Notes From Underground: Beginning Of the End?

Happy and healthy New Year to all of my readers! Thank you for another GREAT year of contributions to make this BLOG a voice of reason in an effort to undermine the accepted NARRATIVE of conventional media investment pabulum. Today, one of the more astute anchors sustained the nonsense that the ECB and Mario Draghi have a SINGLE MANDATE (inflation), which renders the ECB policy easier to decipher as the FED has its self-defined DUAL MANDATE. This narrative as opined by the mainstream analysts is JUST DEAD WRONG. When Mario Draghi seized control of European fiscal and monetary policy in 2012, he said, “WE will do whatever it takes to preserve the EURO ….” and there would be no TABOOS. The ECB’s MANDATE is UNLIMITED and OPEN-ENDED whiles Draghi works to sustain QE and NEGATIVE INTEREST RATES. Economic data has no weight in thwarting the WILL of the ECB.This is going to be a major story in global finance 2018 as the Italians head to the polls.

More importantly for President Draghi is Germany has yet to resolve its September election results as the SPD has demanded a greater Pro-EU/President Macron-esque list of negotiating points for Herr Schulz to reverse pivot from his avowed NEIN to forming a coalition with Merkel’s CDU/CSU. The more that Germany succumbs to the desires of French President Macron, the greater the financial costs to German citizens. Again, the uncertainty about the outcome of European politics and its effect on plans for harmonized fiscal and bank guarantees, the more uncertain German politics. While the mainstream media crowned Chancellor Merkel the most significant politician in western Democracies, it seems ironic that she has failed to craft a coalition within her own country.

But bottom line for traders/investors is that the ECB has accumulated a massive amount of sovereign debt, with no immediate plans to stop the QE program. Yet with all of this political uncertainty in Europe, a negative interest rate program promised until 2019 and ongoing large-scale asset purchases, THE EURO IS 13% higher against the U.S. dollar. Many readers have raised the question about a STRONGER EURO. Richard Tonetti wondered if the ECB’s BOND PURCHASES were creating a false demand for European assets thus driving the currency higher. It is an interesting question but the massive liquidity additions coupled with a NEGATIVE interest rates OUGHT to be causing flows out of Europe in search of higher fixed returns elsewhere, especially as the U.S. equity markets have been the strongest over the last few months.

The European markets have been sideways since the week of November 6 when the German DAX provided a major negative signal, known as an outside KEY REVERSAL. That week the DAX made all-time highs but closed below the previous week’s low. (The high that week was 13,533 and the DAX has not been close even as the U.S. equity markets has continued powering higher.) Today, the STOXX 50, a European large-cap index settled below its 200-DAY MOVING AVERAGE, which is something to watch for Friday. The continued mantra from the sell-side analysts is to be overweight Europe relative to the U.S.equity markets. As Alice would ponder, curiouser and curiouser. The point of this discussion is to make us all wary concerning the common narrative being peddled by the messengers of mediocrity.

To complete the discussion on the European Union, I want to discuss a piece by one of my favorite economists, Carmen Reinhart. In a Project Syndicate post on December 22, Reinhart’s piece, titled, “Monetary-Policy Normalization in Europe in 2018,” provides for an analysis of nation-state monetary policy by utilizing the Taylor Rule. Professor Reinhart’s key point is that the Germans have raised recent concerns about EU financial stability (think Jens Weidmann). But Reinhart warned: “In this context, it is important to ensure that policy normalization in the eurozone does not become Germanization, which was the status quo the last time eurozone conditions were ‘normal,’ before the financial crisis.”

Reinhart uses a chart of the Taylor Rule-based interest rate levels to reflect how it was German economic circumstances that drove ECB interest rate policy ahead of the 2008 financial crisis. Interest rates were far too low for a booming Spain as Germany was referred to as the sick man of Europe.

Now, it is Germany that is booming while the rest of Europe is slowly emerging from the severe financial strains of the global financial crisis. Taylor Rule analysis suggests interest rates are FAR TOO LOW IN GERMANY but not so for the Italian, Spanish, French, Greek and Portuguese economies that are saddled with relatively high unemployment or negative output gaps. Reinhart summed up the discussion: “The ECB would do well to proceed with caution on two fronts in 2018. It must cope with the mounting pressure from Germany for a more aggressive approach to normalization, and it must avoid becoming overconfident about the durability and breadth of the unfolding recovery.”

For investors this raises two more very important issues for all of Europe: First, whose currency is it; and second, with the Germans being the guarantee of the EU credit system not all actors have equal say. This is why Draghi needs to build the ECB balance sheet and create a defacto EUROBOND in which the Germans will have to acquiesce to the role of creditor-in-chief. The end of QE is just the beginning of massive uncertainties.

***Three quick points to consider:

  1. Ben Bernanke said in November 2013 that he understood crypto-currency as a means of transacting but many times he said he didn’t understand GOLD. Where is Ben now to discuss the current state of BITCOIN?
  2. Watch the Aussie dollar (and do your technical work) as the discussion about the 2018 commodity inflation scenario continues to gain traction;
  3. The ironic story of the year from the December 21 Financial Times: “Swiss Central Banks Steps in to Rescue Banknote Component Manufacturer.” The Swiss company Landqart lost a key foreign contract that was jeopardizing the company’s financial health. Because Landqart prints the Swiss banknotes the SNB was forced to takeover the company and keep it solvent. The SNB buying the printing presses to ensure the continued supply of cash. You can’t make this up! More Scotch Please!


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28 Responses to “Notes From Underground: Beginning Of the End?”

  1. Ronald Ferrill Says:

    Easy to agree that TV commentators are typically taking the simplest approach – ECB has a single mandate – Pshaw! What kind of fool am I if I believe that?
    I admit and have to others who asked me, that I have not yet figured out the economic impact of negative rates other than it has hurt my cash-like holdings keeping other rates abated. My belief is that negative rates (throw in Fed rates kept very low for a long time) will have been worst for working REAL middle class people who try to save, and eventually have some catastrophic effect – again to those of us who did work for living or are still.

    Thanks for a year of thought provoking posts and a bit of humor, irony and poking fun at the nomenklatura.

  2. judd Says:

    Another day older and I wish I was in bed! Ok I totally missed the Aussie while in hibernation this week. USD/ZAR has been the best performer with a reversal qtr. It’s flirting with its Semi-Annual level which makes me wary of metals Bulls getting trapped into next week after a very big run. As always you’re the omniscient one!!

  3. Stefan Jovanovich Says:

    “NEGATIVE interest rates OUGHT to be causing flows out of Europe in search of higher fixed returns elsewhere”.

    Where does the imperative come from when the trading supply and demand for debt is so thoroughly dominated by FX calculations? The “return” for private holders of Euro debt has been from the Euro’s beating the dollar.

    The returns for investments in U.S. dollar denominated equities have been modulated by the same effect. Measured in the Euros the Wilshire 5000 was DOWN from January to September; even with the last 3 month’s rally, the Euro-denominated Wilshire 5000 is only UP 6.2% since this time last year.

    • yra harris Says:

      Stefan–yes that is true for European investors who own Euros –but many U.S. funds would be unable to invest in negative interest rates bearing instruments.And why hasn’t the YEN performed better?Yhe Nikkei has been a strong performer but the recent European stock performance relative to the U.S. makes me question this scenario—the strength of the Euro ,with the interest structure and the continued QE OUGHT to have pushed European equities into a parabolic rally.You cite the Wilshire which I do not follow so I can’t be specific to that—but I would argue that rising real yields have historically been a positive force for a currency but of course other variables come into play.At times a country will raise rates to stem the outflow of funds because of politics but that is a short-lived experience .Also,the fear of artificial rate rises such as the U.K. in 1992 can signal a desperate situation but the rise in the U.S. rates does not signal desperation —the ECB I am not sure about as Draghi in my opinion seeks the creation of a EUROBOND

      • Stefan Jovanovich Says:

        Returns are a function of FX and yields; the question the markets keep asking us to answer is which variable is the primary one. I think we all are underestimating how much FX changes are no longer the derivative. The Nikkei’s return for the year is 8.15% if you are a European investor, after making the FX adjustments. For the S&P 500 the number was 4.76%.

        As the quantum physicists like to put it, “the past has causality; the future only probability”.

        All the best for the New Year.

      • yra harris Says:

        Stefan–thanks for the discussion.Best for the new year

    • David Richards (@djwrichards) Says:

      Speaking of physics and currency, may I offer an analogy that FX is like a thermodynamic system. It cycles. And it can be quantitatively modeled. Thus for this year I was very bullish EURUSD in this blog and at work in terms of a major COUNTER-trend rally, and several weeks ago I posted in here that the Euro was set to accelerate (as it has) into the target range I specified (yet to be reached) before collapsing. Subsequent price action has reinforced that technical outlook. And at year-end, Euro positioning by the specs is ominously the most bullish it has been in years, not unlike the dollar at the end of last year. But trend trumps sentiment, which still has room to become more extreme before the big swing high.

      Fundamentally, Europe is a mess of course. Its banking system is insolvent, with little collateral of real value, the highest ratio of NPL’s on the planet and chock full of sovereign debt that is certain to be defaulted on by bankrupt Eurozone states, and is subject to ever larger heaps of ill-advised politically-motivated regulations created by inexperienced bureaucrats, which ultimately will exacerbate the inevitable European banking crisis that lies ahead.

      US tax cuts are a big deal, notwithstanding the socialist meme of the American MSM that they’re counterproductive and destructive. Clearly, tax cuts will boost US corporate competitiveness and return on capital, while European companies languish under high and rising taxation. It’s a big enough deal that China saw fit to immediately meet and raise the ante in the tax-cut race, by legislating a new ZERO income tax rate for foreign companies operating in China. Most of east Asia will almost certainly adopt more low tax incentives quickly too. But where is Europe? Glad you asked. Europe currently has proposals for more taxes and higher costs for European-based operations. While in fact, European companies in the second half of 2017 have rapidly been losing big market share in their largest market, China and Asia. And this week while Westerners are caroling & napping, the Chinese quietly canceled Airbus orders, surely to switch to cheaper Boeing sometime after Americans return from holiday (also perhaps to try to appease the Donald?). During 2017, German automakers have lost substantial market share in Asia to Asian automakers, perhaps due to pricing and consumer reports that show Japanese & Korean vehicles have better reliability than their pricier German counterparts. Meanwhile, as European costs rise and German market share tumbles in Asia, the world’s biggest vehicle market, the Euro rises against the Yen and Won. And western fund managers are rushing to put on more Euro longs??

      Classic momentum play setting up a good short opportunity ahead.

    • Chicken Says:

      “even with the last 3 month’s rally, the Euro-denominated Wilshire 5000 is only UP 6.2% since this time last year.”

      That sounds awesome to me, on the surface. Especially considering Germany has accepted Merkle’s anemic 1~2% rate of growth.

      Anyway, it’s my observation that global central banks have demonstrated control of interest rates (with some compliance from markets) are an effective steering mechanism.

      Steer is a curious word sometimes referencing a member of a herd of cattle.

      Yra, thanks again for sharing your thoughts by:allowing us to climb inside your head.

      And happy New Year to you and yours!

  4. David Richards (@djwrichards) Says:

    “another GREAT year of contributions to make this BLOG a voice of reason in an effort to undermine the accepted NARRATIVE of conventional media investment pabulum.”

    Yes thank you for yours. In the spirit of undermining the conventional investment narrative, I will conjecture once again that the leading determinant for global macro in 2018 is China (with the dollar another key factor, but that’s consensus plus anyway the two are connected).

    IMO the global turnaround and boom times since 2Q2016 was facilitated by China for the President Xi coronation culminating eight weeks ago. That now being history, we face different prospects for the next couple of years as they let air out from the reflation balloon, although it’ll change gradually like how ocean tankers are slow to turn. But why about China? I could write an opus, but in a nutshell, it matters most because since 2014 it has increasingly become the world’s largest economy on a PPP basis (which is what matters most, comparing apples with apples on a real basis rather than an artificial basis like nominal GDP), and more importantly it’s also the largest trading country in the world. Currently, much of the world’s marginal demand is being created (or destroyed) by Greater China, more than anywhere else, sending waves of reflation or deflation around the world, moving the dollar as well as many other markets. Even if you concede the US is the biggest consumer market (a contentious point because it really isn’t anymore; another false narrative from the conventional investment media), western consumption patterns are relatively more stable than the volatility exhibited in the far east.

    Bottom line, for global macro keep an eye focused on Greater China, as the conventional investment media largely overlooks it.

    • David Richards (@djwrichards) Says:

      Per Stanley Druckenmiller, it’s CB liquidity that really matters, not earnings or other fundies. Policymakers in both the US and China have begun to turn back the liquidity spigot with talk of more to come. I’m skeptical, especially in the case of the US (thinking about new Fed governors like NIRP-advocate Goodfriend and Printing Press Powell). At least for the Fed, throughout this decade, any significant hiccup in markets or economic data has been met with Fed liquidity injections or at least a halt to any unwind of accommodation. It is difficult to expect policymakers have the nerve to knowingly bring on a recession in order to reverse monetary excess. This isn’t 1980 when the US was the largest creditor nation (rather than the largest debtor nation like today) and there is no Paul Volcker protégé at any CB today (altho I’d argue there might be one at the PBOC and that the Chinese situation is different in that while China has large debts it also enjoys even larger savings). Druckenmiller sees a repeat writ large of the Fed policy error in 2003-05 in which there was excessive monetary stimulus creating the GFC. He expects a repeat, with an even bigger financial crisis ahead (sorry, Janet Yellen, you’re wrong).

      But meanwhile, risk assets party on and the dollar melts down (EURUSD 1.30 in play?) until Druckenmiller’s bigger GFC arrives, at which time the dollar sharply reverses and soars in a kneejerk flight to safety – a sucker rally as it’s possible that this crisis also precipitates the end of US financial hegemony and the dollar as the global reserve currency.

  5. Se n’è parlato spesso, temo, però, debba ancor attendere, anche se il mondo valutario sarà sorgente di “turmoil” e l’ “oil” | Blog Materiali dell’Associazione Federigo II Svevia Says:

    […] “Notes From Underground: Beginning Of the End?” […]

  6. The Bigman Says:

    Yra How about a New Year contest for the Undergrounders I am willing to provide a bottle of their favorite libation as a prize (within reason, i.e. $100 or less) Let’s predict the 10 year rate on Dec 31 2018. Closest without going over will be the winner. I will go first if you as the sage agree. I predict the 10 year rate at year’s end will be 2.78 based on my belief the fed will raise 3 times as the circus continues fueled by tax cuts and infrastructure spending, Europe remains a mess with troubles within Germany Italy and Spain and ongoing spat between Poland and EU all of which gives Draghi opportunity to continue his campaign. As a result I believe the 2-10 spread will little change. A Happy and most prosperous New Year to all The Bigman

  7. kevinwaspi Says:

    Thank you all, and Yra, for the forum you provide. More thought provoking than any other I am aware of.
    As for the USD/EUR, maybe it is not EUR strength we see, but USD weakness, by virtue of an “unofficial Plaza Accord”. With the U.S. trade deficit rising, and growing Eurozone trade surplus (mainly due to Germany of course), coupled with the rising U.S. budget deficit (which I expect to grow even larger with ‘tax reform’, and any “infrastructure spending bill” in the near future, we have engineered an ‘unofficial’ 1985 smash of the USD. U.S. corporate profits ‘benefit’, as management claims their larger share of the pie by virtue of their ‘brilliance’, Trump sees a rise in U.S. manufacturing/exports, and the Fed gets to measure a little “inflation”, the holy grail that has been so elusive for so long. It’s a Win-Win-Win for anyone other than that slob stuck in the middle (class) who remembers when WIN stood for “Whip Inflation Now”.
    Happy New Year to all, peace and love is breaking out all over…..

    • David Richards (@djwrichards) Says:

      Yes, dollar weakness is indeed pervasive. Recall that a year ago, everyone abroad was concerned that the Trump admin would implement a US border tax. No border tax, but they were able to get a substantially weaker dollar (its worst year in fifteen) like they wanted, with little tit-for-tat currency manipulation abroad.

      This weak dollar trend remains intact. It undermines the standard of living of middle & lower (class) Americans while facilitating a buoyant global economy as dollar borrowers abroad (of which there are many) prosper from the tumbling cost to repay their loans with non-dollar revenue. An international monetary & banking crisis potentially lies ahead when the dollar eventually rips higher again (but cannot say which will happen first; it’s a chicken-or-egg analogy).

      Enjoy 2018 all; this might be the last calm before the storm.

      • yra harris Says:

        David–thanks for the wonderful posts.It will take a while to collect my thoughts and respond to the copious amount of high quality posts that have appeared to the recent blog but it reflects the high level of dialectic that makes this worth the effort—remember this is not about validation but genuine discourse and dialectic.In today’s on-line Foreign Affairs there is an article about the YEN as being a model for the internationalization of the RMB–worth the read.

      • Stefan Jovanovich Says:

        Saori Katada’s concept of a “hegemonic currency” is based on the presumption that Napoleon was wrong, that a country can, indeed, sit on its bayonets. (The remark the Emperor made was this: “A country can do anything in the world with bayonets except sit on them”. It was, I think, Napoleon’s most candid admission that France, first as a revolutionary state and then as a new monarchy, could generate extraordinary military power; but that power became, in economic terms, a snake that had to be constantly eating its tail.)
        Britain’s “dominance” for the century between 1815 and World War I was based on the relative trustworthiness of its banks, brokers, factors and insurers. Its Bank of England’s notes were not “the reserve currency” for the world; sovereigns were. When Britain lost its ability to redeem its bank notes and drafts in specie, the pound, as a paper currency, no longer had any special status. The dollar’s current importance is based entirely on the fact that the world’s essential item of trade – energy – is priced in U.S. currency. One can argue quite persuasively that China, Japan and Germany have been happy to have the U.S. run persistent trade deficits and have the dollar be the unit of account for trade because it allows their central banks to act out John Law’s fantasy of unlimited sovereign debt without redemption or exchange risk.
        None of this has any relevance to whether this evening one should go long or short on the Trumpian cybercurrency vs. the Euro or yen or buy Chinese securities; but, for me, it raises the interesting question of what happens when U.S. import demand for cars, oil and cell phones actually declines in unit volumes and U.S. trade is no longer of primary importance. What happened in London after WW I offers an interesting parallel. The world’s “dominant” exporter – the U.S. – faced an unexpected surprise while Wilson was in Paris remaking the world; Europe was never again going to be the ever expanding customer that it had been. The result was – for the U.S. markets – a crash that was large enough to share the headlines day-in day-out with the influenza pandemic; but for the London Stock Exchange the next decade and a half would without pain and even offer pleasant gains. The “failed” hegemonic currency and the securities that it bought proved far more profitable than everything offered by the New Big Kid on the Block. Consider these numbers: In October 1929 the LSE Index was at 87; at its absolute low in January 1932 it was “down” to 82; but by January 1935 it had risen to 124. Meanwhile, the new hegemon saw its smart money wipe out and its central bank completely unable to prevent real estate prices from collapsing.

      • yra harris Says:

        Stefan—-remember that Churchill made the horrendous mistake of putting Britain back on the gold standard in 1925 but was the first to go off i believe in 1931 which did free up the constraints from deflation

      • Stefan Jovanovich Says:

        I think it is helpful to discuss “the gold standard” by using its two parts: (1) domestic redemption and (2) international exchange. International exchange continued “on the gold standard” throughout the Great War through to Nixon’s final surrender. Exchange rates remained fixed by the central banks, just as they would under Bretton Woods, after pounds, marks and francs stopped being redeemable for coin. What changed in 1914 was that only the U.S. continued to allow domestic redemption of central banked currency.
        When Churchill presented his budget in 1925, he did not propose the resumption of domestic redemption; he was only proposing that the Bank of England would resume the free export of gold to its corresponding central banks. They had to, if the pound was to retain any credibility as an international unit of account.

        This is what he told Parliament:

        “We are convinced that our financial position warrants a return to the gold standard under the conditions that I have described. We have accumulated a gold reserve of £153,000,000. That is the amount considered necessary by the Cunliffe Committee, and that gold reserve we shall use without hesitation, if necessary with the Bank Rate, in order to defend and sustain our new position.”

        “I have only one observation to make on the merits. In our policy of returning to the gold standard we do not move alone. Indeed, I think we could not have afforded to remain stationary while so many others moved. The two greatest manufacturing countries in the world on either side of us, the United States and Germany, are in different ways either on or related to an international gold exchange. Sweden is on the gold exchange. Austria and Hungary are already based on gold, or on sterling, which is now the equivalent of gold. I have reason to know that Holland and the Dutch East Indies – very important factors in world finance – will act simultaneously with us today. As far as the British Empire is concerned – the self-governing Dominions – there will be complete unity of action. The Dominion of Canada is already on the gold standard. The Dominion of South Africa has given notice of her intention to revert to the old standard as from 1st July. I am authorised to inform the Committee that the Commonwealth of Australia, synchronising its action with ours, proposes from today to abolish the existing restrictions on the free export of gold, and that the Dominion of New Zealand will from today adopt the same course as ourselves in freely licensing the export of gold.”

        “Thus over the wide area of the British Empire and over a very wide and important area of the world there, has been established at once one uniform standard of value to which all international transactions are related and can be referred. That standard may, of course, vary in itself from time to time, but the position of all the countries related to it will vary together, like ships in a harbour whose gangways are joined and who rise and fall together with the tide. I believe that the establishment of this great area of common arrangement will facilitate the revival of international trade and of inter-Imperial trade. Such a revival and such a foundation is important to all countries and to no country is it more important than to this island, whose population is larger than its agriculture or its industry can sustain, which is the centre of a wide Empire, and which, in spite of all its burdens, has still retained, if not the primacy, at any rate the central position, in the financial systems of the world.”

        The small point I am trying to make is that, with 1914, there was no longer any private discounting of trade under fixed exchange rates. What had been handled by money brokers in London, Paris, Berlin and New York was now decided by the central banks themselves because clearing had become a governmental function – as it remains to this day. The brokers could no longer clear transactions among themselves because they could not rely on the central banks to redeem domestic bank drafts in money – i.e. coin. Only the central banks could make the decision whether or not a foreign IOU would be accepted or rejected.

        Mundell criticized floating exchange rates because he thought the fluctuations in FX were damaging to international investment. But, the explosion in liquidity that Yra and his fellow futures traders created over the past half century has produced a world in which European, Japanese and Chinese central banks can divorce their domestic credit functions from all questions about redemption. In their internal transactions the ECB, Bank of Japan and Bank of China have no limits on how much bad paper they can continue to hang. The Euro can continue to rise against the U.S. dollar without regard to the credit-worthiness of the loans that the ECB and its member banks roll over.

      • David Richards (@djwrichards) Says:

        I’d add to your last sentence that Euro can (and will) rise against USD as the Bund/T-Note spread shrinks, like it did to begin (and end) last year.

        But IMO the bigger elephant in the room, one that we haven’t discussed here and one largely overlooked by the conventional investment media (because frankly it’s way more complex than cheering Nasdaq 7000) is the broken Eurodollar system. With tens of trillions in dollar shorts building up through that unregulated credit/money supply market. As I hinted about before. It’s a scary sight. Where will those dollars come from to cover/payback?

        Thus one reason for my premise that this EURUSD rally (courtesy in part to the Bund/T-note spread narrowing) is just a big bear rally. One setting up a bigger slingshot reversal sometime later when the broken Eurodollar system collapses and trillions of dollar shorts must quickly cover.

        I expect 2018 sees a technical key reversal on the EURUSD yearly chart, so back-to-back yearly key reversals in opposite directions (although the collapse in the Euro to new lows is perhaps another 2-4 years away?).

        We’ll see. Meanwhile, I’ll be monitoring the Eurodollar, Bund/T-Note and TED spreads.

    • yra harris Says:

      Stefan–thanks for the historical perspective.Having just read Giovanni Arrighi’s book I can agree with the historical view as the shifting role of global powers certainly is impacted by financial power as much as bayonets.The Dutch were masters of exerting great power through the power of global finance—the Soviets failed to comprehend the significance and were unable to sustain the hegemonic nature of its sphere of influence.The Russia of Putin is trying to find its place and this is one of the reasons that I have discussed the importance of October 4th meeting of the Saudi King with Putin in Moscow–first time ever and reminiscent of Nixon going to China—we will continue to monitor the things that have potential to disrupt the popular narrative

    • David Richards (@djwrichards) Says:

      Very interesting, but were those gains in British securities during the end to sterling financial hegemony offset (or worse) by losses in the value of the pound?

      Some smart money managers expect that the end of the dominant global reserve currency status for USD is initially dollar bullish, then very dollar bearish and US equities bullish in nominal terms (that’s a gross oversimplification and not a consensus).

      For more, there’s a new freely available 5-part (6-hour) discussion with several top money managers on the Macro Voices site (google it) dedicated to this issue, how it may unfold and what the financial world will look like as a result. Informative and recommended (available in both mp3 audio and text transcript).

      • Stefan Jovanovich Says:

        The LSE Index data is not adjusted for the pound’s exchange rate fluctuations because, even after the suspension of redemptions in Europe in 1914, rates were fixed. If anything, I understated the relative performance of British pound vs. US dollar investments in the period because the U.S. did devalue in 1933 with its repricing of the gold exchange rate even as it also permanently abolished redemption.

  8. A.M. Look 12/29/17 | Says:

    […] Yra awoke me from my hibernation with his last notes of the year. […]

  9. Chicken Says:

    Rollerball 2018, where the distinct social purpose of The Global Corporate State demonstrates the futility of individualism.

    Don’t get run over! 🙂

    • kevinwaspi Says:

      I am intrigued by the level and depth of these discussions, and extremely impressed with the historical understanding. To the point of the British returning to the gold standard, I posit the the action itself was not the error, but the rate of exchange chosen was too rich for the country to support. So many moving pieces, both then and today.

      • yra harris Says:

        Kevin–you as usual raised that point I was going to make.Being that I am the proud owner of the original Keynes pamphlet criticizing Churchill I agree with J.M.K. that the level chosen was deflationary although it protected the wealth of the British elite

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