Financial topics

[aedens]

http://www.mountainvision.com/newslette ... a8baa56554

transfer from the real economy to the financial black holes.

[OLD1953]

I don't quite see how that increases the cost of capital. Seems aimed at people/companies who offshore money for the purpose of double counting it or tax fraud. That's certainly common enough where I work, discussions on how to hide money while maintaining a security clearance are fairly common place, and it's not like we pay much in taxes in any event. I confess I've never seen the purpose of spending 10,000$ to save 500$ in taxes, but some do and seem to make a sport of it. I just pay mine and go on.

The most common tax dodge among expats is to marry someone from a country that doesn't share banking information with the US. Then simply put all the money in the spouse's account, this won't hide wages but it certainly will hide investment returns. Risky, IMHO, since she can decide to walk on you, but that's a choice.

And Vince, before I read half your post, I was saying to myself, "those trades will be cancelled if they aren't already".

[Higgenbotham]

Copyright 2001.

Ran across this on my hard drive - it's a 418 page pdf called "The Phoenix Principle and the Coming Dark Age". These particular economic observations and predictions appear prescient and relevant to present world conditions. Recent World Views that may have relevance are placed under the corresponding quote from the 2001 pdf.

In reality, it is a self-interested step designed to protect western economies by winding down the debt burden in a controlled manner. Having agreed to these measures, governments are still dragging their feet. They want to minimise their embarrassment as western taxpayers end up bailing out the various banks that have been responsible for this sorry mess. The writing off of debt implies disorganisation. Money loses its meaning as a store of value. The gainers in this case will be the financial institutions who are given a face-saving way out of the situation created by their own illjudged lending decisions.

Many solutions to civilisation’s problems may simply involve buying time, making the situation worse in one obscure area in order to patch things up somewhere else.

In the future, therefore, to gauge how the descent is going, one should not be taken in by statistics. The crucial measure of economic health will be the evidence of genuine innovation that people experience in their everyday lives. If some major new item appears in one’s home, comparable to the vacuum cleaner, the video recorder, or the microwave oven, one can assume that the dark age is getting further away, perhaps by a quarter of a century or more. On the other hand, one may find it difficult to identify what is driving the stock market. One’s own consumption may be of mostly transient pleasures, and one may worry whether one’s work is really making a positive contribution to the commonweal. In that case, the economic descent will be proceeding unchecked.

However, in practice, monetary union will probably not cure the underlying rottenness of the economic order, and European economies will continue to stagnate over the long run. Given ongoing failures of entrepreneurship, the economic unification of Euroland is likely to accelerate the impoverishment of some regions, as workers, companies and capital move more easily to where the pickings are richest. The EU proposes to counter this by channelling money into the depressed regions via various grants and loans, but this is sure to fail as much of the money will be wasted and misappropriated.

24-Mar-12 World View -- Greece's debt crisis spreads to Italy and Spain

Since the ending of communism, there has been an explosion of entrepreneurial activity in Russia. However, the political weakness of the post-Soviet state means that it has been allowed to take on a criminal form. The Russian mafias have built up impressive empires based on such lucrative lines of business as extortion, drug running, art theft, and forcing women into prostitution. In this respect, Russia’s experience is a foretaste of the future for western countries. As they continue to develop in the context of ongoing political
disintegration, their economies will also become increasingly illegitimate and out of control.

The collapse may therefore begin in the poor, peripheral countries, where institutions are weakest, but it will inevitably spread inwards to reach Japan, American and Europe. In the western Roman collapse, such an inrush of darkness took more than half a century. The future collapse, however, is likely to occur in a much shorter time, owing to the speed of contemporary communications. When south Asia or Africa experience such anarchy and comprehensive business failure that urban life is abandoned there, a similar fate for the west may be only a decade away.

25-Mar-12 World View -- Chaotic rebellion in Mali provides opportunity for an al-Qaeda linked Islamist state

[Higgenbotham]

Despite repeated mentions of the large decrease in gasoline demand for January, traffic volume was up 1.6% in January (yoy), and especially strong in the northeast.

http://www.fhwa.dot.gov/policyinformati ... jantvt.pdf

[OLD1953]

I was waiting to see if miles driven were dropping or holding steady. This does indicate the upswing in vehicle sales has trended to higher mileage vehicles, along with natural gas and electric power. People who can replace lower mileage older vehicles are doing so, and this is showing up in the gasoline sales. There are currently about 500 thousand gallons of gasoline per day in projected usage in the USA, from just a few years ago, that is being exported or simply not produced. (Said million to begin with, which was silly of me. Shows lack of focus there.)

It's certainly time for China to collapse, I say this because now we are seeing proclamations that "the US should follow the Asian example". The last time that was common was a short time before Japan started sliding downhill, as Japan Inc learned that simply commanding the tide to turn will not cause the tide to turn. China is learning this lesson right now.

I do sometimes wonder how many posting here are old enough to have clear memories of the latter part of the 1970's. This period has been quite reminiscent of that nasty era, and this is part of the reason why I believe there is light at the end of this tunnel, I've seen much of this before. It is fascinating to me how the reactions to a financial crisis are so nearly identical to previous similar financial situations.

And a note here about China and production, obviously China must eventually outproduce the US in terms of internal consumption, as they have nearly 4x the population of the US. Take Mexico, that country has a GDP of about a trillion dollars, with a population of 114 million. If Mexico expanded population by 12 to 1, so they had a population of 1billion 368 million, they would be very comprable to China at its current population of 1 billion 343 million. According to the CIA factbook, China has a purchasing parity GDP of 11.3 trillion, so in GDP production per person (adjusted for their artificial cap on the worth of their money) they are slightly less productive than Mexico. The current US GDP is 15 trillion, with a population of 313 million. GIven some of the panicky articles I've read lately, you'd think China was about to take over the world with no push back from anyone else at all. Japan, by comparison, with a population of 127 million has a GDP of about 4 trillion. As Chinese money is forced to its natural worth, due to their increasing imports and decreasing exports, the Chinese economy will be forced to adjust to reality, just as every other economy in the world must eventually adjust to reality. Counting two eggs for three or three eggs for two only works while you have an excess of eggs, so nobody is worrying about how many eggs there really are. This farm life example applies to everything in the world.

Admitted, of the countries listed, all of them have governments which heavily interfere in their economies. It would be difficult to determine which have the greatest impact in real terms.

[Trevor]

There's only so much that people can cut back. They still have to go to work, pick their kids up from school, and buy necessary supplies. What they will cut back on is trips that are made for fun, or those areas with good public transportation systems will be used more frequently.

[aedens]

http://www.youtube.com/watch?v=NoptofKb ... re=related

[OLD1953]

That's interesting Aedens, and I don't doubt it. If it's provable, then someone should be in the pen for about 20 years. The country is close to a point where justice will be demanded, and it would not surprise me for that to hit at any time. This is the real similarity between the Tea Party and the Occupy movement, they both want justice. I can't see either side crying over banksters being led to jail.

Trevor, part of the cutting back is simply baby boomers getting older. People tend to cling to the familiar, so someone used to driving an SUV will tend to keep doing that until something breaks them out of their rut. But a baby boomer who no longer has children in the house doesn't need an SUV for any real purpose, they are just used to it. So trading down makes a ton of sense, and saves them money on gas. I think this is a good deal of what we are seeing in terms of market changes, people reevaluating the "familiar" vs the "affordable". And affordable is winning. Naturally, that destroys companies that depend on the familiar to make all their money. The Amazon business model of doing everything possible for the customer, keeping prices and profits as low as possible (2.37% IIRC) and making yourself as convienent as possible is the new business model for success. Anything else is going to be doomed over time.

Speaking to that issue, and returning to Apple for a moment, I do not think Jobs would have allowed this battery business to go on for this long. If the batteries are too hot, then he'd have either sent the customers insulating pads to put under the device or replaced the batteries. Stonewalling is not going to win Apple any new customers.

http://www.startribune.com/lifestyle/143857616.html

It may or not be hotter than an Android device, but is that REALLY what Apple wants to say here? "We're just as good as an Android"? Really?

Somebody needs to hook a dynamo to Jobs, he must be spinning fast enough already to power half of Los Angeles.

[aedens]

http://www.nytimes.com/2012/03/27/busin ... f=business

[OLD1953]

Interesting to see the desperate measures undertaken to make college loans pay.

http://www.bloomberg.com/news/2012-03-2 ... n-woe.html

It's grimly amusing to see them try to wring blood from turnips. Just how is this supposed to happen?

Doubtless, if it was proposed to cancel part or all of these debts, it would be socialist destruction of America. Sometimes there is no winning.