Bloomberg Reports on Ruin in Hong Kong But Leaves Out the Larger Picture

To Save the Rich, China Ruins Hong Kong … When they meet on Sunday, legislators from China’s rubber-stamp National People’s Congress are expected to disregard even the most moderate proposals to open up Hong Kong’s political system. In all likelihood the decision will provoke street protests, drive moderates into the more radical pro-democracy camp and call into question the former British colony’s standing as a global financial center and bastion of free enterprise. And for what? The good of Hong Kong, of course. – Bloomberg
Dominant Social Theme: Capitalism creates prosperity, but the Chinese don’t understand.
Free-Market Analysis: What’s going on in China and Hong Kong is ironic because it seems to mimic much that has held the West back in modern times. In fact, much that China suffers from at its current level of development corresponds to a similar evolution in the West.
Bloomberg resolutely avoids making the comparison – though in our view, this article would have provided a perfect opportunity. Instead, Bloomberg tries to treat Chinese authoritarianism as an Asian problem.
Here’s more:
Wang Zhenmin, a Chinese law professor who sat on the committee overseeing Hong Kong’s constitution, laid out the case most blatantly on Thursday, when he told journalists that the interests of the city’s powerful tycoons had to be safeguarded from unchecked democracy.
“If we just ignore their interest, Hong Kong capitalism will stop,” he said. “Democracy is a political matter and it is also an economic matter.”

This post was published at The Daily Bell on September 02, 2014.

Pushback as US Expands Surveillance, Taxing Authority?

Several Swiss banks pull out of US tax programme … At least 10 Swiss banks have withdrawn from a U. S. programme aimed at settling a tax dispute between them and the United States, Swiss newspaper NZZ am Sonntag said on Sunday, quoting unnamed sources. Around 100 Swiss banks came forward at the end of last year to work with U. S. authorities in a programme brokered by the Swiss government to help the banks make amends for aiding tax evasion. “At least 10 banks that had decided at the end of 2013 to pay a fine have withdrawn their decision,” NZZ am Sonntag said, quoting unnamed lawyers and auditors. It did not name the banks concerned. – Reuters
Dominant Social Theme: Even though the US is seeking to spread its authority around the world, its functionaries are prepared to be reasonable.
Free-Market Analysis: This article can be seen two ways. One, the US tax regime that it is trying to install in Switzerland is being resisted, at least a little.
On two, the news can be seen as a message that once its tax regime is in place, US officials are prepared to be flexible, at least on the margins.
Got a gripe? Work within the system and you may find it’s resolved “fairly.”

This post was published at The Daily Bell on September 01, 2014.

The Ultimate Demise Of The Euro Union

The European Union (EU) was created by the Maastricht Treaty on November 1st 1993. It is a political and economic union between European countries which makes its own policies concerning the members’ economies, societies, laws and to some extent security. To some, the EU is an overblown bureaucracy which drains money…and compromises the power of sovereign states. For others, the EU is the best way to meet challenges smaller nations might struggle with – such as economic growth or negotiations with larger nations – and worth surrendering some sovereignty to achieve. Despite many years of integration, opposition remains strong.
ACCORDINGLY, there are signs the EU is teetering on implosion.
Indeed the Euro zone break up is inevitable for numerous reasons.
Unpayable government debts and the massive bailouts in Greece, Portugal, Spain and Ireland logically pave the road to an eventual EU break up.
While it’s convenient to have the one currency for 17 different nations, the nature of those national economies and their strength is quite different and problematic. Indeed and fact it favors wealthy countries like Germany and France at the expense of the PIIGS (i.e. Portugal, Italy, Ireland, Greece and Spain).
Another issue is that while the 17 nations share the same Central Bank, they do not have a central control on government budgets, nor central political control.
Paul Griffiths, Colonial First State chief investment officer does not want to put a time frame on the euro zone being shrunk, but says it will eventually be very different from what it is today.

This post was published at Gold-Eagle on September 1, 2014.

PENANCE. THE WEEKEND VIGILANTE AUGUST 30, 2014

It’s my fault.
Those who have been reading some of my internet scribblings over the past months or years know I’ve been going down a very interesting path. Having graduated with a Masters degree from the school of hard knocks in Austrian Economics and political “science” over the last decade I’ve begun to dig even deeper into an understanding of the very question of life. Heck, we’ll see if I am still alive by the end of this blog entry. Yes, I am serious about that (I think I will be… but I’ll explain below why I haven’t killed myself yet).
I also want to state that I am not drunk and am just a few sips in to a glass of red wine right now and won’t be drunk by the end of this article. This is all coming straight from my heart after a year of looking in the mirror daily and asking myself who is this person and does he deserve to be here and after spending most of the day today meditating in my underwear and a lot of eye water .
This may get wacky or weird by the time I’m done writing. But before I drizzle digital ink upon you I do want to clarify a few things about the Galt’s Gulch Chile (GGC) clusterfuck.
It appears that many people have taken Wendy McElroy’s and my writings as being that GGC was and is an outright scam, all the money has been stolen and fuck you very much. That is not the case at all if everything I currently know about it is true. I have a fairly high degree of certainty that GGC owns the property where it has been selling lots and that that property has water rights. This is information I have been told by GGC’s past lawyer about a year ago… which was also the last time I had any access to information to anything related to GGC. It has more or less been verified by others investors over the course of the last year as well.

This post was published at Dollar Vigilante on August 30, 2014.

Labor Day 2014: Economic solutions already here for full employment, zero public deficits and debts

Labor Day is an Orwellian holiday: US ‘leaders’ psychopathically pretend to care about American labor while lying about a real unemployment rate of close to 25% (the so-called ‘official’ rate excludes under-employed and discouraged workers).
Along with unemployment, Americans receive policy enabling oligarchs to ‘legally’ hide $20 to $30 trillion in offshore tax havens in a rigged-casino economy designed for ‘peak inequality.’ For comparison, $1 to $3 trillion ends global poverty forever, saving a million children’s lives every month from slow and gruesome death (here, here). And, as always, US ‘leaders’ lie-begat Americans intounlawful Wars of Aggression (in comparison, 11 days of US war cost would pay for all tuition of US college students).
Americans could have full-employment and zero public deficits and debt with monetary and credit reform.
These solutions are obvious upon a few moments of your attention. See for yourself:
What is monetary and credit reform?
Since the 1913 legislation of the Federal Reserve, the US has had a national ‘debt system;’ the Orwellian opposite of a monetary system. What we use for money is created as a debt, with the consequence of unpayable and increasing aggregate debt. This is a description of the simple mechanics of adding negative numbers. Although it’s taught in every macroeconomics course in structure, the consequences of increasing and unpayable debt are omitted (unpayable because it destroys what is used for money, and eventually the debt becomes tragic-comic in amount).

This post was published at Washingtons Blog on August 30, 2014.

Stock Market Tops & Gold Manipulation Suits

Mainstream press pundits are themselves surprised at the bull market the world has seen in stocks, and many are beginning to note that, soon enough, investors themselves will grow wary about investing in the stock market.
The price of gold bullion since March has come down approximately $100 per ounce, and since 2011 the price has fallen from nearly $2,000 an ounce to its current price of approximately $1,300. The story is similar for silver, which fell from its high of $49 in April 2011 to today’s price of $19.50. Many analysts on mainstream press have indicated that the gold bull market is through, but the evidence points towards the contrary.
Behind the headlines of a record breaking stock market, news about suspected gold price manipulation has caught the attention of many. As the New York Times writes of an ongoing hearing regarding the claims:
At a 40-minute hearing, lawyers for more than 20 plaintiffs gathered in Federal District Court in Manhattan to coordinate their linked lawsuits against the five banks that make up what is known as the London gold fix. The suits, filed by hedge funds, private citizens and public investors like the Alaska Electrical Pension Fund, contend that the banks have used their privileged positions as market makers to rig the price of gold to their benefit.

This post was published at GoldSilverBitcoin on August 28, 2014.

Low-Cost Transcontinental Gold

Back in 2001 Turkey produced less than 50k ounces of gold, an insignificant amount considering the geological potential of this transcontinental country. The prolific Tethyan Metallogenic belt, which covers a large part of it, offers an environment capable of hosting large precious-metals deposits. But strangely even though the ancient Romans found great success tapping this belt, the modern-day miners largely ignored it.
Two watershed events finally turned the miners on to Turkey. First was the enactment of a mining law designed to attract foreign investment, which led to large-scale systematic exploration and the discovery of some major gold deposits in the 1980s and 1990s. And second was the 2000s gold bull market, which ultimately encouraged the development of these discoveries.
As a result Turkey has seen steady growth in gold production over the last decade or so. It is now host to 7 commercial-scale mines. And in 2013 they collectively produced over 1.0m ounces. This represents a whopping 2200% increase in output since 2001. And Turkey anticipates a continued uptrend that’ll have it producing 1.6m ounces annually within the next couple years.
One of the biggest and best gold mines in the country is the Copler mine. Copler is 80%-owned by Alacer Gold (a local joint-venture partner owns the balance), one of the first foreign companies to venture into this rich land. This project first hit Alacer’s radar in the late 1990s. And it was early JV work with Rio Tinto that yielded the discovery of its strong zones of epithermal gold/silver/copper mineralization.

This post was published at Gold-Eagle on August 29, 2014.

The Credit Gradient

The United States, and every country, is subject to a monetary authority and legal tender laws. Here in the U. S. we have the Federal Reserve, a central bank that plans money and credit. The Fed thought they had perfected their planning (but of course it cannot be perfected). They thought they had ended the boom and bust cycle, and brought us into a brave new era, their so-called great moderation that ended in 2008. All they really did was manage the banking system to the brink of insolvency.
Let’s try a thought experiment. Suppose the monetary central planner attempts to fix the problem of insolvency by massive injections of liquidity. The central bank buys bonds. It dictates rates near zero on the short end of the yield curve, and promises not to raise rates for years to come. What perverse outcome would we expect?
Arbitrageurs see a green light, telling them that they can safely borrow short to buy long bonds. As the price of a bond goes up, the rate of interest goes down – it’s a rigid mathematical inverse. This is how suppression of short-term rates causes suppression of long-term rates.
This poses a problem for investors. Every investor has a minimum yield he must earn in order to meet his goals, such as retirement. When the yield available in government bonds falls, this gives the investor a strong push to other bonds with higher yields. Some Treasury bond owners sell, and go into AAA corporate bonds. This, of course, pushes up bond prices and pushes down the yield. This pushes some AAA corporate investors into AA bonds. And so on.

This post was published at GoldSeek on 29 August 2014.

The Myth of the Unchanging Value of Gold

According to mainstream economics textbooks, one of the primary functions of money is to measure the value of goods and services exchanged on the market. A typical statement of this view is given by Frederic Mishkin in his textbook on money and banking. ‘[M]oney … is used to measure value in the economy,’ he claims. ‘We measure the value of goods and services in terms of money, just as we measure weight in terms of pounds and distance in terms of miles.’
When money is conceived as a measure of value, the policy implication is that one of the primary objectives of the central bank should be to maintain a stable price level. This supposedly will remove inflationary noise from the economy and ensure that any changes in money prices that do occur tend to reflect a change in the relative values of goods and services to consumers. Thus, for mainstream economists, stabilizing a price index based on a basket of arbitrarily selected and weighted consumer goods, e.g., the CPI, the core CPI, the Personal Consumption Expenditure (CPE), etc., is a prerequisite for rendering money a more or less fixed yardstick for measuring value.
This idea – that a series of acts involving interpersonal exchange of certain sums of money for quantities of various goods by diverse agents over a given period of time somehow yields a measure of value – is another ancient fallacy that can be traced back to John Law. Law repeatedly referred to money as ‘the measure by which goods are valued.’ This fallacy has been refuted elsewhere and rests on the assumption that the act of measurement involves the comparison of one thing to another thing that has an objective existence, and whose relevant physical dimensions and causal relationships with other physical phenomena are absolutely fixed and invariant to the passage of time, like a yardstick or a column of mercury.

This post was published at Ludwig von Mises Institute on Friday, August 29, 2014.

The Unprecedented Failure to Regulate Citigroup Continues

Yesterday, Wall Street’s self-regulator, the Financial Industry Regulatory Authority (FINRA), charged Citigroup with cheating its customers out of fair prices on preferred stock trades – 22,000 times. Citigroup was fined a meager $1.85 million, ordered to pay $638,000 in restitution, allowed to neither deny or admit the charges, and sent on its merry way to loot the next unwary investor.
Why do we believe there will be more charges of malfeasance in Citigroup’s future? Because it is an unrepentant recidivist. Yesterday’s FINRA fine was the 408th fine that FINRA has levied against Citigroup Global Markets or its predecessor, Smith Barney, for trading violations, market manipulations or failure to supervise its traders or brokers.
And that’s just FINRA – the light-handed disciplinarian with industry ties. Citigroup has kept other Federal regulators, including the U. S. Justice Department, very busy as well.
It is now six years since Citigroup’s serial history of rogue conduct rendered it insolvent. Under the law, the U. S. government is not allowed to prop up insolvent banks with taxpayer money. But from 2007 to 2010, in the largest bank bailout in history, over $2.3 trillion was lavished on the serial recidivist Citigroup.
Citigroup received $25 billion in Troubled Asset Relief Program (TARP) funds on October 28, 2008. Less than a month later, Citigroup had blown through those bailout funds and required another $20 billion TARP infusion. But its situation was so wobbly that the government had to simultaneously provide another $306 billion in asset guarantees.

This post was published at Wall Street On Parade on August 27, 2014.

Meet The LMCI – -The Fed’s New Goal-Seeked, 19-Factor Labor Market Regression Rigmarole

In the rush to make QE’s taper and the follow-on ‘forward guidance’ appear more data-related than of due concerns about the structural (and ultimately philosophical) flaws in the economy, the regressionists of the Federal Reserve have come up with more regressions. The problem was always Ben Bernanke’s rather careless benchmarking to the unemployment rate. In fact, based on nothing more than prior regressions the Fed never expected the rate to drop so quickly.
Given that the denominator was the driving force in that forecast error, the Fed had to scramble to explain itself and its almost immediate violation of what looked like an advertised return to a ‘rules regime.’ When even first mentioning taper in May 2013, Bernanke was careful to allude to the crude deconstruction of the official unemployment as anything but definitive about the state of employment and recovery.
So at Jackson Hole last week, Bernanke’s successor introduced the unemployment rate’s successor in the monetary policy framework. Janet Yellen’s speech directly addressed the inconsistency:
As the recovery progresses, assessments of the degree of remaining slack in the labor market need to become more nuanced because of considerable uncertainty about the level of employment consistent with the Federal Reserve’s dual mandate. Indeed, in its 2012 statement on longer-run goals and monetary policy strategy, the FOMC explicitly recognized that factors determining maximum employment ‘may change over time and may not be directly measurable,’ and that assessments of the level of maximum employment ‘are necessarily uncertain and subject to revision.’
Economists inside the Fed (remember, these are statisticians far more than anything resembling experts on the economy) have developed a factor model to determine what Yellen noted above – supposedly they will derive’nuance’ solely from correlations.

This post was published at David Stockmans Contra Corner on August 26, 2014.