Thursday, November 01, 2012

Fraud by Day, Fraud by Night - Max Keiser with John Butler

Max Keiser and Stacy Herbert discuss Chinese investors pouring money into silver, while American investors pour money into bonds 33 times faster than into equities. They also look at the latest updates to the mystery of there being no Chinese gold bars in the GLD vaults and on the fly by day operations at the Federal Reserve Bank. In the second half, Max Keiser talks to John Butler, author of The Golden Revolution and chief investment officer of Amphora Capital, about German gold and a German exit from the euro. Source

‘Yes we Khan’: US applies drone diplomacy at Toronto Airport

Imran Khan (Reuters / Mian Kursheed)Sergey Strokan: One story, overshadowed by Hurricane Sandy, the Obama-Romney race and Syria’s civil war, nevertheless, tells a lot of who’s who in today’s world.

It is the story of who is setting the rules of the game and drawing the world’s new divisive lines to supplement the old barricades. 
Here it is for you. It involves a living legend of Pakistani cricket, largely seen as the country’s next prime minister or president, sportsman-turned-politician Imran Khan. Khan was flying from Ottawa to New York to attend a key fundraising event after collecting money in Canada for the nearing elections in Pakistan when he was removed from the plane to be questioned by US immigration authorities last Friday.
You may ask, why? Well, the detention could be hardly explained by the vague language of a terse statement on the issue, made by the US State Department’s Spokesperson Laura Lucas. The explanation sounds confusing: 
We are aware that Imran Khan had been briefly delayed in Toronto before boarding the next flight to United States. The issue was resolved. Mr. Imran is welcome in the United States.” In a later statement, State Department spokesman Mark Toner denied that Khan was held and interrogated in Toronto.
Anyway, was it really such a bizarre form of “welcome”? Or was it rather a cold shower? What is crystal clear is that Khan’s abrupt offloading at Toronto Airport had nothing to do with security or other reasons which should have prompted US immigration authorities to act in such a weird way, as if catapulting a Pakistani celebrity from the plane. No alleged terrorist connection or serious crime, nor any wrongdoing was reported.

Hurricanes and Broken Windows - azizonomics

Aziz: It is relatively easy to debunk the Broken Window fallacy, the idea that hurricanes or more generally the destruction of capital may be a tragic economic stimulus. Indeed, much has already been written on the opportunity cost of the new spending that may be unleashed by a natural disaster — in the last few days by Robert Murphy and Jim Quinn (and many others) and historically by Henry Hazlitt and Fredric Bastiat. When a window is broken, and money is spent on a glazier, the labour, capital and resources is only moving the economy back to where it was, and it has an opportunity cost — whatever might have been purchased with the labour, capital and resources had the window not been broken.

A Krugmanite might respond to this with the idea that when an economy is in a depression state, where vast quantities of labour and capital are idle, then this opportunity cost is less relevant. But this is not so.
A natural disaster will undoubtedly result in new economic activity that would not have taken place otherwise. Undoubtedly, labour, capital and resources that may not have been employed otherwise will be employed because of an earthquake, or a flood or a fire. But believers in the Broken Window fallacy are looking at the economy through a distorted lens. What they define as “activity” (i.e. GDP) is only one side of the picture. Yes, a major hurricane like Sandy might require $100 billion or more spent to repair the damage. Yet to only look at spending is to only look at one side of the picture — the flow. An economy is both stock and flow. That $100 billion of spending is flow to replace damaged and destroyed capital stock (houses, factories, roads, etc).

What's "Really" Behind Gross Inequalities In Income Distribution? - Mish

Here is the question of the day: What's Behind Gross Inequalities In Income Distribution?

I ask the question after reading three incorrect answers in the article
Inequality and the Second Gilded Age on the Real-World Economics Review Blog.

Misguided Notions on Commodity Values


Writer David Ruccio kicks things off by stating "
The only way you can answer that question is based on a theory of value — a theory of how commodity values are determined and how the resulting flows of value are distributed to different participants in the economy."

Ruccio gets off on the wrong foot because there is no such a thing as "commodity value" that can be measured.


Here are a few snips straight from chapter 2 "On the Measurement of Value" from
The Theory of Money and Credit by Ludwig von Mises.

Although it is usual to speak of money as a measure of value and prices, the notion is entirely fallacious. ... Acts of valuation are not susceptible of any kind of measurement. ... But subjective valuation, which is the pivot of all economic activity, only arranges commodities in order of their significance; it does not measure this significance.

Risk Off: Greek Court Warns Troika-Demanded Austerity May Be Unconstitutional + More Greek Drama: Coalition Member PASOK "In Turmoil As It Seeks To Quell Rebellion"

Tyler Durden's picture While Europe continues to plan and scheme, content in the knowledge that Greece can do nothing to derail plans of status quo preservation, especially ahead of next week's critical parliamentary vote that will see the country imposing even more austerity on its people (see the great profile in the AP today in "Hit by crisis, Greek society in free-fall"), Greece has just decided to pull a "Karlrushe Kardinals who say Nein" move, and as Reuters reported moments ago, the entire process may be scuttled by none other than yet another court, this time in Greece:
  • GREEK COURT SAYS PLANNED PENSION CUTS, RETIREMENT AGE INCREASE  SOUGHT BY EU/IMF LENDERS MAY BE UNCONSTITUTIONAL
What this means is that suddenly Greece once again has all the leverage (recall that last year the mere threat of a Greek moratorium cost G-Pap his job), a development which in June sent Europe plunging on fears that Greece may vote itself out of the Eurozone, leading to a Grexit, the return of the Drachma, redenomination, collapse in risk levels, the apocalypse and other bad things.
Judging by the reaction in the EURUSD, risk is now once again off.

Greece vs IMF: John Lipsky Frustrated He Couldn’t Let his Buddies Loot Greece Dry

Efforts to rescue Greece have failed to provide the basic structural reforms needed to help bring competitiveness to its economy, said John Lipsky, the International Monetary Fund’s former first deputy managing director.
“It has been frustrating because some of these have been clear from the outset in so many ways,” Lipsky said in an interview in Copenhagen yesterday. “I feel this process could have been handled so much better.”
Europe is pressuring Greece to step up efforts to rein in its deficit and deregulate the economy. The austerity measures are exacerbating the nation’s economic pain and won’t lay the foundation for a lasting recovery, Lipsky said. Greece is complying with the terms set by euro-zone leaders in the hope of getting a 31 billion-euro ($40 billion) aid payment this month to help recapitalize its ailing banks.
“It has been so frustrating to see how little the discussion has centered around what are in fact the underlying issues, the truly seminal issues, for Greece, which have been its progressive loss of competitiveness in the euro zone,” Lipsky said. “If that can’t be remedied, there will be no successful solution for the Greek economy, one way or another.”

Ned Naylor-Leyland: If Your Gold Reserves Are at the BOE or NY Fed, You Have No Chance of Getting Out With Any Metal! - The Doc


The Doc welcomed back Cheviot Asset Management’s Ned Naylor-Leyland for an exclusive interview Sunday regarding the German gold repatriation, and how it will affect the physical gold market going forward
In this MUST READ interview, Naylor-Leyland stated that when you take into account the fractional reserve accounting by the bullion banks, the 50 ton annual gold repatriation number is much larger in terms of the impact on the underlying market.

Naylor-Leyland believes Germany and the other central banks storing their gold reserves at the BOE and the NY Fed are essentially SOL, stating: If you’re holding your central bank gold reserves either in the Bank of England or the NY Fed, unless you are Theseus trying to find the Minotaur, you have no chance of getting out of there with any metalThe gold ownership chain of custody is severely tarnished and it’s obvious that it’s a problem.  In light of what we know about the tightness of the physical market it appears the pressure is on, and it’s not likely to dissipate.

Full MUST READ interview with Ned Naylor-Leyland on the central bank panic out of paper and into physical gold reserves below:

Old Boy Net Fascist UK: From MI6 Al Qaeda Plot to Kill Gaddafi to Spying on Domestic Dissent: An MI5 Whistle Blower's Story

Annie Machon: British intelligence agencies considered themselves above the law. "Bug and burgle their way around London... Funding terrorism... Rogue illegal MI6" - False flag: "Israeli MOSSAD bombs own embassy... 2 known innocents jailed for 20 years to cover up!"

The Ethics of Halloween - Ludwig von Mises Institute

By Caleb McMillan: Every Halloween people are engaging in free-market anarchism whether they like it or not. To the economist, it’s clear that the child values receiving candy, even if it means dressing up in a funny or scary costume and going door-to-door, sometimes for hours, saying “trick or treat”. It’s clear that for the adults, joining in for the festive evening is valued more-so than the monetary value of the candy, or else they wouldn’t be giving it away. And some don’t. Some people, adults and children alike, shy away from Halloween night neither tricking nor treating nor allowing their homes to be used as candy repositories. Those partaking in the activity simply go about their business, ignoring the houses with the lights off. Halloween isn’t like most other market activities where exchanges can be marked in monetary value. Yet an exchange is taking place, and no aggression is required for participation or non-participation.
To the free-market anarchist, Halloween is a perfect example of a non-coercive display of voluntary goodwill. Critics of anarchism typically showcase the Hobbesian idea that without a coercive monopoly, people would rob, rape and kill one another. Yet, what is Halloween if not free-market anarchism? There is no central bureaucracy dictating what kids should dress up as, where they should go or at what time and for how long. Likewise, there are no bureaucrats telling adults what types of candy they should offer (“the Davidson’s are giving away Kit-Kats, so the Gibbons’ should offer M&Ms”).

THE TREMENDOUS ECONOMIC BENEFITS OF SUPERSTORM SANDY

By Jim Quinn: The public relations propaganda campaign to convince the ignorant masses that Sandy’s impact on our economy will be minor and ultimately positive, as rebuilding boosts GDP, has begun. I’ve been hearing it on the corporate radio, seeing it on corporate TV and reading it in the corporate newspapers. There are stories in the press that this storm won’t hurt the earnings of insurers. The only way this can be true is if the insurance companies figure out a way to not pay claims. They wouldn’t do that. Would they?
It seems all the stories use unnamed economists as the background experts for their contention that this storm will not cause any big problems for the country. These are the same economists who never see a recession coming, never see a housing collapse, and are indoctrinated in Keynesian claptrap theory.
Bastiat understood the ridiculousness of Kenesianism and the foolishness of believing that a disaster leads to economic growth.
Bastiat’s original parable of the broken window from Ce qu’on voit et ce qu’on ne voit pas (1850):
Have you ever witnessed the anger of the good shopkeeper, James Goodfellow, when his careless son has happened to break a pane of glass?

Debt Jubilee: Greek death spiral raises heat for German-bloc creditors

Greece’s debt-load is rising much faster than expected as the country spirals into a sixth year of depression, ratcheting up the pressure on Germany and Europe’s creditor states to accept debt-forgiveness for the first time. 

By Ambrose Evans-Pritchard: Finance minister Yannis Stournaras said public debt will reach 189pc of GDP, far higher than estimates of 179pc published just weeks ago.
The new estimates exceed the worst-case scenario sketched by the International Monetary Fund and demolish any hope that Greece can claw its way back to solvency. "Unless EU leaders come up with a sustainable solution and cut the debt burden, everything is going to fall apart in Greece," said Simon Derrick from BNY Mellon.
The Greek economy is still caught in a vicious circle. It will contract by further 4.5pc next year, while the budget deficit will remain stuck at 5.2pc, according to forecasts in the 2013 budget.
The EU-IMF Troika is expected to give Greece an extra two years until 2016 to meet budget targets but the issue has already been overtaken by events.
The IMF now fears that the debt will still be 150pc of GDP in 2020. It has already stated that it cannot take part in any further aid packages unless the debt in on track to fall below 120pc.

The euro is heading for a permanent state of depression

If the euro survives in its current form, then Mario Draghi, president of the European Central Bank, will surely have earned his place in the history books as one of the chief architects of its salvation. 

By : A year ago, monetary union looked as if it was heading for certain death, with the European banking system in apparent meltdown and extreme divergence in monetary conditions across the single currency area. In all but name, monetary union had already ceased to exist.
Action by the ECB, first with the cash-for-debt Long Term Refinancing Operation and, more recently, the promise of unlimited bond purchases, has succeeded in stilling the waters, at least to some degree. Even a Greek exit seems, for the time being, to be off the table. With more austerity, Berlin seems minded to give Greeks another chance – until the next bail-out, in any case.
But, though the single currency may have been saved from imminent death on the operating table, it seems now to be heading for a scarcely more appetising alternative – a condition of chronic, long-term illness where still very tight monetary conditions in many parts of the eurozone in combination with lockstep austerity threaten to induce a virtually permanent state of depression. Even Germany shows every sign of slipping back into economic contraction.
For Britain, still reliant as it is on some sort of a recovery in European trade to see it through its own austerity programme, there could scarcely be a set of circumstances less conducive to long-term recovery than this.
New research by Dawn Holland and Jonathan Portes of the National Institute of Economic and Social Research has confirmed what has long been suspected – that co-ordinated fiscal consolidation across many EU countries has not only had a substantially larger negative impact on growth than expected, but has also had the very reverse consequence to the one intended by raising rather than lowering debt-to-GDP ratios.