S2S (Stan-To-Stan) Blog
Issue 6 - Latest
S2S Tue 17-Mar-2009 11:00AM
Irish finance minister is probably not telling the truth!
Today's Irish Times wrote:
Mr Lenihan said Ireland’s membership of the euro zone helped the economy withstand the global financial crisis even as its banks grapple with rising bad debts. “The ECB stands behind the entire Irish banking system, just as the Bank of England will stand behind the banks in the UK,” he said. “So there’s no default issue in relation to the banking system.” Ireland last year became the first country in Europe to guarantee the deposits and borrowings of its largest lenders. Coupled with a sluggish economy and widening deficit, the guarantee raised concerns that the government may struggle to repay its debt.
Lenihan's first sentence contradicts the second! If ECB would really "stand behind" the Irish banks then the gov guarantee to the tune of 440Beu or 480Beu (unprecedented in the euro zone) would have been unnecessary. Incidentally, there is a disconnect between what the gov says the banking assets are, and other institutions' estimates:
Irish gov estimate: 3*GDP = 575Beu (only Irish owned banks in Ireland)
OECD report: 9.5*GDP = 1.8Teu (all banks in Ireland)
BNP Paribas: 11*GDP = 2.1Teu
That is assuming that the above sources used GDP=190Beu, which is not quite certain. Some sources give different figures to estimate the size of the Irish economy,. For example this article uses GNP and gives it as 150Beu. Other unknown is in the fact that the GDP is projected to decline by a few % in 2009 (6-10%) therefore the multipliers are going to be higher than quoted.
I find it strange that there is a great deal of inconsistency between various figures published in the supposedly reputable media or even spoken of by the supposedly reputable officials. That gives an impression that a lot of that are guess-works and journalistic estimates rather than specific figures that should have been provided by the auditors and published, for the Irish taxpayers who are supposed to pay all that! If they can…
S2S Sat 14-Mar-2009 6:00PM
Obama - should we be worried?
March 13, 2009
Mark Segraves, WTOP Radio
… Acar, a native of Turkey, is responsible for buying D.C.'s computer equipment and hiring contract workers for various D.C. agencies. Acar, who has been with the agency since December 2004, has an annual salary of $127,468, according to charging documents. Sushil Bansal, President and CEO of Advanced Integrated Technologies Corporation (AITC) and a former D.C. government employee, was charged with bribery of a public official, money laundering, wire fraud and conflict of interest. Sansal, 41, was released but ordered not to engage in overseas financial transactions and had to surrender his passport. Bansal, of Dunn Loring, Va., is due back in court on April 21. Government records show Bansal, a native of India, is not a U.S. citizen and holds an H-1B visa, which is given to foreign workers in specialty occupations. …
I was contacted in September by an agent from Oxford International, consulting agency/headhunters on tech projects. I asked about availability for me, of some project work for the US gov. He said that they usually require strict citizenship rule or security clearances. I guess the lower the job position you are applying for the more stringent requirements. If I applied to flip burgers in the White House canteen I probably would have to be a 10-th generation US citizen of Mayflower heritage. If you apply for a CEO of the government IT procurement department you can be anybody from anywhere!
Should we be worried? Do you too have a nagging impression that there perhaps may be something basically wrong with Obama? His nominee appointed these con artists! Obama seems to have been happily giving away hundreds of billion dollars of government money and guarantees to the banks while those banks are being busy throwing the home owners who voted for him, on the street! Now that!
S2S Wed 11-Mar-2009 6:00PM
Market moves in such a way as to render the assets of the biggest players worth less!
Some personal thoughts, opinions and beliefs on where we are heading to.
Last 200 years of Western economy were split into stages in the following order:
- Land owners' oligarchy.
- Industrial oligarchy based on manufacturing and natural resources.
- Service based economy.
The current cycle that has just ended, was characterized by:
- Explosion of credit and debt backed by property and service sector stock used as backing assets (mostly the non-manufacturing and non-resource sectors).
Next stage that has just begun is characterized by:
- Implosion of credit and debt.
Similar as in the previous cycles, this unwinding will have to result in the wipeout of the assets of the most privileged class - the banking and financial elite! They have resisted it and will resist by various measures, most likely by:
- Propping up the collateral by supporting property values thought mortgage insurance corporation bailouts and by supporting the service sector stock, probably through various covert "plunge protection" schemes.
- Enacting mutual guarantees and support schemes for the financial assets; see for example the recent US government guaranteeing liabilities of various corporations.
- Direct recapitalization of financial institutions by government. This requires maintaining (an illusion of) low bonds yields to facilitate the debt issue. Note that this process does not eliminate the financial "nuclear bomb in the basement"! It only moves it from one "basement" to another. Obama's bailout for Wall Street bankers belongs in this category.
- Maintaining the currency value to protect the nominal assets' value. Note that this requires a disciplined approach that permits issuing of bonds to cover new debt but prohibits expanding the monetary supply (i.e. it precludes government or central bank from buying back their own bonds or bills for cash).
above measures are characterized by the desire to protect the assets of the
Elite but they do not address the real cause - debt! The problem is that although the value of the assets
declined and was often marked-down, the nominal contractual value of debt was
not declining and generally cannot be easily marked-down to market.
If - when the above
measures fail and the assets continue to fall, the next steps will probably be
an attempt at neutralizing the debt to stave off the mass corporate bankruptcies. It may happen in the following order:
- Shifting of remaining liquidity (by elites) into hard assets such precious metals, land, natural resources, some save heaven countries and others that I cannot yet think of.
- Devaluation of Western currencies.
- Controlled inflation implemented by governments and central banks through buying back bonds with newly printed cash.
- Uncontrolled inflation by governments having to print cash to cover their operating costs, pay for the inevitable gigantic emergency social welfare and debt servicing expenses.
I am concerned that the above depicted scenario may be aggravated by some prevalent corporate-cultural issues, such as:
- Rewarding top executives for accomplishing some short term accounting goals to the detriment of the long term strategic planning.
- Over-reliance on dumbed-down hierarchy of hired management with only business degrees.
- Lack of accomplishment-based rewarding practices and too much tolerance towards an inactivity among the management ("job for life" disease).
- Tendency to expel skilled people from the workplaces through the top-down negative selection ("fish rotting from the head" syndrome).
Recommended and relevant reading:
1) "Atlas Shrugged", Ayn Rand
2) "Social Collapse Best Practices", Dmitry Orlov
3) Clark Winter's (scroll to minute 4 and after)
S2S Sat 24-Jan-2009 12:00PM
Stan P. wrote:
Commodity Online [quote]:
DUBAI: As gold prices zoomed to $900 per
ounce on Friday in New York and London, buyers of the yellow metal are faced
with a different kind of a problem in Middle East’s booming city of Dubai.
There is an acute shortage of gold coins that is dampening the gold buyers at
the annual Dubai Shopping Festival.
The World Gold Council (WGC) is one of the participants of the ongoing mega Jan 15-Feb 15 Dubai Shopping Festival. WGC’s promotion of gold in Middles East during this festival every year has earned Dubai the ubiquitous name ‘City of Gold.’
But this year, Dubai’s biggest shopping carnival has been dampened by the shortage of gold coins, for which there is a big demand. “People are coming and asking for gold coins. But there is a terrible shortage of gold coins. Many gold and jeweler shops in Dubai do not have the stocks of gold coins,” said a manager with Joy Alukkas, a leading jeweler in the Gulf Countries.
He said the main reason for the short supply of gold coins is primarily due to their heavy demand in Dubai, the main regional source for gold in Middle East. “All the jewelers offer special discounts and special offers for gold buying and thus there is a spurt in gold purchases. So there is a shortage of gold coins here,” the manager added.
Comment [Stan P.]
I have a feeling I start to understand the gold dilemma. It
is not a direct manipulation - though there is plenty proof of it. It is not physical demand for jewelry
in India No, the gold dilemma is cultural and political.
First, In the South Asia and Middle East gold is money. It never ceased to be money. It has intrinsic value. It can be traded on the souk or bazaar. In the west it lost its monetary meaning over 5 generations of fiat system. Yes, it has value as an inflation hedge but people generally don’t buy gold coins and bars. There is no market for it. They are hard to store and sell and the premiums are high. Gold is primary used in the paper form as a “gold equivalent”
A city-country like Dubai is awash with oil cash. They don’t know what to do with money There are no good investments anywhere. That means inflation of hard valuable assets like monetary gold (but not paper). Paper gold is simply a low risk bond with no interest on it. This creates disconnect between paper market and real market just like we have a real dollars and square, asset dollars.
Under normal market conditions this would not be possible. Someone would hire a 747 and flew 200 tons of gold bars from London or Zurich to Dubai. The fact it is not happening is a proof the current large owners-central governments do not want to sell. Also, by not releasing a physical gold they prevent the creation (or re-creation) of physical gold market in the West There is nothing to buy or trade. Finally, by NOT selling the gold the West FORCES other countries to buy US treasuries. What else CAN they do? They cannot diversify into gold because there is none available. This is the second, political aspect of the gold dilemma.
Please note gold coin is the simplest product in the world. All you need to manufacture it is a simple stamping press and physical, pure 24 carat gold in bars. There is no such thing as shortage of coins. They can be pressed on the same equipment that makes billions of loonies and twonies. Yes, Chinese could request delivery from Comex, but they would get none and they KNOW IT.
If I am right then there CAN NOT be a quick end to it because it would mean immediate dollar debasement It is the lack of any alternative investment which prevents the dollar from collapsing!
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