—the thing was dead on arrival.

Then on Wednesday, Ackerman started Round 2 of our little street fight, with a post titled “Here’s Why Hyperinflationist Lira Is Wrong”.

Well . . . how could I put it: Ackerman’s Monday piece at least had an argument—an invalid, unsound argument, as I think I pretty much showed. But at least Ackerman pretended to some semblance of rationality.

However, Ackerman’s Wednesday piece? Boy, where to begin—

—and here’s where I discovered my diamond:

Read more »

Talk About A Big Gap In Logic!—Slicing Up Rick Ackerman

2011-04-05T07:56:00.002-04:00

So Rick Ackerman posted a piece that I spotted on Zero Hedge—which surprised the hell out of me. Either Tyler and his gang of merry pranksters are losing their nerve about the downward trajectory they think the U.S. economy and monetary policy is headed in—or they ran the piece for shits and giggles.

“Nothing personal, buddy, you’re just dinner.”

Ackerman’s piece said, in effect, that dollar hyperinflation was impossible. His post was titled “Big Gap in Logic Weakens Hyperinflation Argument”.

I’ve got a rep for being a hyperinflationist—which isn’t exactly true: I’m a dollar hyperinflationist, but a euro deflationist. A friend called me an economic agnostic, which is pretty accurate (and kinda cool, actually): I look at the data, look at the political realities influencing macro-economics, look at the arguments, then make up my mind, regardless of what the various sects of the religion known as Economics deem orthodox.

I suppose my heterodoxy comes from my education: I was trained in philosophy, with emphasis in epistemology (theories of knowledge), Hegel’s political philosophy, and formal logic. That background makes you not want to join a crowd—any crowd. And it makes you willing to question even your most prized assumptions.

So when Ackerman said he had proof positive that hyperinflation in America was impossible—that he had, as he claimed, found a “big gap in logic”—I was like, “Cool: Show me.”

So Ackerman . . . well, he tries. In his piece, he writes:

Mainstream Media Watch: Better Late Than Never?—“60 Minutes”, and Six Months Late

2011-04-04T06:43:00.003-04:00

My readers know that I go through phases: I get interested in stuff—chase it down—devour it—then move on.

Back in October of last year—following Yves Smith’s lead—I got interested in The Mortgage Mess, and wrote several pieces about the whole fiasco:

• The Coming Middle-Class Anarchy (10/7/10)

• The Second Leg Down of America’s Death Spiral (10/12/10) (This was the piece I wrote which was plagiarized repeatedly—and rather embarrassingly, for some.)

• This Is What Brian and Ilsa Said To Their Bank: “Show Me The Note, Motherfucker!” (10/18/10)

• Mulligan Mortgages—The Banks’ Only Way Out (10/21/10)

And now—finally!—the mainstream media is catching up. Here’s last night’s clip from 60 Minutes:

Read more »

The Causes of The Mess We’re In

2011-04-01T07:00:00.010-04:00

Right now, we’re in that weird in-between time of financial crises: The Global Financial Crisis of 2008 is behind us, while the next global crisis is not here yet—but it’s on its way.

“But I just wanted a pony!”

We can feel how it’s on its way. Most everyone plugged into the macro-economic zeitgeist can tell you that bad juju is most definitely in the post—just that nobody yet knows (or is sure) what shape the next crisis will take.

Lots of people have been pointing to the various signs of the coming crisis: A U.S. Federal government deficit that’s over 12% of GDP, to be repeated in fiscal years 2012, ’13, ’14 and possibly ’15, if not surpassed; abnormal rises in commodity prices; European disintegration; a Federal Reserve that is printing money like there’s no tomorrow; the largest bond fund in the world—PIMCO—exiting Treasuries (that’s like Baskin & Robbins exiting chocolate); a complete inability of the political leadership class to do anything about the fiscal mess of the United States, at the Federal, State and local levels.

But though everybody points to the signs of the coming crisis, no one can yet make out its true shape. I’ve posited that it’ll be hyperinflationary, while other very clever people have claimed it’ll be deflationary.

However, these different interpretations about the coming crisis are interpretations of what’s coming up in the future.

As we sit here waiting for the next Apocalypse, let’s forget about tomorrow and instead consider the past. Let’s ask ourselves the obvious question:

What got us here?

How Likely is QE-Three?

2011-03-24T15:30:00.001-04:00

(or, “Is That Your Retirement Account You’re Holding On To So Tightly? Or Are You Just Happy To See Me?” Said The Man From The Government)

So back in September 2008—in the throes of the Global Financial Crisis—the Federal Reserve under its chairman, Ben Bernanke, unleashed what was then known as “Quantitative Easing”.

Sure: It’s fine when they do it to Saddam—
it’s another thing when they do it to you.

They basically printed money out of thin air—about $1.25 trillion—and used it to purchase the so-called “toxic assets” from all the banks up and down Wall Street which were about to keel over dead. The reason they were about to keel over dead was because the “toxic assets”—mortgage backed securities and so on—were worth fractions of their nominal value. Very small fractions. All these banks were broke, because of their bad bets on these toxic assets. So in order to keep them from going broke—and thereby wrecking the world economy—the Fed payed 100 cents on the dollar for this crap.

In other words, the Fed saved Wall Street by printing money, and then giving it to them in exchange for bad paper.

Time passes, we move on.

Then, in November 2010, the Federal Reserve—still under Ben Bernanke—unleashed what is colloquially known as QE-2: The Fed announced that it would purchase $600 billion worth of Treasury bonds over the next eight months.

Read more »

TOLDJA!! The Dollar Broke Lower—So Now What?

2011-03-21T13:35:00.002-04:00

Update below (Tues. morning), with chart.

Like Nikki Finke always says whenever a scoop of hers gets confirmed: TOLDJA!!

Picture of my girlfriend
and the fish I caught. Honest!

A couple of weeks ago, I wrote that we were about to enter a crucial phase for the dollar. Then last Thursday, I wrote that the dollar was about to break through a key support level on Thursday or Friday.

And what happened on Friday? Even after massive Federal Reserve, European Central Bank and Bank of Japan intervention on Thursday night? The dollar broke through!

I was right!—TOLDJA!!

(Yes, I know: I’m an insufferable shit. But I’m also right. So you’ll just have to resign yourself to taking the good with the obnoxious.)

Now it’s all good and fine to have predicted when the dollar was going to break through a key support level—but the obvious question is:

Now what?

Will the dollar continue going down? Will it bounce back up? Roll sideways? What? (“You want answers?” “I want the truth!” “You can’t handle the truth!”)

Me & Max Keiser

2011-03-19T17:13:00.000-04:00

Max Keiser interviewed me the other day—it was fun, and Max is a great guy.

Here’s part i of the interveiw:

Part ii is after the jump:

Read more »

I Think Today Is The Day The Dollar Breaks Down

2011-03-17T09:27:00.007-04:00

Update below, discussing the G-7 intervention.

Update II below, discussing today’s action (Friday March 18).

Update III below, one final chart.

I could be wrong—hell, most of the time, I’m way wrong. But I do think that today is the day the dollar breaks down.

Get used to it.

Consider the evidence:

The Bank of Japan managed to keep the yen down following last Friday’s Sendai quake. It was trading in an eerily placid 81-to-82 band on Monday, Tuesday and Wednesday—but then Thursday (Japan time), someone at the BoJ must’ve prematurely decided that it was all over, because they let go of the gas.

What happened? It all went south—huge. As I write this morning (8:12am EST), the yen is trading at 78.50 to the dollar.

Meanwhile, on the eastern side of the Pacific pond, the Producer Price Index numbers came out yesterday—and they weren’t pretty. During February, PPI rose 1.6%, against a consensus estimate of 0.7%. For the year ending February 28, the PPI rose 5.6%. (report here)

Tomorrow, the Consumer Price Index numbers come out—and if the PPI numbers are any gauge, they do not look promising.

Likely Economic Effects of the Japanese Earthquake

2011-03-13T21:36:00.013-04:00

Living in Chile, I experienced the February 2010 earthquake. That puppy measured 8.8 on the Richter scale at its epicenter. In Santiago, the earthquake registered about an 8.2—and I was on a 15th floor when it happened. Believe me, it was quite the experience. I wrote a first person account of the earthquake here.

Friday, March 11, 2011.

I bring this up in relation to the Sendai earthquake that rocked Japan this past Friday: It was an 8.9 (Richter), and wrought tremendous devastation. As I write, there is as yet no clear accounting as to lives lost, though it is likely in the tens of thousands. At least two nuclear reactor sites have been severely damaged; the Fukushima reactor #1 is close to melting down, and #3 isn’t in much better shape. Hundreds of thousands of people have been evacuated from the area, and further tens of thousands of people are homeless, following the tsunami. And millions of people are without electricity or running water.

This is a tragedy for the Japanese people—the worst crisis since the end of the Second World War.

To those of us untouched by the direct effects of this tragedy, we should thank our lucky stars. But rather than gawk at the lurid images coming through the media, it would be smart for us at this time to analyze the likely effects of this disaster on the rest of the world’s economy.

A Handy Guide to the Revolts in the Middle East—And Their Likely Effects On Us

2011-03-10T04:05:00.002-05:00

The Middle East and North Africa. Click to enlarge.

In 1848, protests and revolutions swept through Europe. The specific causes were different in each country, but the underlying cause was the same everywhere: The middle and upper middle classes—politically powerless in these absolutist monarchies—wanted more control over their lives.

We are having an 1848 moment in the Middle East: Autocratic governments in two of these countries have been overthrown outright (Tunisia and Egypt), one is sliding into civil war (Libya), and a host of others are teetering. A few other undemocratic governments beyond the Middle East are very worried that their restive populations might get ideas—China, I’m looking at you.

The immediate spark for these revolts has been the rising price of food—but the fuel for this bonfire has been decades of political marginalization for large swathes of the educated population of these Middle Eastern countries.

Autocratic regimes never fare well during economic downturns. The Global Depression that began with the financial crisis in 2008 is slowly but surely picking up a head of inflationary steam, which has been squeezing the middle classes in these countries. A middle class being squeezed economically eventually oozes out political unrest—as we have been seeing throughout the Middle East and North Africa.

Now, in early March 2011, with the fate of these various revolts still unclear, it would be wise to go over them, and see where they are in each country. And it would be wise, too, to examine how these various revolts in the Middle East will affect the rest of the world in the short- to medium-term.

So to begin:

Sustained Unemployment Confirms The Failure of QE-2

2011-03-04T11:16:00.001-05:00

So today, two bits of news came out: Unemployment declined to 8.9% last February, as the U.S. economy added 192,000 jobs; and the Federal Reserve signalled that it is definitely-definitely-definitely ending Quantitative Easing 2 (QE-2) in June, as originally scheduled, on the assumption that the economy is improving, and therefore no further extension of QE-2 will be necessary.

Portrait of the author,
chewing over what it all means.

On its face, this would seem to be . . . not good news, but at the least encouraging news: The economy seems to be improving, albeit anæmically.

But is it?

Stepping on the heels of the Bureau of Labor Statistics release of the employment figures, Tyler Durden at Zero Hedge pointed out that, based on the 25 year average of employment participation of 66.1%, U-3 unemployment ought to be at 11.6%—quite a bit higher than the current 8.9% headline number.

This points to something that a lot of commentators of the BLS’s numbers have been saying for a while: The number of individuals in the labor market as defined by the BLS has been steadily dropping. But it hasn’t been because of some sudden demographic shock—it’s been because more people have been unemployed for more than two years.

The Dollar, and The Next Ten Days

2011-03-02T08:26:00.009-05:00

I’ve never been much of a fan of technical analysis. It’s always struck me as something akin to reading tea leaves—and just as batty. But on the other hand, I’ve seen enough technical analysis deliver accurate predictions that I can’t really dismiss it completely.

Right now, the world is going through a pre-crisis mode—you can practically feel it in the air. The limitless deficit spending by the U.S. Federal government, which has instituted systemic +10% of GDP deficits year after year; the insane Federal Reserve policy of Quantitative Easing 2, which is nothing more than debt monetization as I wrote here, enabling the Federal government’s addiction to deficit spending; the popular uprisings sweeping through the Middle East and North Africa, affecting—wouldn’t you just know it—oil producing countries one after the other; the steadily rising food inflation, which in fact triggered those uprisings in Tunisia, Egypt and Libya, and which are beginning to affect the entire globe; the inevitability of a collapse of the euro—the other major world currency—because of the systemic tensions affecting the European continent, between the strong economies of the north, and the weak economies of the peripheries.

All these issues are bringing renewed pressure on the dollar—though which direction the dollar will react to that pressure is the issue up for debate right now.

The next ten days will be key: Will the dollar spike up? Become the safe haven of everyone fleeing from the world’s troubles? Or will the dollar nosedive, the first big step down in its death spiral?

This is where we’re at—and this turning point is happening now: Right now. Consider this chart, sent to me by my friend in Hong Kong, Michael Hampton:

Friday Bonus: The TSA Hunts for Terrorists in Savannah . . . After They Get Off The Train

2011-02-25T16:45:00.003-05:00

The TSA is at it again: Here’s a video of them searching people, at a train station in Savannah, Georgia.

The weird thing is, they are being searched after they’ve gotten off the train.

Notice how the people don’t protest. Placid as cows heading to the slaughter . . .

Libya Now, Iran Then: How Close Are We to 1979?

2011-02-25T08:20:00.007-05:00

Today, the UK’s Telegraph is reporting that British government drones in Whitehall are figuring out the legal means to seize Muammar al-Gaddafi’s assets in Britain, which are said to total some £20 billion.

“Fire in Libya”: Oil fire in 2010.

Notice that’s pounds sterling—the equivalent of US$32 billion: Enough cash to plug up California’s and New York State’s deficits, and still have enough left over for a very respectable weekend at The Palms in Las Vegas.

That these assets are going to be seized is, according to the story, a done deal: The only issue seems to be the legal means by which to do so—

—which means that the British government isn’t worried about pissing off Gaddafi—

—which means that Gaddafi’s days in power are numbered: Whitehall would never dare seize his UK assets, unless they were sure that Gaddafi won’t be around to exact revenge or retribution. After all, the Brits let the Lockerbie Bomber go in 2009, in order to shore up relations with Gaddafi.

Now, for my patented History Flashback™ (All Rights Reserve, All Wrongs Deferred):

“We Owe How Much?”: Waiting for The Big Splatter

2011-02-18T08:00:00.003-05:00

Last week, a bit of news came out that—weirdly—didn’t garner the attention or the reaction one would have thought it would:

The U.S. Federal government deficit for fiscal year 2011 was revised to $1.645 trillion. That revision was up from the previous estimate of $1.4 trillion, which itself was a revision just a couple-three weeks ago by the Congressional Budget Office from the White House’s earlier projection of $1.267 trillion in December.

The additional $378 billion in deficit spending comes from loss of tax revenue: Both from the fall in tax receipts due to the ongoing depression we’re experiencing, as well as from the idiotic budget deal with the Republicans, whereby the Bush-era tax cuts were extended.

These deficit numbers are huge. Huge. HUGE.

Inflation, Hyperinflation and Real Estate (or, The Lessons of The Great Hernán P.)

2011-02-12T09:27:00.002-05:00

“Hyperinflation accompanied by a housing collapse is simply impossible—by definition.”

—None-too-clever financial blogger.

Most people in the advanced economies—including most economists—really don’t have any idea what inflation and hyperinflation is. They don’t have a clue because they haven’t lived through it, or were children when it happened in the States and in Europe during the Seventies.

Wrong metaphor.

They think it’s nothing more complicated than a rise in prices that ripples through the economy—like a spectator in a football stadium who stands up, obliging the people sitting behind him to also stand up, so that they too can see the action on the pitch, which in turn forces the people behind them to stand up too, until finally, the whole stadium is up on its feet.

That’s what these people seem to think: Inflation—and the more severe hyperinflation—affects all goods and services and asset classes equally, in a rippling effect. Sort of like a rising tide.

Because of this very foolish fallacy, many economists and interested observers think that real assets—commodities, land, buildings, factories & machinery—all rise in price equally during an inflationary spell, whereas financial assets—bonds, stocks—uniformly fall.

But this is wrong: It is at best sloppy thinking, at worst dangerously stupid.

Inflation—and hyperinflation—affects two things immediately: Near-term necessities (such as food and fuel), and credit.

The effects on basic necessities is obvious—but the effects on credit are more subtle and complex.

How does inflation and hyperinflation affect credit? By driving up interest rates—obviously. But what is the effects of rising interest rates in an inflationary/hyperinflationary environment?

Real estate price collapse.

Read more »

So There’s This Debate Tonight . . .

2011-02-10T08:58:00.002-05:00

“The Morning After” is below.

So there’s this debate tonight—Deflation vs. Hyperinflation: Stoneleigh vs. Lira.

Click here to sign up.

Nicole “Stoneleigh” Foss of The Automatic Earth is going to be arguing that we are experiencing a deflationary depression, while I will be arguing that this depression is hyperinflationary.

We both agree that we are currently in a depression—a depression that is going to get worse. We just disagree on the road we will collectively be taking to hell.

Stoneleigh was very prescient insofar as her call about the housing bubble and the 2008 crisis, but I think she is very wrong insofar as What It All Means. So I’ll be presenting my take on the period we are experiencing, and where we will be going in the future.

Think of it as the Sugar Ray Leonard/Marvelous Marvin Hagler fight of the financial blogosphere.

The debate is tonight, at 9pm EST. Go here to sign up.

We did a bit of practice last night, and I think it’s going to be a lively debate. We will be taking your questions, which I’m very much looking forward to.

So be there, or be square!

GL

“The Morning After”:

The debate was a pleasure—Nicole is a lovely person, and as sharp as they come. And though there were a number of issues over which we spiritedly disagreed, the debate itself was a lot of fun—hopefully it will be repeated.

I think the best thing about it was, we both had clear visions as to where the economy is heading, and what to look for as the situation unfolds. I think that allowed the audience to really think over the situation, and decide for themselves what they think is going to happen.

The recording of the debate will be available next week. But for now, I just wanted to thank Nicole, Jay Carter for doing an expert job of moderating, and all of the attendees for having given us their attention.

‘Til next time!

GL

Ballsy or Crazy? Where Are We On Inflation and Hyperinflation

2011-02-06T10:41:00.005-05:00

For better or worse, in the financial blogosphere, I’m Hyperinflation Boy.

You decide.

I haven’t actually written that much on the subject: Only five posts from a total of 82 over the last year. I posted the most recent one back in late October—over three months ago—where I made a series of concrete predictions about inflation and hyperinflation of the U.S. dollar.

The predictions were either really ballsy or really stupid—even I can’t quite decide. But be that as it may, it’s only fair and right to revisit the subject, recapitulate my arguments, and then check to see if I was on the money, or full of shit.

To begin: Last August 23, I posted an article called How Hyperinflation Will Happen. I guess the piece must’ve struck a nerve, because between my site and a couple of other places where it was reprinted, it got over half a million page views.

My basic thesis was simple: If there is another financial crisis, I argued that capital would not flee to Treasury bonds—instead, it would flow to commodities. And this spike in commodity prices would lead to dollar hyperinflation.

Deflation vs. Hyperinflation—Stoneleigh vs. Lira

2011-01-30T07:13:00.009-05:00

It’s clear that some type of economic depression is coming to the United States and to much of the rest of the world. In many ways, it has already begun.

The question is, Where is the United States headed?

• A 1930s-style deflationary depression?

• Or a Weimar-style hyperinflationary crisis?

For the first time ever, two of the most prominent writers on this issue will face one another in a live online debate, to be held on Thursday, February 10, 2011, at 9pm EST.

Nicole Foss, a.k.a. “Stoneleigh” at The Automatic Earth, ranks among the most prominent of the deflationists. She maintains that the ongoing contraction of jobs and overall income in the US will lead us into a sustained deflationary depression. Consequently—and in direct contradiction to the advice of hyperinflationists such as Lira—Foss strongly recommends Americans stay liquid in US Dollars and avoid going into any debt. As jobs and many businesses disappear, Foss foresees a crash in the money supply, leaving most people without cash or credit, and a minority hoarding the little that remains.

And as far as me? Well, you who read this know that I’m a hyperinflationista—but a thoughtful one, not some crazed tin-foil hatter. I’ll be drawing on my personal experience from Chile in the early 1970’s, and arguing how the same hyperinflationary crisis will soon take place in the United States, due to the massive oversupply of debased U.S. dollars chasing after a finite supply of tangibles. I’ll be arguing that anyone wanting to survive and prosper would be well-advised to structure their investments and their own personal lives in anticipation of a rapid and stunning hyperinflation.

This live online debate will be moderated by Jay Carter of Financial Survival Radio.

Stoneleigh and I will be taking your questions—live. So if you sign up (and I certainly hope that you will), please have a microphone attached to your computer, in order to participate in the live Q&A.

Remember: Thursday, February 10, at 9pm EST.

Hope you catch our debate!

The Blind Men & The Elephant—The Totally Bullshit FCIC Commission Report and Dissents, Which Put All Together Actually Reveal Something

2011-01-27T22:00:00.024-05:00

The Financial Crisis Inquiry Commission came out with its report—and two dissents!

Wanna cop a feel?

Lots to read! Lots of bullshit to wade through! Lots of finger pointing! Lots of skewed analysis that justify a political agenda!

Whoo-hoo!

Actually, cynical glee is the only emotion that keeps major depression at bay: The FCIC was set up in May of 2009, with the goal of getting to the root causes of the Global Financial Crisis, and find what policies and which actors were responsible for the melt-down. In a very real sense, the FCIC was supposed to be the modern day version of the Pecora Commission—

—but it wasn’t. Not by a country mile.

The bipartisan Commission members cleaved along party lines: The six members of the Democratic majority wrote the report, the four Republican minority members wrote two separate dissents.

The official report of the Commission—the one written by the six Democrats—starts by saying that the financial meltdown of 2008 was avoidable—which is trivially true: Every man-made event is “avoidable”.

Read more »

Not Lazy—Busy

2011-01-27T10:00:00.006-05:00

Dear Readers and Kind Fans,

I haven’t been posting this week because of three reasons:

• I’ve been getting The Hourly G on track.

• I’m traveling to the south of Chile for a wedding (I’m leaving today, as a matter of fact).

• I’ve been prepping an upcoming debate with Nicole “Stoneleigh” Foss—Deflation vs. Hyperinflation. The official announcement will be on Monday, but here’s where you can sign up, if you’re interested.

Please excuse me for not having posted—but I promise that next week, I’ll make your wait worthwhile: A big ‘un is brewin’.

Until then, let me suggest you read a couple of old posts which I think are worth revisiting:

Was Stagflation in ‘79 Really Hyperinflation?

Is the U.S. a Fascist Police-State?

Why Corporations Matter, Part I

All the best,

The Trooper: Installment V (Pages 110–145)

2011-01-22T09:27:00.002-05:00

Another Saturday morning, another installment of The Trooper. Today’s pages are:

• Pages 110–128 are here: Wherein the Trooper defers to dying Baby Boomers, who are now the establishment.

• Pages 129–145 are here: Wherein the Trooper goes to check up on Kendrick. Not “Kramer”—Kendrick. (A nasty bit of action goes down here.)

For those looking to start at the beginning, click here to read it all in order.

There is also a missive from me to the readers—this book might get published by a mainstream press: But if that’s to happen, the book needs your support.

Not money—no. Something much more valuable:

Readers.

So pass this along. Be that annoying friend who keeps telling you to read some book or other—and when you finally do read it, it becomes your favorite book.

See also Is The U.S. a Fascist Police-State?

Kremlinology? Call It Fed-Res-ology: Reading the Tea Leaves of the Federal Reserve Board

2011-01-19T21:30:00.002-05:00

Time was, no one gave a shit about the Federal Reserve’s board. Who the drones were? What they did? Who cared!

No, not the Kremlin:
The Eccles Building.

But ever since the Fed started to expand its balance sheet in the fall of 2008, what the Fed does has mattered—and now with Quantitative Easing 2 and the effective monetizing of 50% of the Federal government’s deficit, it matters more than ever.

Next week, on January 25, the Federal Reserve’s Open Market Committee (FOMC) will meet. This meeting is important, because the composition of the board will change—and therefore, possibly the direction of the board.

So like Kremlinologists of old, we have to start paying attention to what the FOMC looks like, if we want to divine what will happen.

What will happen not merely with monetary policy, but with the American economy itself.

Vacuuming Up the Baby from Mommy’s Tummy

2011-01-16T08:00:00.005-05:00

When I was six years old, in Southern California in 1974, I remember quite clearly a conversation I had with a classmate of mine. I don’t remember the boy’s name, but I remember his face, and the expression he had—he was lording it over me and the other boys listening to him in a semi-circle in our first-grade homeroom class, confident in his superior knowledge, yet at the same time hiding a tinge of worry, as he was deploying this superior knowledge without really understanding it.

He was telling us a new development in what had heretofore been a rather boring saga. Previously, he had told us—casually and not particularly interestedly—that he was going to have a baby brother or a baby sister: A perfectly common occurrence among our six-year-old set. In fact a few months before, I myself had told my clique of friends that my mom was going to have a baby, and had gotten an earful of varying opinions about having young siblings—usually negative if it was a girl, but slightly less negative if it was a boy.

But then my friend gathered us all around him with a new piece of startling news: He wasn’t going to get a baby brother or a baby sister after all—and the phrase he used to explain this new development is a phrase I have remembered quite clearly all these years later: He explained that they had “vacuumed up the baby from mommy’s tummy.”

Read more »

The Trooper: Installment IV (Pages 84–109)

2011-01-15T08:37:00.001-05:00

Another Saturday—another installment of The Trooper:

• Pages 84–96 are here: Wherein the Trooper meets the Richardson family, then meets Yuri and his “family”.

• Pages 97–109 are here: Wherein the Trooper deals with the Richardsons.

To you Kind Fans who have been following this nasty bit of story-telling: Don’t be shy about going into specifics about what you like and don’t like of the book, both in its form and in its content.

And to you New Readers just joining this story-in-progress: Click here to start the story from the beginning.

Just so you know: This novel runs 305 manuscript pages, and it has a big wind-up—but in the end . . . well, let’s put it this way:

All good stories always end with a bang.

Enjoy!

GL

Why Democracies Will Always Go Bankrupt

2011-01-13T16:24:00.007-05:00

When I was growing up, finance was mother’s milk to me, especially as I was a bit of a math geek. But for my formal education, I was trained—rather rigorously, and in spite of my laziness—as a philosopher and a historian. This odd combination is why I have such a jaundiced view of economics: I don’t find economics particularly intimidating, or even particularly challenging—it’s just finance’s snooty but poor (and slightly daft) older cousin. History’s surprisingly ignorant and blinkered accountant. Philosophy and Math’s lightly retarded, Puritanically rigid, and altogether rather embarrassing spawn.

Now, it’s all good and fine for me to rant about how useless economics is—but these aren’t empty complaints on my part: I can point to a single, specific, monumental failing of economics—a failure in the discipline which pretty much proves my point:

The United States is going bankrupt—and economics cannot explain why.

In fact, a surprisingly large number of economists choose to ignore the problem of America’s looming bankruptcy altogether; or claim there is something called a “structural deficit” (a highfalutin way of pretending that it cannot be fixed, and therefore doesn’t need fixing); or else—as is the case of the fools backing Modern Monetary Theory—they make the claim that all deficits are just debts the government owes itself, so therefore the American government cannot go broke, so therefore—and let’s ring out the QED—the fiscal over-indebtedness is actually not a problem because it doesn’t even actually exist!

They really do claim that. And no, they are not high.

Of course, sovereign over-indebtedness does exist, and it is a problem—a terrible, life-or-death problem: As a lot of historians have pointed out, sovereign bankruptcy presages and ushers the collapse of great nations—often violent collapse. And this is something we want to avoid, no?

The Hourly G

2011-01-09T08:00:00.007-05:00

So as I threatened—I started up The Hourly G.

It’s a blog about economics and finance—but quicker and more succinct than my regular blog here. I’ve been posting since yesterday morning, and as of now, I expect to put up three to four posts a day, regarding whatever’s going on in the world of money.

Rest assured—I will still continue to post long, crazed ramblings about the state of affairs we find ourselves in on my regular blog. As a matter of fact, tomorrow (Monday), I’ll be posting a long piece called Why Democracies Will Always Go Bankrupt.

But The Hourly G will be quicker and looser—little asides about what’s going on, instead of big think-pieces about What It All Means. If this blog is the professor giving a long lecture, then The Hourly G is the peanut gallery, shooting off spitballs and clever/snide remarks.

I do hope you visit the site—and I do hope that you enjoy it—and if you do, pass it along!

The Trooper: Installment III (Pages 54–83)

2011-01-08T06:00:00.005-05:00

Here are a few more pages from my unpublished, unpublishable novel, The Trooper:

• Pages 54–68: “Wherein the Speeder threatens the Trooper, the Trooper threatens the Speeder.”

• Pages 69–83: “Wherein the Speeder processes the Speeder, chats with the prison guards, then visits Travis.”

Like I said when I started: Black as outer space.

Is the Federal Reserve Really Purchasing Over 60% of 2011’s Fiscal Deficit? In a Word, uh . . . Yeah.

2011-01-04T10:05:00.007-05:00

The other day, in my post “The Lull Before the Storm”, I mentioned that for fiscal year 2011, the Federal Reserve would be purchasing over 60% of the Federal government deficit.

Literally.

In other words, the Fed would be dancing the Monetization Waltz, just like Latin American countries used to back in the 1970’s: Proof positive that America is indeed a banana republic—only with nukes.

A lot of people didn’t believe me—or wanted me to check my figures. Or wanted to know if I was having an acid flashback from those aformentioned 1970’s. A lot of people couldn’t believe it.

Mark Twain said it best: There are lies, damned lies, and statistics. If you want to deceive your audience, you source your numbers from some shifty salesman with an ideological ax to grind, gussy it up with percentage signs and charts and graphs, and thereby “prove” any damned foolishness you like.

But deceit in this context serves no purpose: It’s in all of our best interests to know exactly what is going on, in fiscal year 2011.

So in this brief post (yes I know—shocker), I’m gonna check the figures for my observation—but I’m gonna get ‘em right from the horse’s mouth: From the White House, and from the Federal Reserve.

To begin—

Thank You

2011-01-02T18:40:00.001-05:00

To My Readers and Kind Fans,

I started this blog this past June as a lark: A place where I could make sense of my crazy ideas, without any expectation that they would be read by anyone except me—and that’s how it was for the first couple of months. A day where I got 40 pageviews was a big day for me.

But then out of the blue, I got an audience—you. In the past four months, my blog has received well over a million hits—and it’s been an exhilarating experience. Addictive. The rush I get from reading comments is hard to describe—especially because the comments I get are smart, even when they completely disagree with what I’ve written.

I feel I owe you, my audience, for this wonderful feeling.

Read more »

The Trooper: Installment II (Pages 24–53)

2011-01-01T08:40:00.003-05:00

©David Dees.

In this second installment of The Trooper, our eponymous hero/antihero/bogeyman has a run-in with the Speeder—unforseen consequences will ensue.

The Trooper is ignorant of these consequences, as he goes looking for entertainment on Saturday, then to Church on Sunday.

Enjoy!

The Lull Before The Storm: What’s Coming in 2011

2010-12-28T19:40:00.002-05:00

Correction below, 12/30/10.

This week—what with Christmas on one end and the new year’s celebration on the other, and everthing in between covered in snow—nothing much is gonna happen: It’s a week that’s about as dead as Dillinger. So I figured I should take stock of where we are—and more importantly, where we’re going.

To me, the biggest macro-economic story of 2010 was Europe: It’s falling apart, and there doesn’t seem to be anything that’s going to stop this collapse.

The second biggest macro-economic story of the year—though not by much—was the successful monetization of 75% of the U.S. Federal government deficit by Ben Bernanke and the Federal Reserve. I use the word “successful” in a morality-free, completely pragmatic sense: Bernanke achieved monetization with minimal market disruption. In fact, a lot of people would argue that QE-lite and QE-2 were not policies of debt monetization—that is how successful Bernanke has been. (Talk about “reality distortion field”! Steve Jobs ain’t got nuthin’ on Benny!)

This “success” has allowed the U.S. Federal government to continue to avoid making necessary, critical budgetary decisions—paradoxically accelerating the U.S.’s deteriorating fiscal situation.

The third biggest macro-economic story of 2010 has been the inexorable rise in commodity prices. Everyone’s been paying attention to silver and gold, but the real story has been industrial metals—especially copper—and agricultural commodities—especially grains—especially wheat—and corn, corn, corn!

To be sure, there were other important stories in 2010—the Mortgage Mess, Wikileaks, Wayne Rooney. But these three issues—auguries of EMU collapse, successful Fed monetization, and commodity price rises—are the ones that mattered on a macro-economic level this past year.

In 2011, every other financial story will be either a cause or consequence of one of these three issues: Guaranteed.

Now then—to specifics:

Read more »

A Christmas Gift for My Readers: The Trooper

2010-12-25T08:01:00.003-05:00

Dear Readers and Kind Fans,

I’ve mentioned here and there that for the past several years, I’ve been writing a monster called The Green of the Republic—but I’ve also written other fiction.

Back in July–September 2008, while taking a break from my monster, I wrote a highly experimental novel called The Trooper.

It’s about a State Trooper, patrolling a suburb in a post-Crash, Millennial Depression wasteland. It’s a dark, scary, creepy book—a horror story for thinking people.

Between its formal experimentation and its black-as-outer-space tone, mainstream publishers would never touch such a book, no matter how good it might be—not in a million years.

But it is pretty good. I know it’s arrogant of me to say that about my own work, but, well, you all know that I’m an arrogant shit. More to the point, if I didn’t think it was good, I’d never mention it—I’d keep it locked away like an unloved adopted child.

But I do love The Trooper. It seems such a shame that—because of publisher timidity—no one will get to read it—

—so I’ve decided to make it available to people via a blogspot site.

Every Saturday, I’ll be posting a ten-to-twenty page chunk of the novel—today, for your Christmas pleasure, I’ve posted the first two such chunks,

So without further ado, here it is—The Trooper.

Enjoy!

As Godzilla Says . . .

2010-12-24T09:00:00.000-05:00

©Mary Wells

Has American Military Spending Really Been a Form of Keynesian Stimulus?

2010-12-22T09:50:00.005-05:00

In my recent post, Falling Forward, I discussed the failure of the American economy to de-militarize once the Cold War ended in 1991.

This is a major issue—major like a hole in the head: The United States spends over 6% of its GDP on the military—more, if you add the money spent on wars in Afghanistan and Iraq. (And by the way: The self-delusion that keeps those two wars “off the books”? Astonishing—but that’s for another time.)

Since the U.S. is the largest economy in the world, that +6% means that America spends more on the military than the rest of the world combined—with room to spare.

Right there, you know something’s gone horribly wrong.

In Falling Forward, I argued that this enormous military created the need to find a new enemy, now that the Soviet Union is no more, and the nations of the former Warsaw Pact are busy trying to join NATO, rather than fight it.

But there’s another thing we should be looking at, when we examine this enormous military spending, especially over the last 20 years: Shouldn’t we really be thinking of it as an enormous stimulus program—a Keynesian stimulus program of the first order?

Military spending as a form of Keynesian stimulus is not an original argument—in fact, it’s been advocated, even by a few non-Keynesians:

Falling Forward: America’s Loss of Direction Since the End of the Cold War

2010-12-17T10:45:00.001-05:00

You know how when you’re pushing against something heavy and unyielding—a heavy door, say, or maybe a car stuck in a ditch—and all of a sudden, the thing you were pushing against abruptly yields? What happens?

Why, you fall forward, of course.

Especially if you’ve been pushing for a good long while: You were so hell-bent on pushing at the thing—the car stuck in the ditch, the heavy door that wouldn’t budge—that when it finally does move, you over-balance. You fall forward. You might even trip up. You might ever fall on your face—and painfully, at that.

This is what’s happening to the United States: After the long struggle of the Cold War, America is falling forward.

And this falling forward is turning into an epic tragedy.

Want To Ruin Your Own Country? Assume Your Banks’ Liabilities

2010-12-14T12:55:00.003-05:00

Recently, I read up on how Iceland is doing—surprisingly well, actually. Unemployment is down, the Krona is going back up. Good balance of trade, good fiscal balance sheet. Quite the turnaround, after its troubles over the last couple of years—

—so then if Iceland is doing OK, why then are we in the hole that we’re in?

Why is the American economy slogging along? Why is Europe circling the drain? Why are the bond markets queasy as a patient with a low-grade malarial fever? Why is Ben Bernanke’s chin quivering and his voice quaking on 60 Minutes? (And by the way: Was that a terrifying spectacle or what?) Why has the conversation turned from bond market risk to sovereign debt risk? Why are commodities rising, equities moving jagged and irrational, and all of a sudden silver is now the new darling of the retail investor?

What the hell is going on? Why are things getting worse, instead of better?

The answer is so simple, it hurts:

A PUBLIC SERVICE ANNOUNCEMENT: Prosecuting the Banksters, and the Mortgage Mess

2010-12-13T19:55:00.000-05:00

As many of you know, I’ve written a lot about the Mortgage Mess—see here in my blog’s directory, for a rundown of the posts I’ve written on the subject.

Yves Smith, whom I respect, posted the following at naked capitalism:

Tomorrow, a group of homeowners is meeting with Iowa’s attorney general Tom Miller, who is leading the 50-state effort which is investigating foreclosure and mortgage lending abuses.

This group is presenting a letter to Miller asking them to prosecute bank executives for mortgage fraud and wants to show broad-based support for this idea via having concerned citizens sign it.

Here is the text of their letter:

Dear Attorneys General,

We, the undersigned thank you for investigating fraudulent and illegal foreclosure practices by the nation’s biggest banks.

Your investigation is the best hope for homeowners and communities since this crisis began. Americans are watching. Our expectations are high that we will see justice for the millions of families who have lost their homes, the millions more who are at risk of foreclosure, and the neighborhoods across the country devastated by falling housing values and vacant properties as a result of widespread mortgage fraud.

The bank executives who committed fraud should be prosecuted. Any settlement needs to go beyond fixing paperwork, fully addressing ongoing abuse and ending the flood of unnecessary foreclosures.

We demand that any overarching settlement agreement contain mandatory loan modification programs, including principal reduction for owner-occupant families facing foreclosure and remedies for those families who have already lost their homes.

Now is the time for bold leadership from the nation’s Attorney Generals to hold big banks accountable for the damage they have done to families, communities and the nation’s economy.

I have signed this letter and strongly encourage you to do so. Please visit the site, www.crimeshouldntpay.com to support this effort. Thanks!

Gonzalo here (to borrow a phrase from Yves): I fully support her call, which is why I have signed this letter, and am now passing it along to my readers, so that they might do the same.

Bitching and moaning never ever achieved anything—in a democracy, numbers count. So please sign up—at least go on record that you support sticking it to these bankster fraudsters.

This is important—and time is short. Thank you.

A Question for My Kind Fans

2010-12-12T05:00:00.000-05:00

Shocking as it is—and it’s a shock to me most of all—but I have fans.

Not just casual readers, but fan fans—diehards.

This message is for them.

Recently, you saw how I wrote about two big subjects over the past few weeks: European sovereign debt, and the whole Wikileaks thing—and I won’t lie to you, it was exhausting.

Having to bear down and and get a firm grip on this material was a lot like, well, work. It was fun, sure—and it was fascinating to find out such interesting stuff—and to once again be underwhelmed by the slipshod practices of the mainstream media.

But it was work—and hard work at that.

The New McCarthyism, The Real Terrorists—The Case of Wikileaks, Part II

2010-12-10T08:40:00.002-05:00

In my previous post, “The Hacker’s Treehouse”, I discussed Wikileaks, its founder and leader Julian Assange, and the latest hubbub they’ve stirred with the State Department cable scandal.

In this post, I discuss the reaction of the various governments to the Wikileaks revelations, and what these reactions say about our current state of affairs. At the end of the piece, I conclude that we are living in the era of the New McCarthyism.

The New McCarthyism, The Real Terrorism

Can you identify the terrorist?
Or do they all look the same to you?

What is a terrorist?

Someone who uses violence and intimidation in order to achieve a political goal.

What is a criminal?

Someone who, whether by action or omission, carries out an offense proscribed by the law, an offense which is therefore punishable by the State.

It’s important to know what these words mean, because both of them—criminal and terrorist—have been liberally applied to Julian Assange and Wikileaks, since it posted its very first batch of documents.

Now, with the State Department cable leaks, those calls have become a collective roar of condemnation, in America:

“Terrorist!”

“Criminal!”

Of course, Assange is neither a terrorist nor a criminal: He simply published some leaked documents that embarrassed some people.

He’s not a terrorist, because he did not commit a single act of violence or intimidation, in order to achieve his political goal.

He’s not a criminal, at least not in the United States, because he has not broken any law in America, and he is not an American citizen, subject to U.S. jurisdiction.

But you wouldn’t know it, from the uproar over the Wikileaks’ case.

The examples are too numerous to list—so let’s go to the highlight reel:

The Case of Wikileaks, Part I—The Hacker’s Treehouse

2010-12-07T08:00:00.011-05:00

This is the first of a two-part examination of Wikileaks. Part II, “The New McCarthyism” will be posted on Thursday morning.

GL.

It’s only when you poke the beast that you get a sense of its true nature.

The American government, media, and corporate establishment are all in a tizzy over the latest poke from Wikileaks:

The “whistleblowing” site (it really isn’t, but I’ll get to that in a minute) is releasing excerpts from a cache of some 250,000 diplomatic cables and other documents. These cables were sent from various American embassies back to the State Department between 1966 and 2010. The leaks have been dripping out since November 28, revealing a whole host of tawdry but so far trivial tidbits of American diplomatic behavior.

None of the “secrets” revealed by Wikileaks are really secrets: They’re mostly confidential appraisals of the U.S.’s allies and rivals; much of it is gossip, or merely pedestrian—demonstrably so:

Of the 251,287 documents Wikileaks has obtained, 134,000 are outright unclassified; 102,000 are classified “confidential”; and 15,652 are classified as “secret”. Source is linked here, confirmation is linked here.

None of these documents are classified “top secret” or higher—anyone claiming that they are “top secret” or that they “put lives in danger” is at best exaggerating, and at worst lying.

Read more »

Firefox Users Are Having Trouble Seeing My Blog

2010-12-02T08:41:00.006-05:00

• Fix below •

√ Problem seems to be fixed, see Update II below.

A housekeeping note: Firefox users are having trouble seeing my blog.

I do not have control over this—it is apparently a Blogger or Firefox problem.

I have contacted Blogger. Hopefully it will be repaired shortly. I do not know how to contact Firefox.

I have ~~also removed~~ left the original cloud background (which is what Firefox users were seeing beneath the text, making blog text well nigh impossible to read), ~~and temporarily replaced it with a smooth cream background~~.

To my readers using Firefox, I suggest you use any other browser, as none of the others I have tried (Safari, Explorer, Chrome, Stainless) seem to have this problem.

Please excuse the inconvenience.

GL

Update I:

The problem seems to be intermittent with Firefox users—some users have trouble, some do not. Considering over a third of my readers use Firefox, this is an issue to me.

To anyone having trouble seeing my blog with Firefox, I would suggest you try out different browsers: You can find downloads for Safari here (I heartily endorse Safari, which I use), Chrome here (which I also recommend), Explorer here, Opera here, and Stainless here (for Mac Snow Leopard only).

GL

Fix for this problem:

The easiest fix for the Firefox users experiencing this problem is:

Go to the View menu—go to Page Style—select No Style.

Voilà!—a plain white background appears, with the text in black and links in default blue. Not as pretty as the regular format, but functional, and you can read all the text easily—which of course is the whole point.

If you are one of the (few) Firefox users experiencing this problem, I am sorry for the inconvenience. However, it appears to be a Firefox issue, not an issue with my blog (I’ve spent the whole afternoon troubleshooting it, to make sure it's okay).

Hope you enjoy my posts.

GL

Update II — Dec. 20, 2010:

All on its own, the problem seems to have resolved itself. Yeay team!

If the problem recurs, please e-mail me. Thank you.

GL

As The Euro Goes The Way Of The Dodo, Where Does That Leave The Dollar?

2010-11-30T16:30:00.002-05:00

The Eurozone is heading for a crash—anyone saying otherwise is either stoned, works in Brussels, or hasn’t checked the European bond market action lately: All hell is breaking loose there.

The Euro:
A famed, flightless bird, now extinct.

And if, as I have argued here, the Irish Parliament decides not to pass the austerity budget next December 7—that is, decides not to take the European Central Bank bailout—then hell is going to break out in Europe just in time for Christmas: Satan and Santa Claus just might be squaring off on the Rue Belliard before year’s end.

Therefore, the smart money starts thinking about what’s going to happen after the euro-crisis-climax happens.

In other words, what’s going to happen to the dollar, once the euro goes the way of the dodo.

First, we have to understand how we got here, in order to figure out what’s going to happen next.

The Banana Republics of Europe

In the 1970’s and ‘80’s, various Latin American republics foolishly pegged their currency to the U.S. dollar.

If Ireland Doesn’t Take The Bailout . . .

2010-11-28T20:30:00.004-05:00

Update I, below. Update II, below.

So a week ago as I write this, the Irish formally asked for a bailout from the European Union, acting in concert with the International Monetary Fund and the British government.

And now, a week after that request, the EU finance ministers just approved the bailout of the Republic of Ireland—

—however . . . However, in those seven days in between, a serious shitstorm broke out in Ireland—it has been one hell of a week, over there in the Emerald Isle.

And though the bailout has been approved by the EU finance drones, we still do not have an approval from the most important player of them all:

The Irish people.

Let’s recap:

On Monday, immediately after the announcement that the Irish government had formally asked for the bailout, the Greens—partners of Prime Minister Brian Cowen’s Fiana Fáil party—left the governing coalition, forcing Cowen to call for an election in January.

The Green’s leader, John Gormley, isn’t stupid: He knows that, in politics, association is the very definition of guilt—and the Greens are guilty of having been in bed with Cowen. So Gormley and the Greens want to put as much daylight between themselves and Fiana Fáil before the election.

Even members of Cowen’s own party are trying to put distance between him and them—they’re openly calling for his resignation. That’s gotta hurt.

Today I’m Exhausted

2010-11-26T11:00:00.005-05:00

Today, I was supposed to post a piece that tied in to Thanksgiving, and alluded to the multiple crises that we are experiencing.

Me, as I write this.

But this morning, I woke up, re-read all the drafts I had of what would have been today’s post, and realized that—frankly—it was all drivel.

Some people—a lot of people, actually—think that most of what I write is drivel. (Oddly, the same people who think my stuff is shit read everything that I post—and comment about it, too. But nevermind.)

Re-reading the crap I had written for today’s post was terribly dispiriting—for a second there, I thought that the haters were right: My stuff is shitty drivel that hardly makes any sense!

It took me a while to recall what I was trying to do—not just in the piece, but in my blog, generally speaking:

What I’m trying to do is write stuff that’s informative, entertaining, and insightful.

For Europe’s Future, Spain Is All That Matters

2010-11-23T14:29:00.001-05:00

Last Spring it was Greece that was in crisis mode—then last week, it was Ireland—and coming up next is Portugal—

—but all those pale in comparison to Spain.

That’s gotta hurt.

If I had to bet on which country will bring about the end of the Euro—and perhaps even the end of the European Union—I’d have to say it’s Spain.

Right now, no one is talking about Spain—Spanish spreads are as quiet as a guilty man in a police line-up—everyone’s too concerned over Ireland, and the upcoming Portuguese Situation.

But Spain is the key—Spain is what you should be paying attention to, if you want to find out what will happen to the European Monetary Union (EMU), and the European Union (EU) itself.

First, a recap of last week’s exciting episode of I’m an Insolvent Nation—Get Me Out Of Here!:

Ireland got into trouble with the Euro bond markets after German Chancellor Angela Merkel made some not-very-clever remarks about Irish bond-holders needing to take some haircuts. The bond markets started to panic—yields on Irish debt started to widen—and then once again, it’s Sovereign Debt PanicTime™ (patent pending).

Read more »

A Full Body Scan of American Corruption

2010-11-21T19:15:00.003-05:00

In the United States, if a policeman stops you for a traffic violation, and you offer him a $20 bill to forget about the whole thing, you’ll likely end up in jail.

But if you leave your Federal government job and go work as a consultant to the very industry you used to regulate, you won’t go to jail—you’ll grow rich. Very rich.

Michael Chertoff

Michael Chertoff is the poster boy for this institutionalized corruption going on in America today. He is not unique. He is not an outlier of any bell curve. If anything, Chertoff’s form of corruption is average—it’s ordinary. It’s what everyone is doing: Everything within the law, everything that the law says he ought to be doing—yet the net effect is a blatant corruption that is personally despicable, and socially disastrous.

Michael Chertoff was the head of the Homeland Security Agency from February of 2005, to January of 2009. But after he left, he formed an outfit called The Chertoff Group—and was promptly hired by an obscure company called Rapiscan Systems.

The Chertoff Group, according to their website, “provides strategic security advice and assistance, risk management strategy and business development solutions for commercial and government clients on a broad array of homeland and national security issues.”

That sounds . . . impressively vague. Slippery as a greased stripper’s pole, actually. So let’s approach this a different way:

What does Michael Chertoff do?

Because of My Web Seminar on Hyperinflation . . .

2010-11-17T06:00:00.002-05:00

. . . I won’t be posting Friday—all the prep work is leaving me no time to write.

Though it’s a lot of work, I’m very much looking forward to my web seminar. It’s not so much that I’ll enjoy talking for 90 minutes about hyperinflation and what it will look like when it hits the United States—I’m actually looking forward to the questions from the audience.

Prepping for the web seminar (I hate the term “webinar”—it sounds like a disease ducks get), I’ve been really concentrating on questions: What questions will my audience ask, how will I answer them. What questions I need to answer. What questions need to be asked.

So that’s why I won’t be posting on Friday—prep work.

If you’re interested in joining me on my web seminar, click here and check it out. It’s on this Thursday, 9:30pm EST—if you think it’s something you’d be interested in, sign up: I’d very much enjoy your participation.

I’ll be back on Sunday with a new post. So until then, all the best,

Is Europe Coming Apart Faster Than Anticipated?

2010-11-16T16:04:00.000-05:00

The sky is black with PIIGS coming home to roost: I was going to write my customary long and boring think piece—but the simmering crisis in the Eurozone just got the heat turned up: Things are boiling over there!

“Euro Dead” by Ryca.

So let’s take a break from our regularly scheduled programming, and give you a run-down of this late-breaking news:

The bond markets have no faith in Ireland—Greece has been shown up as having lied again about its atrocious fiscal situation—and now Portugal is teetering—

—in other words, the PIIGS are screwed. I would venture to guess that we are about to see this slow-boiling European crisis bubble over into a full blown meltdown over the next few days—and it’s going to get messy.

So to keep everything straight, let’s recap:

Read more »

Selecting for Cynicism in the Ivy League

2010-11-14T21:55:00.006-05:00

I did high-school in Chile, graduating in 1985—but I only got around to applying to U.S. colleges in 1990. When I finally did apply, I was a flat broke 22 year-old—naturally, I applied only to need-blind schools: There was no point in getting into a college I couldn’t afford. So I pinned my college hopes almost exclusively on Ivy League schools, because all of them had need-blind admissions.

Baker Library Tower
Dartmouth College

This wasn’t as fool-hardy as it sounds. I had the grades and the test scores—99 percentiles. But what I later realized made me so attractive to admissions committees was that I’d done stuff: Travelled through the Peruvian jungle, complete with a run-in with Shining Path guerrillas. Protested the Pinochet dictatorship, and gotten sprayed by a guanaco (water cannon) for my troubles. Lived through a 7.7 earthquake. Taught English as a second language. Written a first novel.

(I’d also done a few things which I realized wouldn’t go down so very well with the various admissions committees—like arranging my first FMF threeway at 19, brokering a sizable pot sale at 20, and other such adventures. These achievements I kept to myself.)

So when the envelopes from the various admissions committees finally got to my mailbox, they were all fat—I was lucky enough to have my pick of schools.

For fairly ridiculous reasons mostly having to do with the nearby Skiway and the shiny computers every freshman was supposed to get on arrival, I chose Dartmouth as my school. When I got to Hanover as a proud member of the Class of ‘95, I was surrounded by kids who were completely different from me.

Not in their brains or even their backgrounds. Most of them were—like me—private school kids of well-to-do parents. Most of them were—like me—incredibly smart, yet fairly arrogant about those smarts. Most of them—like me—had read pretty much everything, and could talk—knowledgeably—about just about anything.

But there was one big difference between me and my peers:

Community service, and volunteer work.

The Tidal Forces Ripping Europe Apart

2010-11-12T14:00:00.015-05:00

In July of 1994, a comet named Shoemaker-Levy 9 crashed into Jupiter—it was quite a sight.

According to astronomers, Shoemaker-Levy was a comet that was captured by Jupiter’s gravity twenty or thirty years before it was discovered. As the comet circled Jupiter, at one point it passed the Roche limit—the line around a large mass where its gravity will rip apart a smaller mass by way of tidal forces.

Comet Shoemaker-Levy,
after Jupiter’s tidal forces
ripped it apart.

By the time Shoemaker-Levy crashed into Jupiter, tidal forces had had their way with the comet. As the picture shows, it was no longer a single comet—it was a string of small lumps of rock and ice

Tidal forces are pulling the European Union apart.

On one end, European governments have taken on debt and liabilities—both public and private—which they cannot possibly meet. These debts and liabilities are near-term enough that there is only one way to characterize many of the smaller European states: They are insolvent.

On the other end, Europe is unwilling to carry out sovereign default of any one of its member nations. Indeed, there is a sense that—constant drumbeat of the Germans aside—Brussels is unwilling to even contemplate the very notion of sovereign default and debt restructuring. Brussels and the European Central Bank believes in bailouts, not default, because they believe that the entire European project rests on the non-default status of all the EU members. They believe that all EU debt is backed by the entire EU, no matter how irresponsible the EU country that issued the EU debt.

As we watch Europe get closer and closer to the Global Depression, we are seeing as these two opposing forces—insurmountable debt vs. unwillingness to default and restructure—pull the continent apart as surely and relentlessly as tidal forces.

Let’s first look at the debts and responsibilities the Europeans have taken on, which they cannot fulfill.