Doing The Math

Grant Williams is a strategy adviser for the hedge fund, Vulpes Investment Management in Singapore, as well as the blogger behind the popular Things That Make You Go Hmmm….  In the following video, Williams reviews the disconnects between the economic realities that exist in today’s world and the rosy pictures painted by governments, central banks and the main stream media.

  • Williams’ problem #1: The disconnect between fundamentals and equity prices.
  • Williams’ problem #2: The paradox behind China’s mysterious GDP growth during a time of reduced manufacturing, shrinking demand for raw materials and declining imports/exports
  • Williams’ problem #3: How is France able to sell its sovereign bonds at such low interest rates when all indications of its own economy are performing like those of the European periphery?
  • Williams’ final problem: The difference between the “Gold Price” and “The Price of Gold”

In the end, the laws of mathematics cannot be subverted by governments or central banks.  Central banks’ zero percent interest rate policies are damaging:

  • In the short term through the confiscation of savings and the forcing into riskier investments in the search for yield
  • In the long term by suppressing market volatility, which must be reconciled at some point


Mathematics, rightly viewed, possesses not only truth, but supreme beauty – a beauty cold and austere.
– Bertrand Russell

On Germany’s Gold Repatriation

Conspiracy theories are only theories until they become conspiracy facts.  The straws are blowing in the wind as this main-stream CNBC panel discusses the reasoning behind Germany’s gold repatriation. The Bundesbank (Central Bank of Germany) recently stated they have plans to move their gold held at other central banks back to the Father Land.  This includes moving 374 tonnes from France’s Banque de France & 300 tonnes from the New York Federal Reserve Bank.  Could it be that, as Pimco’s Bill Gross opined, that the central banks of the west are starting to lose faith in one another?

A Peace to End All Peace

 

A Peace to End All PeaceIt seems that current news always has some report of violence and disorder in the middle east. And yet few people in the western world truly understand the middle east, let alone it’s geographically disbursed nation states. The boundary lines creating the middle eastern countries were imposed on the people that lived there and the western world believed those people couldn’t govern themselves so they attempted to do it for them. This is the real reason there’s no peace in the middle east!  Imagine some foreigner coming to your residence and taking over your way of life.

This book, by David Fromkin, focuses on the era of World War I and describes how the “great powers” carved states out of the Ottoman Empire to create what we know today as the middle east.  It details the intrigue and secrete treaties these powers (Britain, France, Russia, Italy, among others) entered into in order to secure their part of the middle eastern pie.

Prior to the war, the Ottoman Empire was ruled from Constantinople – what is today Istanbul, Turkey. Though there was an official Sultan for outward leadership, in 1913 a group of secret society brotherhoods rose and formed the true governing power known as the Young Turks or Committee of Union & Progress (C.U.P.). Enver Pasha is perhaps one of the most famous of this clan and indeed is extremely active in this historical reference.  Enver married the Sultan’s daughter and became an important political and military leader within the Ottoman Empire.

The Ottoman Empire stretched from the western end of Turkey all the way east until reaching India and south until the end of the Saudi Arabian peninsula. But even though this huge area was ruled by the Turks, there were several non-Turkish tribes of the Arab descent disbursed among the lands.  All of these tribes didn’t necessarily get along with each other, nor did they fully submit to the rulership of the Sultan. But a common theme was that they would rather be ruled by a moslem Turk, rather than a Christain westerner.

Britain wanted to keep it’s land route clear to India by way of a straight line from Palestine. In addition, a buffer zone was required in order to secure the land route from Russia, which required land to be held in the Syrian and Mesopotamian areas.  And, of course, it was necessary to maintain the control of the Suez Canal, which meant the occupation of Egypt.

France had both business and religious-based desires in what is today Lebanon and Syria.  Greece and Italy had designs on parts of Anatolia as well and wanted to expand their own nations.  Russia was eager to have some control, or at least access to, the great port of Constantinople in order to allow sea routes to the Mediterranian.

The Young Turks, however, were mainly interested in holding their vast empire together – they didn’t want to have it divvied up among the western powers who’d been colonizing in their lands.

When World War I broke out, the Ottoman Empire wanted to stay out of it, but ended up scheming to find a major power in which to ally with in order to prevent its empire from being broken up.  The Young Turks approached almost all the great powers only to be turned down. No one thought the Ottoman Empire was worth partnering with – it didn’t seem like it had much to offer and was considered insignificant because the war’s strategic importance currently centered on the western and eastern fronts within mainland Europe.

However, this all changed when Germany learned that Britain was about to deliver two top-of-the-line battle cruisers to Turkey.  If Germany could add these to their own arsenal, it may be some benefit to the overall war effort. So, the Young Turks found their ally in Germany. (Even though right after the treaty was signed, it was learned that Winstin Churchill, then Lord of the Admiralty, had decided not to deliver the two warships and witheld them for Britain’s own use.)

During and after the war, the great powers continued to deal with each other for the rights to occupy and control certain areas within the Ottoman Empire. Britain sought to control Palestine by partnering with Zionists who wanted to settle a new Jewish home land. In Jordon and Iraq, Britain installed Hashemite leaders Abdullah and Feisal Hussein, sons of Hussein bin Ali, Emir of Mecca, within the Hejaz region of what is today, Saudi Arabia.

In Persia there were conflicts between Britain and the new Soviet Russia. Britain had installed a subsidized ruler, Ahmed Shah, along with a powerful military leader, Reza Khan. Nevertheless, the Persians formally cut ties with Britain and signed treaties with Soviet Russia instead. It was a similar situation for Turkey and Afghanistan – Soviet Russia entreated with them and denied British desires.

Britain faced challenges from France on control of Lebanon and Syria. Britain had attempted to install Feisal, but France was able to dethrone him and take complete control of the area.

On a quest for imperialism on the field of the Great Game, the western powers have created all the problems we see in the middle east today.  The peace settlements at the end of World War I, which divided up the Ottoman Empire’s lands, truly was A Peace to End All Peace.