Economic Mischief - Contrarian Political And Economic Analysis

Two curious pieces of news today: Geithner Says U.S. Examining Ways to Push China on Yuan Rise Treasury Secretary Timothy F. Geithner said the U.S. isn’t satisfied with the pace of yuan gains and is considering ways to urge China to let the currency rise faster. And Fed refused to comment on Japan weakening the Yen . NEW YORK (Dow Jones)--The Federal Reserve Bank of New York declined to comment on Japan's intervention in currency markets that has pushed the dollar sharply higher against the yen. So why are we perfectly happy, or at least neutral, with Japan, the #3 economy, weakening the Yen and are furious at China, the #2 economy, decreasing the value of the Yuan. This is a good question for any would be political economist to ponder. The treasury is certainly in charge of the political aspects of the dollar's relationship to other currencies. The Fed's political objectives are somewhat murky but assumed to be largely the same as the treasury's. Let's call this ...

I have been reading the inflation/deflation debate for some time now on various parts of the web. The inflationists insist that we will collapse like Wiemar. The deflationists insist that we will collapse like Japan. The memory of the 1970s inflation is strong in many an old gold curmudgeon, so the inflationists seem to be more prevalent. I will in this essay attempt to argue that hyperinflation will not happen if global commodity markets remain priced in dollars. The reason for this is that if inflation increases, the rest of the world will bid commodities up drastically, especially oil, and severely throttle U.S economic growth, leading to a more restrictive monetary policy. Hyperinflation always happens due to a foreign exchange crisis. The population, sensing a high level of inflation, rushes to change their earnings in for real goods or foreign currency. In the case of Wiemar, or Argentina, the rest of the world is largely unaffected. They see their currencies drastically...

I have been trying to get a daily reading list together so I can more closely follow economic developments in China. I was trying to stay as far away from western viewpoints of China as possible. Reading western news sources is like reading about science in newsweek vs reading china business based and focuses news sources -- which is more like reading the actual technical journal articles. Ok here's my notes on the topic so far: http://www.chinaview.cn/business/index.htm -Decent - basically Xinhua's (Official Chinese News Agency) business section http://english.gov.cn/service/business/sbw.htm -brief gov news agency business headlines. http://www.chinadaily.com.cn/english/bw/bweconomy.html -Not bad with a lot of original information! for example: Quote: "Tax treaty benefits In this article, we shall analyze the process of adopting a Mauritius company as a holding vehicle. The China-Mauritius tax treaty offers some tax benefits in structuring a tax efficient holdin...

A recent article in The Arab Times seems to shed some light on where all the money sloshing around the world creating asset bubbles is coming from: We in Kuwait seem to have run out of ideas for the time being and our past generations were more creative and looked deeper into our human resources to give their best. The overseas investments have their limits and it is time to seriously think of ways of making and creating new job opportunities for our youngsters and improve their capabilities and abilities. This is the only way to move forward as our financial resources are beyond our abilities and capabilities. It may take some time to come with the right answers but this will not happen without passing some laws through our parliament. Most importantly the land utilization law and liberalization laws to allow the private sector to move forward. The government owns more than 95 percent of the Kuwaiti land and with the BOT law still under revision almost all projects have been shelved ...

The Super SIV appears to be on it's way to sanitize all the sub-prime CDOs. Will it work? Probably Not... Why? Hole in the Dike #1: The Chinese and the Japanese aren't buying it anymore as outflows of capital show: Asian Investors Dumping Treasuries Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries. Mr Ostwald warned that US bond yields could start to rise again unless the outflows reverse quickly. "Woe betide US Treasuries if inflation does not remain benign," he said. See that chart above? That's the August data, before they lowered rates! Hole in the Dike #2: The worst isn't even here yet! See below for a timeline of when rate resets are going to hit. It starts in January 2007. No foreigners want to buy our debt and there are going to be a ton of people defaulting on their mortgages in the coming months....

Financial BS is so entertaining when you actually try to take it seriously.

It seems that everybody is trying to sort out the justice of the situation. People see empty neighborhoods with unkempt lawns and they want to help, it's only natural. Bush: Nobody did anything wrong, there's just a confidence crisis keeping people from being able to re-fi. In this sense, this is the most blissfully academic conventional macro solution because it looks at the whole situation as composed of undifferentiated perfectly uniform economic quantities like interest rates and monthly payments. Bernanke: Bernanke thinks that again no one should pay it's just that whoever bought the MBS paper got too smart and got scared and we need to add more complexity to get the con-job started again. Obama: Think that obviously it's the financial industry that is to blame. He is right about the perpetrator but wrong about the victim. The borrower got to live in a nice house they would never be able to otherwise afford for a couple months and got tons of money for toys vi...

Second Congo War - A.K.A Africa's World War Second Congo War at Wikipedia Why : 3.8 million people died... Since 1996 6 to 7 million people have died in Congo. Seems like a big free-for-all grab for resources by the regional powers. A kind of preview of the new wars of multi-faction anarchy and bloodshed in the midst of plenty that Iraq is now an example of. --- The Second Chechen War Second Chechen War At Wikipedia Why: Russia goes head to head with entrenched Islamic fundamentalist separatists, fights with total disregard for Geneva Convention, and wins. This is the first war that I am aware of where the full brunt of advanced weaponry was brought to bare in unrestricted warfare.

Mr. "I Am Facing Foreclosure" shut his blog down. It's really ugly. I tell ya. The guy tried splattering his whole arguably legally dubious situation onto the Internet and it didn't work. More on this at Another FB'er ——————————— What I did was Stupid!! September 24, 2006. This blog was the WRONG kind of exposure. I APOLOGIZE to my friends, family, associates and especially EVERYONE WHO HELPED ME with my real estate transactions. I DO NOT BLAME ANYBODY for ANYTHING and take full responsibility. What started as an honest desire to share my experience turned into something dangerous - playing with fire. After talking to a business associate this morning I realized I went TOO far and shared TOO much. I turned something small into a big exaggerated mess. Others were telling me this too, but I wasn’t getting it. Now I crossed the line. I misused my ambition. I have damaged my reputation and I have damaged many good relationships through this. I never meant to hurt ...

Over at Mish's blog I've been having a lively inflation/deflation debate. Here's some of it. Ok I've heard the "Imbalances" argument over and over again. It has been popular for at least 20 years since Regan lamented about our national debt. Remember Ross Perot and how we did very well lamenting about the trade deficit back in the early 90s? Well, we're still here... The big hole in their argument is that on an interest rate basis and on a purchasing power parity basis, which are the ony two things that matter with regards to currency values, the dollar is doing fine. Europe and Japan are very expensive and interest rates are lower. It's as simple as that. China, India, Russia and Brazil are cheaper but nobody trusts their financial system to handle institutional size investments. Face it, no country in the world treats wealthy people better than the U.S (with the exception of Singapore, and Hong Kong) and they know it, which is why they keep their m...

http://www.financialsense.com/Market/daily/monday.htm Good article on why gas prices came down so suddenly. Seems to be a short term fix. After the elections prices will probably ricochet right back up again.

http://cbs5.com/topstories/local_story_264014839.html “Not only are Bay Area families moving inland in search of cheaper housing, but apparently so are Bay Area drug operations. Nearly 50 homes in the Sacramento and Stockton areas have recently been exposed as elaborate marijuana growing operations. Since Aug. 2, agents have raided five homes in Sacramento, one in Rancho Cordova, 19 in Elk Grove, and 19 homes in Stockton, three of which were raided Thursday. Marijuana growing operations in upscale neighborhoods are becoming a common problem in North Stockton. Police say that one bust turned up 500 to 600 plants in all, with rows of the plants filling the dining room and great room of the home. In the utility room, an elaborate electrical setup fed power to lights for growing. Authorities believe the operations have the markings of a regional crime ring capable of purchasing dozens of multi-million dollar homes and thousands of dollars in sophisticated equipment. Antioch real estate age...

Regarding these two web sites: http://www.buydanshouse.com http://iamfacingforeclosure.com/ Yes, Generation Y, you do not need to fear the first housing decline you've ever seen in your life times. That's because the panacea of all panaceas, the Internet, will save you. Just take your whole life and splatter it onto the Internet in blog format, add a litle Youtube, and Web 2.0 and everything will work out. Putting a blog up will generate so much interest that you'll get a buyer in no time! With all those pageviews to your website you might even be able to pay for your mortgage payments with Ad revenue!... Worked for the MillionDollarHomePage didn't it?

A Recent NY Times article on the Japanese Housing Bubble got me thinking. Especially this quote: Japanese economists say the United States is not likely to suffer a decline that is as severe or long-lasting as Japan's, because they see a more skilled hand at the tiller of the American economy: the Federal Reserve. Japan's central bank, the Bank of Japan, failed to curb the stock and real estate bubbles until mid-1989, when it was too late and prices were sky-high, they said. Translation: It's different this time! Is it really? Let's listen to some words from Mr Bernanke : But the U.S. government has a technology, called a printing press (or, today, its electronic equivalent), that allows it to produce as many U.S. dollars as it wishes at essentially no cost. By increasing the number of U.S. dollars in circulation, or even by credibly threatening to do so, the U.S. government can also reduce the value of a dollar in terms of goods and services, which is equivalent to...

There have been all kinds of articles recently about how the United States is losing its scientific edge because fewer people are going into the sciences and engineering. There is a great deal of handwringing and people talking about the anti-intellectualism of our country, its poor schools, etc and all sorts of wild guesses as to why this is happening. Well India has plenty of anti-intellectualism, poor schools, etc but they are turning out a lot of engineers. The real reason is that being an engineer in the United States does not mean you're going to get rich relative to your real estate speculating condo flipping peers. Let's look at some facts: The International Herald Tribune says that the average wage for an experienced programmer in India is $11,423 a year. The average wage for an experienced programmer in the U.S is $83,000 a year. However the average per capita income in India is $3,100 and in the U.S it is $40,100 . Per capita income is a good indicator of t...

THIS week, we broke a milestone of sorts - the Zimbabwe dollar collapsed to 100 000 to 1 against the US dollar. Article Link

It's always nice to see that people can come up with all kinds of new ideas for dealing with society's problems. One of those problems has been delivering simple health care in an inexpensive manner. Some enterprising person has come up with a Retail Mall Store that offers health care services.

I for some sick reason am drawn to contrarian investment ideas. I like laughing at the latest hot investing trend; for example, the current housing mania. I did however find that during the last two years, I spent a lot of time looking for ways to criticize the mania more or less so I could find a way to keep the pressure off from my friends and relatives to get a house and a mortgage. This was a big waste of time. Being a bear in a market with upward momentum is impossible. Trying to call a top is something the smartest investors have a hard time doing. There will be a lot of air coming out on the downside and one is unlikely to miss it but waiting for the top can drive one nuts. That's why I've found it far more productive to instead go hunting for the next bubble while everyone is chasing around the current one. How does one know its a bubble by the way? If one is reading about it and one grin starts getting to big, to the point of giddyness one may be becoming emoti...

Put your mad max costume away. Looks like a the peak oil energy crisis will be held off for quit a while thanks to coal into gasoline tech. Fischer-Tropsch technology converts coal to gas at $32/barrel This is what i mean when I say that huge economic forces will be unleashed reshaping the world economy and infrastructure as oil prices start rising.

I read this article Article over at the Economist about the current global credit bubble situation. I think that there is an excess of money flooding into the bond market from the savers and currency peg maintaining central banks in Asia. It is being sent back to them by debt financed consumption in the developed world which they are putting back into bonds. As long as the trade volume keeps increasing at greater than the rate of interest this will keep going as the Asians keep giving the rest of the world the liquidity to issue new debt and make the interest payments on the bonds. This will continue until trade volume becomes flat or falling. A good analogy is that of a person who buys everything he owns from walmart on his walmart credit card. All the profits from walmart gets lent back to the customer so he can pay his interest payments on the credit cards. If walmart stops lending then walmart can't sell anymore. If the customer stops buying than walmart can't fund his int...