Friday, September 25, 2009

G20 Economic statement

9300 words of hubris. Note the power grabs (the section regarding voting rights at the World Bank is illuminating) and continued favor for centralized processes that would somehow banish the business cycle (and organic business development) from the globe. This of course is impossible as the law of ever-changing cycles will prevent some long-standing equilibrium among selfish humans in their quest to gain and allocate resources. Look no further than Washington D.C. house prices for evidence of the next intellectual bubbles.

There will be a conservative backlash among the large G20 members. Another Reagan, another Thatcher.

The text can be found here.

Wednesday, September 23, 2009

Taking is different than holding...

Without a functioning cross-border security plan (and experience in this area would be nice as well), these purchases by Chinese lead concerns do not appear to be pricing in the attendant security risks associated with dealing in Africa. Is Gabon an exception or are we going to see a violent mean reversion?

The remote Belinga mine, nestled deep in a tropical forest, drew interest from top global mining companies, including Brazil's Vale SA. In 2006, Gabon awarded the project to a consortium led by China National Machinery & Equipment Import & Export Corp., known as CMEC, which was allowed to mine the iron without paying taxes related to production there for 25 years.

Tuesday, September 15, 2009

Bernanke: The Recession is "probably" over

The Economics profession gets in line. And no quantification for such a significant opinion. What is "very likely"? 60%? 75%? 99.999%?

WASHINGTON (AP) -- Federal Reserve Chairman Ben Bernanke said Tuesday that the worst recession since the 1930s is probably over.

Bernanke said the economy likely is growing now, but it won't be sufficient to prevent the unemployment rate, now at a 26-year high of 9.7 percent, from rising.

"The recession is very likely over at this point," Bernanke said in responding to questions at the Brookings Institution.

The Fed boss also said he is confident that Congress will enact a revamp of the nation's financial rule book to prevent a future crisis from happening.

Monday, September 14, 2009

OECD: The Recession is over.

Thank goodness we have institutions like this to tell us when things finish. How unfortunate it is then they had no idea the timing and magnitude of the Recessions beginning.

Taken from this article:

The global downturn was effectively declared over yesterday, with the Organisation for Economic Co-operation and Development (OECD) revealing that "clear signs of recovery are now visible" in all seven of the leading Western economies, as well as in each of the key "Bric" nations.

The OECD's composite leading indicators suggest that activity is now improving in all of the world's most significant 11 economies – the leading seven, consisting of the US, UK, Germany, Italy, France, Canada and Japan, and the Bric nations of Brazil, Russia, India and China – and in almost every case at a faster pace than previously.

Each of the 11 economies saw an improvement in July, the OECD said, with only France improving at a slower rate than in June. The July figures are the most encouraging since the indices began ticking downwards during the first quarter of last year.

The OECD's leading indicators are considered a key economic yardstick because they measure the sectors of countries' economies that tend to react first to upswings and downturns. As such they provide early evidence of the way in which the overall economy is progressing.

In the UK, the OECD said the leading indicators were pointing to a particularly strong recovery, with the measure showing a 1.3 per cent improvement during July, the British economy's best performance so far this year on the organisation's measure.

We promise not to appropriate...this time.

Where there is no contract, no legal remedy for destruction or "appropriation" of property, only the credible threat or use of physical force can provide sufficient security for capital investment.

It is clear that opprobrium and international condemnation of Zimbabwe's "farm" polices are not having the desired effect. Calling an alcoholic a reprobate because he drinks too much will probably not alter his behavior.

So if these deals get struck, they will likely be with players who can negotiate private security and also monitor the arms purchases of the Zimbabwe government (or even better earmark any revenues from the mining operations into specific public projects)

Sept. 14 (Bloomberg) -- Zimbabwe’s PresidentRobert Mugabe will this week ask investors to plow their money into platinum, chrome and gold projects to help the country recover from a decade-long recession.

They’ll need to put aside concerns over a farm seizure program that destroyed Zimbabwe’s biggest export industry, recurrent threats of nationalization and a proposed law to force miners to sell 51 percent of their assets to Zimbabweans that the government now says is being reconsidered.

In what’s being billed as Zimbabwe’s biggest ever mining conference Mugabe will present a united front with Prime Minister Morgan Tsvangirai, the former opposition leader with whom he formed a coalition government. They are seeking investors to help them exploit the world’s second-biggest platinum and chrome reserves and companies to reopen idled gold mines and dig coal pits.

Sunday, September 13, 2009

The Logan act, the Fed, and Separation of Powers

It is clear that in this inter-connected and globalized age that Economic intervention, whether unilateral or coordinated, may be considered a foreign policy action.

The U.S. Constitution reserves the power of foreign policy for the Executive Branch. But the founding fathers likely did not forsee the degree of connectivity the world would experience and certaintly would not think a managed fiat currency system would have any chance at achieving price stability.

The Logan act ostensibly prohibits foreign policy actions unless approved agents of the Executive Branch conducts them.

So what has the Fed done with its massive currency swap agreements with foreign central banks? The Fed has entered into commitments of $500 Billion to said banks. The point here is mission creep, where specific powers and specific restraints are willfully disregarded in the name of expedient "action".

I suppose the countervailing point is the scalability of disaster. A poker player will play much differently in pot-limit and no-limit tournemants...the risk of total loss or total disaster does indeed cause decision makers to alter their process.