ANYTHING but real market pricing

[SushiHorn]

For those of you who don't know, Ambrose Evans-Pritchard is deeply connected with the British political establishment. Many of his articles are unofficial position papers from that establishment. In his latest piece, he advocates that the Fed essentially buy up all Treasury bonds in existence if that's what it takes to manipulate interest rates still lower. It's bloody insane. The answer of the insiders is that market pricing is unacceptable since it won't support further ponzi activity.

"The heavy artillery has already been fired," said former Fed vice-chair Alan Blinder.
"I really don't think there is a lot the Fed can do," said Harvard's Martin Feldstein.

"The benefits of additional QE are quite small," said Stanford's John Taylor, of the Taylor rule.

"The US has run out of bullets. More QE is not going to make any difference," said Nouriel Roubini, our Dr Gloom.

Get a grip, the lot of you. While there is no easy way out for the US after stealing so much prosperity from the future through debt, there is no excuse for this dead-end defeatism. Clearly, the 'canonical New Keynesian' model that holds such sway on America's elites is intellectually exhausted.

The Fed has an arsenal of neutron bombs if it wants to use them, and uses them correctly. It can engage in "monetary policy a l'outrance" as Maynard Keynes propsed in his Treatise on Money in 1930, before he lost his way with the General Theory.

http://www.telegraph.co.uk/finance/c...ic-elites.html

Oh and BTW, eff AEP.

[bernorange]

I have read some of his columns in the past and he seemed quite reasonable. For him to suggest the Fed go all in, I get the feeling that he thinks we have passed the point of no return.

[ousuxndallas]

That was satire, right?

[SushiHorn]

One of the things I learned at the intersection of the military and intelligence worlds is to never place blind trust in any model. The map is not the terrain. The dossier is not the man.

This is apparently a lesson that AEP never learned or simply wishes to ignore. The dominant economic models of the past 50-80 years are keynesianism and monetarism and they've both fallen flat on their face - ESPECIALLY on the points where they both agree. Manipulation of the quantity of money (really credit) only works to the extent that people's TRUST is not damaged to a degree that makes the the credit expansion counter-productive. I believe that we crossed that line back in 2007-08. The fact that the idiots of economic orthodoxy keep recommending bigger and bigger doses of failed prescriptions tends to confirm that.

In mathematical terms, credit creation is a discontinuous function and the models are all extrapolating results into unknown territory as if they are dealing with a continuous function. That is the basic problem with the near universal assumption of ceterus paribus in economics. His recommendation is to spew so much credit out there that devaluation is guaranteed - assuming that people will be FORCED to speculate in the process. Frankly he's wrong and stupidly wrong.

The recent reaction suggests that people are much more likely to secede from the financial system. Create a gray market for labor, withdraw from speculative investment to ensure survival by hoarding goods. Price instability usually is reflecting supply instatility and people WILL react to that by stockpiling. If real goods become a more secure and reliable store of wealth than money, that trend will merely be reinforced.

[next2naus]

words

[Meursault]

Alright, I realize that the Fed is independent and all that, but if the United States' Central Bank is buying up all of the United States' debt... like, um, wut? In what universe is that a serious answer?

[CleverNickname]

Sushi - how can you say keynesian models have fallen on their face when we have barely even really tried to move AD yet?

[Meursault]

I have read some of his columns in the past and he seemed quite reasonable[/url][/b].

Some quality contributions in that thread.

[SushiHorn]

Sushi - how can you say keynesian models have fallen on their face when we have barely even really tried to move AD yet?

I'm going to say that annual federal government deficits of 10-11% of GDP should be sufficiently large to test the theory. When you throw in state and local governments, keynesian stimulus is now equal to around 13-14% of the US economy. Every keynesian out there that whines that the problem is not enough spending at this point should be dismissed from serious debate. Absolutely NONE of the high-profile keynesians advertised this as a possible outcome when they were pushing for hundreds of billions in additional spending - which they got and which failed to deliver anything resembling the promised results. At this point, they are looking for excuses for failure rather than re-examining their thesis as any good scientist would.

Same critique for monetarism. The Fed has absolutely flooded the economy with credit - an additional $1 trillion just from direct balance sheet expansion. On top of that, the government has basically signed a suicide note by guaranteeing a bunch of bad private debt to keep it from imploding. The federal government is going to have to repudiate those empty political promises or blow itself up in the near future. The Fannie and Freddie guarantees plus the use of the FDIC to guarantee BONDS issued by banks is probably keeping another $4-5 trillion of credit from imploding as it should. It hasn't made the debt good, just preventing ordinary people from RECOGNIZING how worthless it is while the insiders bail and dump the losses on the public.

[CleverNickname]

I guess it depends on how bad you think demand would have cratered absent the existing deficits. Given the doom and gloom around here, I suggest its not entirely clearly things wouldn't have been much worse. I also think you are wrong re: states & locals... they are a net negative in terms of AD given budget and staffing cuts. Further, a lot of the keynesians wanted a stimulus at least twice as big as what we got. The dramatic monetary easing doesn't mean much if we are stuck in a liquidity trap and no one will lend.

[SushiHorn]

I guess it depends on how bad you think demand would have cratered absent the existing deficits. Given the doom and gloom around here, I suggest its not entirely clearly things wouldn't have been much worse. I also think you are wrong re: states & locals... they are a net negative in terms of AD given budget and staffing cuts. Further, a lot of the keynesians wanted a stimulus at least twice as big as what we got. The dramatic monetary easing doesn't mean much if we are stuck in a liquidity trap and no one will lend.

Ignore what was formally called "stimulus." The deficit is what matters in a keynesian sense of government increasing AD by spending more than it takes in through taxes. State and local governments are contributing MASSIVELY in that sense by spending more than their tax base can support. How much they spent last year or the year before on an artificially bloated tax base is completely irrelevant to that equation. It's less that no one will lend so much as no one is willing to borrow except those who could never pay it back. The country is fresh out of credit-worthy blind optimists.

Things are much, much worse than the government admits. The defictis don't make that better, they make it worse while also partially hiding the true state of affairs. Instead of voluntarily cutting back spending at a time of our choosing, we will be faced with a situation where there is a forced massive cutoff of spending when our creditors decide to cut us off. Instead of landing on a rough field with one engine out and one working, the PTB insist on pressing forward and forcing us into a dead stick landing over random wilderness.

The US is able to borrow like it is because of a dozen generations of fiscal responsibility. The reality has changed but the perception has not - yet. At this rate, our children and grand-children will be able to borrow on the same terms as Argentina, Russia or Mexico. From the Baby Boom generation onward, Americans have over-consumed by eating their seed corn. Capital accumulated by past generations has been raided to support current living standards. Now that most of that is gone, we are turning to raiding the future to support current extravagance. Destruction of the reputation for fiscal responsibility will destroy future generations' ability to borrow. This can be seen as another form of accumulated capital being consumed - in this case moral capital.

[CleverNickname]

I stand by the comment that we haven't tried to expand AD yet, so its hard to say whether it would work or not. We've been blowing out the budget by buying assets to buoy banks who don't lend... that's basically just more monetary surplus. A real AD stimulus would be to just mail everyone a big fat check, or failing that, a nice income tax holiday or whatever (although I don't favor that, as it would screw over the unemployed). I do agree that sooner or later (a) budgets will have to be balanced; and (b) if we stand by and do nothing perhaps the natural tendency for capitalism to eventually sort it all out for the best might happen. But its not the time to do (a) during a major recession and (b) might take a decade plus to work out, if ever.

As far as the debt, I think it was Murray Rothbard who basically said just cut a check to foreign lenders and say "good luck finding a bank to cash that, suckers." In any event, I'm not sure that letting the capitalist chips fall where they may will do us any good. I'm just not optimistic that we will adapt sufficiently fast for climate change, peak resources, or whatever potential shocks await our future. So I guess my question would be... what exactly do you want to happen Sushi? Find out whether the market can efficiently allocate everything and pull us out of the recession? Because as little respect as keynesians get, I'm not sure I really understand the classical (or whatever you believe) solution to the problem of demand shocks and market 'animal spirits'.

[MagicSoccerSpray]

Every keynesian out there that whines that the problem is not enough spending at this point should be dismissed from serious debate.

Fucking this!

[SushiHorn]

I stand by the comment that we haven't tried to expand AD yet, so its hard to say whether it would work or not. We've been blowing out the budget by buying assets to buoy banks who don't lend... that's basically just more monetary surplus. A real AD stimulus would be to just mail everyone a big fat check, or failing that, a nice income tax holiday or whatever (although I don't favor that, as it would screw over the unemployed). I do agree that sooner or later (a) budgets will have to be balanced; and (b) if we stand by and do nothing perhaps the natural tendency for capitalism to eventually sort it all out for the best might happen. But its not the time to do (a) during a major recession and (b) might take a decade plus to work out, if ever.

The FORM of the spending really have little relevance. The federal government is going to spend $1.4-1.7 trillion it doesn't have this FY. It's going to do that by borrowing and then spending the borrowed money. If keynesian theory is correct then the manner in which the money is spent doesn't matter since ANY spending contributes to aggregate demand. Of course his underlying (but unstated) assumption is that the monetary system would remain stable no matter how much the trust of the people was abused. This is from his General Theory:

Pyramid-building, earthquakes, even wars may serve to increase wealth, if the education of our statesmen on the principles of the classical economics stands in the way of anything better.

Keynes had preferences but essentially stated that paying people to dig holes in the ground would increase wealth. He severely misunderstood what real wealth was and the importance of economic incentives embedded in a market system. That's why his ideas have been a near-universal failure. Politicians latch on to them because they provide a convenient pretext for those politicians to grab more power for themselves. His ideas are pushed widely not because they are proven or valuable in and of themselves but because they are convenient for those in power.

Either the current path or allowing market forces to work is going to result in an economic crash and burn. The keynesian foolishness which preceeded the crisis guarantees that. The question is which one will result in less damage and allow us to rebuild more quickly. There is no question that the market will get the job of readjustment done more quickly and efficiently. Japan has been trying to dodge its fate for 20 years now and they are worse off than we are. They've had two decades of alternating stagnation and recession and are still going to get crushed like a bug. Also, the keynesian solution is likely to destroy the credibility of the currency, which will take a century to rebuild. A market solution destroys the politically connected banks and their credit spew but leaves behind a US dollar that still has value as a foundation for rebuilding. That task is far more difficult without a credible currency.

[CleverNickname]

C'mon Sushi, you're 10x smarter than that on these topics. Of course the form matters. You know that just printing digital dollars that go into the reserves of a bank that doesn't lend isn't stimulating AD. Helicopter drops, yes. Crazy infrastructure moon projects, sure. But not just creating fantasy numbers on bank balance sheets - not one single dollar gets spent if the money is just sitting in a vault. And anyway, who gives a shit about the credibility of the greenback? If not bald keynesian AD stimulus, what then? Whats the middle ground between keynes and the von mises institute (e.g. go back to the gold standard). I honestly don't remember enough economics to know a middle ground theoretical basis for understanding the big picture beyond keynes/krugman and neo-classical thinking.

[SushiHorn]

So I guess my question would be... what exactly do you want to happen Sushi? Find out whether the market can efficiently allocate everything and pull us out of the recession? Because as little respect as keynesians get, I'm not sure I really understand the classical (or whatever you believe) solution to the problem of demand shocks and market 'animal spirits'.

I wanted to respond to this separately as this is more philosophy-opinion than economic discussion.

What you and I WANT is irrelevant. The die has been cast by nearly twenty years of stealing from the future on a massive scale. That looted future is now. We can only choose the shape of the disaster at this point. Do we accept a market solution of a few years massive unemployment and living standards about a third lower for the short to medium-term? Or do we go on trying to prop up current living standards which we can't pay for and further damage the future? I think people are deluded that the pain can be avoided. The temporary dampening of business cycles since the early 1990s recession has caused people to arrogantly think we can permanently repeal such cycles. But just the temporary lull has required the wealthiest economy the world has ever seen to load itself up with enormous debts. The lull cannot continue because the debt would have to continue to grow at nearly double digits annually to continue that state of affairs at a time when the current debt cannot be supported.

They should have let it go in 1995 and we would have had a moderately bad recession by postwar standards. Instead we got the dot com bubble and the beginning of the housing bubble. That took us to 2000 when they also could have let things take their course. That would have given us one of the worst recessions of the postwar period - comparable to 1973-74 or 1980-82. Instead the Fed reflated and the government sponsored another bubble - centered in housing but extending to many areas. That's what I dubbed the Universal Debt Bubble. Had they let it go in 2007-08 when that one burst, we were looking at something worse than the nastiest postwar recessions but not GD 1.0 type bad. The attempted reflation of the last two years has undermined the financial position of the government even further while allowing even more damage and losses to accumulate in the banking system. By doubling down again, the Fed and the Treasury have baked in something like GD 1.0 or possibly worse. I have seen several economic historians compare this debt cycle to the first great modern banking crisis - the dual bubbles and collapses of 1719-1721 which led to a series of major wars over the century that followed.

Since the debt cannot be repaid in any honest manner, we have two ways to deal with it - dishonestly via inflation or honestly via default. Both result in impaired future credit but inflation on the scale required to pay off existing debt trashes the economy as well by denying it any stable, credible medium of exchange. Think about Eastern Europe or Latin America in the past when the currency had no real value and there was a thriving black market in dollars. Do we want our economy forced to turn to black market yen or Swiss Franc transactions to maintain commercial activity? Introducing currency instability is a massive cost to any economy

[CleverNickname]

Well shit, if we're gonna eventually default anyway, lets build some new bridges, rail roads, and all that on china's dime.

[Hellraiser97]

How exactly were the evil Keynesians responsbile for the dot.com bubble?

[bernorange]

It seems that TPTB are committed to avoiding a (any) default(s) post Lehman, so the path forward leads to an inevitable destination for all once the tipping point is reached.

[Beau Vine]

That was satire, right?

Had to be...

[SushiHorn]

How exactly were the evil Keynesians responsbile for the dot.com bubble?

Fed reflation and massive liquidity injections in the wake of LTCM blowing up as well as the Russian and Asian Financial Crises. The integrity of the Treasury was trashed by Rubin who led a bailout of Mexican government bond holders with taxpayer money. This led speculators to believe that the US government also was virtually guaranteeing their profits and standing behind the Greenspan Put. This belief essentially helped to green light one of the biggest rounds of stock market stupidity in our history.

But once again, the Fed action was key to events in the equity markets. Shortly after the Asian Crisis reflation the dot com bubble got underway in 1998. You can pull up a chart and see that the Nasdaq doubled in 12 months from the repeated hits of liquidity. It was the further flooding of credit into the market in late 1999 that produced the final big spike. After nearly doubling in 12 months, the Nas proceeded to double again in just four months starting November 1999. That was the Fed flooding the market with heroin to avoid any potential effects from Y2K - basically any excuse to give the junkie another hit.

I remember distinctly because I was watching this all happen from the inside. Being a technology sector analyst living in SF tends to do that and my seats for the spectacle were pretty good. So many of my peers thought they were geniuses and nearly all of them were broken financially by the subsequent collapse. I knew two of the guys running the Munder Net-Net Fund and that's exactly what happened to them. This is where my saying about confusing a bull market with brains comes from.

[ousuxndallas]

Fed reflation and massive liquidity injections in the wake of LTCM blowing up as well as the Russian and Asian Financial Crises. The integrity of the Treasury was trashed by Rubin who led a bailout of Mexican government bond holders with taxpayer money. This led speculators to believe that the US government also was virtually guaranteeing their profits and standing behind the Greenspan Put. This belief essentially helped to green light one of the biggest rounds of stock market stupidity in our history.

But once again, the Fed action was key to events in the equity markets. Shortly after the Asian Crisis reflation the dot com bubble got underway in 1998. You can pull up a chart and see that the Nasdaq doubled in 12 months from the repeated hits of liquidity. It was the further flooding of credit into the market in late 1999 that produced the final big spike. After nearly doubling in 12 months, the Nas proceeded to double again in just four months starting November 1999. That was the Fed flooding the market with heroin to avoid any potential effects from Y2K - basically any excuse to give the junkie another hit.

I remember distinctly because I was watching this all happen from the inside. Being a technology sector analyst living in SF tends to do that and my seats for the spectacle were pretty good. So many of my peers thought they were geniuses and nearly all of them were broken financially by the subsequent collapse. I knew two of the guys running the Munder Net-Net Fund and that's exactly what happened to them. This is where my saying about confusing a bull market with brains comes from.

Sushi FTW.

Plus, the dot com era gave us the enormous douche known as Mark Cuban.

[jimmyjazz]

So many of my peers thought they were geniuses and nearly all of them were broken financially by the subsequent collapse. I knew two of the guys running the Munder Net-Net Fund and that's exactly what happened to them. This is where my saying about confusing a bull market with brains comes from.

I was on the other side of that bubble at a startup that went public, and from where I sat, not too many people thought they were financial geniuses. They knew they weren't clobbering the market. They just thought investing was easy.

[El Guapo]

But once again, the Fed action was key to events in the equity markets. Shortly after the Asian Crisis reflation the dot com bubble got underway in 1998. You can pull up a chart and see that the Nasdaq doubled in 12 months from the repeated hits of liquidity. It was the further flooding of credit into the market in late 1999 that produced the final big spike. After nearly doubling in 12 months, the Nas proceeded to double again in just four months starting November 1999. That was the Fed flooding the market with heroin to avoid any potential effects from Y2K - basically any excuse to give the junkie another hit.

Refresh my memory - what did the Fed do with respect to NASDAQ/the dot-com bubble? I was always under the impression that the late 90's/early 2000 issues had more to do with out of control speculation on web-based business (i.e. investors getting caught up in a frenzy that the internet was the next industrial revolution) coupled with Enron-type fraud. I don't remember hearing much about the Fed back then other than the standard interest rate stuff.

[DieUCLA98]

Refresh my memory - what did the Fed do with respect to NASDAQ/the dot-com bubble? I was always under the impression that the late 90's/early 2000 issues had more to do with out of control speculation on web-based business (i.e. investors getting caught up in a frenzy that the internet was the next industrial revolution) coupled with Enron-type fraud. I don't remember hearing much about the Fed back then other than the standard interest rate stuff.

They kept the interest rate low ( < 6%) in the face of a growing bubble (which allowed for more speculation) and then they tried to "deflate" the bubble by slowly raising the IR circa 2000. That failed and the economy popped instead.

All the aforementioned fraud didn't help matters, naturally.

[SushiHorn]

Refresh my memory - what did the Fed do with respect to NASDAQ/the dot-com bubble? I was always under the impression that the late 90's/early 2000 issues had more to do with out of control speculation on web-based business (i.e. investors getting caught up in a frenzy that the internet was the next industrial revolution) coupled with Enron-type fraud. I don't remember hearing much about the Fed back then other than the standard interest rate stuff.

In the last 3-4 months of 1999, the Fed pumped over $100 billion of credit into the system via standard repurchase agreements. It's right there in the H.1 weekly statistical release. Believe it or not, that was and unprecedented Fed action and $100 billion was a lot of money back then. The number peaked in January 2000 and went back to nearly zero by April - the critical trigger for the severely overpriced market to crash.

On top of that, they had a "special" auction facility (similar to the recent emergency facilities) where they would hold auctions to purchase STRIPs (zero coupon bonds). Like the recent MBS idiocy, they were deliberately overpaying for an asset to give speculators false confidence and enable false marks on bank balance sheets, just like today. They never held a lot on the balance sheet at any one time since they were then pushed back onto the primary dealers. The size of the fraud and therefore losses was relatively small. Nevertheless, around $400 billion of STRIPs went through the Fed auction program in the second half of 1999.

[Brad Wesley]

sushi (or anyone else), would you see a tremendous amount of bank foreclosures on both residential and commercial real estate as a sign that things are improving? i believe that banks aren't foreclosing on assets because they are so far underwater which easily explains the extend and pretend we are seeing. so if they do start to dramatically increase foreclosures it would signal that asset values are at or close enough to what is on their balance sheet to foreclose and sell. this may apply more to commercial real estate than residential but i think the general theory holds true.

[SushiHorn]

Brad
You'd need to see both foreclosures and auctions of the foreclosed properties before I'd even think about expecting improvement. We need to find clearing prices that buyers in an arms-length transaction will pay. Then we can start to figure out what everything ELSE is actually worth in a non-distorted market. One of the key advantages of a free market economy is efficient allocation of capital. But that depends on an effective pricing mechanism employing market forces to determine where the wants and needs are in the economy and which economic goods are in surplus. It is precisely that pricing mechanism that is under attack by the Fed so it should be no surprise that the economy is frozen. No one knows what anything is really worth so nothing moves and we are currently undergoing a form of economic constipation.

[Brad Wesley]

Brad
You'd need to see both foreclosures and auctions of the foreclosed properties before I'd even think about expecting improvement. We need to find clearing prices that buyers in an arms-length transaction will pay. Then we can start to figure out what everything ELSE is actually worth in a non-distorted market. One of the key advantages of a free market economy is efficient allocation of capital. But that depends on an effective pricing mechanism employing market forces to determine where the wants and needs are in the economy and which economic goods are in surplus. It is precisely that pricing mechanism that is under attack by the Fed so it should be no surprise that the economy is frozen. No one knows what anything is really worth so nothing moves and we are currently undergoing a form of economic constipation.

you basically stated what i'm thinking. it's not only the foreclosing, but the banks turning aruond and selling because they can recoup all or a significant amount of their basis in the loan. by doing so, the banks help to establish "market price" for which they can now value the rest of the assets on their books. since nothing is moving, the 3rd party auditors/appraisers/valuation servicer firms (that i think are in bed with the banks) can appraise these loans at whatever the hell they want.

i see tons of CRE deals transacting at 2005/2006 pricing and they are getting pretty decent financing on these deals. sure, it's the more core type product but it's stuff like this that makes me wonder whether this is all part of their desire to try and keep values from dropping. if they had to mark their entire CRE portfolios to market no way would they have the capital to make these loans (they'd be insolvent).

[SushiHorn]

I was on the other side of that bubble at a startup that went public, and from where I sat, not too many people thought they were financial geniuses. They knew they weren't clobbering the market. They just thought investing was easy.

The guys in your circle at least understood that they were at the mercy of the market. My peers often thought differently - especially the young ones who had never known a bear market. I think that close involvement in the market helped to give them the illusion of control. Naive fools were like the rooster that thinks the sun rises because of his crowing.

[Ankf00]

By doubling down again, the Fed and the Treasury have baked in something like GD 1.0 or possibly worse. I have seen several economic historians compare this debt cycle to the first great modern banking crisis - the dual bubbles and collapses of 1719-1721 which led to a series of major wars over the century that followed.

Rogoff's book says something along these lines too

[bernorange]

For those of you who don't know, Ambrose Evans-Pritchard is deeply connected with the British political establishment. Many of his articles are unofficial position papers from that establishment. ...

So what is he advocating here?

Gold is the final refuge against universal currency debasement
...
So we have an early 1930s world where surplus states are hoarding money, instead of recycling it. A solution of sorts in the Great Depression was for each deficit country to devalue, breaking out of the trap (then enforced by the Gold Standard). This turned the deflation tables on the surplus powers – France and the US from 1929-1931 – forcing them to reflate as well (the US in 1933) or collapse (France in 1936). Contrary to myth, beggar-thy-neighbour policy was the global cure.

A variant of this may now occur. If China continues to hold down its currency, the country will import excess US liquidity, overheat, and lose wage competitiveness. This is the default cure if all else fails, and I believe it is well under way.

The latest Fed minutes are remarkable. They add a new doctrine, that a fresh monetary blitz – or QE2 – will be used to stop inflation falling much below 1.5pc. Surely the Fed has not become so reckless that it really aims to use emergency measures to create inflation, rather preventing deflation? This must be a cover-story. Ben Bernanke’s real purpose – as he aired in his November 2002 speech on deflation – is to weaken the dollar.

If so, he has succeeded. The Swiss franc smashed through parity last week as investors digested the message. But the swissie is an over-rated refuge. The franc cannot go much further without destabilizing Switzerland itself.

Gold has no such limits. It hit $1300 an ounce last week, still well shy of the $2,200-2,400 range reached in the late Medieval era of the 14th and 15th Centuries.

This is not to say that gold has any particular "intrinsic value"’. It is subject to supply and demand like everything else. It crashed after the gold discoveries of Spain’s Conquistadores in the New World, and slid further after finds in Australia and South Africa. It ultimately lost 90pc of its value – hitting rock-bottom a decade ago when central banks succumbed to fiat hubris and began to sell their bullion. Gold hit a millennium-low on the day that Gordon Brown auctioned the first tranche of Britain’s gold. It has risen five-fold since then.

We have a new world order where China and India are buying gold on every dip, where the West faces an ageing crisis, and where the sovereign states of the US, Japan, and most of Western Europe have public debt trajectories near or beyond the point of no return.

The managers of all four reserve currencies are playing fast and loose: the Fed is clipping the dollar; the Bank of England is clipping sterling; the European Central Bank is buying the bonds of EMU debtors to stave off insolvency, something it vowed never to do just months ago; and the Bank of Japan has just carried out two trillion yen of “unsterilized” intervention.

Of course, gold can go higher.

[bernorange]

For those of you who don't know, Ambrose Evans-Pritchard is deeply connected with the British political establishment. Many of his articles are unofficial position papers from that establishment. ...

He just published what starts off as a fairly agreeable/lucid overview of the state of the economy, but his conclusion opens Pandora's Box:

...
There is no easy solution to creeping depression in America and swathes of the Old World. A Keynesian `New Deal’ of borrowing on the bond markets to build roads, bridges, solar farms, or nuclear power stations to soak up the army of unemployed is not a credible option in our new age of sovereign debt jitters. The fiscal card is played out.

So we limp on, with very large numbers of people in the West trapped on the wrong side of globalization, and nobody doing much about it. Would Franklin Roosevelt have tolerated such a lamentable state of affairs, or would he have ripped up and reshaped the global system until it answered the needs of his citizens?

http://www.telegraph.co.uk/finance/c...have-nots.html

NWO holla?