Nouriel Roubini Blog: China Is Over-Investing

So where do proceeds from US Treasuries end up?  Hmm..

Nouriel Roubini Blog: China Is Over-Investing: 

IMF now agrees with our Roubini Global long-held view that China is over-investing. Fixed investment is 50 percent of GDP. Lots of bad inves...

Roubini again demonstrates why Economists just don't understand reality, as they work to carve it into contextual fragments that fit their outdated theories. Not only are the rootings of human activity to physics and its laws ignored; but also, how geo-poltical realities define the basis of relevant analysis and commentary.

China is a case in point. Whereas, in the case of most nations the interests of the people and governing body are joint and combined under a  socio-economic-political framework, thread or entity - China is very different.  There are, in both concept and fact, two distinct entities: the Chinese people and the CCP (Chinese Communist Party). Credible topical analysis or commentary must take this separation into account to remain relevant, or it will fail long before pen hits paper.

Thusly, viewing China as two distinct socio-economic-political entities is crucial to understanding their different goals and natures Who is the CCP? Well this abstract from the Epoch Times provides salient insights into its separation, in all respects, from the people of China:


" ...the CCP emphasizes violent struggle against humanity, nature and the laws of Heaven to gain and maintain power, and how it indiscriminately changes its policies with complete disregard for morality, justice and human life. In its 50 years of rule, the CCP has been disastrous for both China and its people. Communist tyranny brought to China an estimated 60 to 80 million unnatural deaths, this number greater than the total deaths from the two world wars, and 13 times ... people killed by the Nazi regime."


Two primary conclusions can thus be drawn. The CCP is clearly  distinct from the people of China, operating separately under its own rules and goals. Secondly, economists who would apply their outdated economic metrics and beliefs to this despotic entity are woefully misguided. The CCP operates under different standards, playing an investment game that is self-serving and dangerous. They play by their own rules - NOT YOURS!

Economists, such as Mr Roubini, would hence be well-advised to pay closer attention to such concrete delineations.


Dr Peter G Kinesa
December 17, 2012

China Over-Investing?

For Whom Does CPP Toll...

Jim Rogers: I would like to find a way to invest in North Korea

Jim Rogers: I would like to find a way to invest in North Korea*


North Korea? Really? Too funny - we just do not know if we should laugh or cry about this implied advice? Certainly, Mr Rogers must regret these remarks in view of recent events, Then again; never mind recent events, how about the on-going atrocities of this evil blood-drenched regime. Oh well, why should anyone believe in moral capitalism when there is a buck to be made? Ask any mercenary...

Well Jim I guess we know what side you're on and who you expect to win the inevitable confrontation. Gotta love Geo-political investing.

Any other bets?

First Financial Insights
December 14, 2012

*Investors' Insights Comments posted December 14, 2012




Wow! Can you believe this comment by Jim Rogers? Some still clearly believe that "money has no smell" - that is, until it smells. For sure, by now Jim must understand that North Korea is one of the most dangerous regimes on the planet set on an unknown nuclear course. Shame, Shame!

So, I wholeheartedly concur with FFI's opinion and just wonder when does business, economic and investment support become not only treasonous, but an outright crime against humanity? Clearly, we all need to rise to a higher standard or risk becoming associated with and supporters of the worst enemies of civilization, along with their sick cowardly deeds.

WE should not wait until their missiles are landing in our backyards to understand the gravity and consequences of how business and geo-political activities are inter-connected. Because waiting until then, would leave so few of us with much else to wait for...

Dr. Peter Kinesa
December 14, 2012

"there will be peace in our time" 

Never ever, ever, ever FORGET...

 

FIRST FINANCIAL INSIGHTS: Marc #Faber : #GDP is not a very Relevant Figure

FIRST FINANCIAL INSIGHTS: Marc #Faber : #GDP is not a very Relevant Figure:

Marc Faber : GDP is not a very Relevant Figure Oh boy; Marc, this is exactly what we posted last week. We  certainly appreciate your sub...


What's wrong with the GDP metric? Too much; as my FFI's comments point out. Would anyone measure and manage a business based purely on its statement of revenues, ignoring completely any view of its balance sheet? No, of course not!

So why then do we use a limited metric to measure and manage the affairs of a nation? And even much more importantly; the affairs of the planet? These delusions trace back to " The Wealth of Nations" and its implied assumption that infinite growth was the operative economic condition and goal. What Mr.Smith should have assumed quite rightly, that finite conditions and goals prevail as the hard reality constraints of any nation or planet.


Perhaps then he would have written a different "story" and named his work " The Wealth of Planets". Oh, how different our world might be -


Dr Peter G Kinesa
December 13, 2012




"Fairy tales can come true... if you are young at heart..."

Finance Documentaries: Super Rich: The Greed Game

Finance Documentaries: Super Rich: The Greed Game: The luxurious lifestyle of those at the top of the world of finance inspires awe, disgust, and ambition. With the mind boggling salaries of ...

Here's an inside view of the game being played by the Masters of Abstractions, causing untold resources and activities to be diverted away from the real and physical economy. They are paper shufflers.

And the game created for personal gain, is an infinite positive sum game based on abstracts.

Whereas, the real physical game is a negative sum finite algebra. There is a growing imbalance between these two game theories - when breached will cause an unprecedented catastrophe. Such events lead to further geo-political instabilities - and there are few, if any, who know where that will lead.  

Our guess is the outcomes may exceed the darkest of predictions to date. Such are the ultimate consequences of greed.

Dr Peter G Kinesa

December 11, 2012

The Graphic Despair of Imbalance

Calculated Risk: FDIC reports Fewer Problem banks, Total REO Declines in Q3

Calculated Risk: FDIC reports Fewer Problem banks, Total REO Declines in Q3

Frankie: So Bring in the Clowns...

Whatever you think, treat these number with the utmost care, and then toss them in the trash.Three quick reasons:

Questionable accuracy of accounting; as we have seen, many regulators and auditors are hired guns with severe limitations. Value adjustments lag the reality often by 18 to 24 months.

Limited predictive value as these are manipulated abstracts "premised on neo-classical economics". If the system worked, then the 2008 meltdown would not have occurred - it did. So what more do we need to say?

Interest rates must revert to historic means, invariably reflecting actual inflation. Hypothetically, mathematically adjusting these reported values using historic- normative interest rates would wipe out 30% of asset values; putting 90% of the system underwater. A mean reversion is 100% inevitable - the doo doo will hit the fan - and be Much Bigger than 2008.

That's the short story. So where are the clowns?

First Financial Insights

December 6, 2012

Start Spreading the News : New York, New York...
 

Marc Faber: Oil Doesn't Have a huge downside risk

Marc Faber: Oil Doesn't Have a huge downside risk

In the short term, market emotions dictate day to day pricing, for the most part. In the long term, fundamentals play out the value of the commodity. Since 1972, when the US surpassed peak production, oil  prices climbed almost 50 fold and brought about profound changes in American foreign policy. American consumption averages about 33 barrels per citizen with few signs of abatement. That's a nation with about 330 million people.

Now consider that both China and India consume just one barrel per person, but are in an all-out effort to bring their respective living standards up to Western style consumption. A thirty fold increase over 3 billion people is enough effectual demand to deplete the known energy reserves in five years. Then what? A fool can figure out the serious geo-political implications - that are clouded by the potential for hair-trigger nuclear decisions effected automatically by deteriorating systems. Get the picture?

Conclusively, there is very little downside to oil prices as long as populations are growing, China and India continue to Westernize their fragile economies, and global  supply is geometrically drained to exhaustion. The question is not about price; but supply, and what happens when we pass peak global production.

Obviously, as evidenced by history -  foreign policies and affairs will change dramatically - Very Scary!

Dr Peter G Kinesa
December 4, 2012

The Horror of Numbers...

Jim Rogers : If you haven't already downgraded US ...

Jim Rogers : If you haven't already downgraded US in your mind, do so now

We have. But the question is how far to downgrade the world's reserve currency? Which leads to the bigger question: How long should we consider this as the currency of last resort? Not an easy answer, however when it loses this special status -- Watch Out! That would be the last stand, clearly signalling the fall of the American Hegemony. The implications are immeasurable.

But if you haven't already done so in your own mind, do so now!

First Financial Insights
December 3, 2012

Don't ask... Don't Tell

 

 

 

First of all,  let me say hello to our friends in Germany, Sweden, India, Swizterland, Netherlands and the United Kingdom for their support, comments, insights and questions over the past month. Your thoughts keep us on our toes and provide much valued feedback. Please continue.

 

Here's a post from today's Investors" Insights I enjoyed and received permission to post concurrently.

 

Dr Peter G Kinesa

December 3, 2012 

Paul #Krugman - Varieties of Errors; #NYTimes

Paul Krugman - Varieties of Errors
#NYTimes



http://krugman.blogs.nytimes.com/2012/11/29/varieties-of-error/


Economics: The Impossible Scoreboard!

Who' s winning? Who will win? When does the game end? Underneath what Paul is saying is a deeper question that relates to how we will ultimately measure success? - success of our theories, assertions and predictions? The whole issue is so complex and clouded with misinterpretation, that you could spend a lifetime in a splendid discourse with very bright people drinking some pretty fine wines.  But what we should not accept are frivolous answers - in the long run we are dead - that is simply childish and immature. 

There is little doubt that Keynesian measures have given us positive benefits, but perhaps these short term advantages in balancing the production-consumption model are aborting a  greater progress. It is an abstractionist model exercising a strategy that focuses on creating "effectual demand" by originating debt and money  Both over the long haul, do not logically relate well to the physical capacities and constraints of the money issuing nations geographic capacities. Resulting in tactics that promote rapid growth; leading to accelerated resource depletion, overpopulation and a destruction of the physical carrying structures that support present and future economic activities.

Whether it is today or tomorrow, a fair conclusion or measure of who is winning remains clouded. But no one wins in the end, if our strategies and beliefs push us over the extinction cliff faster than need be.

Until then, we suffer misfortunes of outrageous slings and arrows - Varieties of Errors!

Dr Peter G Kinesa
December 1, 2012

Take Arms Against the Sea of Errors

December 1, 2012

Jim Rogers - Never Forget

Hmmm...

Jim Rogers: Politicians always look for the easy answer

There is a good reason for this - they are not exactly the sharpest knives in the drawer. In fact there was a village in Texas missing a idiot not so long ago. The consequences are still being fealt today.  

FirstFinancial Insights
November 30, 2012

Sure I can spell it!


 

OUR COMMENTS

 

Too funny, but it was not that long ago. And we should never forget the consequences. Have great weekend!

 

 

Dr Peter G Kinesa

November 30,2012

Marc Faber: The Market is going down because corporate profits will begin to disappoint

Marc Faber: The Market is going down because corporate profits will begin to disappoint

Appreciating that markets are in an unprecedented bear market; the biggest question for investors is what strategy to take? Pending shortages in key raw materials combined with the implications of peak oil, do not provide the footing for sustainable growth of any sort. Our investment strategy is scarcity based. Countries, currencies, populations and hard asset mixes create a new investment calculus; recognizing the existential economic of global decline - the negative sum game that is contrary to the delusional neo-classical economic view.

In the end,  REAL corporate profits can only shrink under the weight pushing national GDPs lower. Such outcomes drive the War of Economic Attrition.

Dr Peter G Kinesa
November 29, 2012 

A Fight to the End

 

 

Marc Faber: The whole Global Financial System will have to be Reset

Marc Faber: The whole Global Financial System will have to be Reset

My god, what next? 

Why will the system collapse? Because it is a system that is flawed in its design, ignoring two constraints of physics regarding finites and chaos theory. These are the hard constraints any economic system must consider or else face a tremendous imbalance leading to its collapse.

The underlying premise of the abstractionist theory is that wealth abstracts can be created forever.Of course, in the abstract world this is possible ( e.g. printing money), and so it can thusly fabricate a positive-sum abstract game. Whereas, in the real physical world, the second law of thermo-dynamics prevails creating a negative-sum real game. There are fewer and fewer raw elements available for use with each passing moment as each transforms into the chaotic or non-usable state.

Neo-classical economics, hence conveys a picture that is contrary to the actual meta-economic version. The Reality. Furthermore, there is a growing imbalance between the stored wealth in the positive-sum abstract game and the remaining inventory of usable elements yet to be transformed under the negative-sum real game. Disaster occurs when the imbalance between the two is breached - causing the systemic collapse of the entire financial system. So no wonder NO ONE UNDERSTANDS RISK!

Hopefully, this sheds further light on Marc's quoted statement and prediction.


Dr Peter G Kinesa
November 28, 2012

Positve-Sum Gamers

FIRST FINANCIAL INSIGHTS: Jim Rogers: Shortages of Raw Materials will lead ...

FIRST FINANCIAL INSIGHTS: Jim Rogers: Shortages of Raw Materials will lead ...: Follow Investors' Insights Regular Updates (Sample Post; November 22, 2012) Jim Rogers: Shortages of Raw Materials will lead to Wars...


Let me add my two cents here. Everyone needs to be more careful when they order lunch.

Dr Peter G Kinesa
November 28, 2012

I won't  forget next time, promise

 

 

 

FIRST FINANCIAL INSIGHTS: Paul Krugman: Franc Thoughts on Bond Vigilantes

FIRST FINANCIAL INSIGHTS: Paul Krugman: Franc Thoughts on Bond Vigilantes:

Paul Krugman: Franc Thoughts on Bond Vigilantes

http://krugman.blogs.nytimes.com/2012/11/23/franc-thoughts-on-bond-vigilantes/


When the statistcal logic is flawed, the evidence is suspect and the comparison is analagous to apples and oranges - thusly lacking relevance; you end up with a pretty meaningless analysis and conclusions. One could also conclude the slide in journalistic standards at the New York Times is self-evident; if we take the same approach saying that an isolated case is representaitive of the attributes of the entire population.

However, no such conclusion is possible because further study is requried


Dr Peter G Kinesa
Novenber 27,2012

Damned Analysis...

Marc Faber : The global economy will hardly grow next year or even contract

Marc Faber : The global economy will hardly grow next year or even contract



Great one year of contraction .However it is much worse then that when you start to measure everything on a real per capita basis. Population alone expands by 1% globally and inflation say runs around 2%. Add it up and it seems like we need about 3% overall nominal growth in order just to keep up. No wonder governments no longer focus on real per capita numbers - otherwise, we would observe and conclude that have been in a global recession for many years.

The other problem with global GDP is what unit of measure provides a standard - is everything being converted to US dollars? Well, the US dollar has been debasing for the past decade. Its real global purchasing power is down by 25 to 30%  the very least. Now, the argument may be made that we have actually been in a global depression for the past decade.

Now this is armchair economics, however one has a certain sense that numbers used by the media, government and other pundits just do not correlate with reality. Lets briefly look at what we face going forward over the next 10 to 25 years.

Minimal global GDP growth in debasing unit(s) of measures

Ever expanding populations growing faster than the nominal GDP

Depletion of raw materials critical to the production of consumable objects

Little in terms of technological breakthroughs expected -  if Apple and Facebook are category leaders- we got problems. 

Climate Change and Geo-Political issues will continue to draw more resources away from consumer production

It therefore looks like the global contraction is running a marathon well beyond the one year predicted by Mr Faber.


Dr Peter G Kinesa
November 26, 2012

Marathon? I'm stuck!

The Daily Bell - Euro Crisis: Major Implications For Investors

The Daily Bell - Euro Crisis: Major Implications For Investors

Why is it that Headline writers are masters of understatements. Certainly there is stronger language at hand that could better convey the gravity of this crisis. This is a situation that was crafted on the hope that all the problems would be worked out along the way. Sounds like a shot-gun marriage - doesn't it?.

Anyway we recommend you read George Sorro's speech from "Festival of Economics" ( no we are not kidding - that's its real name) His talk provides a detailed perspective along a past, present and future outlook outline. Draw your own conclusions, but we still believe there are no one-eyed kings to lead the way out of this mess. And there was never even an exit strategy apparently defined by it originators. Masters of the Universe strike once more.


If you cannot find a copy, email or tweet me, and I  will send it to you. It is a insightful narrative from this guru of finance. 


Dr Peter G Kinesa
November 23, 2012

Annual Festival of Economics 2012

Economists meet to exchange ideas

The Fall of Lehman Brothers - Finance Documentaries

The Fall of Lehman Brothers - Finance Documentaries


These guys obviously were not too big to fail, but the implications of their failure reverberated around the world and triggered the biggest bailout of Banks and Dealers in US history. The question is: Have we leaned anything from this financial disaster? Time will voice its decision; sooner, or later.

Our recommended  business book list ranked "Too Big To Fail"  #7 of all time top ten, because of the importance of  events leading to and occuring after Lehman's demise. A blow by blow account of the power players in Washington and Wall Street,  provides a fly-on-the-wall perspective of their tense inner workings.

The book  and documentary should provide you with an informed view of a time, when the world of finance was mere moments from collapse.


Dr Peter G Kinesa
November 22,2012

Socialist Capitalism ?

Marc Faber : There will be Pain , very substantial Pain

Marc Faber : There will be Pain , very substantial Pain

For sure Marc. Moreover, we are happy you are finally aligned with our economic thinking. The  blog below (Economic Collapse 2020: A Failed Theory)  sets out our view from over a year ago, when we forecasted a financial collapse by 2020. A forecast that compares to Mr. Fabers' and again affirms why First Financial Insights have been accurately predicting events over the past couple of decades. Sorry - just tooting our horns a bit.

To summarize here are a few of the critical drivers:

Outdated abstractionist economic theory prevails - experts slow recognizing that physical economics will override their neo-classical theory. Print money and add more debt. Too bad for everyone.

Not much has changed since 2008, and the leverage and risk may be greater now. Memories are short.

There are imbalances in trade and finance that continue to grow, despite sluggish activity. Some  Banks and Brokers assets are still growing at unsustainable rates relative to global GDP - there will be a reckoning.

Interest rates are too low, too long - setting the stage for a mathematical deflation in asset values that could  have staggering implications; turning into social unrest - and then, geo-political confrontation. History at it again.

Resources deplete while populations grow. In the end, this will never pencil out. 

Euro crisis is still chugging along. Using outdated fiscal and monetary measures cannot affect real or physical economy.The whole thing never made sense because it distorted the benefits of comparative advantage, and the cultural and historical aspects were not homogeneous thereby also impeding free flowing labour. It encouraged inefficiencies, but concentrated power.  

While in the short term large abstractionist institutions are too big to fail, it is naive to think that anything is ever physically too big to fail. Economic entropy is a cruel mistress .


Dr Peter G Kinesa
November 21, 2012

Indeed Entropy: You are cruel.

FIRST FINANCIAL INSIGHTS: Economic Collapse 2020: A Failed Theory

FIRST FINANCIAL INSIGHTS: Economic Collapse 2020: A Failed Theory:


For the record we are authorized to post this First Financial Insights blog from last year. Not much has changed to affect this view. In fact, the tide of evidence and events keeps growing - supporting this forecast. Indeed many leading gurus are just now hopping on the bandwagon over one year later.  Marc Faber and Jim Rogers respective blogs today evidence this trend. Welcome aboard!

Comments posted below restate some of the key drivers behind our concluding prediction. A good idea to keep an eye on these over the months and years ahead.

Dr Peter G Kinesa
November 20, 2012

Welcome Aboard!