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Financial Skeptic Bulletin, December 2012

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[Dec 21, 2011] Ex-Pimco Manager on Investment Strategy, Bill Gross - Video - Bloomberg

Nov. 22, 2011 | Bloomberg

William Powers, a former portfolio manager at Pacific Investment Management Co., talks about investment strategy and Pimco's co-Chief Investment Officer Bill Gross. Powers speaks with Erik Schatzker on Bloomberg Television's "InsideTrack." (Source: Bloomberg)

[Dec 21, 2011] Vladimir Putin Calls Bernanke A Hooligan, Angry At American Money Printing

07/12/2011 | ZeroHedge

Who would have thought that Ron Paul's ideological ally in his quest to take down the Chairsatan would be none other than the Russian dictator-in-waiting (or rather, in actuality), Vladimir Putin. In a speech before the of economic experts at the Russian Academy of Sciences, the Russian prime minister had the following to say: "Thank God, or unfortunately, we do not print a reserve currency but what are they doing? They are behaving like hooligans, switching on the printing press and tossing them around the whole world, forgetting their main obligations." What appears to have angered the former KGB spy is the end of QE2. According to RIAN: "Putin's comments came in the wake of the completion of the US' quantitative easing (QE) 2 program on June 30, in which the Federal Reserve bought $600 billion worth of its Treasury bonds. The Fed's first round of QE, which ended in March last year, amounted to less than half the size of QE2." We can't wait to hear what expletive Putin will usher once Bernanke launches QE3.

What are the next steps: "The Russian authorities have said they would like to see a basket of currencies including the ruble replacing the dollar as the main reserve currency, although most analysts have said a more realistic target for Russia would be if the ruble became a regional reserve currency for the CIS." Too bad most analysts are right 9 out of -7 times. And last time we checked Russia was the largest oil producer in the world, which means it can do pretty much whatever it wants. Which, assuming Russia forms a 21st century axis with China and Germany, as many have suggested, means that while analysts can downplay the impact of what Russian ambitions in the monetary arena mean, pretty soon the only reserve currency in the world will be the one backed not with Tomahawk missiles or printing presses, but actual, hard assets.

AnAnonymous

Makes you wonder...what does Russia, China, et al do when they realize all they have is "paper! paper!" and we have their commodities, goods, etc? It's like the gift that keeps on giving, a treadmill you can never get off of, unless you want your own economy to implode with massive civil unrest.

Hush! Verboten speech on here. The posters on this site want to maintain the illusion that the rest of the world has the good in deal in the globalism stuff and the US citizens the wrong part.

Stating the obvious, that the insane burden of converting paper money into valuable stuff is left to others while US citizens are allowed in straightforward, no brainer consumption thanks to the USD is taboo.

The official mantra of the pravda here is that the US is suffering from globalism, that the US is sacrifying to help the rest of the world.

Each time the US sends a dollar abroad to receive in exchange real wealth like commodities and goods, the US are not importing wealth, they are exporting their own.

Such is the US world order. Victimilogy is high in this US world order and US citizens are perpetual victims. Have been since inception when they were victims of Indians, negroes, religious persons and royalists.

[Dec 18, 2011] Fragile and Unbalanced by Nouriel Roubini

That is not much courage or insight required to declare: " 'Fasten your seatbelts, it’s going to be a bumpy year!' Just bumps, or crashes too? That depends critically on whether the Europeans resolve the crisis they face, and how they go about it if they do. "
Economist's View

Fragile and Unbalanced in 2012 - Nouriel Roubini - Project Syndicate:

The outlook for the global economy in 2012 is clear, but it isn’t pretty: recession in Europe, anemic growth at best in the United States, and a sharp slowdown in China and in most emerging-market economies.

Asian economies are exposed to China. Latin America is exposed to lower commodity prices (as both China and the advanced economies slow). Central and Eastern Europe are exposed to the eurozone. And turmoil in the Middle East is causing serious economic risks – both there and elsewhere – as geopolitical risk remains high and thus high oil prices will constrain global growth. ...

Restoring robust growth is difficult enough without the ever-present specter of deleveraging and a severe shortage of policy ammunition.

But that is the challenge that a fragile and unbalanced global economy faces in 2012. To paraphrase Bette Davis in All About Eve, "Fasten your seatbelts, it’s going to be a bumpy year!"

Just bumps, or crashes too? That depends critically on whether the Europeans resolve the crisis they face, and how they go about it if they do.

Darryl FKA Ron:

"it’s going to be a bumpy year!"

In the US economic results will be tallied at the polls on November 6. Campaign contributions may do less to determine the electoral outcome than externalities in 2012.

[Dec 13, 2011] Asia Times Online Asian news and current affairs By Zhuubaajie

There is nothing to fear from the protectionist noises made by the US Congress. It is all bluff with no cards. Elites from both parties have long agreed (for at least 20 years) that free trade must be defended at all costs. It concerns the future of America.

Historically, free trade has served many prominent Americans well. "Free trade" was the justification that Warren Delano (and the Brits, of course) used to push opium on China, and to build

Dilbert the serious wad that eventually supported Franklin Delano Roosevelt's run for president.

Free trade is also how the American banks were/are going to take over the world. All who want to do business with America must open their markets to American style "banking", meaning trading derivatives.

Derivatives - Opium 2.0? After the 2008 financial debacle, derivatives continued to grow in the United States, and America’s economy has not recovered. In America today, the derivatives cancer has now grown to over US$700 trillion (by June of 2011, according to Bloomberg), which is almost 50 times the United States gross domestic product.

On its face, derivatives are brilliant. As a postindustrial move, derivatives are not constrained by natural resources, not limited by labor, and restricted only by the salesmen’s ability to sell. Upside growth looks unlimited, as "derivatives trading" is based solely on the "ingenuity" of the new-fangled breed of financial engineers.

The salesmen do not even need to explain (and very often cannot) the convoluted "contracts". Instead they rely on the age old "trust me" confidence games. The number of "contracts" is not constrained by anything in the real world. As long as you can find new suckers (buyers), you are set to profit, so the belief goes.

Like opium, derivatives cost very little to "manufacture"; the profits are humongous, and it is hugely destructive. In the 1800s, Anglo Americans (Google "Delano" and "opium") forced opium on China, and in one generation or two caused China's economy to drop from being the world's No1 or 2, to below No 100.

Just like opium, this time around this new "drug" is also pushed as part of "free trade". Demands are made on all nations that want to do business that they must open their banking industry and relevant markets to the derivatives trade.

Except the difference this time is that it is done backwards. The opium trade was supposed to plague foreigners, and to be banned domestically. But the swashbuckling "traders" this time around are so greedy they have no qualms about profiting from the pain of their own brothers and sisters and even grandmothers - and they did. The derivatives drug is so potent, it took down the Anglo American societies and economies before they could kill the Chinese economy.

The cancer appears unstoppable. This month there is serious talk of American mutual funds adopting derivatives on a large scale, and the US Commodities Commission is setting rules to make trading derivatives more accessible to the small guys. The derivatives casino is going to be $1.5 quadrillion in no time.

All of the big banks in America (at least the ones with derivatives exposures, which is just about every one of them) could fail with or without warning, just as Lehman Brothers did, because their leverage (exposure vs equity) is often higher than 50 to 1. If you have an American bank as counterparty on just about any transaction, you can inadvertently be dragged in, even if your company does not touch derivatives.

The 2008 derivatives-caused debacle was only a first taste. National policy that allows sheer gambling involving all of the major financial houses of the nation, at a level 50 to 100 times GDP is sheer madness.

Derivatives and free trade Why is it that the United States of America will not back away from free trade?

Hundred billion dollar trade deficits? Chicken feed. What's a few hundred billion dollars, especially when the profit margins are so low (China exports to America typically carry 3-5% margins), and America makes up for it in the huge profits it makes from operating overseas (in 2010 in and from China alone, American companies made over $100 billion in pure profits).

And then the derivatives profits were going to be pure gravy. Nobody - but nobody - knows "financial engineering" like Americans, and experience shows that in derivatives trades, American banks (collectively) almost always wins (as against the foreigners).

So as long as there is free trade, American banks can swoop in, and skim the cream off of the top from all central banks and large financial entities around the globe. As long as "free trade" keeps the doors open, the American banks were going to make trillions in profits. That's better than having to invade other nations militarily and collecting war reparations as in the imperialist days.

You really think there is any chance free trade will be killed?

2008 complicated things a bit. The world witnessed how even 100-year old financial houses can go belly-up overnight. Lehman Brothers had $60 billion of derivatives on its books, lost 3% or $2 billion, which wiped out its equity. What is the significance of that? Three percent of $700 trillion is $21 trillion, which is more than the total equity of all American financial companies. And you would never know when it would hit. So for the plan to work, foreigners must be convinced to open up their markets, in order to feed the meat grinder.

2008 complicated things, as I said. Both Germany and China ordered their banks to stop gambling in derivatives. Both of their economies recovered. America bet the farm, and counted on expanding the scope of the casino, betting heavily that (a) other countries will be forced to open their markets to this contagion, and (b) the American banks would win.

The $7.77 trillion in subsidies to the American banking industry also complicated things (Bloomberg expose last week after Freedom of Information Act requests). Now the foreigners are going to point to that as in violation of World Trade Organization rules. What other nation's banks can hope to compete against that level of subsidy? $7.77 trillion is more than all of China's subsidies for all industries over the last 5,000 years.

"Free trade" for banking is counted on by Washington to be a grand "double or nothing". So Washington cannot afford to push protectionist trade. Is it going to be double or nothing? What do you think?

Zhuubaajie is a pen name of a businessman operating out of Hong Kong, who travels often to the United States.

(Copyright 2011 Zhuubaajie)

Speaking Freely is an Asia Times Online feature that allows guest writers to have their say. Please click here if you are interested in contributing. Articles submitted for this section allow our readers to express their opinions and do not necessarily meet the same editorial standards of Asia Times Online's regular contributors.

[Dec 02, 2011] Survey- Small Business hiring picking up

ResistanceIsFeudal:

pavel.chichikov wrote:

You mean half-dead, like a socialist command economy?

I don't like the idea either, but there are levels of economic survival I'm prepared to accept.

sportsfan:

ResistanceIsFeudal wrote:

. . . there are levels of economic survival I'm prepared to accept.

Beats the hell out of the alternative.

adornosghost:

NOTaREALmerican wrote:

I've been amazed at the professional skills of the can-kickers so far.

I have been impressed! Buying Treasuries that you issue has astounded me! But so far so good--- just don't look behind the curtain. Helicopter Ben has done a incredible job, if one is in a small enough box.

wrote

Outsider wrote:

Could you define catabolic collapse?

Catabolism is the conversion of lean muscle mass to either fat or energy...basically you end up consuming yourself... .

NOTaREALmerican:

adornosghost wrote:

crashes the 2% growth.

I'm dubious of the 2% growth number as a SINGLE economic number.

If we assume the US is two or three separate economies - with completely separate populations - then one could grow faster that that others.

I'm thinking the A-list US economy will be ok. The C-list one hasn't been for ok for decades but the peasants there have never mattered. The trick will be sucking the life out of the B-list economy to support the A-list economy.

I think the A-list people have the tools necessary to screw the B-list dumbasses without them ever knowing what happened. Overall A+B+C = 2% but A could be more than 2% and only the A-list people matter.

adornosghost:

NOTaREALmerican wrote:

What matters is how it plays out on human time scales. Can the US transition to a 2nd world economic model. I think it can. And the A-list people are smart enough to make it happen in THEIR time-frames.

That is the question. It will be a matter of the steepness of the cliff we will soon go over.

ResistanceIsFeudal wrote on Fri, 12/2/2011 - 1:27 pm (in reply to...)

NOTaREALmerican wrote:

I never knew there was an official website. I always thought it was. First world: Richest sociopaths Second world: Up-n-coming sociopaths Third world: Sociopaths wish they could leave.

I assumed: financial economy, real economy, underground economy

[Dec 02, 2011] The Other One Percent: Corporate Psychopaths and the Global Financial Crisis

Anyone who has ever worked in a large corporation has seen the empty suits that seem to inexplicably rise to positions of power. They talk a great game, possessing extraordinary verbal acuity, and often with an amazing ability to rise quickly without significant accomplishments to positions of great personal power, and often using it ruthlessly once it is achieved.

Their ruthless obsession with power and its visible rewards rises above the general level of narcissism and sycophancy that often plagues large organizations, especially those with an established franchise where performance is not as much of an issue as collecting their rents.

And anyone who has been on the inside of the national political process knows this is certainly nothing exclusive to the corporate world.

Dec 02, 2011 | Jesse's Café Américain

Anyone who has ever worked in a large corporation has seen the empty suits that seem to inexplicably rise to positions of power. They talk a great game, possessing extraordinary verbal acuity, and often with an amazing ability to rise quickly without significant accomplishments to positions of great personal power, and often using it ruthlessly once it is achieved.

Their ruthless obsession with power and its visible rewards rises above the general level of narcissism and sycophancy that often plagues large organizations, especially those with an established franchise where performance is not as much of an issue as collecting their rents.

And anyone who has been on the inside of the national political process knows this is certainly nothing exclusive to the corporate world.

Here is a paper recently published in the Journal of Business Ethics that hypothesizes along these lines. It is only a preliminary paper, lacking in full scholarship and a cycle of peer review.

But it raises a very important subject. Organizational theories such as the efficient markets hypothesis that assume rational behavior on the part of market participants tends to fall apart in the presence of the irrational and selfish short term focus of a significant minority of people who seek power, much less the top one percent of the psychologically ruthless.

Indeed, not only was previously unheard of behavior allowed, it became quite fashionable and desired in certain sections of American management where ruthless pursuit of profits at any cost was highly prized and rewarded. And if caught, well, only the little people must pay for their transgressions. The glass ceiling becomes a floor above which the ordinary rules do not apply.

If you wish to determine the character of a generation or a people, look to their heroes, leaders, and role models.

This is nothing new, but a lesson from history that has been unlearned. The entire system of checks and balances, of rule of law, of transparency in government, of accountability and personal honor, is based on the premise that one cannot always count on people to be naturally good and self-effacing. And further, that at times it seems that a relatively small group of corrupt people can rise to power, and harm the very fabric of a society.

‘When bad men combine, the good must associate; else they will fall one by one, an unpitied sacrifice in a contemptible struggle.’

Edmund Burke

'And remember, where you have a concentration of power in a few hands, all too frequently men with the mentality of gangsters get control. History has proven that.'

Lord Acton

These things tend to go in cycles. It will be interesting to see how this line of analysis progresses. I am sure we all have a few candidates we would like to submit for testing. No one is perfect or even perfectly average. But systems that assume as much are more dangerous than standing armies, since like finds like, and dishonesty and fraud can become epidemic in an organization and a corporate culture, finally undermining the very law and principle of stewardship itself.
'Our government...teaches the whole people by its example. If the government becomes the lawbreaker, it breeds contempt for law; it invites every man to become a law unto himself; it invites anarchy.'

Louis D. Brandeis

MF Global, and the reaction to it thus far, is one of the better examples of shocking behaviour that lately seems to be tolerated, ignored, and all too often met with weak excuses and lame promises to do better next time, while continuing on as before.
"These corporate collapses have gathered pace in recent years, especially in the western world, and have culminated in the Global Financial Crisis that we are now in.

In watching these events unfold it often appears that the senior directors involved walk away with a clean conscience and huge amounts of money. Further, they seem to be unaffected by the corporate collapses they have created. They present themselves as glibly unbothered by the chaos around them, unconcerned about those who have lost their jobs, savings, and investments, and as lacking any regrets about what they have done.

They cheerfully lie about their involvement in events are very persuasive in blaming others for what has happened and have no doubts about their own continued worth and value. They are happy to walk away from the economic disaster that they have managed to bring about, with huge payoffs and with new roles advising governments how to prevent such economic disasters.

Many of these people display several of the characteristics of psychopaths and some of them are undoubtedly true psychopaths. Psychopaths are the 1% of people who have no conscience or empathy and who do not care for anyone other than themselves.

Some psychopaths are violent and end up in jail, others forge careers in corporations. The latter group who forge successful corporate careers is called Corporate Psychopaths...

Psychologists have argued that Corporate Psychopaths within organizations may be singled out for rapid promotion because of their polish, charm, and cool decisiveness. Expert commentators on the rise of Corporate Psychopaths within modern corporations have also hypothesized that they are more likely to be found at the top of current organisations than at the bottom.

Further, that if this is the case, then this phenomenon will have dire consequences for the organisations concerned and for the societies in which those organisations are based. Since this prediction of dire consequences was made the Global Financial Crisis has come about.

Research by Babiak and Hare in the USA, Board and Fritzon in the UK and in Australia has shown that psychopaths are indeed to be found at greater levels of incidence at senior levels of organisations than they are at junior levels (Boddy et al., 2010a). There is also some evidence that they may tend to join some types of organisations rather than others and that, for example, large financial organisations may be attractive to them because of the potential rewards on offer in these organizations."

Clive R. Boddy, The Corporate Psychopaths Theory of the Global Financial Crisis, Journal of Business Ethics , 2011