These Facts Don't Go Away: Rob Kirby Proves That Gold Flees the USA

Sunday, May 31, 2009

Are you sharing a feeling that an imperium in decline will play all foul tricks to keep its head above the waterline? Leave your feelings aside and follow the facts!
Rob Kirby, a specialist for proprietary macroeconomic research whose valuable website is here, has dug through the numbers of the latest Minerals Industry Survey (PDF) published by the United States Geological Survey (USGS) and proves that the USA exported 2,920 metric tonnes of gold in 2008.
This figure of 2,920 metric tonnes is equal to 36 % of all alleged sovereign U.S. gold stocks or more than 14 times annual U.S. gold mine production.
I'll end my teaser here. Read the rest either at Mr. Kirby's website linked above or - pssst - get this piece of golden information for free here.
I fully endorse getting a subscription for Rob's website if you prefer facts to rumours.

Apology for Errors

Saturday, May 30, 2009

Re-reading some of my recent posts I apologize for too many spelling errors, typos or bad orthographics which may wreck the general impression of said posts. Proof-reading HTML-edited posts is a very tiring but nevertheless most important task. I vow to improve.
In general I correct typos and other style errors within the first 24 hours after publishing a blog post. Factual errors will also be corrected at a later time, clearly signed as a correction to keep all posts as genuine as possible. No foul tricks played with potentially 12 billion watchful eyes in mind ;-)

Pulling Rabbits Out of the Hat Austrian CB Writes a Black Zero for 2008

Wednesday, May 27, 2009

Austria's Central bank (Osterreichische Nationalbank OeNB) has barely managed to close its profit & loss statement for the year 2008 with a black zero. According to its annual report (PDFpublished on Tuesday (I pity journalists who have to make sense of the 143 pages with all the footmarks within a few hours) net operating profit tumbled almost 90% to a negligible €47 million in 2008. Net profits for the year sank 82% to €3.15 million.
At the same the balance sheet exploded by 35% to €83,8 billion. Declining profits while shuffling a third more of fiat money in and out of those special revaluation accounts only a central banks has, give a clear hint that the OeNB's balance sheet has structurally dramatically worsened within one year.
Weren't if for the subsidiaries of the OeNB like the Austrian Mint and the sale of credit card processor Austria Card into American hands (we can be confident they will never abuse this mine of data as all US entities live a life holier than the pope) the central bank would have had to record a loss. 
Selling Gold to a Gold-Hungry Public
Its best cash cow these days appears to be the Austrian Mint who is truly experiencing golden times due to its booming sales of its bullion coins in both silver and gold. All this, while the monetary metal silver is slapped with a 20% value added tax in Austria that defies any logic other than to shy away investors from buying the poor man's gold as an investment.
Central bank governor Ewald Nowotny certainly cannot be held accountable for the looting of the central bank by former finance minister "I have no ideology" Karl-Heinz Grasser, who looted half the central banks' reserves or took more than €4 billion in order to reach a balanced budget in his reign. His paper games have been demasked since.
Grasser, once a close friend with the deceased far-right-wing populist Joerg Haider, has now been relegated to carry the handbag of Swarovski heiress Fiona Grasser, trying in vain to land a job with an institution like the OECD or the World Bank since he resigned from government. IMHO a politician without an ideology is only an opportunist, an opinion shared with the thinking third of Austria. 
Grasser got a fat paycheck from his work for Meinl Bank which currently sees itself flooded with lawsuits because they played a pump-and-dump scheme with 3 IPOs that paid the small private bank handsome annual dividends exceeding the half-billion Euro-mark or some 200 times what the OeNB made last year.
A few back-of-the-envelope calculations of the figures presented to find out about the true health of the OeNB make no sense either. 3 pages of footmarks (beginning pg. 97) clearly explain that the style of valuations leave ample room to pull some rabbits out of the hat in order to arrive at the OeNB's set of figures.
While the OeNB has little leeway in valuating liquid and marketable instruments, a derogation from mark-to-market principles for securities held to maturity and mark-to-fantasy rules for synthesized instruments (will any central bank ever separate gold and gold swaps in order to let the public know what's really left in the vaults?) raise suspicions that's where the rabbits are stored.
Austria stopped its gold sales entirely in 2008, realizing a book gain of €480 million on its official hoard of 280 tons of gold. Only in 2004 Austria had left 307.5 tons of gold and I can remember times when this figure was closer to 500 tons before the OeNB ventured like most central banks into dividend- or coupon-yielding investment instruments who now have to be valuated at mark-to-model prices in order not to set the whole house of cards aflame.
I will not lose one word on the central banks forecasts about Austria's economy as Nowotny managed to establish a 100% wrong track record less than one year into office, painting an unjustified rosy picture whenever releasing statements on the health of Austria's economy. 
This economy and the Republic of Austria has been brought down to its knees thanks to the guild of investment bankers who were happy to finance East European consumerism no matter the risk. 
Small footnote: Austrian households are not burgled anymore by citizens from East European EU members as was the case in the last decade. Why should they when it was much easier to get a loan for a flashy BMW at the domestic subsidiary of an Austrian bank?
Expect this country to knock the IMF's door in the medium term, losing its coveted long term AAA rating on the way. Austria was the 6th-richest country in the world at the beginning of this millennium. This ranking is probably gone for the remainder of my life. As always the ratings agencies will do too little, too late. But that's a problem stemming from their business model where the debt issuer pays the agency for his rating.
As a last note I want to add that all these blown-up figures have become so meaningless. I remember that the OeNB, then led by CEO Adolf Wala, boasted to be able to mobilize 50 billion shillings with in 24 hours when Austria came under attack from currency speculators in the early 1990s. 50 billion old money are a laughable €3.63 billion in the synthetic currency called Euro. Today's outlandish numbers are all inflation as described in the text books of the Austrian school of economists.
And as a finally and truly last note I recommend everybody to read books about the European monetary history. All adventures with artificially created currencies in the centuries before ended with wars that starved parts of the old continent every few decades.

Wall Street's Disaster in 2 Graphs - Are You Sure this Sucker's Rally Will Last?

Friday, May 22, 2009

People have been asking me why I am soooo bearish on the stock market outlook.
(Short excourse on human rights violations by US Immigration - a first-hand account from an Austrian friend) I am a bit short on time today due to tending a friend with a heavy trauma after she was detained in San Juan/Puerto Rico for 3 days on the way to relatives in Orlando for not having an onward ticket (buying tickets in the US is a lot cheaper.) So the mother of 3 got the terrorist treatment from Immigration (cavity searches etc.) who refused to believe she is a naturalized Austrian citizen since 2 decades. They accused her of wanting to stay in the USA.
Sorry, who wants to stay in a police state that still needs 3 days to prove the genuineness of her Austrian passport, despite spending billions (or trillions?) for FEMA and DHS and all their expensive aggression toys?
When I asked her whether she was treated well, she had only one word, "a**holes," as they claimed her whole story (17 years of commuting between the DomRep and Austria) was all made up. She was then detained again when the US goons sent her back to the DomRep (3 days in a standing-room only overcrowded cell,) only to receive "special treatment" as a suspected body packer in Frankfurt/Germany again. (End of excourse.
Here comes  #2 of my "2 pictures tell it all" posts.
Hat tip goes to David Shvartsman, editor of Finance Trends Matter for the heads up.

GRAPH: With S&P 500 earnings having declined by 90% the price-earnings (PE) ration has shot up to 120 this year. The Japanese Nikkei index collapsed after 1987 at a PE ratio of 70 from 38,000 to 7,000 and has not recovered since. Chart courtesy of
If this graph has not scared the you know what out of you, here comes the second shot of reality.

GRAPH: S&P 500 earnings have declined over 90% over the past 20 months (with over 90% of S&P 500 companies having reported for Q1 2009), making this by far the largest decline on record (the data goes back to 1936). In fact, real earnings have dropped to a record low and if current estimates hold, Q3 2009 will see the first 12-month period during which S&P 500 earnings are negative. Chart and description courtesy of
CNBC sported a useful graph earlier this day, showing that the debt-to-GDP ration now stands at 375%, compared with 275% in 1929. If you think this is a once-in-a-lifetime chance to short the US market I have one more warning: When this bubble corrects you run a high chance of a default of futures markets too as everybody and his sister will be bankrupt by then.
Readers of The Prudent Investor blog had ample time to reduce their US investments as I had posted a graph on the debt bubble here on July 6,2005.
Keep in mind that these figures do not include the debts of the US' 50 states. Once governor Arnold Schwarzenegger ("it is only a plant") starts thinking about taxing cannabis in California you know it must be really bad. Wasn't the war on drugs all about the dangers of the first plant that was cultivated by humans more than 6,000 years ago, leading to the highest prison population - a good part of them jailed for possession of a few ounces - in the world, far ahead of non-democratic China?

Investors Rush Into Gold at Breakneck Speed in Q1 2009

Thursday, May 21, 2009

Gold sales for investment purposes have grown up to ten-fold in some countries, the World Gold Council, announced on Wednesday in its latest quarterly report.
Fears of future inflation and ongoing financial uncertainty saw investors continue to flock to gold in the first quarter of 2009, seeking out its proven wealth preservation qualities. Total demand for gold in Q1'09 rose 38% year on year to 1,016 tonnes, representing a 36% rise in value terms to US$29.7bn.
According to figures published today by World Gold Council (WGC) in its Q1'09 Gold Demand Trends report, identifiable investment demand for gold, which includes exchange traded funds, (ETFs) and bars and coins, was the major source of growth in the quarter, reaching 596 tonnes, up 248% on Q1'08.
The figures, compiled independently for WGC by GFMS Limited, reveal a record level of investment into ETFs with demand soaring 540% to 465 tonnes at a value of US$13.6bn.
Net retail investment (total bar and coin demand) remained highly robust, rising 33% year on year to 131 tonnes, despite some bar and coin dishoarding in eastern markets as investors took profits. Germany was the single biggest bar and coin market in Q1'09, where demand rose 400% on Q1'08 to 59 tonnes, with inflation concerns being a key buying motivator. Switzerland was the second largest bar and coin market, up 437% to 39 tonnes on Q1'08, followed by the US, rising 216% to 27.4 tonnes.
Austria saw a 12-fold increase from 1,9 to 22,7 tons. The Austrian Mint works 3-shifts, 7 days a week.

The impact of the recession on consumer discretionary spending continued to take its toll on both jewellery and industrial demand. Gold jewellery demand was down 24% on year earlier levels, with most countries suffering a decline as consumers responded to the high and volatile gold price, which reached record levels in some countries, compounded by difficult economic conditions. China bucked this trend recording a positive 3% growth in jewellery demand. This reinforces the view that China's economy, although unquestionably suffering from a sharp deceleration, nonetheless remains resilient relative to most other nations.
Total demand in India, traditionally the world's largest gold market, declined significantly under pressure from record rupee prices and a major deterioration in the domestic economy. Demand fell 83% on year earlier levels to just 17.7 tonnes.
Industrial demand for gold in Q1'09 was 31% down on Q1'08, with the electronics sector being the major contributor to this decline. End user demand for electronics goods has been badly affected by the downturn in consumer spending on items such as laptops and mobile phones.
Aram Shishmanian, CEO of World Gold Council, commented:
'There has been a seismic shift away from capital appreciation towards wealth preservation and we believe this trend will define investment behaviour in the next decade. Gold, as one of the few assets that has held its value during the current economic crisis, has been sought out by investors who are drawn to its proven protective attributes as well as safeguarding themselves from the erosive effects of future inflation.
'The shift in the balance of demand that we have witnessed this quarter, where the gold price has risen despite a severe drop in jewellery and industrial demand, perfectly demonstrates the robust nature of gold's fundamental supply and demand dynamics. While jewellery demand is unlikely to return to more positive territory in current market conditions it remains a key market driver. Affinity for gold jewellery remains and we are confident that demand will grow as consumer confidence and purchasing power returns.'
Demand in the Middle East in Q1'09 was down 26% on Q1'08 to 53.6 tonnes. Both jewellery and investment recorded similar declines in percentage terms (-26% to 49.5 tonnes and -28% to 4.1 tonnes respectively). With 90% of total consumer offtake in the region in the form of jewellery, this decline was largely down to the combination of the high gold price and a tightening of consumer spending.
In the US, total demand for gold was 15% higher than in Q1'08 at 55.2 tonnes, driven by retail investment demand which rose 216% to 27.4 tonnes. Conversely, difficult economic conditions continued to weigh heavily on jewellery demand, which fell 30% to 27.8 tonnes.
Total supply surged 34% on the same quarter last year to reach 1,144 tonnes in Q1'09. With a 55% increase on Q1'08 to 558 tonnes, the primary source of the increase was scrap gold coming back into the market as high prices and difficult economic conditions encouraged record levels of recycling.
Also contributing to the increased supply was a sharp slow down in the levels of producer de-hedging (from -129 tonnes in Q1'08 to -10 tonnes in Q1'09). Mine production was relatively stable, increasing by just 3% to 560 tonnes while lower levels of central bank sales, which fell 54% to 35 tonnes, had a dampening effect.
The full First Quarter 2009 Gold Demand Trends report can be viewed here.

Who Owns the Federal Reserve?

Wednesday, May 20, 2009

As my first attempt to get a list of current shareholders of the semi-private Federal Reserve in late 2008 did never yield an answer I sent an inquiry to the Federal Reserve Board (FRB) today.
As this is still the most important institution in terms of influencing markets I wonder why the Fed does not publish this extremely important piece of information that could provide valuable information about who really pulls the strings in an organisation which uses two different suffix on the web. The server of the Federal Reserve is named "" whereas the FRB's server is registered as "" (corr.27/5/09/ .
The only lists of shareholders of the Fed found on the web through a Go-ogle search are hopelessly outdated and appear to stem from the first half of the 20th century. Or is anyone still doing business with Chase National?
As non-American I cannot file a FOIA (Freedom of Information Act) request as this institution was defined as a semi-private organization. According to this wikipedia entry
"The plan adopted in the original Federal Reserve Act called for the creation of a System that contained both private and public entities."
The Federal Reserve Act was pushed through on Capitol Hill on December 23, 1913 after a secretive meeting of the USA's bankers elite on Jekyll Island.
Today I used the inquiry form on the Fed's website and asked the following questions directly to the FRB:
Dear FRB members,
I have a very simple question: Where can I find a list of current shareholders of the Federal Reserve? On the web I only find hopelessly outdated lists that seem to stem from the first half of the 20th century as most of these institutions are not in business anymore. Can you please provide me with a current list of shareholders and the number of shares they are holding?
I have filed this question in autumn 2008 as a general inquiry but never received any answer so far.
My second question concerns the status of the Federal Reserve as there is a server name "" but also a server name "" Is it a private or a public institution?
My third question is why the shareholders of the Federal Reserve receive a guaranteed 6% dividend that is not taxable?
I am most grateful for an answer.
Yours sincerely
Toni Straka, CEFA
I am curious as to whether I will get an answer to one of the most important questions regarding capital markets.
In order to find truth one usually has to follow the money trail.
Follow the Money - Find the Truth
Let's see where I get. In case I am not getting an answer I am calling all bloggers and everybody else to use the said form so that the Fed recognizes that transparent markets need to be transparent in terms of ownership in the first place and the broad public has a vital interest whether it was private or a public organization whose loose monetary policy and the rejection to regulate markets effectively have led to the biggest economic and financial crisis in mankind's history.
The Fed is certainly the most privileged institution in the world, only having to give testimony on Capitol Hill twice a year and getting away with "missing" $9 TRILLION.
Isn't all this a conundrum? It is!

Guest Commentary: Les Leopold Draws Historic Parallels Between Dickens' Time and Today

As I am busy researching the real financial situation of my home country Austria - which appears to find itself in the eye of the debt hurricane that has added a few more Beaufort in the last 18 months - I am proud that Les Leopold, author of the book "The Looting of America: How Wall Street's Game of Fantasy Finance Destroyed Our Jobs, Pensions, and Prosperity-- and What We Can Do about It," which will be in your bookstore next month has offered a very witty comparison of Charles Dickens' master piece "Little Dorrit" with today's debt situation. Little Dorrit describes the life in debtors prisons during the Victorian era in the heydays of the now defunct British empire.
Regular readers of The Prudent Investor know my love for history. If there would only be more witticisms like this, drawing from history and concluding that experience shows that man never learned anything from experience.
Lean back and enjoy as Treasury secretaries testimony on Capitol Hill sounds like all his other appearances before: he does not have a solution to the problem (but at least his Wall Street buddies get trillion after trillion which the Fed creates with a few mouseclicks, making future hyperinflation a certainty.

Little Dorrit Gives Wall Street a Haircut
by Les Leopold
While watching Little Dorrit with my PBS-addicted wife, I was struck by Dickens's stinging critique of finance capital. It's obvious that Dickens attacks the cruelty of poverty, the stupidity of debtors' prisons, the idleness and conceit of the upper classes, and the inefficiency of government bureaucracies (which he so wonderfully calls the "Circumlocution Office"). But also, he goes after financial elites with a vengeance. Like Adam Smith, he draws a sharp distinction between those who put money, skill and energy to productive uses and those who simply move money around, or waste it by living lavishly, while doing nothing except collecting dividends and rents. 
In the story, Amy Dorrit grows up debtor's prison, the Marshalsea, with her impoverished father. (Dickens's real father also was sent there.) After many Dicksonian twists, it turns out that the Dorrit family actually has an enormous inheritance which gets the father out of prison and allows them to hobnob with the elite. After more twists, the Dorrits loose all of its newfound wealth by investing it Mr. Merdle's bank, which had been all the rage of London until its Ponzi scheme blew up. (Bernie Madoff could have studied at Merdle's feet, except that Dickens's Merdle graciously committed suicide with a pen knife while enjoying a public steam bath.)
Although the Merdle Ponzi scheme destroys the Dorrits' wealth, the real economy allows Amy Dorrit to save and then marry her one true love, Arthur Clennam. When the bank collapsed, Arthur also lost all the capital of the business enterprise he and Daniel Doyce owned and operated. Arthur is sent to debtor's prison and is a broken man. The angelic Amy nurses him back to life, but then, out of male pride, Arthur refuses to let her pay off his debts to get him out of prison. (This is not a feminist story.) Amy then discovers that her inheritance also is lost to Merdle, so now she and Arthur are free to marry.... except that Arthur is still stuck in debtor's prison. 
Enter the real-economy-as-savior in the form of Daniel Doyce. While away in St. Petersburg, Doyce perfects one of his inventions. As a result, their bankrupt company is about to boom again. So Arthur, his debts paid, leaves prison and marries Amy. True love and the real economy conquers the deceit of finance capital and the spend-thrift classes. If only. 
There's one more scene that could have been written yesterday -- a perfect parody of the Obama-Chrysler debt-holder negotiations. As we know, certain hedge funds and investment groups are whining about getting only 30 cents on each dollar of the Chrysler debt they hold. (In financial-speak, they are getting "haircuts".) Dickens takes this literally. Denks, who is a rent collector for a Mr. Casby, sleuths around the slums while, under Casby's orders, squeezing the poor tenants for every last penny owed. Meanwhile, Casby, who hides the origin of his wealth, is well known as a philanthropist, walking the same slums giving out alms to the poor, while winning the adulation of the very people he is ripping off. At the end of the PBS version, Denks can take no more. After being dressed down again by Casby for not squeezing the poor hard enough, he accosts his boss who is on a jaunt through the slum, waving to his admirers and patting the heads of impoverished children. Denks, before all, blows Casby's cover. Then to the jeers and amazement of the angry crowd, Denks says, among other things, "You are a driver in disguise, a screwer by deputy, a wringer, and squeezer, and shaver by substitute. You're a philanthropic sneak. You're a shabby deceiver!'
Then Denks "whipped out a pair of shears, and swoooped upon the Patriarch from behind, and snipped off short the sacred locks that flowed upon his shoulders." I kid you not.
About the author:Les Leopold directs the Labor Institute/Public Health Institute in New York City and is one more loud voice that knows this financial mess is far from over.

Vending Machines in Frankfurt Train Station: Food, Drinks, Cookies and GOLD

Tuesday, May 19, 2009

Frankfurt commuters, always hustled in the German Mainhattan where time is money, do not need to miss out on the roaring gold bull although they are chained to their desks during regular shopping hours.
On Tuesday online precious metals discounter launched a world's first. Inflation-wary Germans can buy 1 gram goldbars with a fineness of 24 carat from a gold coloured vending machine in Frankfurts central train station with a discount to regular gold sellers. Prices are updated every 10 minutes.
Gold-Super-Markt plans to place 500 such Gold-to-go machines in train stations and other high traffic places in Austria, Germany and Switzerland.
While 1-gram bars are not exactly the size gold investors are looking for due to forming costs I am confident that weak-minded souls who only found out shortly before that the day is a special day for one of their loved ones. The gram bars come in a beautiful gift box and will become a bestseller in a country that nicknamed the Euro "Teuro" (literal translation: expensive.)
Germany has seen high price inflation since the inception of the Euro 10 years ago. Starting at an exchange rate of 1.95 Deutschmarks for one Euro, prices in the hospitality industry and many other sectors show now the same figures as then, with the only difference being the €-sign in front of it.
Gold-Super-Markt is an online gold seller that will expand its offerings from gold only to platinum and silver, a press release mailed to me said. Customers can purchase bars weighing between 1 gram and 1 kilo online with delivery times between 3 and 7 days. They mail their bars also to Austria, Belgium, the Czech Republic, Luxembourg, the Netherlands and the UK at present.

Tired of Bad News?

Monday, May 18, 2009

Are you tired of the continuous stream of bad news that fill all news and information websites?
Recession blocker might just be what you are looking for to go back to the time when it was much more enjoyable to read news. Check it out.

My Favourite Economic and Financial Blogs

Although my own productivity rhythm at blogging is cyclical due to frequent travelling for my beloved on-the-ground economic research in all corners of the globe and my love for history books - a book stack that is only growing - I never miss out on my long list of favourite economic and financial bloggers as long as I can go online wherever I am.
As I just cleaned and updated my blogroll in the sidebar (for Internet Explorer users the bar appears down-below my posts) I thought it may be of help to my readers why I read which blogs.
As I consider them all top of the notch I list them in alphabetical order.
1440 Wall Street makes me feel as if I am in the middle of the world's financial capital (for the time being.) It has matured from a blog with insider chat into something much bigger since. Check out all tabs there.
A Fistful of Euros compiles the best of European econ blogging with many contributors from all over the old continent.
Across The Curve delivers all the highlights from fixed income information I need for my macro view.
Aktien Trading Austria focuses on Austria's capital market. German language
Austrian Economists came to my attention only today. As most believers in the Austrian school of economics they deliver a steady flow of out-of-the-box thinking that makes sense.
Beat the Press is the checkpoint to see what MSM (main stream media) got wrong
Bonobo at Home is written by Spain based Brit Edward Hugh who says the best starting point for his and his syndicated writers is Global Economy Does Matter which links to all his other regionalized econ blogs. Edward excels in delivering complete current write-ups of national economies without producing information overkill. Only thing I miss is a RSS feed that aggregates his multitude of said regional blogs. One of my top 5 blogs.
Ueber-blogger Barry Ritholtz has been producing unchanged quality for years at The Big Picture but his style changed from truly big pictures to a more snippet-like form that is nevertheless a must read.
Burning Our Money is an entertaining, sometimes quite frothy chronicle targeting how the UK government wastes its money.
Calculated Risk (we'll all keep a memory of the late Tanta) has evolved from the best blog about the US housing bubble to discuss a wider field of issues. One thing stays the same: When in doubt about real estate, surf there.
Capital Chronicle entertains with sarcastic general commentary.
Capital Markets & Economic Analysis looks at markets from a technical and fundamental perspective.
The Capital Spectator dives deeper into the issues day after day, focusing on markets and macro economics.
Cassandra Does Tokyo makes me chuckle with every new post. One can feel that she has to tame her rightful cynicism.
CommodityBullMarket focuses on the coming bull market in commodities and precious metals, a stance I fully agree with.
Controlled Greed is devoted to investing in undervalued stocks on a fundamental basis.
Culture of Life is the best female econ blogger, compiling all important news of the day in one brilliantly written post. Among my top 5.
The Cunning Realist is written by a Republican fed up with the folly of all politicians.
COTS Timer scrutinizes the commitment of traders statistics in futures markets.
Democracy Now focuses on human rights violations and the uncountable wars around the world.
Daily Kos is my daily dose of US Democrat's issues.
DollarDaze shares my perspective that all paper currencies will devalue to zero and expects a major commodities bull.
EclectEcon: Economics and the mid-life crisis have much in common: Both dwell on foregone opportunities.
Econbrowser by economists James D. Hamilton and Menzie Chinn, two of the better writers in their guild.
Economist's View comments the issues of the day, including more links to the respective subject.
Economic Dreams - Economic Nightmares is most skeptical about America's economic future.
Econom Pic Data offers "darn nice economic eye-candy." Want a graph but are too lazy to do it yourself? It's highly likely Jake has done it there already.
The European Citizen comments daily events in the European Union.
European Tribune is a political blog dealing with issues in the European Union.
Finance Trends Matter offers links of the day and critical opinion on the macro level.
Finance Round Table aggregates the A-list of econ and finance blogs.
Finance Professor reminds us that economics is fun and has a good link collection.
Footnoted is an expert in reading the fine print in SEC filings.
FSK's Guide to Reality gives contrarian in-depth information on issues we all consider indisputable axioms of capital markets. His posts will make you thinking.
Gold Chat focuses on all precious metals issues and is not endorsed by the Australian mint where the author works.
Mish's Global Economic Trends Analysis is very often the fastest instant and thorough analysis on the web concerning macro and corporate issues. One of my top 5 blogs.
Gadling should be visited before you have any travel plans.
Global Voices Online watches the global blogosphere. A nice distraction between all that macro and micro that is my usually daily diet.
Indian Economy Blog is the best I found so far about India's stock market and other issues on the subcontinent.
Jesse's Cafe Americain not only offers insightful commentary but also mouth-watering pics from the food there.
Jim Rogers Blog is not written by the master himself but is a reliable source picking up all of Jim Rogers' media appearances and writings.
Jr Deputy Accountant sees it all from the common sense perspective.
Julien Frisch is a German blogger shooting up the ranks in the German blogger scene. He writes in English.
Learn to Trade Futures is edited by my friend Duncan Robertson on the Isle of Skye. If you have no time to surf hundreds of web pages everyday, Duncan reliably produces a complete digest of today's news all year round.
Luxist blogs on the finer things in a material life. In step with the economic reality there are far less million dollar mansions than in 2007, replaced now by more affordable luxuries in the 3, 4 and 5 figure range.
macroblog, once the unofficial casual style Fed voice among bloggers is still excellent in explaining macroeconomic and Federal Reserve issues.
Mahalanobis is the only other Austrian blogger handling serious economic issues.
Marc Faber Blog is written by the critical and often contrarian investor himself. It came to my attention because he now also twitters (@marcfaber).
Market Skeptics, discovered yesterday, is exactly that. Their post about Dubai's gold shows they browse for the right information destined to be major fundamental events.
Market Ticker never fails to write about current market events in an informative, sometimes rude but always entertaining style. One of my top 5 blogs.
Maverecon is my favorite of all blogs on the Financial Times website.
Miscellaneous Economic Ramblings - the title says it all.
The Mess that Greenspan Made often has the same ideas and the same cycles of creativity and productivity as I do. Cheers Tim.
Mises Economics Blog is another must for Austrian economists.
My 1st Million at 33 are the hands-on experiences of a guy's way to wealth.
naked capitalism is certainly among my top 5 blogs, written by various authors with expert knowledge.
Oil Drum brings you the global outlook and discussion about energy in the future.
Oil Drum Europe offers valuable information on - you guess what - oil and energy of course.
Paper Economy is skeptical about the duration of the current crisis. Will it be longer than we all think?
Past Peak takes a close look on oil (reserves) and has a daily joke as well.
Peter Pilz is a green Austrian politician uncovering corruption affairs and other crimes done by politicians and officials. German language only.
Price of Everything has smart economic commentary written by Tim Price who could also make his money as a comedian once the economic apocalypse engulfs us all.
ProBlogger offers advice how to grow the readership of your blog and make money from it.
Purple Slinky is another welcome distraction from markets.
Robert Reich's Blog is the former 22nd Secretary of Labor and is a professor at the University of California at Berkeley. This is his personal diary on economics.
Russian Stock Market Blog is the source for news about said subject.
Seeking Alpha is the leading source for serious econ bloggers. I am proud to be one of their contributors.
Simoleon Sense covers psychological aspects and other little known valuable knowledge for investors. He also has daily linkfests one should not miss out on, leading to more interesting articles concerning investing.
Skeptical Speculator never tires. Reliable source for the global economic indicators of the day.
Today in Silver focuses on events in the silver sector which is still neglected by most investors but may have a golden future.
Troy Ounce: I have never seen somebody becoming a good writer in a matter of days until I found this blog.
Truck and Barter has more thinking out-of-the-box.
Unbiased Trading is an excellent source for technical analysis.
Vox is full research-based policy analysis and commentary from leading economists.
Washington's Blog is a good alternative to MSM.
When Giants Fall written by best-selling author Michael Panzner is about the most pessimistic blog I have come across. This does not mean that he is wrong with his pessimism.
World2Come provides an outlook into the future on very many issues.
Your New Reality publishes those interesting stories and picture that cannot be found in MSM.
Zerohedge: I marvel how one person can do so many detailed posts in one day. One of my top 5 blogs.

Dubai Moves Its Gold From London Back Home

Sunday, May 17, 2009

The Market Skeptics blog (hat tip) has picked up a story from Business 24-7 that Dubai will move its gold hoard from London back home. This is major news for the gold sector.
The new vaults of DMCC (Dubai Multi Commodity Center) will be home to the gold allocated to the Dubai Gold Securities (DGS) Exchange Traded Funds (ETFs). The vault may also become a natural choice for storage of gold reserves by central banks in the regional market, analysts said.
While the gold allocated to DGS [and GLD] is [supposedly] kept at HSBC's vaults in London, the gold reserves held by GCC's central banks are held by various other vaults in London, market sources said. Gold vaults have existed in London for more than 150 years.
DMCC's new vault became operational on April 26 this year. "We want to bring the gold held under DGS ETFs at the HSBC vaults in London to Dubai. What has been holding us back is the difference in gold specification between London and Dubai," a DMCC official told Emirates Business. Until May 11, the total number of DGS traded stood at 15,200. Each security approximately amounts to one-tenth of an ounce of gold.
Though DMCC officials have declined a direct comment on the matter, a spokesperson with the centre said that ample care has been taken to make the vault "better than the others".
Another DMCC official said that the vault will also be used to store precious metals associated with the ETFs that may be launched in Dubai later this year. At a press conference organised recently, senior DMCC officials had disclosed that they plan to launch new "precious metal ETFs" in Dubai. The ETFs will be traded at Nasdaq Dubai, the Dubai-based regional security exchange where the DGS trades.
Prominent gold dealers in Dubai say that it's "only natural" for the central banks in the region to store their gold in DMCC instead of London, where they have typically held their bullion reserves so far.
"It's a natural home for the central banks in the region to store their gold in Dubai rather than in London where they have typically held their gold. Particularly when DMCC has a state-of-the-art facility to store such precious metals," said Jeffrey Rhodes the CEO of INTL Commodities DMCC, a Dubai-based gold dealer.
In a statement released recently, the DMCC had claimed that its vault combines the advantages of a "unique" location together with the "highest" security standards.
"The vault is intended for both short and long term storage of precious metals and other high-value products. The vault will be open to local and international banks, corporates, HNWIs and DMCC members and uses the latest security equipment and inventory management systems," the statement said.
"With the DMCC vault commencing operations, we can now further support this tradition by offering state-of- the-art infrastructure and storage facilities that are an essential feature of a successful commodities hub," David Rutledge, CEO of DMCC was quoted as saying. Gold imports into Dubai jumped 15 per cent in the first quarter of 2009, the Dubai Multi Commodities Centre announced recently.
The emirate imported a total of 140 tonnes of gold in the first quarter of 2009 up 15 per cent as compared to 122 tonnes imported during the January-March 2008 period, DMCC said.

EU Elections and the Lisbon Treaty: Only Rookies Have No Plan "B"

As I read more and more about EU politics thanks to this EU blogging initiative, which provides me with a good insight on the issues in the other 26 member countries I am becoming more and more enraged. 
Digging through the wealth of information on the EU’s official websites and after reading the Lisbon Treaty in full (find it here in your preferred language) I am more ambivalent than ever because the way to this complete overhaul of the EU’s inner workings lacks too much in terms of a truly democratic process. We the people are certainly not the ones who can influence our very own political future, being overridden by our own governments.

Governments Overriding the Will of the Sovereign
France and the Netherlands had both voted against the treaty, but the decision of some 80 million EU citizens in these 2 countries against the Lisbon Treaty was overruled by their very own governments who were elected to represent the interests and the will of the sovereign, that is the citizens. My last hopes lie with the German constitutional court who will publish his decision on the Treaty only after EU elections.
I am calling on all Irishmen and -women to clearly signal the EU at the second referendum in September that is has to become an institution that follows the will of the sovereign if it does not want to risk major social unrest in the time of the worst global economic crisis since 60 years.
The arrogance of the EU not to accept the sovereign’s decision in 3 countries is unacceptable. In my country Austria the sovereign was not even asked about its stance on the Lisbon Treaty with a heavy focus on the interests of business and the warmongers, while lacking a social charta that deserves that name.

Vote Until It Is RIGHT
People are not as stupid as incompetent politicians on the supranational and national level want to believe. Sensing a more aggressive tone in the only news sector not filled with blatant lies and politicians lala-gobbledygook, the blogosphere, I would say the gloves are coming off in the discussion of our future.
Driving the Irish to the polls again in September is certainly not democratic. It is a clear sign that the EU council, which is not elected by anyone, gives a you know what about the sovereign’s will. Read these older posts.
Being a history buff I am also most skeptic when leaders tell their people that there is only one possible way. Hitler did it in the 1930s (reminder: he was elected before starting his tyranny that cost probably more than 25 million people in Europe and Russia their lives.) Sorry, only rookies, dictators and tyrants have no plan “B.” If you don’t like this very cynical comparison, prove me wrong in comments - without being polemic - please.
Every business, from the one-wo/man graphics design bureau to multinational corporations has to have at least 3 scenarios (best, average, worst case) on their economic future or they would be laughed out of the bank when trying to aquire new funds for an expansion of their firm.
So how come politicians think they can create an agreeing followership when they leave us only one choice? The political spectrum and with it the possibilities is much broader. Seeing tendencies
to discredit the pan-European libertas party - linking them to shadowy characters - I consider a principal discussion of the EU style of democracy much more urgent than anything else.
Having read the Lisbon Treaty my 3 major criticisms focus on
  1. the establishment of a EU president (have they already decided which historical palace will be his residence and how much this will cost?)
  2. the establishment of a EU foreign minister (the sovereign in the smaller countries has probably very different interests than those countries that partook in former US president Bush’s “coalition of the willing.”) Don’t try to tell me this is will be a peacekeeping force. We have this at the global level already, with UN soldiers and the bloody history of corruption, human trafficking and other issues that are far far away from the law I respect most, but which is trampled on by so many Western countries by now.
  3. the foundation of a EU army (will you send your kids to die for imperial visions at the highest level of the EU or will the grown up children of EU politicians volunteer to help their parents’ visions of warmongering?)
EU commissioners Juan M. Barroso’s dangerous visions cannot be displayed often enough. Watch the long version of his statement about an imperialist EU that has a (negative) historical dimension.

Empires always waste the lives of a sovereign turned into cannon fodder. The American Indians may not have known the wheel, but they dissolved conflicts by having the tribal chiefs fighting each other with their communities onlooking. No lives got wasted this way. 
When I voted yes for the EU in Austria in 1995 I voted for a European Community. Now I find myself in a union nobody has ever asked me about whether that is my will.
Can anybody help me with the question whether the EU is really democratic? In 1987 I compiled an executive briefing for the Austrian Trade Union Congress ÖGB. At that time the EEC (European Economic Community) would not have been able to join itself because of lacking democracy. Is this still the case?
Following EU politics I think it still is the same. After all the EU council still can overrule the EP (European Parliament) so easily as they decide on political milestones at their regular meetings.
The EP certainly has an image problem stemming from the length between their decisions and the ratification in all 27 member states that can take up to 2 years. Nobody has such a long attention span.
Putting all internet assistance aside the only EP decision that made it to my ears/eyes is the limit for international roaming fees charged to mobile phone users. But how many normal people, who have 5 weeks or less time to vacation every year, are really helped with this legislation?  This may be very interesting for EU officials jet-setting between Brussels, Strasbourg and their homecountry, but the rest? The internet savvy generation has long discovered that email dispatched in a cybercafe or vocal communication via Skype is much much cheaper than those new limits on roaming fees promise.

Why Zero Tolerance Policies?
This leads me to my last pricipal issue. With 27 member states there are certainly more than just one approach on issues.
Being a smoker who was turned on to cigarettes by unlimited advertising in the 1970s (gorgeous woman surrounding cool guys) I take the mad rush towards a smoke-free world as a good example that the EU would be better advised to respect the personal freedom and the sovereignty of my body.
Austria has a 300 years old history of smoke filled cafes that used to be the second living room of such prominent smokers like the author Stefan Zweig and the Russian revolutionary Leo Trotsky. We call that a “smoking culture.”
(Small anecdote: When the Russian revolution overthrew the Czar’s abusive rulership, a waiter in Cafe Central shook his head, saying, “who should make a revolution in Russia? Don’t tell me it was maybe Herr Trotsky from table 12.”)
Austria has a very high, if not the highest percentage of sovereigns smoking within the EU. Again: First I was turned into an addict (tried to quit uncountable times with no success as I like to relax with a cigarette. Nicotine is the only drug that can both help you relaxing as well as sharpening your concentration.)
Then I was forced to shell out more and more money because the state raised taxes to the point that more than 70% of a pack’o fags’ price lands in the government’s empty coffers.
Now they attack my health a second time with outlawing smoking in many more places so I have to leave buildings regardless of the bad Austrian weather, risking a cold in the process.
I know enough members of the hospitality industry that complain about sharply falling revenues because smokers can no longer socialize in their former favorite venues. All this because some anti-smoking zealots drive their ruthless agenda forward.
Take a look in Paris. Isn’t it perverse that you cannot smoke in a Bar Tabac? Where would Jean-Paul Sartre, Simone de Beauvoir, Serge Gainsbourg and Andre Glucksmann convene nowadays?
I  see the same picture all over Europe by now. As roughly a fourth to a third of Europeans still smoke despite high taxes (just check out the well filled smokers section in the Brussels EU headquarters) I cannot understand that we need a regulation where the free market had found a working solution.
It should be left to the restaurateur/bar owner etc. to decide on this issue by her/himself. Smokers visit their smoke-filled cafe/restaurant of choice and leave the same right to non-smokers in choosing where they go out.
Don’t tell me all places have to be accessible for everyone. Applying the same rigid standards the EU does with non-smoking would mean that all restaurants have to have the same menu in order not to discriminate against somebody. Well, I do not need to go to every restaurant. I prefer those where I can enjoy a meal and the cigarette/cigar afterwards.
If this were really about health politics the EU has a much more pressing problem with alcohol.
Quoting from a EU press release from 2006:
  • 55 million adults are estimated to drink at harmful levels in the EU (more than 40g of alcohol i.e. 4 drinks a day for men and over 20g i.e. 2 drinks a day by women). Drinking more than this is known to carry a health risk
  • Harmful alcohol consumption is estimated to be responsible for approximately 195,000 deaths a year in the EU, due to e.g. accidents, liver disease, cancers etc.
  • Harmful alcohol use is the 3rd biggest cause of early death and illness in the EU, behind tobacco and high blood pressure.
  • More than 1 in 4 traffic accident deaths on EU roads is caused by drink-driving (approximately 10,000 per year)
  • More than 1 out of every 4 deaths among young men (aged 15-29 years) in the EU is due to alcohol (often caused by road traffic accidents, homicide, violence etc) and 1 in every 10 deaths among young women.

  • If the EP is a representative cross-section of 300 million EU citizens, 1 in 6 MEPs has an alcohol problem. Talk to a politician and he will tell you that we have a “drinking culture” in Europe.

    PHOTO: One of 55 million EU citizens with an alcohol problem called "drinking culture"
    Go here for pictures of binge drinking among the younger generation that will direct the EU’s fate in the future. Please tell me more about the alcohol “culture” we have in Europe. Find a treasure chest full of information on this webpage with many more links concerning this “culture” whose total social cost is estimated at 1.3% of the EU’s annual GDP (gross domestic product), equivalent to the costs of smoking.
    Reading that page you will arrive at the conclusion that the EU initiatives to curb drinking are quite lame and do not reach the public at the same level as the propaganda of the anti-smoking zealots (are they all abstinent by now, promoting the same zero tolerance for alcohol?)
    With more than 300 million citizens - each of them an individual with his very own political interests - I consider it a very bad mistake that the EP tries to dress us with only one suit of regulations. Democracy means to tolerate different points of view.
    Last but not least I think the EU should focus much more on the 3 fundamental problems that will relegate Europe to become the backwater of the world if nothing is done very soon:
    1. Heavily indebted Europe has almost no energy or commodity resources, putting us at the mercy of the Chinese who buy up everything all over the world.
    2. The future demographic development with a flip-flop of the age pyramid will force us to roll out the red carpet for “economic refugees” and asylum seekers, spoon-feeding us in senior’s residences.
    3. Labor unit costs are still the highest in the world.
    Enough for today, I will come up with more examples of hypocrisy in the EU next week. And now, PLEASE comment, comment, comment!
    NOTE: This article gets cross-posted at TH!nkABOUTIT, an EU blogging initiative in the runup to the EP elections from June 4 to June 7.

    Weekend Viewing: Leverage Me Tender

    Friday, May 15, 2009

    In these sad sad times everybody needs a good laugh to get away from the mega-trillion madness called capital markets. Here comes my favorite soul-freshener for this weekend, done by the great political cartoonist Mark Fiore. Don't miss out his latest cartoon on "Newspapers vs. Web" which does not yet have an embedding-script but is available at his homepage (as is his entertaining archive).

    In order to loosen up from the tense mood on markets with animated cartoons like this one, go to Mark Fiore's homepage and get an email subscription.

    IMF Chief Says Yes - No - Yes to East European Calamities

    Dominique Strauss-Kahn, managing director of the IMF, tried to square the circle at Austria's central bank major annual macroeconomic summit. Depending on the news source Strauss-Kahn admitted that the IMF overestimated the problems in Central Eastern Europe (CEE) - or not?
    Austrian business daily "Wirtschaftsblatt" quoted Austrian central bank governor Ewald Nowotny who said the IMF head had apologized for exaggerating the direness of the situation in CEE according to earlier IMF figures.
    "He apologized. The matter is resolved for me,"
    Wirtschaftsblatt quoted Nowotny who added that such a human mistake is nevertheless inacceptable.
    Strauss-Kahn was quoted, saying "that worst is behind us," but he also said that the economic outlook remained the same. Huh?
    The English daily Telegraph emphasized Strauss-Kahns warnings:
    Dominique Strauss-Kahn, managing director of the International Monetary Fund (IMF), warned the global downturn was not over and more financial shocks were likely.
    Speaking in Vienna on Friday, he said the world was still in the grips of a "Great Recession" and it would be wrong to become complacent.
    "This crisis is not yet over, and there will, in all likelihood, be further tests ahead," he said.
    Mr Strauss-Kahn said the main reason why the global economy will "almost certainly" avoid a crisis as severe of the 1930s' Great Depression was the co-ordinated action taken by world leaders.
    "World leaders embraced multilateralism, and are reaping the rewards. Vehicles like the G-20 were used to coordinate policies and deliver a unified message," he said.
    He praised central banks for aggressively cutting interest rates to historic lows in a co-ordinated manner, followed by a leap into the unknown with unconventional measures in its attempts to try and resuscitate markets.
    "For most countries, this is uncharted waters - but the fact all were willing to jump in at the same time provided a needed boost to confidence," he said.
    Mr Strauss-Kahn said the IMF had played a key role in directing what policy responses were necessary and was "ahead of the curve".
    Looking to the future he said that credible and co-ordinated exit policies from the policies put in place during the crisis would be required, as would fiscal tigthening if "serious fiscal problems down the road" were to be avoided.
    It doesn't sound all that optimistic to me. Plummeting tax revenues in Europe justify a "when?" and not "if."
    Rising unemployment will add to the Burdens in the EU, requiring more spending on social service for the millions falling through the globalization net.

    Hyper-Inflation in 2 Pictures

    As hyper-inflation becomes a mass fear of destruction technology not only helps to create freshly digitized money (we would have no tree left standing were it all to be printed) but also offers coloured pictures for the first time.
    Here is a picture from the "good old times" I wrote about in 2005.

    Hyper Inflation in Germany 1923
    PHOTO: Germany had started inflation on purpose in order to inflate its way out of war reparation payments that were seen as overdone by the German industry. At the end of this process - that naturally ran out of control - it was cheaper to burn the billions then to buy firewood for it. This led to mass unemployment and in the end made the murderous ascent of Hitler possible. An empire went under within 3 decades.
    Germany, ruined by its loss of WW1 started a process called "monetizing the debt." At the end of hyperinflation 99% of government revenue came fresh off the numerous printing presses running hot and only 1% from tax revenues.
    Troy Ounce (hat tip) published this new picture. Doesn't it look great in colour? Hyper-inflation goes 3rd millennium. Who will become the next nation of billionaire beggars?

    PHOTO: It took a big bag full o' money like this (no paper left for bags?) to get a burger with chips and a small Coke in Zimbabwe. Photo courtesy of Troy Ounce
    Zimbabwe has abolished its own currency earlier this year. People now use South African Rands and Federal Reserve Notes (FRNs) to conduct their financial transactions and shopping (when the super market shelves are not empty.)

    Check Out Zerohedge-Blog for Major Treasury and Fed Revelations

    It is a mystery to me how the old media can miss out on some major scoops Tyler Durden (pseudonym) publishes on an almost daily basis at his blog Zerohedge.
    Read the posts
    The Federal Reserve Can Not Account For $9 Trillion In Off-Balance Sheet Transactions
    FOIA Disclosure Busts Paulson, Geithner And Bair
    and I am confident you will add them to your daily reading. Unshrouding the secrets in America's economy gone bonkers I only wonder how this blogger pushes out high quality post after high quality post. Does he ever sleep or is it a group of experts?
    Attention all blog readers/raters/reviewers/aggregators! Naked Capitalism deserves the same praise.

    3 Figures Explain the Foolishness of Bankers

    I got a strong reminder to the rule whenever people say something is very complicated that they just want to avoid telling the simple truth. Attending a panel discussion headlined "values worth fighting for" and organized by the Austrian Friedrich August von Hayek Institut on Thursday panel speaker Daniel Thorniley from The Economist Group summarized the idiocy of investment banking with 3 figures:
    In 2008 there were
    • 15 nations with an AAA-rating
    • 15 corporations with an AAA-rating
    • 64,000 CDOs (collateraliezed debt obligations) with an AAA-rating.
    Shut Down the Ratings Agencies
    I guess you don't need a computer to find out that there was indeed a 64,000 strong imbalance in a market where the masterminds at the ratings agencies got something fundamentally wrong.
    Not that this would damage their track record. Ratings agencies got caught on the wrong foot in the Russian crisis in the mid-90s, the Asian crisis shortly before and only started to cut banks ratings in this millennium when even the shoeshine boys had pulled out of the market before. They did not do any better in the Latin Amercian crisis of the 1980s and the internet bubble of the 1990s.
    We can confidently expect that the ratings agencies will continue the well-trodden path of misestimating credit risk.
    After all the USA as the biggest debtor in the world is still AAA-rated although president Barack Obama and his Treasury secretary have to come up with $5 billion every day, seven days a week in order to finance the budget deficit (which could be halved by stopping the 2 wars in Iraq and Afghanistan that will only further radical Islam and which the USA will lose as they did in all wars after WW2.)
    In order to save me some typing please (re)visit the first post of this blog from April 2005: "US AAA Rating - How much longer???"
    In this context you may also find the post "The US Debt Balloon - A Simple Explanation for Non-Economists" worthwhile reading.
    As the global discussion on new regulations fill many pages of financial media I have a very simple approach:
    1. Re-repeal the the Glass-Steagall Act and make a division of commercial and investment banking mandatory worldwide. Countries who do not comply could be simply shut out by not doing business with their banks.
    2. Shut down the ratings agencies for good and let bankers return to their core business: assessing risks on their own. No ratings agencies would mean that bankers would have nobody left for a cheap excuse that it was not their fault.
    Signing off for today, still hoping to get an exclusive with the (fallen) god of volatility in the next 3 days.

    CORRECTION to an Earlier Post

    Wednesday, May 13, 2009

    Please click here to find a corrected version of my post about possible censorship.
    I only add the note that blogs ARE censored in totalitarian regimes like Myanmar etc.
    Please also read this article by cryptohippie. I fully agree agree with the author that modern technology has elevated surveillance to a level not even imagined by George Orwell. It is a brilliantly written eye-opener.
    This is the advantage of the internet compared to old style media. No error remains undetected by the potentially 6.3 billion critical readers.
    Yours truly
    The Prudent Investor

    The Ghost of Lehman Brothers Surfs the Web

    Click for a larger image.
    8 months after the bankruptcy of Lehman Brothers I still receive webhits from them. Does anybody have an explanation for this?

    CORRECTED - Does My Blog Get Censored by Internet Service Providers?

    Tuesday, May 12, 2009

    As I have just received the 3rd notification from Feedblitz that a subscriber was requested by his internet service provider (ISP) to remove my blog which they have received by email subscription, I am deeply worried.
    Does the internet get censored by ISPs?
    I am not aware that my blog contains anything offensive. I began critiscising the policies that led us into the biggest economic crisis in human history in April 2005 and have never ever received a complaint in 5 years of blogging concerning my writings. The only thing that may differ from other websites is my use of plain and direct language when deciphering the lala-gobbledygook of policymakers for my valued readers.
    Feedblitz informed me this way with a standardized email: has unsubscribed from "The Prudent Investor"
    The reason is: 08: ISP requested removal
    I have mailed all 3 former readers in order to inquire the details as to why their ISP essentially restricts their access to my blog.
    This is a violation of the human (and in many countries also of the constitutionally guaranteed) right for free information. So far I have not received a reply to my inquiries which makes me wonder even more.

    Please Let Me Know
    I humbly point you to the many other options to subscribe my blog in the sidebar if this happens to you. 
    I am most interested in any information readers and other bloggers can provide regarding this worrisome issue.
    Please let me know of any such irregularities in comments or by email. Find my email address in my blogger profile.
    Once more: In a democratic country you have a guaranteed right to choose the information you read freely and unimpeded. Everything else is an unlawful censorship.
    My sidebar also contains
    a link to the Electronic Frontier Foundation (EFF.) This organisation actively defends the right to express your opinions. Bloggers can join EFF here. I recommend all others to check out EFF's compilation of blogger's rights in the USA. 
    In my homecountry Austria I have the plight to follow the laws of professional journalists without having any of their privileges. If you understand German, read my thoughts at my other blog Impressum
    I tried to found a bloggers guild to no avail. The serious Austrian blogosphere could convene in a school bus and I did not receive a single positive answer from my fellow Austrian bloggers. At least my other blog initiated a cyber discussion on this issue in Switzerland.
    I hope to receive more information regarding all attempts to censor free speech from you, my valued readers.
    UPDATE: I just came across this worrisome article about a police state study that ranks the USA as the 6th worst.
    CORRECTION: I am relieved that censorship is NOT the case for these notifications. Blog reader Jim E C. mailed me this response:
    It's entirely possible that some of your readers cannot figure out how to unsubscribe to an email feed. Instead they mark the email as spam, not realizing that by moving the email to their spam folder (thus saving them a trip to the "delete" button), they also send feedback to their ISP. Feedblitz then responds to those misguided attempts to unsubscribe.
    On the other hand, it is probably a good idea to back up your posts.
    You might also subscribe via email to your blog just to watch how the email is formatted etc. (Ed: I do)
    You might also contact Feedblitz about this, but it's probably a lost cause.
    After a bit of the Google, I found the following link:
    Such behavior happens all the time. I follow your blog using RSS/Atom. No problems (other than you don't write enough...)
    I nevertheless point readers again to my link to the study on police states. Follow it to find a PDF-File there about the dimension of surveillance modern technology has made possible, exceeding George Orwell's sad visions by far.

    A Decision Help for Austrian and Other EU Voters

    Monday, May 11, 2009

    Do you have the same problem in deciding who you will cast your vote for in the EU parliamentary elections in the first week of June?
    I dug myself through the political promises of all Austrian parties competing in the EU parliamentary elections in the past weeks, scrutinizing their agendas for European policy in the next 5 years. I have to admit I did not waste my time with the 2 far-right nationalist contenders FPÖ and BZÖ as nobody could be farther away from my political opinion. I don’t even want to honour them with a link to their sites. If they deem it necessary they shall go blog themselves. Condemning any form of racism, xenophobia and supremacist ideologies this reduced my voting choices to the other 6 parties.

    Surfing through the websites ofdid not help my decision process. 
    As I am certainly left leaning I tended to disregard the Conservatives and the Young Liberals. So I am basically left with Social Democrats, Greens, Independents and Communists (whom I consider a vital part for a functioning democratic process as the Austrian political sphere is unfortunately dominated by center to right wing parties.)
    Having attended the curtain rising event of the Social Democrats I was delighted to see that the term class warfare has found its way back into the semantics of the party that had changed its name from Socialists to Social Democrats in the last millennium while being led by a bank CEO.
    Conservatives Acting Stalinist 
    The stalinist style of the Conservatives who had almost no other agenda after the elections in 2000 than to put their cronies into vital positions rules them out as achoice for me either. If they have only the aim to put “their” people in ministries and the Austrian bureaucracy on the domestic level I don’t even want to ponder what they want to do within the Bruessels Moloch. (In modern English usage, “Moloch” can refer derivatively to any person or thing which demands or requires costly sacrifices.)
    As their hypocritical tactics say “no more taxes” on the one hand, the other hand was busy in the last 8 years to raise prices for federal, state and community services. (isn’t this what we are paying taxes for?) This is highly biased towards their loyal constituency, consisting mainly of public employees and farmers.
    A deep rift within the Conservatives showed up when they nominated former interior minister Ernst Strasser as their top candidate, putting old-hand MEP Otmar Karas only in second position. This resulted in an outcry from all former ÖVP party heads who rejected to form an election committee for him. Strasser is the architect of Austria’s “Sicherheitspolizeigesetz” (literal translation: police may do almost anything without a warrant) and also rushed a law on online surveillance in a coup-like style through parliament in December 2007. Without going too much into detail; the Nazis would certainly have liked his strategy of throwing a total surveillance net with today’s technical possibilities over this small neutral country.
    While I can sympathize with the Greens for the fact that they try to revoke the shift to a police state that has been ongoing in Austria since the beginning of the new millennium, I have my problems as they have a blind spot in terms of an economic policy. Their constituency consists mainly of the younger generation who cannot find enough truly social engagement within the SPÖ and affluent older voters who mainly worry about costly biological food.
    I ticked off the young liberals as well, as their agenda focuses mainly on student’s issues. I am past that age but maybe my teenage daughter is interested in them.
    Having seen enough election promises that were not fulfilled later, I am very wary for whom I should cast my vote.
    A little more web surfing resulted in finding a truyl useful help for my decision process. (polling booth) part of the international network Vote Match Europe with partners from 11 European countries offers an online survey that can be done in a few minutes. They also offer an English version for those internationalists that want to give it the Austrian try.
    Listing 25 questions concerning the agenda of the EU parliament ranging from issues such as whether the EU should employ military forces to fend off African boat people looking for a better opportunity in life than their continent can offer (with a Czech last name, my predecessors were certainly economical refugees who came to Vienna in search of a more human life 100 years ago) to the issue whether I would want to vote for MEPs from other countries. I like this one especially as this method would certainly be a better idea to further the pan-European process.
    The results of my choices at the wahlkabine website were a big surprise for me. I ended up with the Greens in the top position who could score 289 points with me. The Communists came in a close second with 273 points. I was astonished to see the Social Democrats coming in with only 13 points on place 4, behind Liste Martin. The Conservatives followed on fifth place with a mere 9 points. And I am proud that xenophobic FPÖ was left in the dust with minus 59 points.
    NOTE: This post gets crossposted at TH!INKABOUTIT.EU, a EU blogging initiative in the runup to the EU parliamentary elections from June 4 to June 7.

    Is the Interest Rate Model Fundamentally Flawed in Favour of the Banks?

    Sunday, May 10, 2009

    I have a few questions I hope to be answered from my readers who like to think out of the box too.
    Doing my micro survey among my friends and aquaintances from all walks of life I see that there is only one industry sector left that still enjoys a 5-day-workweek: the banks. All other business sectors have morphed into an era where work around the clock has become the norm by now and most do not even get paid an extra for slaving away Saturdays and Sundays.
    Bankers are the only exception to this rule. They leave their desks early on the casual Friday afternoon, looking forward to 2 full days they can spend with their kids, vroom their Ferraris and burn the charcoal in the BBQ.
    As I am certainly not envious - having long changed to a life without an alarm clock - I only wonder why this privileged industry charges the rest of the world as if they were following the same distressing schedule of all other mere mortals.
    Remembering the days when I got trained to do interest rate calculations on my long gone HP 12C business calculator (is it still produced?) I see the numbers 30/360 and 365/365 (or actual/actual) - standing for the interest base - in front of me. The first one is used in the formula to calculate interest on deposits and the second one is applied on your loans, giving the bank already an almost unnoticed advantage in the long run. I had to get a diploma to find out about this scam.
    Calculate the following highly hypothetical example yourself: Take a theoretical 1000 money units deposit at 4% and an equivalent loan at the same rate and tell me in comments how long it takes until your deposit has gone to zero while the loan is still not paid off.
    Any financial whiz kids out there who can do this math in comments (I only write but do not calculate on Sundays)? In order to see it from the comfy banks' perspective it would be welcomed if you start out with 1,000,000,000 money units.
    While this could be easily regulated by law I see a much worse flaw that should be corrected in a fair world.
    Why the hell are we being charged interest on weekends and holidays when there is no possibility to execute transactions with the monies in our accounts, regardless whether it is a deposit or a loan? Leaving away the peanuts of credit card payments and ATM withdrawals banks do not offer any service for 2 days per week, but nevertheless they still charge consumers and businesses as if they could put their money to work on weekends.
    What's your take on this? I hope for a lively discussion.

    A Must See: "Zeitgeist Addendum" Explains the FIat Money System

    Watch the brilliant movie Zeitgeist Addendum in order to understand the process of fiat money creation. I am confident it will make you thinking that any discussion about a new world currency order will come to the conclusion that only a gold/silver standard can protect savers from inflatiuon which destroys their savings. Don't shy away because it is a 2-hour movie. After all it's a Sunday today and the issue of fiat money is covered in the first half hour. But I guess you will be so thrilled by then, deciding it will be worth viewing the whole movie.

    In this context read Alan Greenspan's essay from 1967, "Gold and Economic Freedom," when he wrote, "in the absence of the gold standard, there is no way to protect savings from confiscation through inflation." Also read this earlier post "Greenspan Bends Truth On Stabilizing Effect Of Gold Standard"
    Greenspan also pondered a return to the gold standard in a Wall Street Journal article from September 1, 1981.
    Greenspan also once answered Congressman Ron Paul's question why the USA should not sell its gold reserves if everybody deemed them unnecessary in a fiat money system, saying that in times of international crises gold is the only accepted international currency.

    Monetizing the Debt - Explanation For Non-Economists, Bankers and Other Laymen

    Friday, May 08, 2009

    As I see uncountable search engine inquiries with the phrase "monetizing the debt" landing at this blog I begin to realize there is a huge void of knowledge not only amongst interested economic laymen but also among employees from what were highly prestigious financial institutions only 2 years ago. Let me fill in with the executive briefing version.
    In order to monetize the debt you need the following:
    1. An economy in shatters that cannot produce enough taxes for the state
    2. A parliament/congress/senate full of incompetent politicians eager to continue showering their constituencies with pork regardless of a nation's declining tax income
    3. A people that has never received any macroeconomic education in their schools (otherwise they'd be shouldering the pitchforks by now)
    4. A central bank with a transaction computer running under Unix (Windows would probably crash before any real economic damage could be done)
    5. Commercial banks with executives searching the web for an easily understood explanation of the said term and no idea about monetary inflation either, but a perfect understanding of their contracts sweetened with lavish bonuses, no matter whether they remain prudent or crash the cart against the wall.

    Now that we got our most important players together (starving retirees, widows and kids will only appear on the scene after the monetizing-the-debt-party has sunk the world into a depression) we take a punch bowl (literal), fill it with cheap credit and pass it around to everybody except the central bank computer (it has to work hard very soon.)
    In contrast to all commodities unbacked fiat money is created at virtually no cost. This is most comfortable as it means the central bank computer can keep the party going.
    All that needs to be done are a few keystrokes (maybe they already have macros for the task) and a screen wide enough to accommodate the ever growing number of zeroes after the $/€ sign.
    So they enter a number, e.g. €60 billion as the ECB will do somewhen in the coming weeks, and wire this digitally created money to the commercial banks who in return hand over other serious looking papers that are called "securities" as collateral. In our fractional reserve banking system banks can use this central bank money to hand out ten times as much in loans. For 10 money units lent they have to hold one money unit as "reserve," just in case some investors want their deposits back. 
    It truly is a thrilling business: Put one money unit in the cash register (for which they currently pay 0.25% (Federal Reserve Notes) to 1% (Euros), let the borrowers come in and lend them 9 money units at anything between 5% (mortgages) to 12% (business loans.) You do the math yourself. It is virtually impossible not to turn a profit, weren't it for the rocket scientists with their Excel spreadsheets who think about new ways (derivatives!) on how to produce still more income that will be paid to them in form of a bonus. This is why the bankers drive Ferraris, but rarely their customers.
    If you now wonder, what this has to do with "monetizing the debt," you are right. It doesn't. But it explains that banking would be such a surefire business, had they not hired mathematical whiz kids who came up with those derivatives Warren Buffett calls "weapons of financial mass destruction."
    Ok, I will try to continue explaining the original subject in comprehensible words (which is a tough issue, I say after having spent already six hours on this post and far from over.)
    So here we go again: As it didn't cost the central bank more than a few cents to create this money/credit but the unknowing hard working public will accept it as compensation for their labour, we are already a step further in the Ponzi scheme called fiat money creation.
    Now the politicians have to act plainly ignorant (which should not pose a problem for most of them) and develop still more ambitious spending projects. As their Keynesian advisers had told them that a slowing economy is best countered with stimulating spending they scratch their heads, wondering where the money will come from. Their advisers had missed out on telling them that John Maynard Keynes had also recommended to build reserves during the good economic times.
    Diabolic help arrives in the form of a delegation from the central bank that will offer a solution so easy that the politicians immediately jump on their bandwagon.
    "If you issue a bond we will buy them for the amount you write on your piece of paper," whispers the pin-striped central banker into the finance minister's (treasury secretary) ear. The politician is jubilant now as this appears to be such an easy game with winners only.
    So the Treasury prints a government bond and writes, let's say 100 billion on it.
    As the economy has slowed for reasons that fill the long evening discussions of economists, without reaching a decisive answer, potential investors have no more money left to buy this bond.
    US Treasuries: The Longest Running Ponzi Scheme In the World
    So the central bank creates this wonderful stuff called MZM (Money Zero Maturity) or unbacked central bank fiat money and "buys" (hahaha) the bonds for itself. The state turns around, starts new "growth projects" and is comfortable as it watches the mere mortals without any macroeconomic education working hard in order to get a part of this funnily coloured money.
    This game usually lasts for a few years before the broad public starts scratching its heads. They begin to see (or gut-feel) a recurring scheme: Public projects fill almost everybody's wallets but prices are ratcheting up too. That's called monetary inflation as the quickly rising amount of fiat money is spread over a slower growing amount of produced goods and services.
    Politicians, eager to keep up economic growth in order to get reelected, will want to keep the game going and issue the next bond, confident that their central bank will - hahaha - "buy" the next issue again with the next round of freshly created fiat money.
    This game could go on and on if there were no rational and prudent private bond buyers around. As in every Ponzi scheme the only disturbance arises once these prudent investors want their money back. As the state has no money it will beg the central bankers for the next shot in the arm. This usually works as the central bankers know they are in the end at the mercy of the politicians.
    The end of the monetizing the debt game is always the same. This time it will be the Chinese who have amassed so many FRNs (look at a greenback: it nowhere says US dollar!) that they will cozy up to the idea of throwing all their FRN holdings on the market in exchange for some real assets like commodities because the FRNs are only backed by future tax income. But in a recession this tax income shrinks too and therefore this backing is worth less and less.
    A truly diabolical circle and we haven't yet touched the next due issue, called hyper inflation...
    NOTE: Nothing is more difficult than explaining high finance in simple terms. Please let me know in your comments whether this attempt (after busying myself with the subject since 2001) was useful to you. I will strive to improve as this is the single most important issue in the process of ruining a country.

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