Sarrazin, His Independence, And That of The Bundesbank

Monday, August 30, 2010

German Bundesbank executive Thilo Sarrazin digs his heels in deeper as calls for his resignation mounted on all sides on Monday. Presenting his new book “Germany Eliminates Itself” the controversial central banker said his ideas were scientifically founded and claims he was Anti-Semitic were "absurd".
The Bundesbank picked up the ball with a statement that certainly won't earn him a promotion there any longer:

China Ratings Agency Asks Whether Bernanke Is Up To His Job

The question whether Federal Reserve Chairman Ben Bernanke has learned the right things from his Great Depression studies becomes more widespread.
While I wonder whether Bernanke's library includes Murray N. Rothbards work America's Great Depression where he clearly points out from the Fed's 1920 figures that monetary inflation was engineered via special agencies et al, proving that deflation can only be preceded by inflation, Chinese buy-side analysis is not so gentle. 
As we know from some Fed economist who missed out on the chance to become world famous like a few bloggers who correctly predicted the US recession as early as 2005 that the Fed does not want to be bothered by blogger criticism, here comes a piece from an economist. (BTW, the Fed has taken K. A's blogger criticism offline. It is stored here for posterity.)
Feel the hot breath in this essay from former Fannie Mae chief economist Peter Treaday who now chairs research at CTRisks, in its own definition the biggest rating agency in Asia.

- by Peter Treaday -

Keynes' Most Interesting Statement

Sunday, August 29, 2010

This does not sound very earthly. From John Maynard Keynes "The General Theory of Employment, Interest and Money (London: Macmillan, 1936), p. 129."
"If the Treasury were to fill old bottles with bank-notes, bury them at suitable depths in disused coal-mines which are then filled up to the surface with town rubbish, and leave it to private enterprise on well-tried principles of laissez-faire to dig the notes up again (the right to do so being obtained, of course, by tendering for leases of the note-bearing territory), there need be no more unemployment and, with the help of repercussions, the real income of the community, and its capital wealth, would probably become a good deal greater than it actually is."
This is Ponzi economics at its best.

Bundesbank Executive Attacks Jews, Turks, Africans et al in Xenophobic Seizure

German Bundesbank executive Thilo Sarrazin has sparked a new uproar by saying that "all Jews share a common gene" and also attacked the Basques in Spain the same way in a newspaper interview.
This comes only a few days after Sarrazin came under fire in Germany for using shock talk about the country's Muslim immigrants, Turks, Middle Easterners and Africans when he presented a new book.
Sarrazin’s new book, whose title translates as “Germany Eliminates Itself,” sparked a heated debate. A spokesman of the Bundesbank so far only said that the book is Sarrazin's personal opinion, not exactly distancing itself from Sarrazin's xenophobic bouts.
His frothy statements were immediately rebutted by foreign minister Guido Westerwelle and minority representatives. A spokesman for chancellor Angela Merkel began his Sunday with expressions of outrage.
Sarrazin is still on the job after an interview with conservative German Sunday paper "Welt am Sonntag" where he extended his attacks to Jews.
German official news outlet Deutsche Welle was the first to report on Sarrazin's nationalistic outbreak that is destined to destroy Germany's image rebuilt in the last 65 years.
Sarrazin appears to have wild mood swings. In 2009, the central banker, who is a member of the Social Democratic Party (SPD), had said he would prefer immigration "if it was by eastern European Jews with a 15-percent-higher IQ than the German population."
His new book, to appear on shelves this week, claims that immigration from Turkey, the Middle East and Africa would dumb down his country and led him to draw a line between Christian culture and the rest.
From Deutsche Welle:

Coming Sony Pictures Movie "Inside Job" Looks like a Fed/Wall Street Thrasher

Saturday, August 28, 2010

Wow! Sony pictures, not exactly an alternative media for purists, thrashes the banker caste. Taking it from the trailer - starring Paul Volcker, George Soros, Eliot Spitzer et al - the Fed and Wall Street will not get away unscathed.

From the ad:
INSIDE JOB, the first film to expose the shocking truth behind the economic crisis of 2008. The global financial meltdown, at a cost of over $20 trillion, resulted in millions of people losing their homes and jobs. Through extensive research and interviews with major financial insiders, politicians and journalists, INSIDE JOB traces the rise of a rogue industry and unveils the corrosive relationships which have corrupted politics, regulation and academia.
Meet me at the movie house.

Update On the (Bad) Situation of Austrian Banks

Friday, August 27, 2010

Tight-lipped finance ministers from Austria, Germany, Switzerland, Liechtenstein and Luxembourg left a round table meeting in Vienna on Thursday without any statement to the public. According to Austrian Börse-Express talks centered around government budgets and bank secrecy (that's no pun.)
Austrian finance minister Josef Pröll had said earlier that Austria will not move on a loosening of bank secrecy as long as UK based trusts are able to invest anonymously and wants to shift this discussion onto the OECD level.
Conservative Pröll, currently breaching Austria's constitution with the nod of social democrat chancellor Werner Faymann, because both ruling parties want to delay the 2011 budget until after two provincial elections in October, may have other worries about the Austrian banking sector on his mind.
Recent data from Austria's central bank confirms that Austria's banks, mainly Raiffeisen group and Erste Group, are still heavily dependent on favorable forex crosses, i.e. Central Eastern European (CEE) currencies and the Swiss Franc.
The Economist today had this graph based on data from Oesterreichische Nationalbank (OeNB) that shows that CEE inhabitants are highly leveraged with foreign currency loans that become more expensive day by day as long as the Swiss Franc and the Euro rise against their domestic currencies.

The sub-headline "A slow fuse still burns on eastern Europe’s foreign-currency debts" could not be more courtly given Austria's dominant position in the foreign currency loan business in the Eurozone.
From the Economist:

Spoiling the SFR "Safe Haven" Party

Thursday, August 26, 2010

Short note to all euphoric EURSFR sellers.
This chart looks good:
CHART: Playing EURCHF on the short side has certainly be profitable fun and most recent action around the 1.30 mark is probably just a technical correction in the free fall of the Euro that began on August 10. Chart courtesy of Yahoo!
But looking at this pie chart from Credit Suisse it may be advisable to take profits.

MUST SEE VIDEO: The Capitalist Conspiracy

I am a bit preoccupied with thinking and reading these days as we are getting closer to the disintegration phase of the ongoing biggest Euro-American financial, economic and political crisis in modern history. The price of gold certainly says so as it has always been the only safe haven in history.
While I still have a problem with conspiracies and certainly want to avoid to get the nutcase brandmark being stamped on my forehead I nevertheless cannot close my eyes before the fact that this crisis was engineered primarily by central banks holding interest rates at ridiculously low levels never seen before in history, encouraging companies and people to borrow easy money to go on shopping sprees.
They were aided by the political goal to create home-ownership societies - and now these homeowners wake up to the fact that their house actually belongs to their bank and they are only debt slaves until the last mortgage installment will be paid.
This will become increasingly difficult once interest rates will rise again. They have to as we live in a Wonderland where risks have never been greater and rates never been lower.
Noting that the whole world, excluding mainstream media, begins to scratch its heads whether it all is really driven by free market forces - it is not as central banks have a monopoly on the price of money - I urge my readers to take their eyes off the charts for 48 minutes and watch this 1960s documentary "The Capitalist Conspiracy" which resulted in another bout of insomnia for me last night.
Wikipedia summarizes the movie the following way:
The film theorizes a conspiracy upheld by big government through money control by citing these books:
Tragedy and Hope by Carroll Quigley,
Philip Dru: Administrator by Edward M. House,
The Strawberry Statement by James Simon Kunen and
The Communist Manifesto by Karl Marx and Friedrich Engels.

The film is summarized in seven conclusions:
  1. There is a conspiracy among some of the richest people in the non-communist nations and that its power is protected by their respective governments. That it is perpetuating its wealth by creating money out of nothing.
  2. In the USA it is perpetuated through the Federal Reserve system. That although it appears that the executive branch controls them it is in fact the other way around.
  3. The capitalist conspiracy in the USA surfaces in the Council on Foreign Relations that influence on the public through television, education and press.
  4. The capitalist conspiracy opposes communism only on the surface because it needs the illusion of a foe. And because the chaos byproduct of the managed conflict advances its own goal of totalitarian world government. A tactic called "pressure from above and below" laid down in Edward M. House's novel Philip Dru: Administrator: Deliberately create problems and frightful domestic and foreign conditions and provide solutions that result in publicly accepted government expansion at the expense of personal liberties and national sovereignty.
  5. There is "much evidence indicating" that both the capitalist and communist conspiracy is directed by a single master conspiracy that may have continuity with The Illuminati, but that this historical question is not as important as what can be done about it.
  6. The reaction to the conspiracies should be to dismantle the big government and localizing schools and police.
  7. That the root of the evil is that money is created out of nothing. The solution is to reduce the power of the Federal Reserve and returning to the gold and silver standards and thus preventing anyone, in or out of government, to manipulate the money supply.
Exposing the conspiracy to public view, by circumventing the establishment's channels of mass communication, would cause it to collapse.
I concur. The world is not going to fare better if we only replace a collapsing fiat money system with another one as the IMF proposes. The Bancor will not work but only extend debt slavery. It is interesting that the Bancor idea never made it into MSM as a Go ogle search reveals but was mainly picked up by alternative online media.
I have ordered all 4 books linked for your convenience below.

Open Letter to Chancellor Merkel: Repeal The Financial Aid Laws To Save Germany

Wednesday, August 25, 2010

Renowned German economist Professor Wilhelm Hankel has written a second open letter to German Federal Chancellor Angela Merkel after his first plea to follow the dictates of reason and not introduce the constutionally disputed financial aid laws that will pump €750 billion into insolvent Eurozone banks while pushing Germany deeper into social and economic abyss was ignored.
Hankel has already warned in 2005 that the Euro system is unsustainable.
While I am still wondering to whom Germany will sell all the goods it now produces (and warehouses) when all important trade partners face the same economic and social problems, Hankel focuses on the adverse effects the hastily pushed through financial aid laws for Greece - which is already running into difficulties to comply with the austerity conditions that are part of the bailout - will have on Germany in the future.
He warns of dire consequences and states that Merkel may run afoul of the German constitution and her oath to stave off the German sovereign from bad damage.

Poll: 98% Want a Public Referendum on Eurozone Aid
The letter, supported by such German academic capacities like Wilhelm Nölling, Karl A. Schachtschneider and Joachim Starbatty has been co-signed by 7,315 German citizens since August 18. His first letter was co-signed by 6,128 sovereigns.
A poll on his website asking whether there should be a public referendum on Eurozone aid shows that 98% of voters are in favor of a direct democratic decision.
Here is Hankel's letter translated into English.

WSJ: Data Shows Gold Is Money

Tuesday, August 24, 2010

Photo courtesy Bloomberg
The discussion on what gold is good for appears to take a new sharp corner with every day. Only one day after German financial watchdog BaFin said gold is not money, without providing any hard facts to back up its dumb opinion, it is of all places the Wall Street Journal (WSJ) that fired a fact and data based broadside the other way a day later.
WSJ writer Jeff Opdyke simply did what needs to be done before forming an opinion and checked correlations between the global currency of the past 2,800 years, commodities and fiat money.
Opdyke has correctly noted that gold does well in both periods of inflation and deflation times.
As gold is routinely called a hedge against inflation, it is interesting to see that it stubbornly remains close to its all time high at $1,258 reached on June 18 despite continuously low (official) inflation figures and frequent deflation warnings from the Federal Reserve. Remember, President Roosevelt jacked up the gold price from $20 to $35 per ounce in the worst period of deflation the USA has ever seen.
But gold does well in inflationary periods as well. Its previous all time high of $850 in January 1980 (intraday it had shot up to $887,50 but I doubt many trades happened at that price as the fixing price was more relevant in ancient pre-realtime eras.)
Both periods had one common denominator, though: The economy sucked, driving investors out of volatile (sinking) markets and into assets that are a store of value. Gold has never lost its value as all fiat currencies did so far.
Here are Opdyke's main findings from the August 21 edition of the WSJ:

79 Common Sense Reasons For A Gold Standard

Monday, August 23, 2010

The world enters the final stage of financial destruction thanks to a one-sided application of John Maynard Keynes' equation because politicians and central bankers did a terrific job in deficit spending since the USA defaulted on its gold obligations in 1971, but never followed Keynes advice to build reserves in surplus years. This is a direct result of a fiat money system that allows to create money at essentially no cost, to quote Fed chair Ben Bernanke from his infamous 2002 speech.
IMHO the heated discussion about a new gold standard will follow philosopher Arthur Schopenhauer's saying: "All truth passes through three stages. First, it is ridiculed. Second, it is violently opposed. Third, it is accepted as being self-evident."
Digging a little further I probably could come up with more than 79 facts debunking urban gold myths. I chose this number as gold has the atomic number 79.
  1. Gold has been voluntarily accepted worldwide since 2,800 years.
  2. All fiat currencies of the past 3 centuries have devalued to (near) zero within a human's life span.
  3. All fiat money systems were abused by irresponsible politicians who ignited credit bubbles. All credit bubbles ended with a bust.
  4. Under a gold standard. prices remained stable for more than a century in the USA.
  5. Even former Fed Chairman Alan Greenspan got it in his early years. He wrote "in the absence of the gold standard, there is no way to protect savings from confiscation through inflation" in his famous essay from 1967 titled "Gold and Economic Freedom". Anecdote to the side: When Congressman Ron Paul got a copy signed by Greenspan, the parting Fed chair said in 2005 he still stands behind this essay.
  6. In one of hist last appearances on Capitol Hill Greenspan said that in extreme time, e.g. war, gold is the only internationally accepted currency. Does anybody have a video proof of this? I watched it live but searched in vain for a video documentation.
  7. One more quote from a young and very wise Greenspan: In the early stages of a developing money economy, several media of exchange might be used, since a wide variety of commodities would fulfill the foregoing conditions. However, one of the commodities will gradually displace all others, by being more widely acceptable. Preferences on what to hold as a store of value, will shift to the most widely acceptable commodity, which, in turn, will make it still more acceptable. The shift is progressive until that commodity becomes the sole medium of exchange. The use of a single medium is highly advantageous for the same reasons that a money economy is superior to a barter economy: it makes exchanges possible on an incalculably wider scale.
  8. Excerpt from the US Constitution, Article I, section 10: No State shall ... coin Money; emit Bills of Credit; make any Thing but gold and silver Coin a Tender in Payment of Debts....
  9. Under a gold standard, the amount of credit that an economy can support is determined by the economy's tangible assets, since every credit instrument is ultimately a claim on some tangible asset. But government bonds are not backed by tangible wealth, only by the government's promise to pay out of future tax revenues.
  10. Lesson from history: ALL fiat money experiments or the debasing of gold currencies ended in complete devaluation. From Rome to Britain: every empire vanished into oblivion soon after it went off the gold standard.
  11. Gold is durable,
  12. portable,
  13. homogeneous,
  14. divisible, and, therefore, has significant advantages over all other media of exchange.
  15. Gold demand will never cease as half the globe's population intuitively prefers gold over paper. Or does your lady prefer paper over gold on her neck or her fingers?

Essential Books For The Prudent Investor

Saturday, August 21, 2010

German Financial Watchdog Says Gold Is Not Money

Friday, August 20, 2010

Can it get anymore idiotic?
The German financial watchdog BaFin has ruled that German mutual fund company DWS may not sell its DWS-Gold fund anymore publicly, because it holds 50% of its funds in gold. BaFin considers gold a commodity of which funds may only hold a maximum share of 30%, Austrian Börse-Express reported.
Maybe these "experts" walk over to the German Bundesbank or the ECB and get a lesson about the #1 item in their balance sheets (hint: look on the left side's top).
The German Bundesbank holds some 3,151 metric tons on gold, which is by far their biggest currency reserve. The ECB would be bankrupt by now, had their gold stash not a value of €352 billion as of last count, despite reckless selling in the last 10 years.
The Bundesbank has not sold any gold under the CBGSA as other not so smart European central banks did, selling the best performing asset of the last 10, 20 or 40 years. Germany's money guardians at the Bundesbank - undeniably the best inflation watchdog before the inception of the Euro - fight every attempt by debt-addicted politicians who want to sell gold for short term financing needs with claws and teeth. They only release a few kilos/tons every year for the legally required minting of gold coins that usually get gobbled up by German small private investors on the day of release.

GRAPH: Gold was the best performing currency/asset/commodity in the last 10 years, trading at €965 at the time of writing.

Fed Hands Barclays Bank a Cease and Desist Order Plus a $298 Million Fine

Thursday, August 19, 2010

What did Barclays Bank do that angers the Federal Reserve Board (FRB) so much it handed a "cease and desist order" and levied a $298 million fine on the British bank and its New York branch? It must be some dealing with Iran, North Korea or somebody closely affiliated with the US' enemies, according to this Fed release from late Wednesday:
The Federal Reserve Board and the New York State Banking Department on Wednesday announced the issuance of a consent Order to Cease and Desist against Barclays Bank PLC, London and the bank's branch in New York. The Order requires Barclays Bank to improve its program for compliance with U.S. economic sanctions requirements on a global basis.
While it is most interesting that a US regulatory authority can levy a fine on a British bank entity outside of the USA, the move was actually assisted by the UK's Financial Services Authority (FSA), the Fed said further:

Iranian Gold Imports Skyrocket in Current Year

Including the Tehran Times into my daily reading as the saber rattling increases I stumbled across a notice that immediately reminds me one more time of one of Alan Greenspan's most rare defences of the US gold hoard (which may be 261 million ounces or not as this has never been audited.)
In an exchange with Congressman Ron Paul then Fed Chairman Alan Greenspan in one of his last appearances on Capitol Hill answered that "in times of extreme stress, like war, gold is the only internationally accepted currency."
It appears that the #1 enemy of the US, Iran, is heeding his advice.
According to the Tehran Times from August 18,

US Fiscal Gap May Be $202 Trillion - Doubling of Taxes Needed

Wednesday, August 18, 2010

The story is already from last week but has failed to make the headlines it deserves. According to Boston university economics professor Laurence J. Kotlikoff the USA faces an almost unbelievable $202 Trillion fiscal gap or more than 4 times the so far worst estimates. In a commentary published on August 11 for Bloomberg Kotlikoff says the US would need to double all taxes to rein the deficit in order to follow IMF guidelines.
To put this in another perspective: $202 Trillion is roughly 4 times the entire planet's wealth.
Kotlikoff's commentary in full:
Let’s get real. The U.S. is bankrupt. Neither spending more nor taxing less will help the country pay its bills.
What it can and must do is radically simplify its tax, health-care, retirement and financial systems, each of which is a complete mess. But this is the good news. It means they can each be redesigned to achieve their legitimate purposes at much lower cost and, in the process, revitalize the economy.
Last month, the International Monetary Fund released its annual review of U.S. economic policy. Its summary contained these bland words about U.S. fiscal policy: “Directors welcomed the authorities’ commitment to fiscal stabilization, but noted that a larger than budgeted adjustment would be required to stabilize debt-to-GDP.”
But delve deeper, and you will find that the IMF has effectively pronounced the U.S. bankrupt. Section 6 of the July 2010 Selected Issues Paper says: “The U.S. fiscal gap associated with today’s federal fiscal policy is huge for plausible discount rates.” It adds that “closing the fiscal gap requires a permanent annual fiscal adjustment equal to about 14 percent of US GDP.”
The fiscal gap is the value today (the present value) of the difference between projected spending (including servicing official debt) and projected revenue in all future years.
Double Our Taxes

Video Documentary on German Hyperinflation

Friday, August 13, 2010

Reading When Money Dies: The Nightmare of the Weimar Hyperinflation, led me to search for video material about the money printing excesses that ultimately led to the rise of Adolf Hitler. Watch this BBC documentary to get the picture what led to hyperinflation. BTW find a link for an online version of the book here.

The Euro Is Dying And There's No Cure Against It

Thursday, August 12, 2010

Photo courtesy Davide Guglielmo
A decision by the European Union that forces Germany to include the shortfalls of government-owned banks into its national debt, pushing the debt/GDP ratio to 90% from 79% overnight, is the final straw that will have broken the Euro's back. (Hat tipping Zerohedge who broke this news first in blogosphere and extrapolated what a similar scenario would mean for US.)
It is ironic that the Eurocrats are solely responsible for this. According to a report in the Wall Street Journal,
The bailout of Germany's banking sector may swell the country's public debt rate to 90% of gross domestic product, Die Zeit weekly newspaper reports Wednesday. (NOTE: It is not public but government debt, which makes a big difference for me. Or did you sign one of the risky deals that put us into this mess?)
The weekly based this estimate on a recent decision by Eurostat requiring Germany to include the balance sheets of public-owned bad banks (NOTE: It is government-owned; or did you vote for any of these nationalizations?) - set up to help financial institutions offload toxic and non-strategic assets - into its overall debt ratio.
As Eurostat is the statistical office of the EU it can be expected that all other EU members will have to follow suit, igniting a fresh round of debt growth of government debts.
It is permissible to speculate that Eurostat may have sent such a notice to all EU nations.
So far, only Germany and Austria had to resort to outright nationalizations.
In Germany, which took ownership of WestLB and Hypo Real Estate (HRE) earlier,
state-owned WestLB AG bank has already offloaded €77 billion into such a rescue bank. Going by the Eurostat decision, €54 billion of WestLB's toxic assets transferred to the bad bank must be included in Germany's overall debt level.
Finance ministry spokeswoman, Jeanette Schwamberger, said the "winding-down entity of WestLB has already been included in the government's recently published calculations of the debt level." 
In July, it forecast Germany's debt level will rise from 73.1% in 2009 to 79% of GDP in 2010, 80% in 2011, to 80.5% respectively in 2012 and 2013 before easing to 80% in 2014.
Die Zeit said that if nationalized mortgage lender Hypo Real Estate is added to the equation, Germany's debt level could widen to 90%.
However, the impact from Hypo Real Estate is yet unclear because a rescue bank hasn't been set up and it's unknown how big the volume will be, according to Schwamberger.
Hypo Real Estate has said it plans to offload €210 billion into such a bad bank, but has already added that it might need less fresh capital than previously said. A consolidation of assets might reduce the widening of Germany's debt,
the WSJ wrote.
Living in Austria I naturally think first what this will mean for this country (more thoughts on the rest of Europe below) that got wrecked by former chancellor Wolfgang Schüssel under whose "leadership" white-collar crime and corruption has begun to mushroom since 2000. Only today a German paper concluded that nobody gets ever prosecuted as long as he is connected to the government. Austrian observers have been enraged about this for some years. Now the sovereign will be presented with a horrific - and probably un-payable bill.
Austria has nationalized scandal-laden Carinthian Hypo Alpe Adria AG last December. The bank recorded a net loss of  €1.6 billion in 2009 but still sits on a portfolio of €7.3 billion non-performing loans and another €7 billion in loans on the watchlist while prosecutors are still combing through the bank's files to find out if there may be still more losses in the offing.
 If these €14 billion end up on the governments tab, the debt/GDP ratio will rise some 7 percentage points to more than 73%.

Eurocrats Suicided the Euro

Compilation of Official Lies And Spins About the Euro

European news compilation service Openeurope has published a wonderful document containing all key statements about the Euro in the last 15 years. Simply structured into "What they said then" and "What they say now" categories will most likely result in cynical chuckling when reading the twists of politicians and central bankers over time. For a good measure Openeurope has thrown in some quotes from HMSM (hypocrite mainstream media) journalists who don't look all that good in hindsight.
Here are a few teasers that should whetten your appetite:
What they said then:
"There is no bank in the world as independent from politics as the European Central Bank" (1st ECB President Wim Duisenberg in 1998, who drowned in his pool after retirement in 2005)
What they say now:
Against all its vows, and against an explicit ban within its own constitution, the ECB has become involved in financing states. Obviously, all of that will have an impact." (Former German Bundesbank President, Karl Otto Pöhl, in May 2010)

50 Seconds Bank Run Video From Germany 1931

Wednesday, August 11, 2010

This is what bank run looked like in 1931. Will it look different this time when ATMs suddenly don't work anymore?

Never forget: It led to the rise of Hitler. Here are some first-hand witness accounts.

This is how it ended.

5 Years On The USA Has Not Solved One Of Its 14 Most Pressing Problems

In June 2005 I had summed up the 14 most pressing problems of the USA in this post. Reading this list again I am quite shocked to see that all these problems are still around. The only thing that has changed is the name of the president.
Here is the list from 2005 (annotations as of today in brackets):

In Bernanke's Own Words: The Fed Has No Other Choice Than QE2Infinity

Tuesday, August 10, 2010

The Federal Reserve will keep the helicopters in the air. Don't get too excited, though.
As nothing fundamental has changed since December 2008 (I am not aware of any kind of recovery) I am not surprised that the Fed will continue quantitative easing 2 infinity as stated in the latest FOMC statement:
To help support the economic recovery in a context of price stability, the Committee will keep constant the Federal Reserve's holdings of securities at their current level by reinvesting principal payments from agency debt and agency mortgage-backed securities in longer-term Treasury securities. The Committee will continue to roll over the Federal Reserve's holdings of Treasury securities as they mature.
Don't get too excited. Fed chairman Ben Bernanke knows definitely since December 2008 that he has no other choice than to print more money aka "Monetizing the Debt", this video proves.

Any more questions? The Fed's strategy will delay the inevitable market meltdown, but rest worryingly assured as it will be inevitable.

The New Royalty: EU President Costs €6 Million Per Year, Free Viagra For MEPs

Thanks to a question by British MP Lord Stoddart of Swindon it is revealed that the newly installed - but not elected - EU president Herman van Rompuy costs Europeans €6 million annually in salaries, office and travel expenses. This comes on the heels of news that the EU wants to collect its own tax.
From UK parliament communications:
...what is the annual cost of the Presidency of the European Council; and how it is met?
Answer by Under-Secretary of State, Ministry of Defence, Lord Astor of Hever: In 2010, the cost of the office of the President of the European Council, including staff, travel expenses and salary, is €6 million. The cost is being met this year from within the EU's annual budget, using funds which had been previously allocated to other Council projects. The budget for the office of the President of the European Council in 2011, like all other EU institutions, is currently being decided as part of ongoing negotiations on the EU's budget for next year.

You Pay: Free Viagra and Penile Implants for MEPs
The hubris of the Moloch in Brussels does not stop here. The UK Independent Party has found out that members of the EU parliament (EP) are entitled to

Stiglitz Wants a Measure Of Well-Being to Replace GDP Fetishism

Sunday, August 08, 2010

If there were just more voices of reason like that of Nobel laureate Joseph Stiglitz. In a presentation from July 29 delivered in Melbourne, Stiglitz attacks the concept of GDP being a measure of the well-being of a nation as it was not intended to fill this role.
As GDP is basically a measure of what a nation spends, not what it produces, I've always had my problems.
What would US GDP look like without military spending? What would the global economy look like without military spending? This money could be much better used in education. Smart people talk, they do not go to war.

BP Spill Reminder #21 - Day 111 - Coverup Instead of Cleanup

Dead Northern Gannet. Photo by Drew Wheelan

BP has succeded in the spin. MSM have jumped on the "cork the well" bandwagon and remain ignorant on the long term enviromental damage that so far been held away from the public's eye. At least US Congress has launched an investigation into BP's efforts to buy silence in the scientific community.
First-hand accounts from residents and environmentalists tell a wholly different story, though. Apparently innumerable dead animals were carted away under the cover of the night and the beaches cleanup is a bluff as oil is found a foot below in many places.
From the Tampa Bay News:
University of South Florida researchers are rebutting BP claims that beaches hit by oil from the Deepwater Horizon spill are clean, noting evidence of tar balls and buried oil along miles of sand in northwest Florida and Alabama.
While the beaches appeared clean after crews left, closer inspection revealed tiny black tar balls, the scientists said. They also said cleanup efforts did not address layers of oil buried inches below the sand, accounting for possibly more than half of the beach contamination.
"That leads us to the conclusion that the cleanup at this point is basically superficial," said Ping Wang, a USF beach geologist who led the research. "That maybe using these machines which are crushing the tar into small pieces may not be the smartest thing to do."

The Huffington Post writes:
The reason BP has gone to such great lengths to hide the devastation caused by the irresponsible drilling operations and blow out at Mississippi Canyon 252 is financial. Every death that results from the oil spill has a cash value, whether animal or human. Images of dead animals are difficult to spin in the media, and they resonate across all demographics. BP also has a strong interest in maintaining a business-as-usual model for the beach resort communities along the Gulf Coast that have been economically devastated and lost the majority of their annual revenue during the summer season of 2010. The only sharks circling the Gulf waters now are based on land.
I recommend to read his entire report that makes it clear BP is rather interested in a coverup than a cleanup. Read more first-hand accounts in this second post that reveal that BP is very well aware that contact with the spill will cause cancer.

Book: The Economics of Inflation

Saturday, August 07, 2010

Is your weekend as rainy as mine? Great, then you have an excuse to dive into "The Economics of Inflation" by Costatino Bresciani-Turroni, written in 1937.
The author was a member of the WW1 Repatriation Commission and this is the most timely documentation of the German hyper inflation I have come across so far.
Economics of Inflation by Costatino Bresciani-Turroni, 1937

Russia Was A Better Investment Than the USA In The Last Decade

Friday, August 06, 2010

Russia may make headlines these days with its grain export ban, but actually the resource-richest country in the world has become an economic champion overlooked by investors.
This is what the Economist forecasted in 1998:
  • Russia would see inflation hit 10,000%
  • GDP would collapse by at least 20%
  • Communist rioters would storm the Kremlin
  • Russia would break up into four heavily armed mutually antagonist regions
  • Civil war would ensue
And this is what really happened since 2000 according to Russian investment house Otkritie:
  • GDP growth averaged 7.5% p.a.
  • Forex reserves reached $600 billion
  • 15-fold increase in pensions
  • Sharp decrease in poverty
  • Demographic stabilization, unprecedented political stability
  • World's best debt and equity markets since 2000
For a view from Russia check out this Otkritie presentation from late July that made it to my inbox.

Money Theory: "Das Geld" by Karl Hellferich

Thursday, August 05, 2010

Having noticed great interest in the books recommended in my last 2 posts here is another noteworthy piece of money theory by German Karl Helfferich from the early 20th century. I can present the book "Das Geld" only in German.
Either click this link
Das Geld by Karl Helfferich
to buy the book or read/download it for free at the link below. Judge yourself as I have yet to thumb through.

Wikinvest Wire