Friday, November 30, 2012

Links 11/30/2012

- Japan used to be the best at technical innovation - now they are the best at...printing money, they do it all the time! But much longer will it last? Japan Approves Modest yet another Stimulus Package. SEE ALSO: Special report: After a bashing, BOJ weighs "big bang" war on deflation
Oh, and what about the japanese stock market?  The capitalists, especially the bankers, are of course loving this new round of QE, because they will get a new bailout package, disguised as "a stimulus package to help solve the unemployment crisis" - hence the big move upwards in Japan's stock market after these news... 

- BOE (the Central Bank of England) has just found a new multi-billion "black hole" in the British banking system. So, another round of QE is to be expected soon, and then another, and another, etc..Money printing from here to eternity then, at least until the rest of the world decides that it will no longer accept payment in currencies that are continually being debased...

- China Moves Forward in Opening Gold Market: No surprise really, they are simply getting ready for the day of reckoning for western currencies.

- China’s Oil Quest Comes to Iraq: Let the Americans fiht it out, let them stent all of their money in fighting all these wars an become hated all across the globe, while a the same time China is signing one business deal after the other, in Iraq, in Africa, etc. securing the natural resources they need (energy, land, food, raw materials, etc.).

- Turkey's gold exports continued to surge in October, confirming Ankara is still using the commodity to pay for Iranian gas and circumvent sanctions as U.S. lawmakers mull a package that could specifically target the complex trade. GOLD-FOR-OIL (instead of dollars-for-oil): That is a game-changing deal worth thinking about for the future, as the oil-produsing nations are increasingly rejecting the dollar as means of payment for oil...

MUST READ, via The Economist: Not what it used to be: American universities represent declining value for money to their students
[...] there is growing anxiety in America about higher education. A degree has always been considered the key to a good job. But rising fees and increasing student debt, combined with shrinking financial and educational returns, are undermining at least the perception that university is a good investment.
 [...] Concern springs from a number of things: steep rises in fees, increases in the levels of debt of both students and universities, and the declining quality of graduates. Start with the fees. The cost of university per student has risen by almost five times the rate of inflation since 1983 (see chart 1), making it less affordable and increasing the amount of debt a student must take on. Between 2001 and 2010 the cost of a university education soared from 23% of median annual earnings to 38%; in consequence, debt per student has doubled in the past 15 years. Two-thirds of graduates now take out loans. Those who earned bachelor’s degrees in 2011 graduated with an average of $26,000 in debt, according to the Project on Student Debt, a non-profit group.
More debt means more risk, and graduation is far from certain; the chances of an American student completing a four-year degree within six years stand at only around 57%. This is poor by international standards: Australia and Britain, for instance, both do much better.

Despite so many fat years, universities have done little until recently to improve the courses they offer. University spending is driven by the need to compete in university league tables that tend to rank almost everything about a university except the (hard-to-measure) quality of the graduates it produces. Roger Geiger and Donald Heller of Pennsylvania State University say that since 1990, in both public and private colleges, expenditures on instruction have risen more slowly than in any other category of spending, even as student numbers have risen. Universities are, however, spending plenty more on administration and support services [...]
Also worth checking out: Online schools spend millions to attract students

- LOL, 7$ for a cup of coffee? If the people can't even understand this simple scum, how can they understand the far more complex scums that exist out there? Starbucks offering a $7 cup of coffee, since drinking coffee at Starbucks is about "more than just coffee", it's about "being cool", and this is why Starbucks is able to trick you into giving them 7$ for a cup of coffee. It's the same thing with Apple's overpriced iPhone, which costs way more than all the other smartphones, beacause it is not just 'better', but it is also 'cooler'. Is it a coincidence that Apple has yet to release a cheap smartphone? Apple's phone is about being "being the best", so if Apple releases a cheap version of the iPhone, then owning an iPhone will no longer being associated with "being the best". It will be like owning a Samsung phone, or an LG phone, etc - let's face it, "everyone" can afford a "regular" smartphone, so noone is really impressed when you own a Samsung or a LG (even if it is a great phone). But "everyone" is impressed when you own an iPhone, right? Anyway, I'm getting carried away here, so I'm stopping.

- TECH: Bend me, shape me: Flexible phones 'out by 2013'

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Thursday, November 29, 2012

Links 11/29/2012

- China is getting ready for A world without America at the helm - You have to check out the graphs on this article, they are GREAT (although the article itself is way too China-biased, as it was published in the Asia Times): Post-US world born in Phnom Penh

- Yawn: More money-printing coming from the FED (Well, how else are they gonna save the banks from bankruptcy, and at the same time reduce the workers wages, if not by money-printing from here to eternity?).
A useful note would be to always check out Jon Hilsenrath's articles on the Wall Street Journal, as he is the 'journalist' the FED has selected to talk to when they want to convey something to the public.

- And since America is gonna to hyperinflate the dollar, what else is there for those who have savings and want to preserve them but gold?
How Do the Chinese View the Gold Market?
Indians hoard 20k tonnes gold worth record $1.16 trn

- Poverty, bankruptcies, unemployment are rising in America, the "housing bubble" is still going strong, and since the educational system is not really producing workers that are "competitive enough" in the global market, America now has an "education bubble", as students cannot repay the investment they made when they borrowed money to go to college:
Growth In College Tuition Vs. Growth In Earnings For College Graduates
Pennsylvania's Capital Is Drowning In Debt And Likely To Threaten Bankruptcy Again
Surprise: Right After The Election, New Home Sales Tumble From Downward Revised Two Year High
MCDONALD'S STRIKER: 'They're Not Paying Us Enough To Survive'

About those unemployed/underemployed workers: In Spain, they are even having lotteries where the winner gets a job, and the others starve to death. I guess that gambling will never die, in fact it will grow in times such as these, because it gives you [false] HOPE. A few workers will get a job through this lottery system, the others will remain unemployed, but everyone accepts this system, because everyone hopes that "maybe I will be the one that wins the lottery".

ALL the major banks will be saved (via austerity AND money printing). Of course, all this money-printing inflates the currency and erodes the people's belief in this currency's credibility->The people start moving away from that currency-> hyperinflation. This is something that is happening everywhere across the West. However, Germany has other plans, as it is in relatively better shape than all the others. So Germany will accept printing money to save the banks (including the German banks) from bankruptcy, but it will require the PIIGS nations to become little more than protectorates. Furthermore, Germany is NOT going to print "unlimited" amounts of euros, like America is doing, so the euro will be a better choice for those who want to protect their savings. So, more and more "big-time" investors will start opting for the euro instead of the dollar, and this has the Americans worried, because they know that in the long run, they are screwed: Germany displaces China as US Treasury's currency villain.

The Arctic ice cap is melting - Excellent news for energy exploration/drilling/transportation. MELT IT ALL, who cares about the enviroment and all that 'unimportant' stuff (?!): Gas tanker Ob River attempts first winter Arctic crossing.

- TECH: Intel 'preparing' to put an end to user-replaceable CPUs - From now on, the CPU will be permanently attached to the motherboard, and the user will NOT be able to upgrade it or replace it if it breaks down. And since Intel is now pretty much a monopolist (AMD is on the verge of bankruptcy), they will have their way...In reality however, most people prefer laptops and smartphones nowadays - most people don't change their CPUs, they don't even know how. So, most people won't even know the difference. The only 'player' in the CPU market that could hurt Intel, especially in the 'low-budget CPU'market, is ARM, the company that designs CPUs that are not very strong (but are strong enough for simple tasks) and are already used in smartphones, tablets, etc.
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Tuesday, November 27, 2012

Links 11/27/2012

- India and China Deepen Economic Ties

- Saudi Arabia: King's Rumored Death and the New Line of Succession

- Intel Views Indonesia as a Lifeline - The West buys gadgets (until it runs out of money), but Asia is growing, no?
Desktop and laptop sales to millions of first-time computer buyers in Indonesia are likely to bolster revenue at Intel Corp. and offset some of the ground lost in more-mature markets where consumers are turning to tablets.

 The sales of desktops and laptops that use Intel's chips are expected to surge in Southeast Asia's largest economy as rising incomes enable more people to buy computers. Intel has been struggling in more-developed markets, where the most demand growth is coming from sales of smartphones and tablet computers that don't use Intel's processors.

Everyone is doing it, because this is a great way to be competitive. And everyone knows this:
- NOT JUST APPLE: Samsung Under Fire For Allegedly Giving Employees 16-Hour Workdays, One Day Off Per Month

-  UK: Increasing numbers of working people live in poverty, report finds. This is "great" (!), this means tha tmore and more people are becoming desperate-> They are becoming willing to work for less money ("they are becoming more competitive") -> The profits of the capitalists that will employ some of them (those that actually survive this ordeal) will be higher. Sacrifice an entire generation (the "lost generation" as they are already calling them), in order to gain cheap labor force for the future!

- TECH/Innovation: Harnessing Energy From the Body to Run Devices
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Friday, November 23, 2012

Links 11/23/2012 + A story from Bulgaria:Welcome to your future dear PIIGS worker

  • Brent to eclipse US crude as world oil benchmark (livemint)
  • Iran doesn't like the dollar - in fact, Iran has been calling for an end to the current "petrodollar" system for years, and this is obviously the biggest reason why America has branded it as a "terrorist-state": Iran urges use of alternative currencies in global trade (PressTV)
  • Saudi Arabia Plans $109 Billion Boost for Solar Power (Bloomberg) - Why sell your oil now, when you can just save it for the future, when the "petrodollar" system is over and oil has been reprices MUCH higher in dollar terms (as the dollar is heading for hyperinflation and everyone who is everyone knows it)
  • What about all those alternative power sources? Well, they are not proving to be as efficient as we once hoped them to be, so, at least for now, we all "have to" pay the price by substituting winds and solar farms, as they cannot be profitable enough by themselves: Energy bills to rise by £170 a year to fund wind farms
  • China today confirmed the first successful carrier landings of its J-15 fighter aboard its first aircraft carrier the Liaoning (BusinessInsider)

And what about the West's demise? Here are some of the latest news:
  • After France, Britain's AAA credit rating returns to the spotlight (Telegraph)
  • There are still more than a million young people not in education, employment or training (Neet) in England, despite a dip in the numbers (BBC)
  • Greek Milk Costs More Than Anywhere Else In Europe As Suicide Rate Rises By 37% (ZeroHedge)

As a bonus, here is a very interesting article from Bulgaria: 40.000 Small Businesses in Bulgaria To Go Bankrupt by End-2012.
What does this article show us? Well, it shows us that the model that the ruling class are trying to enforce in the PIIGS countries, if not everywhere ( = improving the competitiveness of the workers by reducing their wages), will never bring back growth. Bulgarian workers are really cheap, but there are even cheaper workers in others countries, so, without any specialized training and education, these workers have a very hard time to find a job, and when they do, they get really low wages...Welcome to your future dear Western worker
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Thursday, November 22, 2012

Links 11/22/2012

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Wednesday, November 21, 2012

A few thoughts on the matter of deficits: Do they matter or what?

Family and financial problems have prevented me from updating this blog, and I also have to prepare from moving from Greece to Australia, so my free time is limited.

However, I just read a couple of articles that caught my eye, and I'd like to share a few quick thoughts on the matter of deficits:

Britain's official public deficit climbs higher

Public sector net borrowing soared to £8.6 billion ($A13.28 billion) last month, the Office for National Statistics said in a statement on Wednesday.
That compared with £5.9 billion ($A9.11 billion) in October 2011.
Market expectations had been for public borrowing of £6.0 billion in October, according to analysts polled by Dow Jones Newswires.
Everyone knows that almost all Western nations have been running trade deficits for decades know, and that it was once -famously- said that "deficits don't matter". This may sound strange, but I kind of agree: 

It's not the 'deficits/debts' themselves that matter, rather than the 'ability to repay these debts in the future through future productivity" that actually matters. For example, there are no people that would loan me 1.000.000$, because noone seriously believes that I will be able to produce enough wealth in the future to repay such a loan. But there are a lot of people that would gladly loan 1.000.000$ to APPLE, because they think (rightly or wrongly so) that APPLE will be able to produce enough wealth in the future to repay this loan (+ interest of course, why else would the bondholders loan the money?). 

The problem today is that most corporations (AND countries) have very little (or zero) CREDIBILITY (i.e noone believes that they will be able to repay their loans). 

This is why deficits didn't used to matter, but now they do: People used to think that "countries are always able to repay their loans", so they are always credible, and thus "their deficits don't matter [because they will be able to repay their debts in the future through future productivity]". Now, their credibility is gone, so now "deficits matter"...

Here's another interesting article, from the NY Times:

A Call for Japan to Take Bolder Monetary Action 

For years, proponents of aggressive monetary policy have offered this unusual piece of advice as a way to end Japan’s deflationary slump and invigorate the economy. Print lots of money, they said. Keep interest rates at zero. Convince the market that Japan will allow inflation for a while.
Japan’s central bankers long scoffed at such recklessness, which they feared would ignite runaway inflation. But now, the bank’s hand could be forced by an unlikely alliance of economists and lawmakers who have argued for Japan to take more monetary action after more than a decade of weak growth and depressed prices. 
Championing their cause is the former prime minister Shinzo Abe, who is favored to return to the top job after nationwide elections next month.
Japan’s monetary pump-priming is “like a morphine addiction that is getting worse,” Ryutaro Kono, chief economist for Japan at BNP Paribas, said Tuesday. “Fiscal or monetary policy doesn’t have the power to create new value” for Japan, he said.
Unfortunately, Japan is not the only Western nation that is doing this. It has been doing it for several years now, and it is probably reaching "the end of the road": More and more people are noticing that Japan, and most Western nations actually, are no longer producing a lot of products that the market actually wants and is willing to buy (i.e. "competitive products") [*].

So, what do these countries do? Well, they can't seem to be able to innovate their way out of the crisis by creating new, valuable products, so they start printing more and more money: This way, they decrease the wages of the workers, making them more competitive, and thy also use the newly-printed money to recapitalize the banks. Here's something from one of my previous posts:

1) Capitalism is based on the exploitation of the workers by the capitalists.

2) After the collapse of the former USSR, all the workers of the Soviet block + the Chinese workers were intergraded into the labor marker that truly became global.

3) Capitalists off-shored production to Asia, as the workers of those countries could be exploited much more so than the workers of the West (as the Western workers had achieved some important victories through a century of labor struggles, that inhibited the capitalists ability to exploit them).

4) As the industrial base of the West was diminishing, capitalism became more "leveraged" and credit-based, as it needed more and more "banking loans" to keep the system going:
-If a factory was closed down, either because the owner off-shored production to Asia or because it just couldn't compete against the cheaper goods that were made in China, the workers of that factory could still get a job, or start a business themselves, by getting a loan from the banks.
-The workers wages have stagnated for a long time (link), but they could still "afford" a new house, by getting a mortgage. And they could also afford rising tuition fees for their children's education, by getting a student loan. And they could even a new plasma TV set, by getting another "consumer's loan". And the list goes on and on.
-This meant that the construction workers could find a job (thanks to all these mortgages), and the companies that produce this plasma TV set and the merchants who sell this TV would make a profit. So, there would be a job for those who make these TV sets, or sell them.

5) The problem with all this is that the houses that the people live in are not "their" houses, they belong to the bank. And if you can't make your payment on your mortgage, then the bank kicks you out. Can all these debts be repaid? No, of course not.

6) So, the Western workers earn relatively low wages, and are deeply in debt, as they had to keep the system going by "overconsuming" for a very long time. And it's not just the workers, entire states are heavily indebted and cannot possibly repay their debts.

7) As the people cannot get any more loans, capitalism can't keep growing. No jobs for the construction workers, factories close down as noone can consume all the good that they produce, etc.

8) But as these debts cannot be repaid, the banks are also in trouble, as they have to write down heavy losses. This is a very heavy blow for them, as they are ALL bankrupt, just like Lehman Brothers.

9) The difference is that, unlike Lehman (and a lot of smaller banks), the rest of the banks were saves through endless bailouts. Let's not forget that the banks have become bigger than ever, as capitalism needed more and more credit. So, the bankers have the politicians in their pockets, and they managed to get the money they needed (from us). After all, they are "too big to fail", whereas we are not, we are "replaceable". So, all the wealth of our societies is being redirected to the banks, in order to cover their losses, leaving the rest of us to starve.

10) But the banks need a lot of dollars. Trillions and trillions of them. So, this "money" is being "created out of thin air" (quantitative easing - money printing). This process of money printing has being going on for many decades now, ever since Nixon abolished the gold standard. The system needed more credit, and so it became more leveraged. The gold standard was interfering with capitalism's need for increased leverage, so they abolished it. And now that the banks have to be bailed out, they are printing even more money than before - here's a great chart:

11) All this newly created "money" (currency) goes to the banks, so that they won't have to face another "Lehman-type" moment, or even a global collapse of the entire banking sector. But this newly created 'money' isn't based on newly created wealth (new products/services), nor on wealth's"monetary counterpart", gold (gold, as we have already explained, is the "monetary representation" of wealth, as capitalism has a tendency to monetize everything, and so all goods and services have a value that can now be expressed through gold, in order for the people to be able to exchange them in the market (buying/selling).

As all this newly created "money" is not based on new wealth/gold, it is simply a way to debase the currency and redistribute wealth:
The banks get bailed out, by getting all the newly created "money", and the workers get paid less (as the value of the currency in which they are getting paid is being diminished). This is necessary for the capitalists, who get to save the banks, and improve the "competitiveness" of the working class. The destruction the currencies is a sacrifice that they have to make, in order to save the banking sector from collapsing, and at the same time to reduce the wages of the wokers, so that they become "more competitive", thus attracting capital investments.

13) One of the greatest "side-effects" of this process of "money printing" is that fewer and fewer people want to own/use the various currencies, as they can easily understand that these currencies will lose a lot of their current value in the future. More and more capitalists turn to gold for protection of their wealth, as they realize that gold is the one thing that will always remain constant. So, China, Russia, the oil states (and many other rich "players") are buying gold, and they are trying to dump the dollar when they trade with each other. The oil states have a "special role" to play in all this, because if and when they reject the dollar as a means of payment, the world will experience a great "oil crisis", much bigger than the 1973 oil crisis (which was the first time the oil states publickly rejected the dollar and demanded to be paid in gold, as they obviously didn't like America's decision to abolish the gold standard in order to print as many dollars as the USA wanted).

13) The West is obviously caught between a rock and a hard place. But saving the banks and impoverishing the workers are the top priorities, so this process of "money-printing" will continue, despite the various obstacles, twists and turns. Money printing is today a "systemic necessity" for capitalism, and there is not much point in putting the blame solely on Bernanke, Obama, Bush, the FED or their English/Japanese/European counterparts (The Europeans are also printing money, although Germany does not need the same amounts of "money-printing" as the rest of Europe, as the German workers are already very competitive, thanks to their high productivity. But Germany also accepts the need for money-printing, as it is the only way to save the banks from their "toxic loan situation". And they are VERY WELL PREPARED for the coming destruction of the dollar (hyperinflation), as the euro-system has combined the European nation's gold, making it the "least bad" option in a world of fiat currencies that are being massively debased).

14) But gold is not just an inflation hedge or a deflation hedge - it is a measure of trust in the system: The reason why gold was considered to be a "fringe investment", or even "a thing of the past" is because there was a lot of trust the system's ability to grow. The capitalists don't really like gold's stability, because capitalism wants to constantly expand. So, the capitalists prefer investments that return a profit for them, like starting a business, or investing in stocks, etc.. If and when the economy is doing well, then businesses make profits, investing on stocks is also profitable, etc. So why buy gold? Why would anyone want to save his capital for another day, when he can invest his capital today, and make a lot of money?

15) Things change however, and today the capitalists are not very confident that the economy will grow in the future (there is no trust in the system). There is enough capital concentrated in the hands of a few oligarchs, and there are many cheap workers in Asia - and yet the capitalists are NOT willing to make a lot of investments (especially in the West, where the workers are "too expensive"). As the workers lack the necessary "purchasing power" to buy things, it is obvious that a lot of products will not be consumed (because the people are too poor to buy them).

16) But the capitalists prefer to let the workers starve to death, even if this aggrevates the crisis on the short-term. The more desperate the workers become, the more inclined they will be to accept serfdom (or "increased competitiveness", as the capitalists see it). So even if a few capitalists get killed in the process ("coladeral damage"), the end result will be great for the rulling class, as they will have created an "ultra-competitive" world, where a few oligarchs own almost everything, and the workers work for scraps (->more profits for the capitalists). It is only then that they will start investing again (especially in the West). Until thw workers accept working for scraps, the capitalists will not invest.

17) In order to achieve this goal, the capitalists need a safe place to store their capital: GOLD. Once the workers have become "desperate enough" to accept serfdom, the "business cycle" can start again, and they will invest some of their gold in productive investments. But until they feel confident that they will make a profit, they choose to save their capital for the future - and gold is the only thing that will not lose value when everything else is collapsing.

[*] Don't get me wrong, the West is still producing a lot of great products, but, with the notable exception of Germany, they are all running trade deficits (i.e. the goods they buy from the market have a greater market price than they goods they sell on it. Note: Please notice how I used the term market price instead of market value, because these two things are not the same, unless for example you honestly think that footballs players are worth all these millions of dollars that they get. But that is another discussion, for another time).

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