Monthly Archives: April 2012

Things That Make You Go Hmmm…: 20120429

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In his usual entertaining oblique approach to subjects, Grant gives a historical summary of the Maginot line and  German dam defenses in WWII. Both were designed to be as impregnable as possible. The first was circumvented by an end run around it. The second by an ingenious new frontal assault weapon, the British development of a dam-busting bomb. This leads up to the current Franco-German attempts to build firewalls around the weak economies of Southern Europe. Key points are:

  • Quantitative Easing … printing money out of thin air, CANNOT fix this [the massive credit produced by 2 decades of easy money].
  • I’ve got news for you, folks; there will be PLENTY more QE to come. In fact, QE will be used and used again until it is finally proven not to work and, when that day finally arrives, the world’s Central Bankers will be out of ideas – and time.
  • The combined might of the EFSF/ESM is, to all intents and purposes a monetary Maginot Line that the market will simply find a way around.
  • He reviews events in Spain and the Netherlands that suggest the defenses constructed by the EU and the IMF are threatened.

Time to Pull the Plug

Foreign Policy Magazine (FAM) published an article today titled The Jet That Ate the Pentagon. This ‘supersonic albatross’ as they call it continues to escalate in price while missing deadline after deadline. Canada’s proposed procurement of this aircraft to replace its aging CF-18s has been in the news lately, particularly over confusion of estimated costs for acquiring it.

This article confirms in our mind that the F-35 is a flying money-pit. Until we develop a rational defense policy, we should not even be doing anything more than kicking the tires – and we have already done that. Canada is essentially a maritime nation, an island (since an attack across our single land border by our neighbour is indefensible and need not be considered). It doesn’t take much to understand that our navy is our primary defensive instrument and our air-force then falls into a supporting role. For more on this boondoggle, read on.

Quote of the Day: 20120430

The Fed is transferring immense wealth from the middle class to the most affluent, from the least privileged to the most privileged.

— Mark Spitznagel quoted by Zero Hedge.

If You Thought You Had All Bases Covered …

Cumberland Advisors sends out email free commentary fairly regularly. These are well connected and smart people that run money, their own and others. Their commentaries are somewhat erudite but always insightful and well informed. The latest we thought we would reproduce most of since it will be a couple of days before they have a link on their home page. Titled Stock Market Outlook – Shocks, it lists 5 events that are likely to come to pass that may create a major shock in the economy and markets. They provide their own commentary on each event.

To the Sheep of Canada: When the Shepherd Approaches You from Behind, Watch Out

This post serves as an introduction to the International Monetary Fund (IMF), Canada’s involvement to date, and your involvement in IMF activity as a Canadian taxpayer. If you are a taxpayer in another country, you have a similar involvement. As the shepherd of the global economy, the IMF works behind the scenes and never in the parliaments and governing institutions of the member countries.

King World News: April 2012

This is a site we follow. It’s principal focus is on how precious metals (PM) and PM mining stocks are behaving in the markets. They’re good to listen to if you have this interest. They also touch on other topics of high relevance to today’s principal events in economics, finance, and geopolitics. We will try and make key observations if you don’t have the time to listen. Note that we do not link all audio and blog files. If you do listen, the first minute or so is advertising which you might want to skip. The links appear chronologically from most recent for the month, backwards.

Quote of the Day: 20120429

The following is a collection of statements that Fed Chairman Ben Bernanke actually made to the public over the last seven years (click on the number at the front of each for its source):

  • #1 (July, 2005) We’ve never had a decline in house prices on a nationwide basis. So, what I think what is more likely is that house prices will slow, maybe stabilize, might slow consumption spending a bit. I don’t think it’s gonna drive the economy too far from its full employment path, though.
  • #2 (October 20, 2005) House prices have risen by nearly 25 percent over the past two years. Although speculative activity has increased in some areas, at a national level these price increases largely reflect strong economic fundamentals.
  • #3 (November 15, 2005) With respect to their safety, derivatives, for the most part, are traded among very sophisticated financial institutions and individuals who have considerable incentive to understand them and to use them properly.
  • #4 (February 15, 2006) Housing markets are cooling a bit. Our expectation is that the decline in activity or the slowing in activity will be moderate, that house prices will probably continue to rise.
  • #5 (February 15, 2007) Despite the ongoing adjustments in the housing sector, overall economic prospects for households remain good. Household finances appear generally solid, and delinquency rates on most types of consumer loans and residential mortgages remain low.
  • #6 (March 28, 2007) At this juncture, however, the impact on the broader economy and financial markets of the problems in the subprime market seems likely to be contained. In particular, mortgages to prime borrowers and fixed-rate mortgages to all classes of borrowers continue to perform well, with low rates of delinquency.
  • #7 (May 17, 2007) All that said, given the fundamental factors in place that should support the demand for housing, we believe the effect of the troubles in the subprime sector on the broader housing market will likely be limited, and we do not expect significant spillovers from the subprime market to the rest of the economy or to the financial system. The vast majority of mortgages, including even subprime mortgages, continue to perform well. Past gains in house prices have left most homeowners with significant amounts of home equity, and growth in jobs and incomes should help keep the financial obligations of most households manageable.
  • #8 (January 10, 2008) The Federal Reserve is not currently forecasting a recession.
  • #9 (June 10, 2008) The risk that the economy has entered a substantial downturn appears to have diminished over the past month or so.

— This is the wisdom of the head of the Federal Reserve, the institution that manages the US economy and influences strongly, the global economy.

Quote of the Day: 20120428

You can lead a Socialist (or Liberal) to knowledge, but you can’t make him think.

— The POOG

The Collapse of the European Economy

We have several posts tracking isolated aspects of the overall European economy. These include Placing Spain on Deathwatch, Tracking The Downgrade of Europe (and Others), and Tracking the Next Recession. Today’s post by Mike Shedlock, Eurozone Retail Sales Plunge at Strongest Pace Since Late-2008; German Retail Sales Plunge Into Contraction; French Retail Sales Plunge at Record Pace; Record Job Losses, Record Retail Plunge in Italy, gives a more comprehensive picture of the economic situation there. Basically, the entire European economy is slowing down. This will move countries not already in recession, towards that state. None of this is good for a financial crisis who’s only hope of a solution other than default, is vigorous economic growth.

The Great European Train Wreck continues in slow motion.

The higher context is the global economy. The decision by the BoJ to print 5 trillion yen shows that Japan’s economic problems continue (forever it seems). In the US, Q1 GDP at 2.2% missed estimates of 2.5% by a mile showing all is not happy with that economy (a late report suggests a Q1 GDP number of zero: GDP Miss Far Bigger Than Announced; Real GDP is 0% Using More Reasonable Deflator). These are not isolated occurrences. With global trade and money flows, they all feed into each other. The risk is a self-feeding downward spiral. And central banks around the world are left with tools that can only exacerbate the problem, not fix it.

Reality Check: 20120427

Here is Gary’s article, Health and Free Trade. For more by Gary, visit his website at http://www.garynorth.com/.

In this article Gary talks about issues created by Medicare and US government imposition of the nanny state in health care. If you suffer from chronic undiagnosed ailment, read this.

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