Mark Blyth - Austerity: The History of a Dangerous Idea

Adjust to the accent and speed of delivery if you must, what he has to say is worth hearing and he is quite informative in an entertaining and lively way.

I think it is fair to say that the purpose of his talk is to demonstrate why austerity is a corrosive policy choice. And he does this quite well. In doing so he tends to ignore the roots of the financial crisis, emanating as they did from New York and London in this talk, the distortions caused by regulatory policy changes in the financial system, and the systemic frauds that followed. He does touch on this at the very end in the Q&A which is heartening.

It is not equivalent to say that because austerity is bad, therefore stimulus must be good. If only the world were so linear and simple.

The corruption of the regulatory and political process by Big Money is the bigger long term issue. Therefore he appears to take a more mechanically optimistic, model based view of a US recovery, which I think is unfortunately not correct.

I hate to say on such thin evidence but the talk sounds conventionally Keynesian. He also gives unnecessarily short shrift to the regulation of the growth and quality of credit expansion, but that is probably unfair based only on this talk. I intend to read his book after I listen to this a few more times.

I think we will see a repeat bubble and collapse in the US as we did in the tech stock and housing bubble cycles unless reform occurs. Or the long run trend of inequality will become so severe that the political system will evolve. He speaks of Germany's role in Europe quite a bit, but barely touches on China.

He used Germany's growth out of the depression as a positive model of state activism to cure unemployment. But he ignores the school of thought that this growth never became organic, and was much like a Ponzi scheme. To keep growing it had to expropriate wealth, much of it from the Jews, and engaged in wars of aggression to obtain even more resources that it could not otherwise procure. So National Socialism never really became self-sustaining. I suppose it cold have done so by engaging in the export of goods rather than of bombs and bullets, but that never quite seems to work out either. Think the industrial policies of Germany and China today.

This example has to do with government sponsored stimulus and economic management without reform, and an unhealthy concentration of power, and the the two seem to go together.

He also does not address the currency wars, and imbalances in world trade flows because of governmental policies, which are one of the greatest economic macro changes in our generation. In the past they often have been resolved by military war and the rise of empires. So we will have to see what comes next in this particular iteration of conflicts of interests.

I am not saying Mark Blyth is wrong. I am merely saying that he does not address these things because they lay a bit outside his chosen topic which is the short term dilemma being faced in Europe and the UK. I find his style refreshing and his thought process and ability to tie things together fascinating. I have listened to any number of lectures on the history of economics, and his is one that informs while not making one's eyes glaze over. And for me that is high praise. I wish I knew Mark Blyth well enough to discuss these things over a few beers. He seems like a great guy.

If one is comparing the US to Europe I would grant that it certainly looks better because their system is inherently unstable and not sustainable. And the theme or purpose of his book and talk are that austerity is doomed to failure. And I agree. But I also think that stimulus is also going to fail, unless the system that caused the problems is changed through meaningful reform.



h/t Yves

Gold Daily and Silver Weekly Charts - Forms of Expropriation as a Negative Effect on Wealth

In this video interview Jim Rickards comments on Roubini's Recent Comments on Gold.

Jim takes down Roubini's comments point by point and very well. I thought he was a bit easy on Roubini, but he may have missed the mark on interest rates.

I think the 10 year rate is completely inappropriate in deriving real interest rates against short term inflation.  And the official and even 'market-based' measures of inflation are distorted in ways that can be easily demonstrated by John Williams for example.   So I thought that was a bit disingenuous on James Rickard's part.  Short term rates are very negative and this is an easily observed phenomenon and result of QE.  They are merely expanding that effect along the yield curve.

Gold is not correlated to inflation per se. It is correlated to  negative interest rates and expectations of inflation, two concepts which are related.   Negative rates are the result of expansive monetary policy.

And most importantly, in the final analysis gold is correlated to the perception of all monetary risks as a negative effect on wealth, whether that be from inflation, or any other forms of the use of money and the terms of the financial system as a means of expropriation of wealth.

This is so fundamental that I cannot believe that economists do not realize it.  Or why they just ignore it.  It is written across the history of the past four thousand years. 

The bad money drives out the good, and good money is sound money that is not easily taken away or reduced by the entanglements of fraud or official debasement.

Think about it.  Inflation, negative interest rates, floating Money Market Funds, bail-ins,  non-quantifiable counterparty risks, seizure of illiquid and non-transportable real assets, and even systemic fraud are all risk effects on individual wealth. 

People seek safe havens in time like this.  And those who are expropriating wealth, for whatever reason, have a disdain for gold and silver equal to their disdain for the rights of individuals to preserve themselves from their own exploitation.

The financiers have not only completely 'screwed things up' in their greed, but they seek to take the losses out of the wealth of the innocent whom they had an obligation to inform and protect in the first place.  This is deceitful, low, and truly despicable.

Luckily, and this is most definitely not out of spirit of altruism, there are large and powerful entities out there in the form of sovereign countries and organizations and people outside the Anglo-American system, who are also going to resist the demands of expropriation and exploitation of their own sovereign wealth. 

Thankfully there is not a 'one world government' although the collusion of nationless oligarchs is troubling.

Corrupt and desperate people have been down this road many times before,  in trying to make other people pay the price for their own malfeasance and illicit gains.  That they seek to do so by perverting justice and the fundamental protections of government is nothing new either.  This is the continuing threat of which the people have been warned since the very founding of the American republic.

The system must be reformed from the financialized control fraud which it has become over the past twenty years.  And to do that, the country must face some hard truths about the real source of the problems which we are facing, the corruption and concentration of power,  the corrosive effect which money has had on political discourse and governance, and what must be done to restore a balance to the real economy and the general welfare of the entire nation, and not just for a fortunate and powerful few.  

SP 500 and NDX Futures Daily Charts - Where Are the Customers' Yachts?

The financialization of everything will continue until no one knows the value of anything, until they are otherwise informed.

NAV Premiums of Certain Precious Metal Trusts and Funds

The Gold/Silver ratio is at a high point given its recent history.

I think there are signs of speculative excess to the downside. The professionals seem to have been covering their short positions in gold and to some extent silver.

The disappointment one feels with the regulators at the CFTC and the SEC does not seem to be misplaced given recent revelations of a lack of integrity and honor amongst corporate management and government officials overall. There is always an element of society without shame. Unfortunately it has risen into the halls of power. This is an age where corruption, greed, pride, and selfishness are not only tolerated, but have become fashionable as a mark of the fortunate few.

Unfortunately this is not a recent trend, but an extension of a trend that has been in place for some time. It will change, and when it does, there will be a greater hope for a sustainable economic recovery.

CFTC Gold and Silver Bank Participation Report - Ted Butler's Comments

The US Banks have gotten net long of gold in this last report.

The charts below are from Sharelynx.com.

Here is what Ted Butler of Butler Research had to say about this report today:

"Since the BPR of February 5, the US bank category position (in effect, almost exclusively JPMorgan) has swung by a net 100,000 contracts, from net short 70,000 contracts to net long 30,000 contracts (all rounded). There has never been a move of such magnitude before. Over that same time, the total net commercial short position (in the COT) declined by 113,000 contracts, meaning that JPMorgan accounted for almost 90% of the entire commercial decline. It is not possible for that extreme degree of concentration and market share not to be manipulation, pure and simple.

And here’s the manipulative icing on the cake – JPMorgan was able to flip a net short position in COMEX gold of 50,000 contracts in February to a net long position of 50,000 contracts on a gold price decline of as much as $350. I would submit that the singular purchase of 10 million ounces of gold (worth the equivalent of $15 billion) within four months on a greater than 20% price decline could only be accomplished if the price was manipulated lower by the purchaser. No other explanation would be possible...

JPMorgan’s emergence as the big COMEX gold long changes the dynamic of the gold market. In addition to conclusively proving that this is the most crooked and evil financial institution ever to exist, it confirms the extremely bullish set up for the gold price...

Of course, if JPMorgan can continue to accumulate inventory on lower prices, we will get lower prices temporarily. But having JPMorgan confirmed as being on the long side of gold is a game changer. That’s why I continue to throw money out the window on silver call options."

I read Ted twice a week for color commentary on the metals markets. Its a subscription service. I tend to take some confidence from what he says about the bullish set up because several other things that I watch carefully are inclining to show the same setup for a serious short squeeze on the funds.

He also had quite a bit to say about silver, which is his area of special interest and unsurpassed expertise, but you will have to subscribe to read that.

I took my first silver position in a while on Friday and expanded my gold position on that weakness.

C. A. Fitts On Debt, Centralization, Money, Equity Markets, Currency Wars, and Gold

Catherine Austin Fitts served as managing director and member of the board of directors of the Wall Street investment bank Dillon, Read & Co. Inc., as Assistant Secretary of Housing and Federal Housing Commissioner at the United States Department of Housing and Urban Development in the first Bush Administration, and was the president of Hamilton Securities Group, Inc., an investment bank and financial software developer.

Fitts has a BA from the University of Pennsylvania, an MBA from the Wharton School and studied Mandarin at the Chinese University of Hong Kong

The discussion gets particularly interesting after the 9 minute marker.

For your convenience here is a written summary of the main points of this interview.

I agree with much although it is important to remember that there are quite a few assumptions underlying it.

People are being 'conditioned' to prefer equities over other risk management products like bonds and commodities.

And this is not so simple a task because there is not one world government and one currency. We must never forget that this is where quite a few of the oligarchs, who are already thinking of themselves as borderless, are trending.

And as we all should always remember there are black swans and fat tails.

The word for today is enantiodromia. It pairs nicely with hubris.

In their pride people who have too much power and not enough restraints can go to far and achieve an effect that is unexpected and even the opposite of what they had intended.