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Bubbles, Balloons, Needles and Pins

M. C. Escher Meeting (Encounter) 1940

It’s no surprise that China has its own plunge protection team -but why were they so late?-, nor that Beijing blames its problems on Trump’s tariffs. GDP growth was disappointing at 6.5%, but who’s ever believed those almost always dead on numbers? It would be way more interesting to know what part of that growth has been based on debt and leverage. But that we don’t get to see.

So we turn elsewhere. How about the Shanghai Composite Index? It may not be a perfect reflection of the Chinese economy, no more than the S&P 500 is for the US, but it does raise some valid and curious questions.

Borrowing from Wolf Richter, here are some stats and a graph::
• Lowest since November 27, 2014, nearly four years ago
• Down 30% from its recent peak on January 24, 2018, (3,559.47)
• Down 52% from its last bubble peak on June 12, 2015 (5,166)
• Down 59% from its all-time bubble peak on October 16, 2007 (6,092)
• And back where it had first been on December 27, 2006, nearly 12 years ago.

The first thing I thought when I saw that was: how on earth is it possible that in an economy that’s supposedly been growing 6%+ for a decade, stocks have gone nowhere at all? And obviously the role of the Shanghai index is different from that of the S&P, the DAX or the FTSE, but at the alleged Chinese growth rate, the economy would have almost doubled in size in 10 years. And none of that is reflected in stocks?

And if you think Shenzhen is a better barometer of ‘real’ China, Tyler Durden had this graph yesterday. Not the same as Shanghai, but similar for sure.

…click on the above link to read the rest of the article…

The Biggest Ponzi in Human History


Jean-Léon Gérôme Slave market 1866
Here’s the story in a nutshell: Ultra low interest rates mark a shift away from people’s wealth residing in their savings and pension plans, and into to so-called wealth residing in their homes, which are bought with ever growing levels of debt. When interest rates rise, they will lose that so-called wealth.

It is grand theft auto on an unparalleled scale, and it’s a piece of genius, because while people are getting robbed in plain daylight, they actually think they’re winning. But as I wrote back in March of this year, home sales, and bubbles, are the only thing that keeps our economies humming.

We haven’t learned a thing since March, and we haven’t learned a thing for many years. People need a place to live, and they fall for the scheme hook line and sinker. Which in a way is a good thing because the economy would have been dead without that ignorance, but at the same time it’s not because it’s a temporary relief only and the end result will be all the more painful for it.

Whatever Yellen decides as per rates, or Draghi, it doesn’t really matter anymore, this sucker’s going down something awful. This is a global issue. Housing bubbles have been blown not only in the Anglosphere, though they are strong there, many other countries have them as well, Scandinavia, Netherlands, even Germany and France. It’s what ultra low rates do.

First, here’s what I said in March:

Our Economies Run On Housing Bubbles

What we have invented to keep big banks afloat for a while longer is ultra low interest rates, NIRP, ZIRP etc. They create the illusion of not only growth, but also of wealth. They make people think a home they couldn’t have dreamt of buying not long ago now fits in their ‘budget’. That is how we get them to sign up for ever bigger mortgages. And those in turn keep our banks from falling over.

…click on the above link to read the rest of the article…

Leonard Read’s Vision of a Liberty-Loving Government

Leonard Read’s Vision of a Liberty-Loving Government

In a dramatic contrast with political candidates’ promises to violate moral principles and other people’s property, Leonard Read recognized that “Nothing is in our nation’s capital except that which is taken from individuals.”

In Richard Ebeling’s “This Is What a True Liberty-Loving Politician Would Look Like,” he provides a sharp contrast between politicians as we know them and politicians who would advance liberty. But there is another little-remembered source that provides a similarly inspirational example of a politician “who loves liberty better than power” rather than panderers who love power better than liberty. That is Leonard Read’s 1948 Pattern for Revolt, written for that year’s presidential campaign. Revisiting some of his insights also remind us of how invaluable our liberties, and all the blessings they provide, are.

The all-authoritarian state marches on…abetted by an ever-increasing number of gravy-trained citizens.

The people [have] no choice except between power-seeking personalities and groups, each offering a superior administration of government-as-master. Such a choice…is no choice at all.

The voice of expediency…must mislead because it represents the rejection of moral principles for the hope of temporary gain…a truly liberal party would have been asking “How can we liberate the individual from the tyranny of the State.”

Transfer of power from one party to the other is important only if the ascending party has principles which it is important to substitute for the principles of the party in power.

Government should not be so expanded…Men in government, therefore, should be those who aim at making government as unnecessary as possible.

In every field where arbitrary authority is imposed we shall inquire how it may be removed and replaced by a reliance on the initiative and enterprise of individual citizens. We must give to the art of self-government its American renaissance.

…click on the above link to read the rest of the article…

 

The Only Real Europe is Greece


Eugene Delacroix Greece expiring on the Ruins of Missolonghi 1826
European Commission president Jean-Claude Juncker, famous for his imbibition capacity and uttering -not necessarily in that order- the legendary words “when it becomes serious, you have to lie”, presented his State of the Union today. Which is of pretty much limited interest because, as Yanis Varoufakis’ book ‘Adults in the Room’ once again confirmed, Juncker is nothing but ventriloquist Angela Merkel’s sock puppet.

But of course he had lofty words galore, about how great Europe is doing, and how that provides a window for more Europe, in multiple dimensions. Juncker envisions a European Minister of Finance (Dutch PM Rutte immediately scorned the idea), and he wants to enlarge the EU by inviting more countries in, like Albania, Montenegro and Serbia (but not Turkey!).

Juncker had negative things to say about Britain and Brexit, about Poland, Prague and Hungary who don’t want to obey the decree about letting in migrants and refugees, and obviously about Donald Trump: Brussels apparently wants ‘to make our planet great again’.

What the likes of Jean-Claude don’t seem to be willing to contemplate, let alone understand or acknowledge, is that the EU is a union of sovereign countries. The meaning of ‘sovereignty’ fully escapes much of the pro-EU crowd. And if they keep that up, it will break the union into pieces.

The European Court of Justice has ruled that Poland, the Czech Republic and Hungary must accept their migrant ‘quota’, as decided in Brussels, and that, too, constitutes an infringement on these countries’ sovereignty. And don’t forget, sovereignty is not something that can be divided into separate parts, some of which can be upheld while others are discarded. A country is either sovereign or it is not.

…click on the above link to read the rest of the article…

Having A ‘Retreat’ Property Comes With Real Challenges

TrueActivist.com

Having A ‘Retreat’ Property Comes With Real Challenges

About that bug-out plan…

The basic idea is to develop some measure of security in an increasingly insecure world, and pursue some measure of independence in an increasingly fragile system of global supply chains.

The intuitive solution to many, from the super-wealthy on down, is some version of a hideaway in the woods: a remote locale known only to the owner, where the owner can burrow safely away until the storm passes.

It turns out security and independence are tricky qualities, and surprising reversals are not just possible but likely: what appears to be secure at first glance might be highly insecure, and independence turns out to be highly relative.

The Remote Cabin in the Woods: The Perfect Target for Theft

The first problem with the remote cabin in the woods (RCITW) bug-out plan is that “remote” and “secret” are two different things. As I explained in my 2008 essay The Art of Survival, Taoism and the Warring States, the local residents have a much different view of what’s remote and secret than outsiders.

Simply put, if humans are settled anywhere nearby, nothing is remote or secret. I have come across guys on foot in extremely remote logging roads miles from any paved road, much less a settlement. I’ve been startled by hunters on family-owned wooded acreage far from neighbors or towns.

Throw in drones, Internet access to terrain photography that was once the domain of spy satellites, and humans’ healthy curiosity, and “remote” and “secret” just got even scarcer.

…click on the above link to read the rest of the article…

Yes, You Do Understand Economics

Yes, You Do Understand Economics

The following conversation between my good friend Michael McKay and a friend of his illustrates that we all understand and use economic principles every day. In fact we could  not function without understanding these basic economic principles. Pat Barron


The other day I was having coffee with a new friend, a retired businessman who customized luxury cars in California. I mentioned I had recently retired from owning an investment firm and had many years of study of economics, especially Austrian Economics.

As so many people I have met before him, he said, “I really don’t understand economics and always have been confused by it.”
To which I surprised him with, “Of course you understand economics; it is the thought process you use every day to deal with three things: Scarcity, Property and Relationships.”

His eyes got big and he said, “Whoa! Say that again.”

“OK”, I said and continued, “Everything in human life is organized around how we decide about three things: Scarcity, Property and Relationships.

“First let’s talk about Scarcity which you’ve known about all of your life – you notice when something is missing or about to be missing; it is how you decide when it’s time go to the grocery store, do your laundry or whether you should drive your car faster so not to be late for an appointment.

“Every human being is an expert in the decision process of Scarcity. It is something we all naturally do whenever we act and choose – which, by the way, we are doing all the time, every day, all day long.”

I smiled, “I could go on and on. You want more?”                                                                                                       

“Sure.”, he smiled back.

 

…click on the above link to read the rest of the article…

 

 

 

 

Olduvai IV: Courage
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Olduvai II: Exodus
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