Frightening Quotes from Environmentalists:
The right to have children should be a marketable commodity, bought and traded by individuals but absolutely limited by the state. —Kenneth Boulding, originator of the “Spaceship Earth” concept (as quoted by William Tucker in Progress and Privilege, 1982)
We have wished, we ecofreaks, for a disaster or for a social change to come and bomb us into Stone Age, where we might live like Indians in our valley, with our localism, our appropriate technology, our gardens, our homemade religion—guilt-free at last! —Stewart Brand (writing in the Whole Earth Catalogue).
Free Enterprise really means rich people get richer. They have the freedom to exploit and psychologically rape their fellow human beings in the process…. Capitalism is destroying the earth. —Helen Caldicott, Union of Concerned Scientists
We must make this an insecure and inhospitable place for capitalists and their projects…. We must reclaim the roads and plowed land, halt dam construction, tear down existing dams, free shackled rivers and return to wilderness millions of tens of millions of acres of presently settled land. —David Foreman, Earth First!
Everything we have developed over the last 100 years should be destroyed. —Pentti Linkola
If you ask me, it’d be a little short of disastrous for us to discover a source of clean, cheap, abundant energy because of what we would do with it. We ought to be looking for energy sources that are adequate for our needs, but that won’t give us the excesses of concentrated energy with which we could do mischief to the earth or to each other. —Amory Lovins in The Mother Earth–Plowboy Interview, Nov/Dec 1977, p.22
The only real good technology is no technology at all. Technology is taxation without representation, imposed by our elitist species (man) upon the rest of the natural world. —John Shuttleworth
What we’ve got to do in energy conservation is try to ride the global warming issue. Even if the theory of global warming is wrong, to have approached global warming as if it is real means energy conservation, so we will be doing the right thing anyway in terms of economic policy and environmental policy. —Timothy Wirth, former U.S. Senator (D-Colorado)
I suspect that eradicating smallpox was wrong. It played an important part in balancing ecosystems. —John Davis, editor of Earth First! Journal
Human beings, as a species, have no more value than slugs. —John Davis, editor of Earth First! Journal
The extinction of the human species may not only be inevitable but a good thing....This is not to say that the rise of human civilization is insignificant, but there is no way of showing that it will be much help to the world in the long run. —Economist editorial
We advocate biodiversity for biodiversity’s sake. It may take our extinction to set things straight. —David Foreman, Earth First!
Phasing out the human race will solve every problem on earth, social and environmental.—Dave Forman, Founder of Earth First!
If radical environmentalists were to invent a disease to bring human populations back to sanity, it would probably be something like AIDS —Earth First! Newsletter
Human happiness, and certainly human fecundity, is not as important as a wild and healthy planets…Some of us can only hope for the right virus to come along. —David Graber, biologist, National Park Service
The collective needs of non-human species must take precedence over the needs and desires of humans. —Dr. Reed F. Noss, The Wildlands Project
If I were reincarnated, I would wish to be returned to Earth as a killer virus to lower human population levels. —Prince Phillip, World Wildlife Fund
Cannibalism is a “radical but realistic solution to the problem of overpopulation.” —Lyall Watson, The Financial Times, 15 July 1995 Poverty For “Those People”
We, in the green movement, aspire to a cultural model in which killing a forest will be considered more contemptible and more criminal than the sale of 6-year-old children to Asian brothels. —Carl Amery
Every time you turn on an electric light, you are making another brainless baby. —Helen Caldicott, Union of Concerned Scientists
To feed a starving child is to exacerbate the world population problem. —Lamont Cole
If there is going to be electricity, I would like it to be decentralized, small, solar-powered. —Gar Smith, editor of the Earth Island Institute’s online magazine The Edge
The only hope for the world is to make sure there is not another United States: We can’t let other countries have the same number of cars, the amount of industrialization, we have in the U.S. We have to stop these Third World countries right where they are. And it is important to the rest of the world to make sure that they don’t suffer economically by virtue of our stopping them. —Michael Oppenheimer, Environmental Defense Fund
The continued rapid cooling of the earth since WWII is in accord with the increase in global air pollution associated with industrialization, mechanization, urbanization and exploding population. —Reid Bryson, “Global Ecology; Readings towards a rational strategy for Man”, (1971)
The battle to feed humanity is over. In the 1970s, the world will undergo famines. Hundreds of millions of people are going to starve to death in spite of any crash programs embarked upon now. Population control is the only answer. —Paul Ehrlich, in The Population Bomb (1968)
I would take even money that England will not exist in the year 2000. —Paul Ehrlich in (1969)
In ten years all important animal life in the sea will be extinct. Large areas of coastline will have to be evacuated because of the stench of dead fish. —Paul Ehrlich, Earth Day (1970)
Before 1985, mankind will enter a genuine age of scarcity…in which the accessible supplies of many key minerals will be facing depletion. —Paul Ehrlich in (1976)
This [cooling] trend will reduce agricultural productivity for the rest of the century. —Peter Gwynne, Newsweek 1976
There are ominous signs that the earth’s weather patterns have begun to change dramatically and that these changes may portend a drastic decline in food production—with serious political implications for just about every nation on earth. The drop in food production could begin quite soon… The evidence in support of these predictions has now begun to accumulate so massively that meteorologist are hard-pressed to keep up with it. —Newsweek, April 28, (1975)
This cooling has already killed hundreds of thousands of people. If it continues and no strong action is taken, it will cause world famine, world chaos and world war, and this could all come about before the year 2000. —Lowell Ponte in “The Cooling”, 1976
If present trends continue, the world will be about four degrees colder for the global mean temperature in 1990, but eleven degrees colder by the year 2000. … This is about twice what it would take to put us in an ice age. —Kenneth E.F. Watt on air pollution and global cooling, Earth Day (1970)
Sunday, 31 January, 2010
Victoria British Columbia
Captain James Cook, R.N. - 1778Historical Outline
In the spring of 1778 Captain James Cook, R.N., became the first known European to set foot on what is now British Columbia. Permanent European settlement, long delayed, was brought about by the gradual overland penetration of the fur trade companies towards the Pacific Coast.
On March 13, 1843, Chief Factor of the Hudson's Bay Company James Douglas, accompanied by the pioneer Roman Catholic missionary Father J.B.Z. Bolduc, anchored off Clover Point in the "Beaver." The next day he selected the site for Fort Victoria. By mid-June Chief Factor Charles Ross was busy at work constructing the new post.
The Hudson's Bay Company - 1843
The Hudson's Bay Company - 1843Hence the City of Victoria was founded by the Hudson's Bay Company on March 14, 1843, as a trading post and fort at the location the native Indians called "Camosack" meaning "Rush of Water." Anticipating that under the Oregon Treaty, then being drawn up, the 49th parallel would be chosen as the International Boundary Line, the Hudson's Bay Company moved its fort from Vancouver on the Columbia River to the southern end of Vancouver Island. Thereafter, for a short time, it was known locally as "Fort Albert," but by resolution passed by the Council of the Northern Department of the Company meeting at Fort Garry on June 10, 1843, it was officially named
"Fort Victoria" after the great British Queen.
To buttress the British claim north of the 49th parallel, the Hudson's Bay Company, by Royal Grant dated January 13, 1849, received title to the whole of Vancouver Island, but only on condition that colonization should be undertaken. By midsummer Chief Factor James Douglas was in residence at Fort Victoria to begin this task, with the assistance of his colleagues in the fur trade.
Crown Colony of Vancouver Island - 1849
To buttress the British claim north of the 49th parallel, the Hudson's Bay Company, by Royal Grant dated January 13, 1849, received title to the whole of Vancouver Island, but only on condition that colonization should be undertaken. By midsummer Chief Factor James Douglas was in residence at Fort Victoria to begin this task, with the assistance of his colleagues in the fur trade.
Crown Colony of Vancouver Island - 1849Constitutional history began in 1849 with the creation by the Imperial Government of the Crown Colony of Vancouver Island and on March 11, 1850, Richard Blanshard formally assumed office as Governor of the Colony of Vancouver Island.
It was a wintry day, but every effort was made to make the ceremony as impressive as the rudeness of the surroundings at Fort Victoria would permit. A salute of seventeen guns roared out from "H.M.S. Driver" and was answered from the bastion of the fort. All available British residents and a complement of sailors from the "Driver" were assembled in front of the fort to hear the newly-arrived Governor read the Royal Commission, appointing him the first Governor of the first Crown Colony to be established in British territory west of the Great Lakes.
City Incorporation - 1862
The name "Victoria" was adopted when the townsite was laid out in 1852. Victoria was incorporated as a City on August 2, 1862. Mr. Thomas Harris was elected (by acclamation) as Victoria's first Mayor on August 16, 1862, and he presided at the City Council's first meeting held on August 25, 1862.
The Gold Rush - 1858
The Gold Rush - 1858The life of the little community of Victoria, numbering 450 men, women and children in 1853, centered in the business of the Hudson's Bay Company until 1858 when gold was discovered on the mainland of British Columbia.
Then miners and adventurers from the gold fields of California and Australia, and indeed from all parts of the world, flocked to Victoria which was the only ocean port and outfitting centre for the gold fields of the Cariboo.
The first ship bringing these modern argonauts, the "Commodore" - a wooden side-wheel American steamer, entered Victoria harbour on Sunday morning, April 25, 1858, just as the townspeople were returning homeward from church. With astonishment, they watched as 450 men disembarked - typical gold-seekers, complete with blankets, miner's pans and spades and firearms; and it is estimated that within a few weeks, over 20,000 had landed.
The gold rush was on in earnest and the quiet of Victoria shattered forever. Overnight, as it were, a City of tents sprang up around the fort and quickly spread out over both sides of James Bay. While the great majority of these people were only transients, the rush of gold-seekers on the way to the diggings on the Fraser River suddenly transformed "Fort Victoria" from a sleepy village into a bustling commercial centre. A wild land-boom followed, and one reads of city lots that were going begging one day at $25 apiece, being eagerly snapped up a week later at $3,000 each.
With the discovery of gold on the Fraser and Thompson Rivers on the mainland, and in consequence of the ensuing "rush," the Crown Colony of British Columbia was inaugurated at Fort Langley on November 19, 1858, with the subsequent decision to "lay out and settle the site of a city to be the capital of British Columbia on February 14, 1859, at New Westminster."
Union of the Colonies - 1866
With the discovery of gold on the Fraser and Thompson Rivers on the mainland, and in consequence of the ensuing "rush," the Crown Colony of British Columbia was inaugurated at Fort Langley on November 19, 1858, with the subsequent decision to "lay out and settle the site of a city to be the capital of British Columbia on February 14, 1859, at New Westminster."
Union of the Colonies - 1866
With the waning of the gold excitement, the continued separate existence of the Crown Colonies of Vancouver Island and British Columbia became costly and impractical. Early in August 1866, an Act for the Union of the colonies was passed by the Imperial Parliament.
It became effective at noon on November 19, 1866, when it was proclaimed simultaneously in the two capitals. In Victoria, there was no rejoicing, and in New Westminster only a "small knot of people" gathered in front of the government offices to hear the Acting High Sheriff of British Columbia, J.A.R. Homer, read the proclamation. Not a cheer was raised.
"The Birdcages"
Parliamentary government in British Columbia dates back to August 12, 1856, when Governor James Douglas convened the first Legislative Assembly of Vancouver Island within Fort Victoria. In 1859 government buildings were constructed at James Bay, south Fort, and christened "The Birdcages."
"The Birdcages"Parliamentary government in British Columbia dates back to August 12, 1856, when Governor James Douglas convened the first Legislative Assembly of Vancouver Island within Fort Victoria. In 1859 government buildings were constructed at James Bay, south Fort, and christened "The Birdcages."
In continuous use for almost forty years(except for the brief period 1866-68 when New Westminster, not Victoria, was the capital) they were replaced in the 1890's by the present Parliament Buildings, completed late in 1897. The formal opening took place on February 10, 1898, when Lieutenant Governor R.R. MacInnes drove up in his carriage to open the first session of the Provincial Legislature to be held in the new buildings.
Confederation - The Capital City - 1871
Confederation - The Capital City - 1871
On July 21, 1871, British Columbia became the sixth province of the Dominion of Canada and Victoria was proclaimed the Capital City. The achievement of Confederation was no simple undertaking. The colonial legislative Council had for weeks in March, 1870, debated the terms of union and, agreement reached, three delegates were appointed to negotiate with the federal government.
Dr. J.S. Helmcken from Victoria, Dr. R.W.W. Carrall from Cariboo, and Hon. J.W. Trutch, senior government official, left Victoria on May 10 and, travelling of necessity most of the way through the United States, reached Ottawa early in June to begin the negotiations which were to reach their culmination the following year. With Confederation, the continued establishment of the British or Canadian naval and military headquarters on the Pacific at Esquimalt, adjoining Victoria, was guaranteed.
Victoria Biography
Victoria is Western Canada's oldest city. The City began in 1843 as a Hudson Bay Company trading post, named in honour of Queen Victoria.
With the Fraser Valley gold rush in 1858, Victoria grew rapidly as the main port of entry to the Colonies of Vancouver Island and British Columbia. When the colonies combined, the City became the colonial capital and was established as the provincial capital when British Columbia joined the Canadian Confederation in 1871.
For most of the nineteenth century, Victoria remained the largest city in British Columbia and was the foremost in trade and commerce. However, with construction of the Transcontinental railway, Vancouver, as its terminus, emerged as the major west coast port and the largest city in British Columbia.
In the twentieth century, Victoria evolved primarily as a city of government, retirement and tourism. The City remains, however, Canada's western naval base and home to a major fishing fleet. Ship building and repair, as well as forest products and machine manufacturing industries, continue as significant sources of employment.
Victoria Biography
Victoria is Western Canada's oldest city. The City began in 1843 as a Hudson Bay Company trading post, named in honour of Queen Victoria.
With the Fraser Valley gold rush in 1858, Victoria grew rapidly as the main port of entry to the Colonies of Vancouver Island and British Columbia. When the colonies combined, the City became the colonial capital and was established as the provincial capital when British Columbia joined the Canadian Confederation in 1871.
For most of the nineteenth century, Victoria remained the largest city in British Columbia and was the foremost in trade and commerce. However, with construction of the Transcontinental railway, Vancouver, as its terminus, emerged as the major west coast port and the largest city in British Columbia.
In the twentieth century, Victoria evolved primarily as a city of government, retirement and tourism. The City remains, however, Canada's western naval base and home to a major fishing fleet. Ship building and repair, as well as forest products and machine manufacturing industries, continue as significant sources of employment.
Increasingly, the city is developing as a marine, forestry and agricultural research centre. The City is also noted for its fine educational institutions which include the University of Victoria, Lester B. Pearson College of the Pacific (one of only six in the world operated by United World Colleges), and the recently opened Royal Roads University.
Today (20o9) with an estimated regional population of 326,000, a moderate climate and scenic setting, Victoria has retained a very vital but comfortable quality of life. The City is proud of its British heritage, its fine homes and neighbourhoods, its historic and attractive downtown, the flowers and parks and, of course, the Inner Harbour with its vistas toward the famous Empress Hotel and the Parliament Buildings.
In a survey conducted by Conde Nast Traveller magazine, Victoria was judged to be one of the world's best cities, topping the list in the category of environment and ambience. In a cross-Canada survey, Victoria residents registered the greatest satisfaction with their city.
Today (20o9) with an estimated regional population of 326,000, a moderate climate and scenic setting, Victoria has retained a very vital but comfortable quality of life. The City is proud of its British heritage, its fine homes and neighbourhoods, its historic and attractive downtown, the flowers and parks and, of course, the Inner Harbour with its vistas toward the famous Empress Hotel and the Parliament Buildings.
In a survey conducted by Conde Nast Traveller magazine, Victoria was judged to be one of the world's best cities, topping the list in the category of environment and ambience. In a cross-Canada survey, Victoria residents registered the greatest satisfaction with their city.
This satisfaction and regard for the quality of life and environment is perhaps the most notable feature of Victoria today, and the challenge in its future.
The Battle of the Titans
JP Morgan Versus Goldman Sachs, Or Why the Market Was Down for 7 Days in a Row
We are witnessing an epic battle between two banking giants, JPMorgan Chase (Paul Volcker) and Goldman Sachs (Geithner/Summers/Rubin). Left strewn on the battleground could be your pension fund and 401K.
The late Libertarian economist Murray Rothbard wrote that U.S. politics since 1900, when William Jennings Bryan narrowly lost the presidency, has been a struggle between two competing banking giants, the Morgans and the Rockefellers. The parties would sometimes change hands, but the puppeteers pulling the strings were always one of these two big-money players. No popular third party candidate had a real chance at winning, because the bankers had the exclusive power to create the national money supply and therefore held the winning cards.
In 2000, the Rockefellers and the Morgans joined forces, when JPMorgan and Chase Manhattan merged to become JPMorgan Chase Co. Today the battling banking titans are JPMorgan Chase and Goldman Sachs, an investment bank that gained notoriety for its speculative practices in the 1920s. In 1928, it launched the Goldman Sachs Trading Corp., a closed-end fund similar to a Ponzi scheme.
The fund failed in the stock market crash of 1929, marring the firm's reputation for years afterwards.
Former Treasury Secretaries Henry Paulson, Robert Rubin, and Larry Summers all came from Goldman, and current Treasury Secretary Timothy Geithner rose through the ranks of government as a Summers/Rubin protégé.
One commentator called the U.S. Treasury “Goldman Sachs South.”
Goldman’s superpower status comes from something more than just access to the money spigots of the banking system.
It actually has the ability to manipulate markets.
Formerly just an investment bank, in 2008 Goldman magically transformed into a bank holding company.
That gave it access to the Federal Reserve’s lending window; but at the same time it remained an investment bank, aggressively speculating in the markets. The upshot was that it can now borrow massive amounts of money at virtually 0% interest, and it can use this money not only to speculate for its own account but to bend markets to its will.
But Goldman Sachs has been caught in this blatant market manipulation so often that the JPMorgan faction of the banking empire has finally had enough.
The voters too have evidently had enough, as demonstrated in the recent upset in Massachusetts that threw the late Senator Ted Kennedy’s Democratic seat to a Republican.
That pivotal loss gave Paul Volcker, chairman of President Obama’s newly formed Economic Recovery Advisory Board, an opportunity to step up to the plate with some proposals for serious banking reform.
Unlike the string of Treasury Secretaries who came to the government through the revolving door of Goldman Sachs, former Federal Reserve Chairman Volcker came up through Chase Manhattan Bank, where he was vice president before joining the Treasury. On January 27, market commentator Bob Chapman wrote in his weekly investment newsletter The International Forecaster:
“A split has occurred between the paper forces of Goldman Sachs and JP Morgan Chase. Mr. Volcker represents Morgan interests. Both sides are Illuminists, but the Morgan side is tired of Goldman’s greed and arrogance. . . . Not that JP Morgan Chase was blameless, they did their looting and damage to the system as well, but not in the high handed arrogant way the others did."
The recall of Volcker is an attempt to reverse the damage as much as possible. That means the influence of Geithner, Summers, Rubin, et al will be put on the back shelf at least for now, as will be the Goldman influence. It will be slowly and subtly phased out. . . .
Washington needs a new face on Wall Street, not that of a criminal syndicate.”
Goldman’s crimes, says Chapman, were that it “got caught stealing. First in naked shorts, then front-running the market, both of which they are still doing, as the SEC looks the other way, and then selling MBS-CDOs to their best clients and simultaneously shorting them.”
Volcker’s proposal would rein in these abuses, either by ending the risky “proprietary trading” (trading for their own accounts) engaged in by the too-big-to-fail banks, or by forcing them to downsize by selling off those portions of their businesses engaging in it.
Until recently, President Obama has declined to support Volcker’s plan, but on January 21 he finally endorsed it.
The immediate reaction of the market was to drop – and drop, day after day. At least, that appeared to be the reaction of the market.
"Financial analyst Max Keiser suggests a more sinister possibility. Goldman, which has the power to manipulate markets with its high-speed program trades, may be engaging in a Mexican standoff."
The veiled threat is, “Back off on the banking reforms, or stand by and watch us continue to crash your markets.”
The same manipulations were evident in the bank bailout forced on Congress by Treasury Secretary Hank Paulson in September 2008.
In Keiser’s January 23 broadcast with co-host Stacy Herbert, he explains how Goldman’s manipulations are done. Keiser is a fast talker, so this transcription is not verbatim, but it is close. He says:
“High frequency trading accounts for 70% of trading on the New York Stock Exchange. Ordinarily, a buyer and a seller show up on the floor, and a specialist determines the price of a trade that would satisfy buyer and seller, and that’s the market price".
"If there are too many sellers and not enough buyers, the specialist lowers the price. High frequency trading as conducted by Goldman means that before the specialist buys and sells and makes that market, Goldman will electronically flood the specialist with thousands and thousands of trades to totally disrupt that process and essentially commandeer that process, for the benefit of siphoning off nickels and dimes for themselves."
"Not only are they siphoning cash from the New York Stock Exchange but they are also manipulating prices. What I see as a possibility is that next week, if the bankers on Wall Street decide they don’t want to be reformed in any way, they simply set the high frequency trading algorithm to sell, creating a huge negative bias for the direction of stocks. And they’ll basically crash the market, and it will be a standoff."
"The market was down three days in a row, which it hasn’t been since last summer. It’s a game of chicken, till Obama says, ‘Okay, maybe we need to rethink this.’”
But the President hasn’t knuckled under yet. In his State of the Union address on January 27, he did not dwell long on the issue of bank reform, but he held to his position. He said:
“We can't allow financial institutions, including those that take your deposits, to take risks that threaten the whole economy. The House has already passed financial reform with many of these changes."
"And the lobbyists are already trying to kill it. Well, we cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back.”
What this “real reform” would look like was left to conjecture, but Bob Chapman fills in some blanks and suggests what might be needed for an effective overhaul:
“The attempt will be to bring the financial system back to brass tacks. . . . That would include little or no MBS and CDOs, the regulation of derivatives and hedge funds and the end of massive market manipulation, both by Treasury, Fed and Wall Street players."
Congress has to end the ‘President’s Working Group on Financial Markets,’ or at least limit its use to real emergencies. . . . The Glass-Steagall Act should be reintroduced into the system and lobbying and campaign contributions should end. . . . No more politics in lending and banks should be limited to a lending ratio of 10 to 1. . . . It is bad enough they have the leverage that they have. State banks such as North Dakota’s are a better idea.”
On January 28, the predictable reaction of “the market” was to fall for the seventh straight day.
The battle of the Titans was on.
We are witnessing an epic battle between two banking giants, JPMorgan Chase (Paul Volcker) and Goldman Sachs (Geithner/Summers/Rubin). Left strewn on the battleground could be your pension fund and 401K.
The late Libertarian economist Murray Rothbard wrote that U.S. politics since 1900, when William Jennings Bryan narrowly lost the presidency, has been a struggle between two competing banking giants, the Morgans and the Rockefellers. The parties would sometimes change hands, but the puppeteers pulling the strings were always one of these two big-money players. No popular third party candidate had a real chance at winning, because the bankers had the exclusive power to create the national money supply and therefore held the winning cards.
In 2000, the Rockefellers and the Morgans joined forces, when JPMorgan and Chase Manhattan merged to become JPMorgan Chase Co. Today the battling banking titans are JPMorgan Chase and Goldman Sachs, an investment bank that gained notoriety for its speculative practices in the 1920s. In 1928, it launched the Goldman Sachs Trading Corp., a closed-end fund similar to a Ponzi scheme.
The fund failed in the stock market crash of 1929, marring the firm's reputation for years afterwards.
Former Treasury Secretaries Henry Paulson, Robert Rubin, and Larry Summers all came from Goldman, and current Treasury Secretary Timothy Geithner rose through the ranks of government as a Summers/Rubin protégé.
One commentator called the U.S. Treasury “Goldman Sachs South.”
Goldman’s superpower status comes from something more than just access to the money spigots of the banking system.
It actually has the ability to manipulate markets.
Formerly just an investment bank, in 2008 Goldman magically transformed into a bank holding company.
That gave it access to the Federal Reserve’s lending window; but at the same time it remained an investment bank, aggressively speculating in the markets. The upshot was that it can now borrow massive amounts of money at virtually 0% interest, and it can use this money not only to speculate for its own account but to bend markets to its will.
But Goldman Sachs has been caught in this blatant market manipulation so often that the JPMorgan faction of the banking empire has finally had enough.
The voters too have evidently had enough, as demonstrated in the recent upset in Massachusetts that threw the late Senator Ted Kennedy’s Democratic seat to a Republican.
That pivotal loss gave Paul Volcker, chairman of President Obama’s newly formed Economic Recovery Advisory Board, an opportunity to step up to the plate with some proposals for serious banking reform.
Unlike the string of Treasury Secretaries who came to the government through the revolving door of Goldman Sachs, former Federal Reserve Chairman Volcker came up through Chase Manhattan Bank, where he was vice president before joining the Treasury. On January 27, market commentator Bob Chapman wrote in his weekly investment newsletter The International Forecaster:
“A split has occurred between the paper forces of Goldman Sachs and JP Morgan Chase. Mr. Volcker represents Morgan interests. Both sides are Illuminists, but the Morgan side is tired of Goldman’s greed and arrogance. . . . Not that JP Morgan Chase was blameless, they did their looting and damage to the system as well, but not in the high handed arrogant way the others did."
The recall of Volcker is an attempt to reverse the damage as much as possible. That means the influence of Geithner, Summers, Rubin, et al will be put on the back shelf at least for now, as will be the Goldman influence. It will be slowly and subtly phased out. . . .
Washington needs a new face on Wall Street, not that of a criminal syndicate.”
Goldman’s crimes, says Chapman, were that it “got caught stealing. First in naked shorts, then front-running the market, both of which they are still doing, as the SEC looks the other way, and then selling MBS-CDOs to their best clients and simultaneously shorting them.”
Volcker’s proposal would rein in these abuses, either by ending the risky “proprietary trading” (trading for their own accounts) engaged in by the too-big-to-fail banks, or by forcing them to downsize by selling off those portions of their businesses engaging in it.
Until recently, President Obama has declined to support Volcker’s plan, but on January 21 he finally endorsed it.
The immediate reaction of the market was to drop – and drop, day after day. At least, that appeared to be the reaction of the market.
"Financial analyst Max Keiser suggests a more sinister possibility. Goldman, which has the power to manipulate markets with its high-speed program trades, may be engaging in a Mexican standoff."
The veiled threat is, “Back off on the banking reforms, or stand by and watch us continue to crash your markets.”
The same manipulations were evident in the bank bailout forced on Congress by Treasury Secretary Hank Paulson in September 2008.
In Keiser’s January 23 broadcast with co-host Stacy Herbert, he explains how Goldman’s manipulations are done. Keiser is a fast talker, so this transcription is not verbatim, but it is close. He says:
“High frequency trading accounts for 70% of trading on the New York Stock Exchange. Ordinarily, a buyer and a seller show up on the floor, and a specialist determines the price of a trade that would satisfy buyer and seller, and that’s the market price".
"If there are too many sellers and not enough buyers, the specialist lowers the price. High frequency trading as conducted by Goldman means that before the specialist buys and sells and makes that market, Goldman will electronically flood the specialist with thousands and thousands of trades to totally disrupt that process and essentially commandeer that process, for the benefit of siphoning off nickels and dimes for themselves."
"Not only are they siphoning cash from the New York Stock Exchange but they are also manipulating prices. What I see as a possibility is that next week, if the bankers on Wall Street decide they don’t want to be reformed in any way, they simply set the high frequency trading algorithm to sell, creating a huge negative bias for the direction of stocks. And they’ll basically crash the market, and it will be a standoff."
"The market was down three days in a row, which it hasn’t been since last summer. It’s a game of chicken, till Obama says, ‘Okay, maybe we need to rethink this.’”
But the President hasn’t knuckled under yet. In his State of the Union address on January 27, he did not dwell long on the issue of bank reform, but he held to his position. He said:
“We can't allow financial institutions, including those that take your deposits, to take risks that threaten the whole economy. The House has already passed financial reform with many of these changes."
"And the lobbyists are already trying to kill it. Well, we cannot let them win this fight. And if the bill that ends up on my desk does not meet the test of real reform, I will send it back.”
What this “real reform” would look like was left to conjecture, but Bob Chapman fills in some blanks and suggests what might be needed for an effective overhaul:
“The attempt will be to bring the financial system back to brass tacks. . . . That would include little or no MBS and CDOs, the regulation of derivatives and hedge funds and the end of massive market manipulation, both by Treasury, Fed and Wall Street players."
Congress has to end the ‘President’s Working Group on Financial Markets,’ or at least limit its use to real emergencies. . . . The Glass-Steagall Act should be reintroduced into the system and lobbying and campaign contributions should end. . . . No more politics in lending and banks should be limited to a lending ratio of 10 to 1. . . . It is bad enough they have the leverage that they have. State banks such as North Dakota’s are a better idea.”
On January 28, the predictable reaction of “the market” was to fall for the seventh straight day.
The battle of the Titans was on.
Quotes from the Dow theory founding fathers on non-confirmations.
Robert Rhea – “A wise man lets the market alone when the averages disagree.”
Robert Rhea – “When the averages disagree they are shouting ‘be careful.'”
Robert Rhea – “The most useful part of the Dow theory, and the part that must never be forgotten for even a day, is the fact that no price movement is worthy of consideration unless the movement is confirmed by both averages.”
William Peter Hamilton – “In the study of the price movement, based upon Dow’s theory, so successfully applied in The Wall Street Journal for the last twenty years or more, it has been repeatedly found that the two averages must confirm each other to give an authoritative prediction.”
William Peter Hamilton – “Independent movements on previous experience are usually deceptive, but when both averages advance or decline together, the indication of a uniform market movement is good.”
William Peter Hamilton – “A new low or a new high made by the one (average) but not confirmed by the other, is almost invariably deceptive. The reason is not far to seek. One group of securities acts upon the other; and if the market for Railroad stocks is sold out, it cannot lift the whole list with it if there is a superabundant supply of the Industrials.”
William Peter Hamilton – “It seems a clear inference in a movement where the averages do not confirm each other that uncertainty still continues as concerns the business outlook.”
William Peter Hamilton – “The movement of both the railroad and industrial stock averages should always be considered together. The movement of one price average must be confirmed by the other before reliable inferences may be drawn. Conclusions based upon the movement of one average, unconfirmed by the other, are almost certain to prove misleading.”
William Peter Hamilton – “Dow’s theory stipulates for a confirmation of one average by the other. This constantly occurs at the inception of a primary movement, but is anything but consistently present when the market turns for a secondary swing.”
William Peter Hamilton – “When one breaks through an old low level without the other, or when one establishes a new high for the short swing, unsupported, the inference is almost invariably deceptive.”
William Peter Hamilton – “Indeed it may be said that a new high or a new low by one of the averages unconfirmed by the other has been invariably deceptive. New high or low points for both have preceded every major movement since the averages were established.”
William Peter Hamilton – “The two averages may vary in strength, but they will not vary materially in direction especially in a major movement. Throughout all the years in which both averages have been kept, this rule has proved entirely dependable. It is not only true in the major swings of the market, but it is approximately true of the secondary actions and rallies. It would not be true of the daily fluctuations, and it might be utterly misleading so far as individual stocks are concerned.”
Robert Rhea – “When the averages disagree they are shouting ‘be careful.'”
Robert Rhea – “The most useful part of the Dow theory, and the part that must never be forgotten for even a day, is the fact that no price movement is worthy of consideration unless the movement is confirmed by both averages.”
William Peter Hamilton – “In the study of the price movement, based upon Dow’s theory, so successfully applied in The Wall Street Journal for the last twenty years or more, it has been repeatedly found that the two averages must confirm each other to give an authoritative prediction.”
William Peter Hamilton – “Independent movements on previous experience are usually deceptive, but when both averages advance or decline together, the indication of a uniform market movement is good.”
William Peter Hamilton – “A new low or a new high made by the one (average) but not confirmed by the other, is almost invariably deceptive. The reason is not far to seek. One group of securities acts upon the other; and if the market for Railroad stocks is sold out, it cannot lift the whole list with it if there is a superabundant supply of the Industrials.”
William Peter Hamilton – “It seems a clear inference in a movement where the averages do not confirm each other that uncertainty still continues as concerns the business outlook.”
William Peter Hamilton – “The movement of both the railroad and industrial stock averages should always be considered together. The movement of one price average must be confirmed by the other before reliable inferences may be drawn. Conclusions based upon the movement of one average, unconfirmed by the other, are almost certain to prove misleading.”
William Peter Hamilton – “Dow’s theory stipulates for a confirmation of one average by the other. This constantly occurs at the inception of a primary movement, but is anything but consistently present when the market turns for a secondary swing.”
William Peter Hamilton – “When one breaks through an old low level without the other, or when one establishes a new high for the short swing, unsupported, the inference is almost invariably deceptive.”
William Peter Hamilton – “Indeed it may be said that a new high or a new low by one of the averages unconfirmed by the other has been invariably deceptive. New high or low points for both have preceded every major movement since the averages were established.”
William Peter Hamilton – “The two averages may vary in strength, but they will not vary materially in direction especially in a major movement. Throughout all the years in which both averages have been kept, this rule has proved entirely dependable. It is not only true in the major swings of the market, but it is approximately true of the secondary actions and rallies. It would not be true of the daily fluctuations, and it might be utterly misleading so far as individual stocks are concerned.”
The China Controversy and the Stock Market
The news spotlight recently was stolen by Google, the Internet search engine giant. A statement issued by Google a couple of weeks ago was greeted by dismay on Wall Street as shares retreated in response to the company’s announcement that it no longer supports China’s censoring of searches that take place on the Google platform. China has defended its extensive censorship after Google threatened to withdraw from the country.
Adding fuel to the controversy, the Obama Administration announced that it backs Google’s decision to protest China’s censorship efforts. In a Reuters report, Obama responded to a question as to whether the issue would cloud U.S.-China relations by saying that the human rights would not be “carved out” for certain countries. This marks at least the second time this year that the White House has taken a stand against China (the first conflict occurring over tire imports).
Without wishing to dramatize an already volatile situation even further, let’s take some time to examine a critically important issue for U.S. and global investment markets. We’ll take pains to avoid the potential political and military ramifications surrounding the U.S.-China issue, focusing instead on the financial implications.
Let me first say by way of disclaimer that any time the topic of discussion turns to China there will always be a certain level of nebulousness and confusion surrounding the issues being discussed. China is very much like Sigmund Freud’s “Dark Continent” in that the lack of transparency in that great country, coupled with Communist Party propaganda, makes it difficult to discern the true state of affairs.
I’ve followed the China musings of several analysts in recent years and have always been perplexed at how there can be so much disparity among what these analysts are proclaiming on any given issue concerning China. Sometimes their statements are diametrically opposed on the issues under discussion, leading one to ask,
“How can so many China observers be so completely at odds with each other in their observations and conclusions?”
In light of the recent Google-China conflict, however, I’ve come to the realization that one of the sources I’ve been reading is probably more correct than some of the others. I’m referring to the FRC Money Forecast Letter and its sister publication, The U.S.A./China Letter.
For some time now FRC has been forecasting a turnaround in U.S.-based manufacturers here at home based on the contention that U.S. firms in China have already begun a slow exodus from the country.
Apparently these firms are discovering that the pot of gold promised to U.S. firms doing business in China hasn’t been forthcoming. It also turns out, according to FRC, that China’s government courted U.S. firms to set up shop in China, only for these U.S. firms to have their technology and intellectual property stolen from them.
Now that China has complete access to Western technology and production methods, they no longer have need for these firms. And so the exodus continues with Google representing the latest in a growing number of U.S. corporations that have exited China in recent times.
But the Google issue isn’t the only one troubling the great Red country. It’s free ride at the expense of America’s long-term thirst for foreign imports has apparently ended. One factor that has helped create a reversal of China’s longstanding dominance in the U.S. as a net exporter is the continued weakness of the dollar.
The weak dollar has helped to bolster America’s trade balance at the expense of China.
In an article by the Grameen Foundation it was observed,
“The sliding dollar has already begun swelling the total new manufacturing orders.” Grameen asks rhetorically,
“Will manufacturing jobs shipped overseas due to cheap labor come back to the United States due to the current financial crisis?” Grameen goes on to point out that a large number of Chinese factories are closed there due to the scaled back spending by American consumers. Grameen asks further,
“Now what effect does this have in bringing manufacturing back to the United States?” Grameen continues:
“The primary reason manufacturers move overseas is purely cost savings. Companies do not move to China for any reasons other than cheap labor. So cheap labor drove manufacturing companies overseas. But America’s cost structure was not rising – it was falling. Meanwhile, China’s costs were rising fast.
All of this could bring a massive readjustment in currency values. What would that mean?
First, a reduction in the value of the U.S. Dollar. What would a weak dollar really do?
A low value dollar, along with a rising yuan (China’s currency) could make any manufacturing overseas commercial unfeasible. That is, the American companies would see no reason to set up factories in China to export to the U.S.”
This analysis confirms what has been seen in recent times, most notably underscored by the Google controversy.
All of this leads us to ask, if in fact U.S. firms begin a mass exodus out of China and back to the home land, and if current U.S. export and consumption trends continue, what impact will all of this have on U.S.-China relations?
Or more to the point of this analysis, how will China’s economy withstand the shock this would almost certainly create? Already, according to FRC and other sources, there are telltale signs that China is heading down the same primrose path that was trod by America not many years ago – the path that leads to economic perdition. FRC explains:
“The latest data from Red China [shows] State-owned banks have been throwing cash at any communist party member who wants cash to buy. It is all part of a plan to replace consumer sales to Americans. The trouble is that this fast spread of easy money has already begun producing a giant expansion of bad debts in China.”
Is China’s economy setting up for its first major debacle since its aggressive growth spurt began?
If so, it will almost certainly be preceded by a pronounced decline in China share prices. To that end, we’ll be focusing our attention closely on the Shanghai Composite stock index as well as our favorite proxy for U.S. listed China shares, the China 25 Index Fund (FXI).
Adrian Van Eck, in a recent edition of the Money Forecast Letter, observed:
“But there is one nation that is riding a bubble right now and that nation is the People’s Republic of China. Henry Kissinger once told President Nixon that the Chinese people are the smartest on Earth.
Yet there is a defect in their official national character that has brought them from very high levels of achievement to very low levels of failure a dozen times over the past 4,000 years. They would build dynasties and conquer nations on all sides, forcing these captive people to pay tribute to the Chinese Imperial Court.
“But then pride turned to arrogance and arrogance caused them to make mistakes – big mistakes and a lot of them….Each time that one of their dozen rich dynasties fell, China endured long periods of awful poverty.
I suspect that will happen again….The Chinese State Bank is spreading billions of dollars in loans around to encourage wild consumer spending by communist party members…all to replace lost sales resulting from the sharp drop off in American consumer products important from China. China’s money has been pushed up in value 20% since Bernanke took over the Fed. Greenspan allowed them to cut the value of their Yuan by a lot (the higher the number per dollar the cheaper the yuan) and then freeze it.”
Van Eck concluded, “Because of strong domestic inflation, China can no longer afford the kind of cheap prices they have offered [in the past]. The game is about over for them. And at the same time I expect manufacturing plants to begin coming back to America.”
Over the past few years the China 25 Index Fund ETF (FXI) has been an important indicator for the direction of the global emerging markets, as well as China’s economy. Of technical significance the 30-week (150-day) moving average has been an excellent tool for plotting the trend of the FXI. The 30-week MA has acted as a key support and resistance for FXI many times over the last few years, as the following charts shows. (Click to enlarge)
Adding fuel to the controversy, the Obama Administration announced that it backs Google’s decision to protest China’s censorship efforts. In a Reuters report, Obama responded to a question as to whether the issue would cloud U.S.-China relations by saying that the human rights would not be “carved out” for certain countries. This marks at least the second time this year that the White House has taken a stand against China (the first conflict occurring over tire imports).
Without wishing to dramatize an already volatile situation even further, let’s take some time to examine a critically important issue for U.S. and global investment markets. We’ll take pains to avoid the potential political and military ramifications surrounding the U.S.-China issue, focusing instead on the financial implications.
Let me first say by way of disclaimer that any time the topic of discussion turns to China there will always be a certain level of nebulousness and confusion surrounding the issues being discussed. China is very much like Sigmund Freud’s “Dark Continent” in that the lack of transparency in that great country, coupled with Communist Party propaganda, makes it difficult to discern the true state of affairs.
I’ve followed the China musings of several analysts in recent years and have always been perplexed at how there can be so much disparity among what these analysts are proclaiming on any given issue concerning China. Sometimes their statements are diametrically opposed on the issues under discussion, leading one to ask,
“How can so many China observers be so completely at odds with each other in their observations and conclusions?”
In light of the recent Google-China conflict, however, I’ve come to the realization that one of the sources I’ve been reading is probably more correct than some of the others. I’m referring to the FRC Money Forecast Letter and its sister publication, The U.S.A./China Letter.
For some time now FRC has been forecasting a turnaround in U.S.-based manufacturers here at home based on the contention that U.S. firms in China have already begun a slow exodus from the country.
Apparently these firms are discovering that the pot of gold promised to U.S. firms doing business in China hasn’t been forthcoming. It also turns out, according to FRC, that China’s government courted U.S. firms to set up shop in China, only for these U.S. firms to have their technology and intellectual property stolen from them.
Now that China has complete access to Western technology and production methods, they no longer have need for these firms. And so the exodus continues with Google representing the latest in a growing number of U.S. corporations that have exited China in recent times.
But the Google issue isn’t the only one troubling the great Red country. It’s free ride at the expense of America’s long-term thirst for foreign imports has apparently ended. One factor that has helped create a reversal of China’s longstanding dominance in the U.S. as a net exporter is the continued weakness of the dollar.
The weak dollar has helped to bolster America’s trade balance at the expense of China.
In an article by the Grameen Foundation it was observed,
“The sliding dollar has already begun swelling the total new manufacturing orders.” Grameen asks rhetorically,
“Will manufacturing jobs shipped overseas due to cheap labor come back to the United States due to the current financial crisis?” Grameen goes on to point out that a large number of Chinese factories are closed there due to the scaled back spending by American consumers. Grameen asks further,
“Now what effect does this have in bringing manufacturing back to the United States?” Grameen continues:
“The primary reason manufacturers move overseas is purely cost savings. Companies do not move to China for any reasons other than cheap labor. So cheap labor drove manufacturing companies overseas. But America’s cost structure was not rising – it was falling. Meanwhile, China’s costs were rising fast.
All of this could bring a massive readjustment in currency values. What would that mean?
First, a reduction in the value of the U.S. Dollar. What would a weak dollar really do?
A low value dollar, along with a rising yuan (China’s currency) could make any manufacturing overseas commercial unfeasible. That is, the American companies would see no reason to set up factories in China to export to the U.S.”
This analysis confirms what has been seen in recent times, most notably underscored by the Google controversy.
All of this leads us to ask, if in fact U.S. firms begin a mass exodus out of China and back to the home land, and if current U.S. export and consumption trends continue, what impact will all of this have on U.S.-China relations?
Or more to the point of this analysis, how will China’s economy withstand the shock this would almost certainly create? Already, according to FRC and other sources, there are telltale signs that China is heading down the same primrose path that was trod by America not many years ago – the path that leads to economic perdition. FRC explains:
“The latest data from Red China [shows] State-owned banks have been throwing cash at any communist party member who wants cash to buy. It is all part of a plan to replace consumer sales to Americans. The trouble is that this fast spread of easy money has already begun producing a giant expansion of bad debts in China.”
Is China’s economy setting up for its first major debacle since its aggressive growth spurt began?
If so, it will almost certainly be preceded by a pronounced decline in China share prices. To that end, we’ll be focusing our attention closely on the Shanghai Composite stock index as well as our favorite proxy for U.S. listed China shares, the China 25 Index Fund (FXI).
Adrian Van Eck, in a recent edition of the Money Forecast Letter, observed:
“But there is one nation that is riding a bubble right now and that nation is the People’s Republic of China. Henry Kissinger once told President Nixon that the Chinese people are the smartest on Earth.
Yet there is a defect in their official national character that has brought them from very high levels of achievement to very low levels of failure a dozen times over the past 4,000 years. They would build dynasties and conquer nations on all sides, forcing these captive people to pay tribute to the Chinese Imperial Court.
“But then pride turned to arrogance and arrogance caused them to make mistakes – big mistakes and a lot of them….Each time that one of their dozen rich dynasties fell, China endured long periods of awful poverty.
I suspect that will happen again….The Chinese State Bank is spreading billions of dollars in loans around to encourage wild consumer spending by communist party members…all to replace lost sales resulting from the sharp drop off in American consumer products important from China. China’s money has been pushed up in value 20% since Bernanke took over the Fed. Greenspan allowed them to cut the value of their Yuan by a lot (the higher the number per dollar the cheaper the yuan) and then freeze it.”
Van Eck concluded, “Because of strong domestic inflation, China can no longer afford the kind of cheap prices they have offered [in the past]. The game is about over for them. And at the same time I expect manufacturing plants to begin coming back to America.”
Over the past few years the China 25 Index Fund ETF (FXI) has been an important indicator for the direction of the global emerging markets, as well as China’s economy. Of technical significance the 30-week (150-day) moving average has been an excellent tool for plotting the trend of the FXI. The 30-week MA has acted as a key support and resistance for FXI many times over the last few years, as the following charts shows. (Click to enlarge)
Of interest, the FXI slipped under the 30-week MA on Friday, Jan. 15, as shown in the following chart.
There has also been an observable link between the gold price and the FXI in recent years. Divergences between these two asset prices has often preceded strength or weakness for both. For instance, whenever both the FXI and the gold price have been in decline and the gold price reverses the decline by making a series of higher lows, FXI invariably follows gold’s lead.
Conversely, at tops whenever the FXI is the first to make a lower high the gold price usually follows FXI lower, as was recently the case (see below). It’s therefore important that we follow the relationship between the FXI and the gold price as represented by any of the actively traded gold ETF, such as the SPDR Gold Trust (GLD).
The internal momentum structure of the U.S. listed China shares was previously shown to have noticeably weakened heading into 2010 with most of the momentum indicators making a series of lower highs. Notice the position of the CHINAMO internal momentum series shown below. The legend for interpreting these indicators is as follows:
Dark blue: dominant short-term momentum bias
Pink: dominant internal trend
Orange: sub-dominant interim momentum
Aqua/light blue: dominant interim momentum
Purple: longer-term momentum/bias
This served as a warning signal of potential weakness ahead for China shares as discussed several weeks ago and the indicators still justify a defensive stance on the China stock outlook, and by extension, the near term gold price outlook.
Bear Market Trading
One of the aspects of stock market gurus that is most off-putting to independent traders is the relentless focus on buying stocks with virtually no discussion devoted to when to sell them. The words of the Chinese sage would apply in this case:
“Easy to buy, not so easy to sell.” Stock market guru extraordinaire Jim Cramer is fond of saying, “There’s always a bull market somewhere.”
But what of the opposite of this statement?
The simple fact of the matter is that there is always a bear market underway at any given time somewhere in the stock market and it usually doesn’t require much work to find out where it is.
Rather than focusing all one’s energies on buying stocks at all times, there are times when it’s best to recognize that selling stocks or even selling them short is the best policy.
When the internal path of least resistance within a given market sector is down, it only follows that profits will be made by pursuing a trading strategy that’s in line with the downward trend.
Saturday, 30 January, 2010
CUBA: Zeolite, Mineral of a Thousand Uses
Cuba, which has major reserves of zeolite, aims to boost exploitation of the mineral, whose properties and uses in products and technologies contribute to protecting the environment.
Cuban expert Martha Velásquez believes this non-metallic mineral of volcanic origins will play an essential role in sustainable development. Its various uses range from filtering out toxic gases to recovery and improvement of soils, livestock nutrition and as an additive to cement to create lightweight concrete for construction.
Zeolite's wide range of uses are due to its potential as an exchanger of ions, its capacity for reversible adsorption (the process through which a solid is used to eliminate a water soluble substance), and its function as a natural molecular sieve, which means it can be used to clean up aggressive toxic substances.
It is also capable of ionic exchange in heavy metals, like lead, nickel, iron and cobalt, and of purifying potable and wastewater for appropriate discharge, Velásquez, an expert with the government's Research Centre for the Mining-Metallurgic Industry, told Tierramérica.
Because of its low cost and great versatility, zeolite also plays an important role in agriculture. It can be used to improve soils, boost the effects of chemical and organic fertilisers alike, and as a component of substratum for the development of different crops.
For livestock, it is used as a food additive for several types of animals and in bedding, which results in a fertiliser rich in ammonia and other high-quality substances for farming, said Velásquez.
According to official sources, 70 percent of Cuba's cultivated area suffers from erosion, high salinity or acidity. However, the use of zeolite remains limited in the farming sector, which has yet to recover from the economic crisis of the 1990s triggered by the collapse of the Soviet Union and the East European socialist bloc, Cuba's main aid and trade partners.
The wave of economic recession also interrupted the programmes for mining and development of zeolite, which had been gathering force in the 1980s.
The lack of transport and capital, in addition to other obstacles created by the crisis, put the brakes on zeolite, which had been on its way to widespread use, especially in agriculture.
Velásquez said the current policy for reactivating the farming sector will lead to an expansion of zeolite use.
”We are studying the issue of transport and looking for the most economical options,” she said.
Other experts said that boosting domestic consumption is the priority at the moment.
”We want to employ our resources in the country, but confidence in Cuban zeolite and the technology we've created is needed. Unfortunately, many entrepreneurs are distrustful of local products,” said an official interviewed by the Cuban news media.
As part of the recovery plans, the government is investing in three zeolite plants currently in operation. The goal is to prepare them for a future increase in demand. Improvements are also planned for about a dozen zeolite deposits around the country.
In 2008, Cuba exported 600 tonnes of zeolite. The total in 2009 reached 4,490 tonnes. Among the buyers is Brazil, where among other uses, the mineral goes toward replacing highly polluting sodium tripolyphosphates in the manufacturing of detergents.
There is a high demand for zeolite in the European Union, United States, Canada and some Latin American countries. Prestigious institutions in Brazil and Japan have great faith in the high quality of Cuba's natural deposits, said Velásquez.
”It would be ideal to process the mineral in Cuba and then sell it with greater added value, but we lack financing,” said another expert.
According to studies, there are more than 50 types of zeolitic soils. Clinoptilotite possesses properties best-suited for adsorption filtration and sequestering cations (positively charged ions). Zeolites - ”boiling stones” in Greek - have a cage-like structure formed by tetrahedrons, united by oxygen atoms.
The mineral is most typically found in areas where there were prehistoric volcanoes. The United States, Australia, Turkey, Japan and China, as well as several countries of Africa, are among the leading producers of zeolite, although it is believed the mineral can be found on all continents.
According to data from Cuba's National Office of Mining Resources, there are deposits of zeolite distributed among almost all of the island's provinces.
Cuban expert Martha Velásquez believes this non-metallic mineral of volcanic origins will play an essential role in sustainable development. Its various uses range from filtering out toxic gases to recovery and improvement of soils, livestock nutrition and as an additive to cement to create lightweight concrete for construction.
Zeolite's wide range of uses are due to its potential as an exchanger of ions, its capacity for reversible adsorption (the process through which a solid is used to eliminate a water soluble substance), and its function as a natural molecular sieve, which means it can be used to clean up aggressive toxic substances.
It is also capable of ionic exchange in heavy metals, like lead, nickel, iron and cobalt, and of purifying potable and wastewater for appropriate discharge, Velásquez, an expert with the government's Research Centre for the Mining-Metallurgic Industry, told Tierramérica.
Because of its low cost and great versatility, zeolite also plays an important role in agriculture. It can be used to improve soils, boost the effects of chemical and organic fertilisers alike, and as a component of substratum for the development of different crops.
For livestock, it is used as a food additive for several types of animals and in bedding, which results in a fertiliser rich in ammonia and other high-quality substances for farming, said Velásquez.
According to official sources, 70 percent of Cuba's cultivated area suffers from erosion, high salinity or acidity. However, the use of zeolite remains limited in the farming sector, which has yet to recover from the economic crisis of the 1990s triggered by the collapse of the Soviet Union and the East European socialist bloc, Cuba's main aid and trade partners.
The wave of economic recession also interrupted the programmes for mining and development of zeolite, which had been gathering force in the 1980s.
The lack of transport and capital, in addition to other obstacles created by the crisis, put the brakes on zeolite, which had been on its way to widespread use, especially in agriculture.
Velásquez said the current policy for reactivating the farming sector will lead to an expansion of zeolite use.
”We are studying the issue of transport and looking for the most economical options,” she said.
Other experts said that boosting domestic consumption is the priority at the moment.
”We want to employ our resources in the country, but confidence in Cuban zeolite and the technology we've created is needed. Unfortunately, many entrepreneurs are distrustful of local products,” said an official interviewed by the Cuban news media.
As part of the recovery plans, the government is investing in three zeolite plants currently in operation. The goal is to prepare them for a future increase in demand. Improvements are also planned for about a dozen zeolite deposits around the country.
In 2008, Cuba exported 600 tonnes of zeolite. The total in 2009 reached 4,490 tonnes. Among the buyers is Brazil, where among other uses, the mineral goes toward replacing highly polluting sodium tripolyphosphates in the manufacturing of detergents.
There is a high demand for zeolite in the European Union, United States, Canada and some Latin American countries. Prestigious institutions in Brazil and Japan have great faith in the high quality of Cuba's natural deposits, said Velásquez.
”It would be ideal to process the mineral in Cuba and then sell it with greater added value, but we lack financing,” said another expert.
According to studies, there are more than 50 types of zeolitic soils. Clinoptilotite possesses properties best-suited for adsorption filtration and sequestering cations (positively charged ions). Zeolites - ”boiling stones” in Greek - have a cage-like structure formed by tetrahedrons, united by oxygen atoms.
The mineral is most typically found in areas where there were prehistoric volcanoes. The United States, Australia, Turkey, Japan and China, as well as several countries of Africa, are among the leading producers of zeolite, although it is believed the mineral can be found on all continents.
According to data from Cuba's National Office of Mining Resources, there are deposits of zeolite distributed among almost all of the island's provinces.
The Ultimate Bubble and the Mother of All Carry Trades
Among the many opinions expressed by billionaire investor George Soros over the course of the 2010 World Economic Forum in Davos, Switzerland was his statement on January 28 in an interview with Maria Bartiromo , host of CNBC's Closing Bell, that
"When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold."
New York spot gold closed at $1085.40 down $1.80, but the price of gold is not as much about gold as it is about the value of currencies, particularly the US dollar.
Since new currency is created through lending activity, very low or 0% US interest rates and government deficit spending are fueling a US dollar carry trade and monetary inflation in the US dollar resulting in rising asset prices and global speculation. According to Zhu Min , deputy governor of the People’s Bank of China,
“The US dollar carry trade] is a massive issue; estimates are that it is $1.5 trillion, which is much bigger than Japan’s carry trade.”
The close relationship of global commodity prices, particularly the gold price, to the value of the US dollar can be seen by comparing the changing value of the US Dollar Index to an inverted US dollar spot gold price chart. Click to enlarge
"When interest rates are low we have conditions for asset bubbles to develop, and they are developing at the moment. The ultimate asset bubble is gold."
New York spot gold closed at $1085.40 down $1.80, but the price of gold is not as much about gold as it is about the value of currencies, particularly the US dollar.
Since new currency is created through lending activity, very low or 0% US interest rates and government deficit spending are fueling a US dollar carry trade and monetary inflation in the US dollar resulting in rising asset prices and global speculation. According to Zhu Min , deputy governor of the People’s Bank of China,
“The US dollar carry trade] is a massive issue; estimates are that it is $1.5 trillion, which is much bigger than Japan’s carry trade.”
The close relationship of global commodity prices, particularly the gold price, to the value of the US dollar can be seen by comparing the changing value of the US Dollar Index to an inverted US dollar spot gold price chart. Click to enlarge
The inverted gold price chart follows the USDX closely and while the fluctuations are not strictly proportional the overall trends as well as the peaks and troughs generally correspond, thus the asset price bubbles noted by Mr. Soros are reflections in asset prices of both the US dollar carry trade (the effective value of the US dollar) and, ultimately, of the long-term devaluation of the US dollar, thus the value of the US dollar in real terms.
An “ultimate bubble” in gold could be an offspring of the mother of all carry trades, but its magnitude would depend not only on the effective value and rate of change in value of the US dollar while the carry trade is booming, but also on the actual, eventual value of the US dollar (in real terms) after the carry trade has come to an end. Although the value of the US dollar will certainly recover to some degree when the carry trade ends, it will remain significantly lower in value for other reasons.
US Dollar Devaluation
In the above mentioned interview, Mr. Soros went on to say that "Some countries, like the US and European countries have plenty of room to increase their deficits; [although] the political resistance to doing so increases the chances of a double dip [recession] in the [global] economy in 2011 and after that.
"Since further monetary inflation as a consequence of government deficit spending may be necessary to maintain economic stimulus measures and financial system life support, Mr. Soros anticipates further devaluation of the US dollar. Devaluation of the US dollar will have both beneficial and harmful effects on the US economy.
Devaluation of the US dollar will reduce the value of debts in real terms, reducing the overall debt to GDP ratio of the US economy, and stimulate nominal GDP growth as domestic prices and wages (at different rates) adjust to the altered value of the US dollar, while at the same time helping to create conditions where US banks can resume lending to consumers and small businesses.
Unfortunately, currency devaluation also has deleterious effects, such as higher prices, a loss in the value of savings and a reduction in the real value of wages. There is also a risk of uncontrolled domestic price inflation (although prices can be held in check without raising interest rates by curtailing the flow of money and credit to consumers and small businesses).
In addition to reducing the US debt to GDP ratio, devaluation of the US dollar will lessen the risk of higher interest rates resulting in greater deficit spending by the US government as a consequence of increased debt service ($145.4 billion in fiscal 2009) since it will allow the US federal government’s tax receipts grow faster than the increase in debt service resulting from higher interest rates.
Currently projected US federal government borrowing (or, alternatively, quantitative easing) will maintain downward pressure on the value of the US dollar through the year 2019.
According to the US Office of Management and Budget’s (OMB) baseline projection of current policy, federal deficits will total between $7 and $9 trillion for fiscal 2010 through fiscal 2019 and the US public debt will grow from $12.3 trillion to more than $16 trillion in 2019 (PDF)
If debt held by government accounts is included, total US federal government debt will exceed $23 trillion in 2019, setting aside the net present value of unfunded federal liabilities based on Generally Accepted Accounting Principles (GAAP).
According to David M. Walker, former Comptroller General of the United States from 1998 to 2008 and current President and CEO of the Peter G. Peterson Foundation, current federal liabilities and unfunded obligations total approximately $63 trillion .
As a result, further devaluation of the US dollar is inevitable.
Disparate US Dollar Values
Curiously, the US dollar has two different and diverging values, one within the US financial system and another in the broad US economy. As a result of the US financial system rescue, which included purchases of various assets from banks at book value by the US Treasury and Federal Reserve, the US monetary base has expanded roughly 150% since the beginning of the global financial crisis in 2008, but the newly created currency has not filtered into the broad US economy where, in contrast, deflationary pressures persist.
Although it is not apparent in the broad US economy, the value of the US dollar has been dramatically altered and its devaluation cannot be isolated indefinitely within the financial system independent of the broad US economy. The counterbalancing, but much smaller, contraction of the broad US money supply, as measured by the M3 monetary aggregate , also cannot continue indefinitely.
At some point, the two disparate values of the US dollar (that found within the financial system versus that found in the broad US economy) will be reconciled and, unless current policies are reversed, the outcome will be a substantially less valuable US dollar.
The consequences of the eventual reconciliation will certainly include price inflation in the US, higher US dollar prices for commodities that are subject to global demand, such as oil and gold, as well as higher nominal values for US dollar denominated assets.
However, the potential unintended consequences of a falling US dollar include high domestic price inflation, a further reduction in international demand for US debt or a collapse in demand, a disruptive decline in trade, i.e., US imports, or in the worst case, rejection of the US dollar as the world reserve currency or a hyperinflationary collapse of the US dollar.
Is Gold in an Asset Price Bubble?
Diversification for the purposes of risk mitigation and wealth preservation is a rational response to unstable market conditions and is not comparable to a market mania, like the dot-com bubble. Similarly, a long-term shift in asset allocation favoring one general category of assets over another based on fundamentals, while it may result in rising prices, does not by itself describe an asset price bubble.
An asset price bubble, such as the Dutch tulip mania of the 1630s, is an irrational and economically unsustainable investment trend that holds sway over investors only temporarily and that inevitably collapses violently. Asset price bubbles end when a tipping point is reached where the awareness of and tolerance for escalating risk exceed irrational exuberance producing a panic. So long as the great majority of market participants discount risk, individual participants may rely on the irrational exuberance of others. In contrast, rational confidence does not depend on a majority of market participants behaving irrationally and is based instead on sound fundamentals.
The view that rising global commodity prices, fundamentally, are asset price bubbles in various stages of formation unreasonably discounts the risks associated with financial institutions, governments and currencies. If we are to learn anything from Iceland, the Baltic states, Dubai, and Greece it is that if irrational exuberance exists in the financial markets today it is exactly confidence that is not based on sound fundamentals in financial institutions, governments and currencies.
In the 1980 asset price bubble, gold rose from an inflation adjusted low using constant 2009 dollars of $392.57 per Troy ounce on August 31, 1976 ($104 1976 dollars) to its January 21, 1980 peak of what would have been $2,358.04 in 2009 dollars ($850 1980 dollars), a gain using constant 2009 dollars of more than 500% in 4 years. The 1980 asset price bubble in gold violently collapsed in same year, returning to 1979 levels by 1982.
On April 4, 2001, the gold price would have been $315.78 in constant 2009 dollars, the lowest value since 1970 adjusted for inflation. From that point, the gold price rose from a nominal low of $255.95 on April 4, 2001 to a nominal high of $1,212.50 on December 2, 2009 (London PM fix), a gain of roughly 375% over approximately 10 years (284% using constant 2009 dollars).
Over the past decade, the US dollar has declined from its 2002 high by roughly 33% compared to other major currencies and approximately 40% from is 2000 high compared to the Euro. At the same time, most of the currencies in the major indices have been debased alongside the US dollar since 2008 for the same reasons, thus the value of the US dollar in real terms is not apparent from the index alone.
The alternate US Dollar Indices published by Shadow Government Statistics (SGS) suggest that the Federal Reserve’s trade weighted exchange index of major currencies, which includes the Euro zone, Canada, Japan, the United Kingdom, Switzerland, Australia, and Sweden, may be an optimistic formulation.
The decline of a national currency, particularly that of a nation with a large trade deficit, is first apparent in international trade while domestic prices do not at first fully reflect the devaluation of the currency. As a result, the prices of commodities that are subject to global demand tend to rise before the general increase in domestic prices that results from currency devaluation, thus the prices of commodities such as gold would be expected to rise faster than domestic measures such as the US Consumer Price Index (CPI).
The alternate CPI measure provided by SGS may represent a more accurate method of estimating the US dollar prices of commodities that are subject to global demand. The SGS alternate data show accelerating price inflation over the past decade leading up to the global financial crisis in 2008.
If the SGS alternate CPI data are applied to the gold price it is apparent why Shadow Government Statistics’ John Williams stated in an interview with Bloomberg reporter Pham-Duy Nguyen that if the same methodology of measuring inflation were used today as in 1980, the 1980 gold price would be equivalent to $7,150.
While gold certainly has enjoyed tremendous gains over the past decade, including the effect on the gold price of central bank gold demand, the current gold price, following on the heels of an unprecedented global financial crisis, has little in common with the 1980 asset price bubble.
The current gold price reflects a rational diversification into hard assets for the purposes of risk mitigation and wealth preservation and can be explained in terms of monetary inflation and associated loss in the value of the US dollar independent of the US dollar carry trade. The continuing devaluation of the US dollar will result in a further rise in the prices of commodities that are subject to global demand, thus the gold price will continue to rise also.
Mr. Soros is certainly correct in that low interest rates contribute to the formation of asset price bubbles, but neither the value of the US dollar or the price of gold depend only on interest rates or on the US dollar carry trade.
The view that a gold price over $1000 per Troy ounce represents the “ultimate bubble” ignores the ongoing devaluation of the US dollar, discounts risks associated with the stability of financial institutions, governments and currencies, and does not reflect confidence consistent with sound fundamentals.
Friday, 29 January, 2010
Legalize Competing Currencies
Much has been made recently about the supposed economic recovery. A few blips in a few statistics and many believe our troubles are all over. Of course, they have to redefine recovery as "jobless" to account for the lack of improvement on Main Street. But the banks have money, Wall Street is chugging along, and the administration would like to get on with other agendae.
They have even set up a commission to investigate the crisis as if it were all in the past.
The truth is that Americans are still losing jobs, the Fed is still inflating, and more regulations are in the works that will prevent jobs and productivity from coming back. We are on this trajectory for the long haul. The claim has been made many times that this administration has only had a year to clean up the mess of the last administration.
I wish they would at least get started! Instead of reversing course, they are maintaining Bush's policies full speed ahead. They are even keeping the Bush-appointee in charge of the Federal Reserve! They are not even making token efforts at change in economic policy. And for all the talk of transparency, we hear that some powerful senators will do all they can to block a simple audit of the powerful and secretive Federal Reserve.
We have been on a disastrous course for a long time. The money supply has doubled in the last year, our debt is unsustainable, the value of the dollar is going to continue its drop, and those Americans who understand where we are headed feel helpless and held hostage by foolish policy makers in Washington.
When the bills finally come due and the dollar stops working we are in for some real social, economic and political chaos. That is, unless we take some major steps now to allow for a peaceful transition in the future. These steps are laid out in my legislation to legalize competing currencies.
First of all, no one should be compelled by law to operate in Federal Reserve notes if they prefer an alternative. We should repeal legal tender laws and allow Americans to conduct transactions in constitutional money. Only gold and silver can constitutionally be legal tender, not paper money. Instead, it is illegal to conduct business using gold and silver instead of Federal Reserve notes. Simply legalizing the Constitution should be a no-brainer to anyone who took an oath of office.
Consequently, private mints should be allowed to mint gold and silver coins. They would be subject to fraud and counterfeit laws, of course, and people would be free to use their coins or stay with Federal Reserve notes, as they see fit. Finally, we should abolish taxes on gold and silver, which puts precious metals at a competitive disadvantage to paper money.
The Federal Reserve is a government-sanctioned banking cartel that has held far too much power for far too long and is in the end stages of running the dollar into the ground, and our economy along with it.
The very least Congress can do, if they are not willing to abolish the Fed, and perhaps not even conduct a serious audit of it, is to allow citizens the freedom to defend themselves from being completely wiped out by their monopoly power.
They have even set up a commission to investigate the crisis as if it were all in the past.
The truth is that Americans are still losing jobs, the Fed is still inflating, and more regulations are in the works that will prevent jobs and productivity from coming back. We are on this trajectory for the long haul. The claim has been made many times that this administration has only had a year to clean up the mess of the last administration.
I wish they would at least get started! Instead of reversing course, they are maintaining Bush's policies full speed ahead. They are even keeping the Bush-appointee in charge of the Federal Reserve! They are not even making token efforts at change in economic policy. And for all the talk of transparency, we hear that some powerful senators will do all they can to block a simple audit of the powerful and secretive Federal Reserve.
We have been on a disastrous course for a long time. The money supply has doubled in the last year, our debt is unsustainable, the value of the dollar is going to continue its drop, and those Americans who understand where we are headed feel helpless and held hostage by foolish policy makers in Washington.
When the bills finally come due and the dollar stops working we are in for some real social, economic and political chaos. That is, unless we take some major steps now to allow for a peaceful transition in the future. These steps are laid out in my legislation to legalize competing currencies.
First of all, no one should be compelled by law to operate in Federal Reserve notes if they prefer an alternative. We should repeal legal tender laws and allow Americans to conduct transactions in constitutional money. Only gold and silver can constitutionally be legal tender, not paper money. Instead, it is illegal to conduct business using gold and silver instead of Federal Reserve notes. Simply legalizing the Constitution should be a no-brainer to anyone who took an oath of office.
Consequently, private mints should be allowed to mint gold and silver coins. They would be subject to fraud and counterfeit laws, of course, and people would be free to use their coins or stay with Federal Reserve notes, as they see fit. Finally, we should abolish taxes on gold and silver, which puts precious metals at a competitive disadvantage to paper money.
The Federal Reserve is a government-sanctioned banking cartel that has held far too much power for far too long and is in the end stages of running the dollar into the ground, and our economy along with it.
The very least Congress can do, if they are not willing to abolish the Fed, and perhaps not even conduct a serious audit of it, is to allow citizens the freedom to defend themselves from being completely wiped out by their monopoly power.
Thursday, 28 January, 2010
“Sell and Fold” the New “Buy and Hold”
Where we are now is a matter of great debate: Are we in recovery? Or is the depression deepening?No one knows for sure. Investors stumble around in the dark, bumping into data and knocking over lamps. It would be nice if someone would turn on the lights. But that’s not how it works.
The best we can do is to try make out the shapes of the biggest pieces of furniture in the room. What else is out there? We don’t know.
Broadly speaking, the period we are in is deflationary. It is a period of credit contraction (at least in the private sector), de-leveraging and depression. How can we be sure? Well, let’s turn on the lights…
Take a look at this chart, for example. What it shows is not a ‘jobless recovery.’ It shows no recovery at all.
This slump is worse than any since World War II because it is correcting an expansion that dates all the way back to 1945! Credit began increasing right after the war. It kept increasing until 2007. Then, in the private sector, it began going the other way.That trend continues.
It makes sense from a theoretical point of view, too. Every big credit expansion is followed by a big credit contraction. As credit expands, more and more mistakes are made. You can see how this works by looking at the mortgage industry. The first borrowers were solid. Subsequent borrowers were not-so-solid, but they were still generally reliable. The last borrowers – at the height of the frenzy in 2006 – often had no jobs, no income, and no plausible way of repaying their mortgages. Those mistakes are now being corrected.Overall, credit is still expanding – thanks to the US federal government. But credit is contracting sharply in the private sector…where it counts most. Business lending is falling at a 16.6% rate… the steepest plunge since 1948 (when businesses stopped borrowing for war production). But government borrowing is more than making up for the shortfall in private borrowing. Overall, credit-market debt is up 5.5% in the seven quarters since the business cycle peak in December 2007.
Private sector credit down. Public sector credit up. What to make of it?
We can presume that eventually the government will run into the same wall the private sector hit in 2007-09. Looking through the history of economic crises, so well documented for us by Carmen Reinhart and Ken Rogoff, we see that crises in the private sector typically lead to crises in the public sector. As the private sector sobers up… the public sector goes on a spree. It won’t be long before it, too, crashes and burns.
We can anticipate how this crash in public debt will come about. This passage, from a brief account of French financial history called The Undying Debt by Francois Velde, is a story of the past. It may also be a story from the future:
With the opening of hostilities [in WWI], the Bank of France suspended the link between francs and gold, and part of the war was financed with large issues of paper currency. When France’s prime minister Poincare re-established the link in 1928, he could only do so at 20% of its pre-war parity.
In other words, the French got into a fix. They got out by defaulting on 80% of their obligations. The history of French financial management is not so different from that of any other nation. Time after time, France found itself a little short. And time after time, it defaulted…devalued…and reneged on its promises. Over nearly three centuries, a government debt equal to ten ounces of gold – with a present value of about €7,850 – was reduced, says Velde, to €1.20. That’s about “enough to buy a café crème at the bistro on the way out from the Treasury.”
(I don’t know what bistro Velde is talking about. A café crème usually cost me twice as much!)
Returning to the image we led off with, investing is not just like trying to find your way through a room in the dark. It’s like trying to find your way through a room in the dark…when the furniture is all moving! Trouble is, in the here and now there is so much furniture moving around, it is hard to make a move without tripping over something.
Under these conditions, I’m not sure we can come to any useful conclusions about how one price will move relative to the others. Which will go down most, the dollar or the euro? Will copper rise in dollars? Or fall against cotton? Will bond prices go up before they go down? We can’t say.
But we can say that governments are very good at borrowing…and not so good at re-paying. So even if credit-contraction and deflation is the trend of the moment in US financial markets, government credit-creation is rapidly expanding…and that’s inflationary.
That’s why we are wary of government debt. We own no US Treasuries…or any other form of government obligation. Shorting US and European government bonds is probably a good speculative play.
The Space Between ... Job Losses and Gains
Key points
1) Jobs, jobs, jobs … the most popular theme of questions I've been getting.
2) The gap between job losses and job gains is wider than normal given massive uncertainty—but there's a lot of reason for hope.
3) Investors need to be reminded of the link between the economy, jobs and the market.
December's employment report a dud
After a much better-than-expected jobs report for November, showing a cut to payrolls of "only" 11,000, hope for an even better December was evident as we entered 2010, with ever-rising "whisper" expectations as the monthly employment report approached earlier this month.
Indeed, it was a disappointing reading, with a loss of 85,000 jobs instead of the positive job growth that was expected. There was also a net downward revision of 1,000 jobs over the preceding two months. However, November was revised to a slight gain—representing the first month of job gains since December 2007 (the month the recession began).
The unemployment rate—the most popular (but most lagging) jobs metric—remained at 10%. There's almost nothing good to say about a double-digit unemployment rate, particularly given that, when adding in disaffected workers, the so-called "U6" unemployment rate is north of 17%.
Observed objectively, the unemployment rate remains one of the most lagging of all economic indicators. What we need to remain focused on are the leading indicators for job growth, and here the news is undeniably improving.
Jobless claims have plunged
Many are already declaring our eventual jobs recovery as "jobless," as the two that preceded this one have been dubbed. If we look at the decline in initial (not continuing) unemployment claims, there's much about which to be hopeful.
Notice that the sizeable drop in the four-week average of initial claims since the peak in 2009 is now quickly closing in on the pace that followed the brutal back-to-back recessions of the 1980s. The jobs recovery that began in 1983 unfolded to be extremely robust.
In contrast, the two "jobless" recoveries following the 1991 and 2001 recessions were indeed anemic. As you can see, the present trajectory of initial claims is trending much better than those two periods.
Not a jobless recovery after all?
1) Jobs, jobs, jobs … the most popular theme of questions I've been getting.
2) The gap between job losses and job gains is wider than normal given massive uncertainty—but there's a lot of reason for hope.
3) Investors need to be reminded of the link between the economy, jobs and the market.
December's employment report a dud
After a much better-than-expected jobs report for November, showing a cut to payrolls of "only" 11,000, hope for an even better December was evident as we entered 2010, with ever-rising "whisper" expectations as the monthly employment report approached earlier this month.
Indeed, it was a disappointing reading, with a loss of 85,000 jobs instead of the positive job growth that was expected. There was also a net downward revision of 1,000 jobs over the preceding two months. However, November was revised to a slight gain—representing the first month of job gains since December 2007 (the month the recession began).
The unemployment rate—the most popular (but most lagging) jobs metric—remained at 10%. There's almost nothing good to say about a double-digit unemployment rate, particularly given that, when adding in disaffected workers, the so-called "U6" unemployment rate is north of 17%.
Observed objectively, the unemployment rate remains one of the most lagging of all economic indicators. What we need to remain focused on are the leading indicators for job growth, and here the news is undeniably improving.
Jobless claims have plunged
Many are already declaring our eventual jobs recovery as "jobless," as the two that preceded this one have been dubbed. If we look at the decline in initial (not continuing) unemployment claims, there's much about which to be hopeful.
Notice that the sizeable drop in the four-week average of initial claims since the peak in 2009 is now quickly closing in on the pace that followed the brutal back-to-back recessions of the 1980s. The jobs recovery that began in 1983 unfolded to be extremely robust.
In contrast, the two "jobless" recoveries following the 1991 and 2001 recessions were indeed anemic. As you can see, the present trajectory of initial claims is trending much better than those two periods.
Not a jobless recovery after all?
Click to enlarge
Source: FactSet and the US Department of Labor, as of January 19, 2010. Current (November 7, 2008-January 8, 2010). 1983 (May 14, 1982-September 30, 1983). 1991 and 2002 (average of November 2, 1990-March 20, 1992 and May 25, 2001-October 11, 2002).
There's more good news on this front. I've written a lot about the healthy improvement to the leading economic indicators, of which initial unemployment claims and the stock market are two subcomponents. The turn in the LEI, which coincided with the March 2009 low in the stock market, has now increased at a pace that's bested both of the past two recoveries.
Unemployment rate as investment "excuse"
There are other similarities between today's economy and that of the early 1980s, which was the last time the unemployment rate spiked above 10%. Many have cited high unemployment as their reason for remaining out of the stock market during the past year.
Many made that same mistake in the early 1980s, at the birth of one of the greatest bull markets and economic booms of all time.
In fact, a rising unemployment rate has rarely kept the stock market from advancing in anticipation of recessions ending and into the early quarters of recoveries. As you can see in the chart below, the typical path of the stock market was to bottom during recessions and continue to rise after their conclusions, even as the unemployment rate was still rising.
For those who question the seeming disconnect between the economic fundamentals and the strong market during the past 10 months, look no further than this chart to see that stocks have done what they're "supposed to" based on historical precedent.
Market leads economy which leads employment
Click to enlarge
Source: Ned Davis Research, Inc. as of January 19, 2010.
Uncertainty remains rampant
There's an important difference between now and the early 1980s, though, and it partly sits behind what are very tempered expectations for economic growth in this recovery. In 1983-1984, real gross domestic product (GDP) grew at a 6.6% annual rate.
In the early 1980s, President Ronald Reagan was cutting marginal tax rates across the board while also keeping government social spending in check. Today, policy is the mirror image of that era and represents the biggest threat to the economy and confidence.
I wear no blinders to the other obvious perils facing job creation in today's environment. Typically, the strongest engine of job growth coming out of recessions is expansion of debt-financed consumption on housing, autos and other durables. Clearly, there are massive impediments to a repeat of this cycle.
In addition, small businesses, typically the biggest job creators, remain confidence-deprived. They continue to be denied access to credit and are less able to capitalize on the strong overseas growth relative to larger companies.
Profits and temporary hiring on a roll
Broadly, however, corporate profitability is a precursor to job gains, and here the news is decidedly rosier—especially for larger companies. Not only are upward revisions to earnings expectations (by Wall Street analysts) breaking previous records, but federal corporate tax receipts (a direct way to measure profits) have surged at a 595% annual rate during the past three months, according to ISI Group.
Here's the cycle: Layoff announcements ease first, then there's generally a surge in temporary hiring, followed by more permanent hiring, reflecting renewed profitability and pent-up demand. We're seeing that cycle unfold, as you can see in the chart below. The surge in utilization of temporary workers bodes well for permanent hiring in the near future.
Temporary hiring surging!
Click to enlarge
Source: FactSet, High Frequency Economics and the US Department of Labor, as of December 31, 2009.
Ultimately, it's the strength of the economy that will dictate the pace of employment growth. You can see this clearly in the chart below, which tracks past GDP recoveries (horizontal axis) against payroll gains (vertical axis).
GDP and hiring highly correlated
Click to enlarge
Source: Bureau of Economic Analysis, FactSet and the US Department of Labor, as of January 19, 2010.
I keep close tabs on economists' forecasts for GDP growth and, at best, the hope is for about 4% GDP growth in 2010. If you plot that 4% squarely on the linear regression line, it suggests a relatively anemic job growth of only a bit north of 1%—better than either of the immediate predecessors, but anemic nonetheless.
However, I will admit to being more sympathetic to the above-consensus economic outlook.
Where I think the consensus might be wrong (by being too pessimistic) is in taking account of the likely massive turn in inventories, which are likely to contribute well over 3% to fourth-quarter 2009 GDP alone! This has been one of the dominant "coiled springs" about which I've spoken and written a lot during the past several quarters.
Positive outliers cropping up
We are starting to see a few outlier forecasts for much higher-than-expected growth. One of the latest lofty GDP assumptions comes from a true icon in our business, my friend Bill Miller of Legg Mason.
In one of his latest musings, he mentioned a blistering 8% GDP growth rate at some point in 2010, which is intriguing to say the least. If he's right, when looking at the slope of the regression line in the chart above, it sure would boost the likelihood that we avoid a jobless recovery.
The task of rebuilding employment is daunting, no question—it's likely to be a long slog. Even if we don't ultimately declare this recovery as jobless, the time span ("space between") the era of job losses and meaningful job gains is likely to be longer than normal.
There remains too much uncertainty—about consumer demand, taxes, health care costs, credit availability, and so forth.
But I also think there remains too much pessimism about our economy's ability to pull itself out of this.
Wednesday, 27 January, 2010
STUBBORN FACTS
Facts are stubborn things; and whatever may be our wishes, our inclinations, or the dictates of our passion, they cannot alter the state of facts and evidence.“ —John Adams
A More Detailed and Realistic Look at Unemployment
We’ve long been skeptics of “official” government figures. And we leave it to John Williams at Shadow Government Statistics to paint a more detailed and accurate picture of the U.S. unemployment rate. As believers in the maxim “pictures paint a thousand words” – to us, the Shadow Government Statistics Chart below is an eye-opener.
Per Williams’ site the unemployment stats in the chart are explained as follows:
1) “The U-3 unemployment rate is the official monthly headline number.“
2) “The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.“
3) “The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994 (our emphasis). That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.“
4) In other words, the chart indicates the “real” unemployment rate is far higher than the headline 10% rate. When short-term discouraged and marginally-attached workers, those forced to work part-time because they cannot find full time employment, and long-term discouraged workers are added together – the U.S. unemployment rate hovers around 22%.
A More Detailed and Realistic Look at Unemployment
We’ve long been skeptics of “official” government figures. And we leave it to John Williams at Shadow Government Statistics to paint a more detailed and accurate picture of the U.S. unemployment rate. As believers in the maxim “pictures paint a thousand words” – to us, the Shadow Government Statistics Chart below is an eye-opener.
Per Williams’ site the unemployment stats in the chart are explained as follows:
1) “The U-3 unemployment rate is the official monthly headline number.“
2) “The U-6 unemployment rate is the Bureau of Labor Statistics’ (BLS) broadest unemployment measure, including short-term discouraged and other marginally-attached workers as well as those forced to work part-time because they cannot find full-time employment.“
3) “The seasonally-adjusted SGS Alternate Unemployment Rate reflects current unemployment reporting methodology adjusted for SGS-estimated long-term discouraged workers, who were defined out of official existence in 1994 (our emphasis). That estimate is added to the BLS estimate of U-6 unemployment, which includes short-term discouraged workers.“
4) In other words, the chart indicates the “real” unemployment rate is far higher than the headline 10% rate. When short-term discouraged and marginally-attached workers, those forced to work part-time because they cannot find full time employment, and long-term discouraged workers are added together – the U.S. unemployment rate hovers around 22%.
A Sobering Assessment
In the January 8th commentary “Man of the Year” – included a chart showing that we now may be in the “eye” of what could turn out to be a mortgage re-set hurricane.
In his January 10, 2010 commentary at www.telegraph.co.uk titled, “America slides deeper into depression as Wall Street revels” – Ambrose Evans-Pritchard writes:
“The labour force contracted by 661,000. This did not show up in the headline jobless rate because so many Americans dropped out of the system. The broad U6 category of unemployment rose to 17.3pc.
That is the one that matters. Wall Street rallied. Bulls hope that weak jobs data will postpone monetary tightening: a silver lining in every catastrophe, or perhaps a further exhibit of market infantilism.
The home foreclosure guillotine usually drops a year or so after people lose their job, and exhaust their savings… Realtytrac says defaults and repossessions have been running at over 300,000 a month since February.
One million American families lost their homes in the fourth quarter. Moody’s Economy.com expects another 2.4m homes to go this year. Taken together, this looks awfully like Steinbeck’s Grapes of Wrath…
The home seizures are occurring despite frantic efforts by the Obama administration to delay the process… This policy is entirely justified given the scale of the social crisis. But it also masks the continued rot in the housing market, allows lenders to hide losses, and stores up an ever larger overhang of unsold properties.
It takes heroic naivety to think the US housing market has turned the corner (apologies to Goldman Sachs, as always).
The fuse has yet to detonate on the next mortgage bomb, $134bn (£83bn) of “option ARM” contracts due to reset violently upwards this year and next. US house prices have eked out five months of gains on the Case-Shiller index, but momentum stalled in October in half the cities even before the latest surge of 40 basis points in mortgage rates. Karl Case (of the index) says prices may sink another 15pc.
“If the 2008 and 2009 loans go bad, then we’re back where we were before – in a nightmare.”
David Rosenberg from Gluskin Sheff said it is remarkable how little traction has been achieved by zero rates and the greatest fiscal blitz of all time. The US economy grew at a 2.2pc rate in the third quarter (entirely due to Obama stimulus). This compares to an average of 7.3pc in the first quarter of every recovery since the Second World War…
For the record, manufacturing capacity use at 67.2pc, and “auto-buying intentions” are the lowest ever.
The Fed’s own Monetary Multiplier crashed to an all-time low of 0.809 in mid-December. Commercial paper has shrunk by $280bn ($175bn) since October. Bank credit has been racing down a hair-raising black run since June. It has dropped from $10.844 trillion to $9.013 trillion since November 25. The MZM money supply is contracting at a 3pc annual rate. Broad M3 money is contracting at over 5pc.
5) The stock market has become a lagging indicator. Tear up the textbooks.”
Sobering words indeed.
And while Mr. Pritchard’s commentary reflects his personal opinions
It’s also loaded with cold, hard, facts which, as unpleasant as they may be – are difficult for us to deny.
And we’re in the fact business. Rather than denial – we’ve chosen to embrace the facts – because after all, they’re what reality is based on.
And only in reality lies opportunity.
Incredible 'Real' Reason for Carbon Trading?
Critics who think that the U.S. dollar will be replaced by some new global currency are perhaps thinking too small.On the world horizon looms a new global currency that could replace all paper currencies and the economic system upon which they are based. The new currency, simply called Carbon Currency, is designed to support a revolutionary new economic system based on energy (production, and consumption), instead of price.
Our current price-based economic system and its related currencies that have supported capitalism, socialism, fascism and communism, is being herded to the slaughterhouse in order to make way for a new carbon-based world. It is plainly evident that the world is laboring under a dying system of price-based economics as evidenced by the rapid decline of paper currencies. The era of fiat (irredeemable paper currency) was introduced in 1971 when President Richard Nixon decoupled the U.S. dollar from gold.
Because the dollar-turned-fiat was the world's primary reserve asset, all other currencies eventually followed suit, leaving us today with a global sea of paper that is increasingly undesired, unstable, unusable. The deathly economic state of today's world is a direct reflection of the sum of its sick and dying currencies, but this could soon change. - The August Review (Carbon Currency: A New Beginning for Technocracy?)
Dominant Social Theme: Green is good.
Free-Market Analysis: We tend to analyze articles that appear in the mainstream press but regular readers know that the Bell will make an exception from time to time. And in this case, we have. The paper we have alluded to, (above, excerpted) seems to reveal details about the power elite's REAL agenda as regards global warming and carbon trading. While some of the information alluded to in the article has come out already in serial reports, we think the way the August Review has pulled it together and synthesized the information may be seen as both original and important.
In fact, the mind-blowing report that the Review is presenting today on its website (for the first time anywhere) sounds credible to us, understanding as we think we do, the memes of the power elite and the reason for their promotion. click here to read Carbon Currency:
A New Beginning for Technocracy?
We are not surprised by the quality, generally, of the Review's publications. The August Review is a "global elite research center." The tone of its analysis is often scholarly and its articles - while frank - seem to place a priority on research over opinion. Here's more on the August Review from the site itself:
The August Review is an exclusive Internet-based publication of the editor, Patrick M. Wood, and focuses on the Trilateral Commission, its members and activities. The research "juggernaut" that was created by Wood and Antony Sutton to study the Trilateral Commission has been enhanced using various professional sources now available on the Internet. This editor is committed to performing original and innovative research, as opposed to re-hashing second hand or opinionated writings of other news services or commentators. The August Review also monitors the press for news stories relating to members, policies and meetings of the Trilateral Commission.
The emphasis on making carbon an environmental bogeyman makes sense within a context of power elite promotions. The elite creates fear-based dominant social themes to frighten people into giving up wealth and power to authoritarian solutions that have also not-so-coincidentally been created by the elite.
Regulate carbon and you basically have a way to monitor and control people's entire lifestyles, or certainly the part that involves the use of oil, gas, etc. That water vapor is responsible for trapping the majority of greenhouse gases doesn't enter into the equation - because the environmental movement in its later stages is not about reacting to environmental problems but about creating more power and wealth for the handful of families and individuals that create these promotions.
Here's some more from the new August Review white paper:
The modern system of carbon credits was an invention of the Kyoto Protocol and started to gain momentum in 2002 with the establishment of the first domestic economy-wide trading scheme in the U.K. After becoming international law in 2005, the trading market is now predicted to reach $3 trillion by 2020 or earlier.
Graciela Chichilnisky, director of the Columbia Consortium for Risk Management and a designer of the carbon credit text of the Kyoto Protocol, states that the carbon market "is therefore all about cash and trading - but it is also a way to a profitable and greener future." (See Who Needs a Carbon Market ?)
Who are the "traders" that provide the open door to all this profit?
Currently leading the pack are JPMorgan Chase, Goldman Sachs and Morgan Stanley. ...
Whoever controls the currency also controls the economy and the political structure that goes with it ... Technocracy and energy-based accounting are not idle or theoretical issues. If the global elite intends for Carbon Currency to supplant national currencies, then the world economic and political systems will also be fundamentally changed forever.
Considering the sheer force of global banking giants behind carbon trading, it's no wonder analysts are already predicting that the carbon market will soon dwarf all other commodities trading.
The August Review is a foremost authority on the Trilateral Commission. Here at the Bell we certainly believe that such private groups are damaging to free-enterprise because they inevitably seek to involve government power and to use the force of law for private ends. Such a system is called mercantilism and it is a true curse of modern Western societies.
It is the Bell's contention that the mercantilist destruction wrought by the power elite's dominant social themes has possibly met its match in the 21st century thanks to the Internet. It is the longtime contention of the editors of the Bell (for nearly a decade now in various publishing incarnations) that the Internet has been undermining the entire promotional program of the power elite and that the elite's memes would meet increased resistance as the Internet's influence grew. In fact, we believe this is taking place.
We have utilized the impact of the Gutenberg press on society as a historical reference point when making the case that the power elite will have to take "a step back" as it did before when confronted with the unique challenges of a major communications revolution.
In fact, we are not impressed with arguments that because US military agency DARPA invented what became the Internet, the power elite expected and anticipated what the Internet has become. In fact, it was the invention of the floppy disc and personal computer that created the phenomenon of the Internet, and this was the result of private enterprise and could not have been easily anticipated.
The August Review's presentation of "Carbon Currency: A New Beginning for Technocracy?" may be seen, from the above perspective, as a further example of how the Internet is causing headaches for the power elite and its banking and financial instrumentalities.
Once a concept is understood and transmitted throughout the Internet, plenty of readers take advantage of the information and elaborate on it in their own way. This will happen, we are confident with the revelations contained in "Carbon Currency:
A New Beginning for Technocracy?" (It could thus mark an "end" rather than a new beginning, or certainly slow the momentum.)
Power elite promotions rely on secrecy and a sense of inevitability. But in the case of global warming, the promotion has been greatly damaged. It was the Internet that made possible the exposure of the reprehensible emails that showed a conspiracy to defraud as regard the impacts (and even the existence) of global warming. It was the Internet that provided people with a way to organize against environmental fascism. And now it is the Internet, in our opinion, that is exposing the further scheming that lies at the HEART of the power elite's promotional efforts as regards this horrid dominant social theme.
We are aware of the growing argument among certain observers of the alternative press that the exposure of power elite themes must be part of a larger plan. But if so, why didn't the same phenomenon occur in the 20th century when power elite promotions were at their peak and most powerful? The answer of course is the Internet.
Every power elite meme from the war on terror, to global warming and central banking is under powerful attack these days. We can't imagine that this is a desirable outcome from the point of view of those involved with their implementation.
It may be that the power elite will begin "exposing" its own promotions in order to gain some advantage from Internet revelations.
But we have difficulty believing that such an exercise will pay sufficient dividends to make up for the current destruction of its dominant social themes, which likely have to be rebuilt from the ground up - once the Internet is tamed (and when will that be?).
As a final aside, we are gratified that in this white paper, the August Review also deals with the fraud of peak oil. We are entirely unsurprised that Technocrat M. King Hubbert and his economically illiterate energy concepts manage to slither into the middle of the story that the August Review has to tell.
The idea that the market itself would not (and somehow could not) respond to peak oil with new stores of energy is yet another power elite promotion. (Meme: Only government authorities, including the UN, can properly plan energy replacements!)
Conclusion: The August Review's presentation of the apparent planning and purpose behind the carbon scam is yet a further proof of the power of the Internet in our opinion.
Between the emails revealing the conspiracy and the more recent revelations of phony research and false numbers (and the Review's seemingly accurate revelations as to where all this is really headed) we think the global warming meme is under extreme duress.
Sure, it may stagger along - that's one of the hallmarks of a power elite promotion (it won't die no matter how many holes are shot into it) - but it's very hard to promote a theme or meme that has been discredited.
And boy is it being discredited.
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