Tuesday, January 31, 2012

Rational expectations.

I never understood this term. It sound almost Hegelian in its finality and simplistic tone. Why is a local average used in such a bewildering (P) Density is beyond me.

About those "Malvinas" Islands...

...the British resort to 19th century displays of power...which is largely appropriate due to the continued nonsense sprouting from Buenos Aires regarding reversion rights to the Falkland Islands. In matters of "national interest", power is the only arbiter. Once oil as opposed to sheep became the economic issue, that question was closed for the U.K. Full article (and impressive stock photo with similar Falkland Geography) here.

The HMS Dauntless will set sail for the Falkland Islands in the coming weeks armed with a battery of missiles that could "take out all of South America's fighter aircraft let alone Argentina's," according to one Navy source.
The Type 45 destroyer is the most advanced anti-aircraft and anti-ballistic ship in the world equipped with 48 Sea Viper missiles and the Sampson radar, which is more advanced than Heathrow air traffic control

Wednesday, January 25, 2012

Changing cycles...

...late to the party, as always. The ironic thing is this may all come to pass, but markets will have a different reaction given the forward-looking prospects of the actors and the discounting that has already been priced in.

In other words, a viable strategy would be to invest exactly opposite to the IMF's esteemed forecast. In other institutional news, The Recapitulator also notes the "Smartest Guy" is being considered as the head of the World Bank. To laugh or cry...

On Tuesday, the International Monetary Fund said that it predicts slowing global economic growth and a rising risk of global economic calamity if governments fail to act appropriately.

Last fall, the IMF predicted that the global economy would expand by a paltry 4 percent, but has since downgraded its expectations to 3.25 percent global economic growth in 2012.

The economy that makes up the largest chunk of the projected growth is China (the world’s most rapidly expanding economy), which is expected to enjoy 8.2 percent growth over the next year. In comparison, the United States, which owes trillions of dollars to the Chinese, is expected to experience only 1.8 percent economic growth in 2012.

The IMF says that the slowed global economic growth falls heavily on the economic disaster unfolding in eurozone countries, where a “mild recession” is expected to take hold.

Tuesday, January 24, 2012

All things being equal...

...serves as the death knell for analytical thought amongst policy makers. This elicited an "um...what???" from your humble blogger when it came across the wires:


Hanke being part of the Cato institute, seems to have conspicuously ejected the entire context of Lehman's downfall.

Monday, January 23, 2012

Enter the Dragon...

...the problem with a dependence on FDI is the mercurial nature of that type of investment.

Jan. 22 (PTI) --
From K J M Varma China's foreign exchange
reserves amounting to over USD 3 trillion declined for the
second straight month in December, snapping the trend of years
of accumulation.
Chinese lenders bought USD 142.5 billion on behalf of their
clients in December, while they sold USD 157.8 billion, marking
the second monthly deficit, China's State Administration of
Foreign Exchange (SAFE) said in a statement.
The December deficit stood at USD 15.3 billion, up from USD
800 million in November.
China sits on the world's largest forex reserves.
The SAFE data came after the central bank had said earlier
this month that the country's yuan funds outstanding for foreign
exchanges fell to 25. 36 trillion yuan in December.
Analysts said the deficit, like falling yuan funds, is a
result of a narrowing trade surplus, a slowdown in the growth of
foreign direct investment and weakened expectation for yuan's

Thursday, January 19, 2012

And now...

...claims and Housing starts display positive numbers. The CPI reflects a bit of deflation.

Quite the contrast to the cacophony of the Doom Cult.

Wednesday, January 18, 2012

The professional class...

...of politicians have done a couple of things today that attracted my attention.

The first, of course, is the SOPA act that is garnering all kinds of attention. Question for the class: Who is the chief sponsor of the bill and what industry was his main campaign donor?

The second is the vast amount of information and investigatory power that can be focused during presidential competitions. This brief is quite stunning in breadth, depth, and tone.


...the doomsters on the attack again. That correction I spoke about previously is starting to bubble now.

Welcome to the 2012...

...World Bank Funding Drive. Operators are standing by to take your donations.

Beijing, January 18, 2012 – Developing countries should prepare for further downside risks, as Euro Area debt problems and weakening growth in several big emerging economies are dimming global growth prospects, says the World Bank in the newly-released Global Economic Prospects (GEP) 2012.

The Bank has lowered its growth forecast for 2012 to 5.4 percent for developing countries and 1.4 percent for high-income countries (-0.3 percent for the Euro Area), down from its June estimates of 6.2 and 2.7 percent (1.8 percent for the Euro Area), respectively. Global growth is now projected at 2.5 and 3.1[1] percent for 2012 and 2013, respectively.

Slower growth is already visible in weakening global trade and commodity prices. Global exports of goods and services expanded an estimated 6.6 percent in 2011 (down from 12.4 percent in 2010), and are projected to rise by only 4.7 percent in 2012. Meanwhile, global prices of energy, metals and minerals, and agricultural products are down 10, 25 and 19 percent respectively since peaks in early 2011. Declining commodity prices have contributed to an easing of headline inflation in most developing countries. Although international food prices eased in recent months, down 14 percent from their peak in February 2011, food security for the poorest, including in the Horn of Africa, remains a central concern.

“Developing countries need to evaluate their vulnerabilities and prepare for further shocks, while there is still time,” said Justin Yifu Lin, the World Bank’s Chief Economist and Senior Vice President for Development Economics.


Shows deflationary pressures. We are five years into this "money printing" and so-called reversion into Banana Republic status because of excessively loose monetary policy.

So again, I ask, where is the inflation? How long does it take for mainstream economic theorists and media pundits to realize they are fundamentally wrong on the subject of money creation in a fiat currency world?

Friday, January 13, 2012


...consumer sentiment surprises to the upside.

The same folks who incessantly against the premature demise of the business cycle at economic peaks now seem perplexed by the cycle's symmetry.

Tuesday, January 10, 2012


Thank goodness for rating agencies.

LONDON—Fitch Ratings on Tuesday pointed to Italy as the euro-zone member that poses the greatest threat to the currency bloc's future, as the lack of a regionwide plan to prevent the sovereign-debt crisis from spreading has coupled with the country's large debt burden and high borrowing costs.

Of course...

...a "correction" (whatever that means) is likely in the coming months given the recent up-ticks in lending activity, employment, and today's bond auctions, but this should not preclude observers from concluding the overall trajectory of the recovery. This is especially true considering the previous engines for growth in the world (the "de-coupled" emerging markets and the Euro are) and in the doldrums and in China's case is effectively inviting disaster. I don't see how encouraging this type of capital injection (with its peripatetic nature) is a viable solution.

-- China will open capital markets further to foreign investors - securities regulator

-- China will seek a greater role for long-term institutional investors in a bid to boost the country's sagging stock market, the regulator adds

-- Comments come after Premier Wen Jiabao said the government will take measures to boost market confidence

-- The regulator pledges to advance reform of initial public offering system and delisting mechanisms

-- Regulator seeks to roll out more futures products, including government bond futures and silver futures as well as financial derivatives like options

Monday, January 09, 2012

Consumer Credit...

...to the continuing dismay of the EOTers, the engines of recovery continue to hum along.

U.S. November Consumer Credit
Nov. Oct.
2011 2011
Total $2,477.7 $2,457.3
Dollar change $20.4 $6.0
Annual % chg. 9.9% 2.9%

The dangers of specialization...

...Economics like any other field (especically within the strata of social studies) suffers greatly from over-specialization. The more abstract the thought, the more removed from the daily reality of problem-solving it becomes.

For example, your blogger has (inter alia) a degree in philosophy, and loves to read anything written under that broad category. But I equal parts shudder and waive my hands dismissively when I come across sentences such as this one that has long ceased to have any causal, probative, logical, explanatory, or moral value:

Therefore, what has been proposed above as a means of redirecting the development of postmodernity toward more livable, human dimensions is a heterotelic narrative transitivity—an active reimmersion of narrative in the social—which contrasts sharply with the autotelic concern for their own procedures and the hermetic intransitivity of modernist self-consciousness and late modernist self-reflexivity.
-- Joseph Francese, Narrating Postmodern Time and Space

Friday, January 06, 2012


...comes in strong as suspected. The same folks who used the Employment figures when they were near 10% as a sign of weakness (not doubting the accuracy and veracity of the figures) now use them as disconfirming evidence. A curious double-standard.

Thursday, January 05, 2012


Surprises to the upside. Seasonal adjustments aside, this is welcome and something the EOTers will engage in procrustean mental gymnastics in order to ignore.

Wednesday, January 04, 2012

The future...

...is being invested in right now. Does this look like a chart that portends great suffering and doom in the coming decade or is this a positive leading indicator for increased economic activity. And yet the Mayan doom-cult is the only sound in the media echo chamber.


So many times the term is misapplied. None more egregious than when describing the global financial system. It is a gross simplification that intellectual Hedgehogs (in Isiah Berlin's nomenclature) use when they cannot wrap their collective brains around the simple fact that in a floating or soft currency world, an incremental payment fraud system is completely inapplicable.

But whatever, the types of quotes below are seldom viewed with a self-critical lens...or chastened with some humility.

Oliver Cromwell summed it up centuries ago: "I beseech you, in the bowels of Christ, think it possible you may be mistaken"

Lastly, the gradual creep higher in US interest rates after QE3 and QE4 resulted in several near-failed auctions looks as though it could signal the beginning of a fundamental shift that may potentially, in 2013, bring about the final unraveling of the global government bond ponzi scheme.

Tuesday, January 03, 2012

The EOTers shudder...

...and fulminate.

The great function of the market, as discounting mechanism for future probable outcomes, continues its march. With "DOOM!" being the popular and erudite response to the current global imbroglio, it is no surprise to readers here that the markets have promptly gone the other way...and not without data.

U.S. December ISM Manufacturing Index:
Dec. Nov.
2011 2011
Manufacturing index 53.9 52.7
Prices paid 47.5 45.0
Production 59.9 56.6
New orders 57.6 56.7
Backlog of orders 48.0 45.0
Supplier deliveries 49.9 49.9
Inventories 47.1 48.3
Customer inventories 42.5 50.0
Employment 55.1 51.8
New export orders 53.0 52.0
Imports 54.0 49.0