PLATINUM WEALTH PARTNERS - Financial Times, The Guardian, Jim Rogers

PLATINUM WEALTH PARTNERS:

Week Ended July 14, 2013

 DR. PETER G. KINESA'S 
INTERNATIONAL INSIGHTS

"PLATINUM WEALTH PARTNERS"

VISIT OUR WEBSITE 

PLATINUM WEALTH PARTNERS

www.pwa2100.blogspot.com

MARKET ALERT

Europe shifts back into the spotlight this week, as Euro bond yields could soar higher and then reverberating around the globe as jittery traders push the button. Bond Vigilante's may be in for an early Christmas Bonus - long before the.summer is over. It is unlikely that equity markets can protect themselves if the bonds decide to take cover. Safety first, and every man for himself.

First Financial Insights
July 12, 2013

Financial Times - Portugal's Bonds Soar 7.9% -  MORE Euro Troubles  

Just add another country to the list of European nations that are seeking "national salvation" as 10 year bonds rose to 7.9% this past Friday, settling back to 7.27% - up 53 basis points. Again the neo-classical economists have no solutions and no plan, other than to print money and provide bail-outs. Nor do they even remotely understand that the underlying issues stem from physical economic constraints - too many people and too few resources. So the economic cancer that came to the forefront in Greece, is masticating around the continent, remember Cyprus just a few short months ago . 

Here's the real problem - as Europe falls apart and bond yields move to 10% and higher in these "thinly traded markets," the fears will begin to take hold and grip the global markets as well. At the same time, the European economies are also starting to slip into one of the profoundest depressions ever to be experienced, as asset prices deflate and consumer disposal spending is over-burdened with huge increases in debt service costs. A One - Two body blow.

This could be the snowball that plunges the bond markets into a long bear-cycle. Expect the turmoil in Europe, to test the nerves of jittery bond traders in Asia and North America this week. And this could also trigger long over due downside actions in the equity markets around the world next week.

Seems like there is no where to run; no where to hide.For now.

INVESTORS INSIGHTS

First Financial Insights

July 11, 2013

Who will pull the trigger?

The Marc Faber Blog : Crude Oil is one of the very few Commodities that look attractive

What is it about these guys? One day, Dr.Kinesa, says oil could go to $500 a barrel because the finite physical constraints are going to cause economic problems, resulting in social disruptions, political turmoil and then geo-political upheaval . What can we say? We read the same articles or fools seldom differ...

Platinum Wealth Partners

First Financial Insights

July 11, 2013

Great Minds Think Alike

A few years back a Canadian economist - Jeff Rubin boldly predicted that oil could reach $200 a barrel sending shock waves through-out the financial world. This tells us a number of things: markets have short horizons, human cognition is flawed, and most folks simply do not understand that exponential mathematics and physics impose hard non-negotiable constraints. We do!

Dr Peter G Kinesa

July 11, 2013

THE JIM ROGERS BLOG - Rogers: More Money has been lost in GOLD Mining Shares than any other industry in America 

We agree for the most part, except JIM you forgot one important aspect of mining, that is many mines are polymetallic, so they extract many other minerals including gold in their process. Should gold gravitate to zero, these mines will treat it as a by-product, and thus only assign the incremental costs associated with the ore or even  possibly leave it unprocessed for a period of time. If gold is a by-product then the full weight of production costs will not be attributed.So even at $50 an ounce, some miners may still be able to produce it on a break-even cash basis  because the cost assignments are arbitrary.

Anyway we are happy you enoyed our article - "Gold is a Psychotic Placebo - NOT AN INVESTMENT." And by the way, we confirm that old story about gold mines - 99% of all stock mining ventures end up being worthless. And yes, it will be very hard for these sociopaths to attract capital in the future. That's one good thing for the greater cause - our future generations!

Platinum Wealth Partners

First Financial Insights

July 10, 2013

Faber and Rogers are still building physical gold positions regardless of what is happening - the US dollar is still a powerful medium that can be exchanged for real objects. Moreover, there are strong resource-based currencies offering a greater lon-term mineral diversification. It is still just too easy to get blind-sided by an object that depends upon the bouncing emotional neurons of the collective masses who do not even know how they will think one day to the next. Too buggy for us, when there are just so many better other places to garner safety,income and growth in global purchasing power terms.

Dr Peter G Kinesa
July 10, 2013  

Somewhere Under A Rainbow

The Guardian - SuperFreakonomics is SuperFreakingWrong

The Guardian - SuperFreakonomics is SuperFreakingWrong

 Business Media Protecting our Planet

This article brings out a number of salient points regarding the information propaganda game being played with climate change by the nefarious business press. Never, however, do Canadians forget that "the medium is the massage" - because media has the subtle profound power to define realities that don't actually exist. The list of outright lies built on misinformation with its brutal consequences are endless. Therefore, investors should, as a rule, have little faith in the objectivity of the mainstream business press that is sadly run by so many hidden agendas.  

Climate change as pointed out in this article is being panned or suppressed with the passion of an addict who denies their affliction. The usual media suspects are mentioned, along with other crazies, who are promoting hair-brained schemes* to remedy irreversible damages already facing the bio-sphere. More false PROFITS! 

*(Remember Get Smart? Let's Bring Down the Cone of Silence)

To invest effectively, the planet's hard physical constraints must be considered in any decisions we make. Denial or ignorance could be very costly. Is climate change that serious? The best way to answer the question is with the question: Why is, Mayor Bloomberg, spending $30 Billion on a seawall for New York City? 

That's a serious - REAL Business Agenda...

Platinum Wealth Partners

First Financial Insights

July 9, 2013 

Climate Change - could be bad for Business? 

Reading between  the lines, modern journalism has turned into a propaganda machine. The questions foremost in our minds: is for whom and why? And so, our democracies evaporate and freedoms disappear without a single vote being cast,  nor a voice raised in anger nor a pitchfork held in defiance.  So invisible.

In the end - IKE was Right!

Dr Peter G Kinesa

July 9, 2013 

ALJAZEERA (Video) - EGYPT IS HOT SPOT PUSHING OIL PRICES HIGHER?

ALJAZEERA (Video) - EGYPT IS HOT SPOT PUSHING OIL PRICES HIGHER?

Economics, Theology, Politics or EXISTENTIAL PHYSICS?

More and more, we are keeping an eye on these powder kegs around the world, as the potential for physical disruptions in oil supplies or critical raw materials grows with each new revolution or social disruption. Sure shootings and violence will bring the interested parties to the table, seeking diplomatic solutions, but we fear that they are short lived. Why? Because what is really needed are economic solutions that grow ever so much more impossible to effect, as these countries have overshot the physical capacities of their geographies. Too many people and too little resources.

There are two clear actions countries such as Cyprus, Greece, Spain, Japan, Egypt and the rest need to do - first,  effect civil policy measures  to reduce populations levels in the years ahead, as they can no longer draw blood from a stone. It is time to face the reality that certain geographies will only be able to sustain their population levels for so many years, before completely collapsing. And certainly, infinite sustainability is absurd. Secondly, develop and implement a  "National Business Strategy" - that may also mean opting-out of global or regional institutions (EU, IMF,WTO, etc.) that largely  restrict emerging foreign competition through trade agreements providing short-term benefits, but working to the long-term and over-weighted benefits of bigger players. In other words, denying or retracting their ability to develop sustainable "comparative advantages" through protective measures that allow industries to develop and grow over time.

Some tough medicine here, in very general terms, however if measures are not soon taken to re-balance a nation's physical economy's limits with the number of people it can optimally and sustainably serve; then the political situations in many nations will simply spin out of control. Not good for oil! markets! consumers!- and just about anything you can think of.


Dr Peter G Kinesa
July 9 2013     

Blood From an Existential Stone?

PLATINUM WEALTH PARTNERS - Paul Krugman, Jim Rogers, Peter Kinesa

PLATINUM WEALTH PARTNERS:

Week Ended July 7, 2013

 DR. PETER G. KINESA'S 
INTERNATIONAL INSIGHTS

"PLATINUM WEALTH PARTNERS"

VISIT OUR WEBSITE 

PLATINUM WEALTH PARTNERS

www.pwa2100.blogspot.com

The Paul Krugman Blog - Rationality of the Euro

(Click Below)

The Paul Krugman Blog - Rationality of the Euro

These comments reflect more on economics and thought-process rather than  markets, however that is what defines the markets when all is said and done.

Britain was certainly on the right track when it decided not to participate in the European experiment. And it remains shocking that Poland is seeking membership in this club, given the mess and clear failure of this project. What is it about Polish people? There is something that we just do not understand. All we can say, is that too often we give up long-term advantages, in order to remedy a short-term problem.

Why did the Brits decide not to join the club - by gosh, as Paul sarcastically notes in his New York tone, they did some "analysis." No one else apparently does? This point, in itself, raises some fascinating considerations when in comes to expressions such as: "they did their homework," "paralysis through analysis" analysed to death" and so on, and so forth. In fact, just writing about it makes one wonder and come to believe that analysis is much more perpetual in motion than stoic; as new ideas, devices, facts and knowledge is brought to the awareness of our cognitive processes. Particularly, for complex situations where the deterministic and subjective variables are always in a dynamic state of change, with the possibility of even  two opposites co-existing as truths at the same or different times. Go figure - the movie never ends !

So you see there is enough material here to write at least ten, five hundred page, books about the analysis of analysis. What is the right amount? the right tools? the right perspective? Or how about  analyzing the initial diagnostics and its tools - if its wrong, then so should be the supporting analysis. Then, there are the assumptions and we can assume that most people have different ones - or can we? The point being, do we ever really know if we are doing the most relevant  diagnosis, analysis and evaluation of goal, facts and constraints leading to the optimal solution for a moment or forever? I have a funny feeling that such knowledge is impossible to attain, except for those who command the arrogance to think otherwise.Why? Because they know, they know everything. 

In the end, this is a "very serious" topic and process, as it defines the fate of individuals, economies, businesses and our species in so many other ways. The case of Britain, supposedly doing the right analysis once, contrasts with years of bad analysis, that saw their Empire rise and fall, from being a political, economic and military powerhouse, to what it is today, and the tomorrows to come. Should we blame it on the analysis?

 Probably, but you may never know for sure!

First Financial Insights 
July 6, 2012

New Yorkers, eh!

ANALYZE THIS BUDDY !

The Dr Peter G Kinesa Blog : ALL ECONOMISTS ARE WRONG - DEAD WRONG: Captain, My Captain... ALL  ECONOMISTS ARE WRONG – DEAD WRONG! Why we are in this mess: Where did it all begin? Why? ..

Good  time to do a little report and see if there is any evidence that would suggest that Economists are right, and perhaps this conclusion is wrong. Let's see there's Europe, Cyprus, Egypt, Brazil, China, Japan, Greece, and, and, and...

Then of course there's the Fed and the interest rate trap ready to launch us into an asset deflation spiral.  As well as, overpopulation, unbridled growth, biosphere devastation and  exponential resource exhaustion. Hmm. Not much has changed, so....

ALL ECONOMISTS ARE STILL WRONG!

First Financial Insights
July 5, 2013 

Not that way- your other RIGHT!

The Dr Peter G Kinesa Blog : Human Longevity OR Unbridled Growth??: WHAT IS OUR GOAL: HUMAN LONGEVITY OR UNBRIDLED GROWTH? 

Stars of what we are...bringing them back into our arms -

Every now and then it is a good idea to return to a prior article and look at it with a older set of eyes to discover if your thoughts and ideas have been changed, modified or turned upside down in some strange way. In this case, very little has changed and there is a strong belief that to have a shot at the universe -  the orientation of humanity's goals must be towards its longevity; not just the absurdity of growth for the sake of growth.

Again, the mathematics speaks in a way that words cannot convey, insofar as the algebra of population and resources can define our visitig rights on this planet. Obviously, the lower the population levels, the greater the time we should have as a species, with all other things remaining equal. Then! And only then, could we come to know what is unknown, a path less chosen and yet to be discovered.

Why not? For that is what makes all the difference.

First Financial Insights  
July 4, 2013

Moving hearts is like trying to catch a star - bringing their minds into its heart; back where it belongs...

The Marc Faber Blog: Low Rates FREEZE markets - Mr. Bernanke is most likely to retire and unlimited QEs forever will continue

There is no doubt that Central Banks painted themselves into a corner - they have made it impossible to raise interest rates, regardless of inflation. Why? Because if they do, it will cause an unprecedented deflation in asset prices and bring consumer spending to its knees, as disposable income is siphoned away to service debt service costs that could double or worse. It would cripple consumer demand and confidence, in a horrifying way with these double knock-out financial blows, triggering a deep prolonged depression. Moreover, obliterating the balance sheets and capital boxes of  the world's biggest commercial and investment Banks, with the mere stroke of a pen.

What this also means is that governments will do all they can do to manipulate inflation numbers to fool consumers, investors and savers. Time will tell if this form of quiet debasement, confiscation and taxation will work. Probably, because all Central Banks are moving in a similar co-ordinated step - and there are no other planets offering better rates and liquidity. So far!

The big point being - is how did everyone manage to get into the same no-escape situation that Japan has been in for the past two and a half decades? We have some answers, but we will leave them for another time. Meanwhile, we concur with Marc insofar as we should get use to the QEs for a long, long time.  Pretty boring stuff.

First Financial Insights
July 2, 2013

Intergalatic Bankers Now Preside Over More Years of QE

The Jim Rogers Blog : Central Mystic Bankers Sell Holdings - GOLD Prices make a nice, firm bottom when mystics start selling

The Jim Rogers Blog : Central Mystic Bankers  Sell Holdings - GOLD Prices will make a nice, firm bottom when the mystics start selling their gold out of despair

Who are the Mystics, JIM? Why are they selling? The first answer is Central Bankers; starting in developing countries, second in marginally developed countries; and lastly, all the rest. And they all have plans to unload their holdings on whomever will step up to the plate, while the gold party still commands peak prices. Central Bankers are like everyone else; wanting to keep their jobs. Big market wins do little for their meal ticket, but if they get caught on the short end, they might as well  start heading for the cottage. Permanently! Or much worse in some cases. Hee, hee...

Central Bankers are dumping  to balance out debt or pay for fiscal austerity measures and shortfalls with no end in sight. Politicians almost everywhere are desperate to save their hides, stem social unrest and avoid having their nations fall into the hands of revolutionaries. More countries are sure to be selling gold reserves in the future, as they too face austerities, caused by ever dwindling national resources, and yet more mouths to feed. Our finite planet is tightening the noose. Meanwhile, buyers are waking up, to the fact, that gold is a terrible investment, currency proxy or insurance device, as demonstrated by the past 30 years market performance.

Should Mystics overwhelm the market with sales (either directly or through collateral monetization)  - NO ONE; not even Jim, can then predict or fathom how low gold's price could go - even $50 an ounce is possible. We must never forget that we are dealing with a social phenomena, and not a scientific phenomena subject to object deterministic rules and observation. Therefore, anything is possible. Anything - and that goes both ways in this commodity's market.


Dr Peter G Kinesa
July 6, 2013

MONEY, GOLD, MARKETS AND MYSTICS' PHENOMENA

Nassim Taleb - How Debt Ruins Systems

Nassim Taleb - How Debt Ruins Systems

click above

Nassim, by far, is the smartest, brightest and most scientific thinker in the fields of finance and economics. Leagues above of any of those who profess to have either aquired knowledge, recognition or academic accreditation. He gets it, all the others are pretty hopeless.

His best selling book; The Black Swan (listed and linked under our top recommended readings) came out in 2007, about the same time that First Financial Insight's (FFI), now famous, "Eye of the Storm" presentation was released. Both forecasted that a huge credit crunch, economic upheaval and a market meltdown was coming soon. Over a year before other top pundits, economists or regulators had any sense of the pending avalanche that was going to soon beset financial history.

Albeit for different reasons, these works saw the proverbial writing on the wall. Taleb was, by nature, much more empirical, while FFI's stressed the glaring weaknesses in banking, credit and other economic fundamentals. To this day, both Taleb and FFI do not believe that we are out of the woods - a 2008 hangover persists, as many of the underlying reasons behind the meltdown have not been addressed. Continuing crisis after crisis in Europe, demonstrates we still have not learnt key lessons from the 2008 Meltdown about leverage, oversight, economics, transparency, cronyism and so forth; thereby, dooming the global system to make the same mistakes time and time again. Concluding that we are not that bright, as a species, hard to refute.

Back to Nassim's latest book, we can only comment based on the excerpts that convey an organic hypothesis that systems are self-corrective, but that leverage increases its fragility making the corrective process much more devastating. You could almost call it an ant-chaos theory. However, one salient point that Nassim seems to miss is that  the growth of the abstract financial systems will also be limited by the hard constraints imposed by physics. Limits of a finite planet, that make it absolutely impossible to physically grow wealth forever.

Nauru and Easter Island were microcosms of the larger world, but recent events on other island nations such as Iceland, Ireland and Cyprus prove that there is much more to be heeded and learnt from the economic and social demises of these island examples. For starters, the same physical economic disease, caused by input shortages, is clearly spreading inland to countries like Greece, Egypt, Portugal and Slovenia, amoung others. Leverage in the financial system premised on archaic Keynesian theory is exacerbating their illnesses - missing also the real overshoot problems their populations now face relative to geographic resources they control.

Notwithstanding this fundamental flaw, we believe his new book should provide other useful insights to readers, considering the  thoughtful and argument is his earlier works.

Dr Peter G Kinesa
April 28, 2013  

"You really think leverge leads to geo-economic conflicts?"  

   

  

INVESTORS' INSIGHTS - Jim Rogers Blog - #Cyprus sets the Standard

 INVESTORS' INSIGHTS - April 2, 2013

Jim Rogers Blog - Cyprus Sets The Standard For Other Coun...

Some NY Times Op/ED columnists seem to believe that more debt is not a problem - it is just money we owe ourselves. Perhaps we need to revisit what debt and money represent in a more physical sense - being an obligation to provide the requisite physical goods and services to the holder of the debt instrument, as time specified.

Here's the perspective that illogical neo-classic economics do not grasp. The holders of National debt are ultimately future generations - who are the one's that will be expecting payments back to them. However nations, banks, pension funds and all forms of  financial intermediaries will be unable to make these payments. Why? Not because there is no shortage of worhtless abstract fiat currencies - we can electronically create those forever. Rather, it will be a result of economies not having input resources to convert to goods and services - they are at a future date: resource bankrupt.

Now you would think that, by now, the neo-classical economists could learn a lesson or two about real economics. There are so many recent lessons, like Greece, Ireland, Cyprus, Iceland and the lingering certain demise of the whole EU. Are these situations providing a wake-up call? Nope, not a chance - they are either all part of the Financial Mafia or just - Thick as a Brick. You can and may be the judge of that.

Dr Peter G Kinesa
April 2 ,2013  

P.S. I would to say hello all our friends and followers in Moscow, St. Petersburg and many other places in Russia - we appreciate your on-going support and readership, helping us to create a leading global reach. Cheers. 

Happy Days and Cheers!

 NOSTROVIA!

Marc Faber Blog: #Cyprus could burst bubbles and bubbles and bubbles

Marc Faber: we are creating bubbles and bubbles and bubbles

Marc says we got more bubbles and bubbles and bubbles, created by a fiat banking system inflating assets with more leverage, into a dangerous unsustainable territory. He's right. The burst will be caused by a spike in interest rates with a  resultant: "rate spike contagion" that could begin with the Cyprus bailout and then spreads through the rest of Europe and emerging markets, in short order.

Think about what investors, savers, and money managers have been learning in the last few weeks. First and foremost, Cyprus exposes the EU, ECB and IMF as regulators who have acted with little foresight or control over the EU banking system. These guys are running a no holds barred carnival worse than the wild, wild west. How could they not have known that Cyprus wasn't headed for financial disaster a year or more ago? Can't they read financial statements? Do they ever audit any of these national EU Banks? 

Listen, I am not sure if they can even add numbers any more. So how would you feel about investing in their bonds, buying securities, or depositing funds in countries under their jurisdiction? If you would not be scared out of your mind, then you are under a better medication than most. Realistically rates should pop by 200 to 300 basis points at the long end, if not more, over the next few weeks as stakeholders get their minds around how bad the structural issues are. The fact that these regulatory bodies have learnt little or nothing since the 2008 meltdown, creates even more fears for anyone involved with these markets or banks.

By the way, if you believe that the EU banking system is a crap shoot - then emerging markets offer even less confidence given pervasive black markets, corruption, and cronyism in such nations. Their systems of jurisprudence, finance, accounting and auditing are not as developed, while these nations are open to regime change in a moment, thus demanding much higher risk premiums than the EU. 

With all these pending interest rate increases being sparked by the EU's Cyprus crisis, then inversely correlating asset values would be pushed downwards, purely due to the triggered financial mathematics . That's not good for the bubbles in stock markets, bonds, real estate, construction and corresponding employment. The winners, by default, when the dust settles, looks to be the US dollar and Gold - for the time being. 

So sing along with Mr Faber, "bubbles, bubbles and more highly- levered bubbles" - where even a small incident like Cyprus brings the House of Bubbles tumbling towards the ground. 


Dr Peter G Kinesa
March 30, 2013

Everyone is singing along with Mr Bubbles

Marc Faber Blog - #Cyprus Next Nauru?

Marc Faber: Governments Will Take 20-30% of My Wealth

Inept governments' last measure is not taxation; it is "confiscation." Marc's concerns are well-founded, as Cyprus tells us that this Royal medieval tactic is now being considered and employed by top global governments, agents and regulatory bodies. Why? First, it is because they never really understood economics in the first place. They relied upon make-believe abstracts, then creating banking bubbles with fiat currencies they a grinded out of their printing presses 24 hours daily.  

However, amoung  many other things, they ignored the idea that wealth is created from physical inputs that could not not forever produce goods and services outputs. Add, an illogical bias towards increasing populations, through birth or immigration, and you'd further stressed this fragile equation.  Throw into the mess, the degrading of the bio-sphere and your economy and society is sure to collapse - sooner or later,  just like so many others before. The most recent case being Nauru - just another short history of progress!

Secondly, to make matters worse they levered the system to the hilt, at all levels, and then failed to even monitor the risk exposures. Third, a crony and corrupt banking system became so widely inter-connected, that the failure of one small player could bring the whole house cards tumbling down. Truth be known,  Europe's finances were severely strained by the 2008 meltdown, contributing to much of today's crisis. 

What is disappointing, beyond dumb and dumber, is that even after the 2008 meltdown; no one at the EU, EC or IMF learnt a thing about financial oversight. So is Cyprus about to become another Nauru? You bet - and there are many more trending into this devastating predicament of physical economic bankruptcy- too many people with no input resources. 

Who's next? Slovenia? Where is that?

Dr Peter G Kinesa
March 26, 2013

EU, ECB and IMF oversight sees banking crisis coming...

   

JIM ROGERS BLOG - #Cyprus is Doomed

Jim Rogers BLOG : Cyprus is a real threat to the U.S.

Everyone was asleep at the switch, in fact; many had a hard time finding the switch, including the US media which was more concerned about March Madness and the Easter Bunny, before they figured out that Cyprus could bring down the global financial system. Let's remember what Churchill said about Americans, give them enough time and they'll figure it out.

Jimmy's right, but he should emphasize Cyprus is a real threat to Cyprus first. Secondly, there is little doubt now that Cyprus is the trigger that will bring down the EU and ECB. Why? Where was the oversight? There was none, or else this thing would not have gotten so far out of hand. Two, it tells you not only is there no political unification in the union - there is also no unification of its financial structure. You don't have to be a rocket scientist to figure out that without these key ingredients, you cannot possible make this Euro Experiment work. Thirdly, there is a clear lack of forward thinking power at work within the troika. Cyprus indicates that they are reactionaries engaging no proactive vision or understanding of what the problems and opportunities are - equating to "thought bankruptcy"

Looking at Cyprus and the bail-out solution shows clearly they had and have no clue. First, their actions should result in 20-25% of this country's economy shutting down with loss of its international banking sector. No one in their right mind is going to invest or save money in this country for decades. This will not only lead to massive unemployment and social unrest impacting their tourist trade, but it will cause a collapse in the country's asset values due a combination of spikes in borrowing costs and a lack of liquidity. "Hey buddy, wanna buy some a condo in Cyprus? " You see what I mean?

Now all those involved should have foreseen and understood these consequences. Did they? - No! Consequently, Cyprus will fall into a depressed economic state that could last for decades - in fact, this resource poor nation may just never recover. Anyway what the EU, ECB and IMF should have done along with the bailout plan is put together an program of economic revitalization to be implemented concurrently, in order to soften the economic blows and preserve asset values - and hence cut this disease off with the economic surgery required not mere band aids. However, that would take proactive thought - it could be painful.

In the meantime, this nation faces more doom and gloom as other parts of its economy domino into collapse affecting not just Cyprus, but other EU nations as well. Then of course as Jimmy's says the US as well.

Dr Peter G Kinesa
March 25, 2013   

"What do you mean we have to think about it? That hurts."

Al Jazeera English: #Cyprus bailout talks 'at very delicate stage' - Europe -

Cyprus bailout talks 'at very delicate stage' -  Al Jazeera English

Who has been the primary beneficiary of the Euro, ECB and EU? Germany! And yet, when it comes to keeping the whole scheme together, the Germans are running for the hills. Germany's export bonanza, since the institution of the Euro is directly attributable to the lower currency value ascribed under the unified currency. This meant that German goods were priced much lower in international markets. Otherwise, using its own currency would have resulted in much lower exports and economic benefit.

But at the same time, other Union members were seeing their comparative advantages undermined, because their exports were being priced much higher in international markets. Moreover, tourism and other attractions of foreign currency were impaired as vacations to these countries would be more expensive than they needed to be. Add the inability to print your own currency, and your  monetary devices are largely eliminated. So indirect taxation through currency debasement is not possible.

The real lesson of the "European Experiment" is that without complete political unification you cannot have an economic unification that works. Would you set up a joint account with all your neighbours, who also control access to your funds? Not a chance.

There are four concerns that are now self-evident. Germany will not step up to the plate, despite having won the most and still having the most to win long-term. Europe will not undergo a matching political unification centralizing its power. The weaker countries cannot save themselves, without a lower currency to unleash their comparative export advantages. Lacking control over monetary policies, further hampers the weaker countries ability to adjust rates to the short-term economic needs; forcing them into extreme unlawful measures. Taxing bank deposits!

Conclusively, the EU is a lousy deal for the majority of its participating nations. It is a deal made worse, when those nations that have profited handsomely from the economic sufferings of the others, do not help out when needed - largely because of their national political agenda.

It is time to undo this European experiment, and let the weaker nations have a chance to recapture their economic viability through comparative advantage and fair floating exchange rates. Otherwise, the path to economic destitution will result in these weaker countries experiencing greater social unrest, leading to extreme political changes, that will also put a end to this one-sided and misguided economic scheme that has no potential for unified political rectification.

Without this, then this is simply a BAD DEAL  



Dr Peter G Kinesa 

March 24, 2013  

The Art of the Deal

Where's Trump when you really need him?

      

FIRST FINANCIAL INSIGHTS: INVESTORS' INSIGHTS - NEWS ALERT - "Russia Rebuffs...

FIRST FINANCIAL INSIGHTS: INVESTORS' INSIGHTS - NEWS ALERT - "Russia Rebuffs...:

INVESTORS’ INSIGHTS   “NEWS ALERT ” Russia Rebuffs Cyprus Bailout Click Above for today's Globe and Mail Article   This...

Everyone should be scrambling now. The banks in Cyprus will no doubt face a major deposit run when they open, making it almost impossible to put any sort of figure on what amount is needed to save the day. The problem here apparently stems back to write-offs of Greek Bonds resulting in losses and under capitalization. So here is the first sign that the inter-connected bank borrowings in the EU could end up snow balling.

Bond markets as well as depositors should be concerned as this will no doubt put further pressure on interest rates across the EU, and perhaps even globally. Similar to the 2008 meltdown, one bad security leads to another, then that bad apple rots the whole barrel because of the complex inter-connected financial borrowings.

We are keeping an eye on the ball here - just too many unknowns.

Dr Peter G Kinesa
March 22, 2013

One bad apple

Nouriel Roubini Blog: Cyprus: Capital Controls & Deposit Freeze Is The Only way...:

Nouriel Roubini Blog: Cyprus: Capital Controls & Deposit Freeze Is The O...: 
"Capital controls & Argentine-stlye deposit freeze (Corralito/Corralon) unavoidable in Cyprus given lack of a bail in deal. Only wa...

Sorry Nouriel, but what should have happened and didn't, was that the EU and ECB should have stepped up to the plate and fixed this situation long before it reached front and centre on the global stage. Imagine if the FED decided not to bail out Nevada; for example, because of suspected nefarious activities. The Union and Central Banking functions would fall apart.

Cyprus is less than .2% of the EU's  GDP, yet they let this economic scratch turn into a flesh eating disease, that exposes the EU and ECB as "name only" institutions without functional substance. Where were the oversights in the first place? 

This is just bad management on all fronts, from start to finish. The cost could ultimately be the sinking of this whole European experiment forever. Which is startting to look like the most sensible solution to the situation with each passing crisis. 

Time to bite the bullet.


Dr Peter G Kinesa
March 21, 2013

Pick ONE!

Marc Faber Blog: Cyprus (RISK?): No large impact on Emerging Markets

Marc Faber Blog: Cyprus (RISK?) : No large impact on Emerging Markets

Wrong! Wrong! Wrong! Cyprus will have huge impact on Emerging Markets and we can analyze and determine why from two points of view. 

Emerging Markets is a sexy term crafted by promoters, mutual funds, banks, and money managers to basically dress up high risk sovereign situations. " Lipstick on a Pig Markets" would not have the same marketing or sales flair to it, so a more sanitized semantics is useful. 

But what are we dealing with really? Generally speaking, third world economies where the business, legal and ethical practises are not that well-established or developed. Moreover, the risk of political power changes is high and thereby the rules of the game. And not all countries are the same; the risks of change extremism is further heightened by theological and cultural beliefs. In short, the rules are more likely to change at any moment in these countries' economies.

The defining of financial risks has a checkered past, in fact, the definitions often result from events or fancy theory. They do not have the same certitudes of scientific discovery or observation. Systemic risk is a product of the debatable "efficient market hypothesis", while settlement and counter-party risks were discovered when related events created serious turmoil in the markets. Counter-party risk was not a major concern until the experiences of the 2008 meltdown came home to roost. You could say that it didn't exist until these events occurred - it was an Unknown, Unknown.

With the Cyprus deposit tax (theft) proposal another such "Unknown, Unknown Risk " is now known and self-evident  -  Cyprus Risk. What is Cyprus Risk? It is basically the possibility that a sovereign nation will confiscate the assets of savers or investors arbitrarily without notice or due process of law. This risk applies not just to deposits, but all types of financial assets; including, reality, stocks, gold, bonds and insurance instruments. It is a risk that must now be imputed into the ambiguities of risk management algorithms.

Emerging markets, because there is a greater likelihood of game-changing rules, should now be expected to pay a higher premium on capital to compensate for this additional risk. This premium may also be calculated into capital costs of EU countries. The premium will, hence, add restrictions to liquidity flows and raise earnings expectations of investors and savers. Both will act to depress the value of assets, such as stocks, bonds and real property in these higher risk markets. 

It is still too early to tell what exact economic outcomes will be of Cyprus Risk, but bringing this heretofore, unknown, unknown risk out from under the covers cannot be a positive discovery for neither Emerging Markets nor the EU.   

Dr Peter G Kinesa
March 20, 2013

Cyprus Risk

"Folks Are You Ignoring Me?" 

       

FIRST FINANCIAL INSIGHTS: INVESTORS" INSIGHTS - "NEWS ALERT MARKET WARNING'...

FIRST FINANCIAL INSIGHTS: INVESTORS" INSIGHTS - "NEWS ALERT MARKET WARNING'...:

INVESTORS’ INSIGHTS “NEWS ALERT MARKET WARNING” Cyprus Rejects Deposit Tax Click Above for today's Wall Street Journal Article ...

Thank God! They came to their senses at the last moment. However, the idea of even pushing the button that could have caused a nuclear financial collapse is disturbing. Who will invest or save money in Cyprus ever again? How will their Banks retain current deposits? What will be the implications on EU bond markets  and banks? There is little doubt many reconsiderations are underway relative to the EU - and there will be an impact on capital flows and borrowing costs. A price will be paid at the worst of possible times.

Yet we need to look beyond the "Cyprus Crisis" and underscore the bigger issues here. First, how many more EU nations could possibly consider these most desperate financial tactics. Let's count them; Spain, Italy, Portugal, Greece,and Ireland could be readily added to the pool, bringing the total to six. In percentage terms that calculates to over 35% of the EU. So far! Trending has not been good and the fact that these countries do not have their own currencies and thus monetary policy control is not helping matters. \

Yep, they cannot pull the FED's famous "invisible deposit tax trick" and debase their currencies by printing more money.  People don't notice it and rarely turn to social unrest when it is applied. People don't understand it and some probably even believe that it is a good thing. So governments will continue to use this quieter confiscation of wealth because the direct tax approach makes the theft so much more obvious and really gets people upset.

For a moment let's turn back to what the real problem is here - Neo-Classical Economic Theory, or better described as the positive-sum abstract game. Whereas, what these countries are truly confronting is the physical algebra and negative-sum game of Meta-Economics;  meaning their populations have over shot the resource capacities of their geographic jurisdictions. Moreover, with each passing day the matter is made worse as more people are added while resources dwindle. So when we ignore all the typical abstracts and concepts of economists, it is really easy to see what the problem is here. With fewer inputs per capita - you produce fewer outputs - that cannot be increased by imaginary economic devices of any sort.

What is also clear, is the direction that each of these nations is heading, particularly if they continue to adhere to the Wizard of Oz's positive-sum economic theories. They are returning to a post-industrial society that will not be able to sustain the same numbers and outputs as in the past. That is, if social and political upheavals do not interrupt a smooth transition. Historic probabilities suggest the transition will not be so smooth.

So again keeping an eye on events is essential. What is interesting to note, is that many of the high profile trouble spots are island nations; Cyprus, Iceland and Ireland, that became Banking Center (Abstract) Economies when their underlying real physical economies overshot the populations they could support. So arguably are Japan and the UK. So were Nauru and Easter Island; of course, largely minus comptemporary banking and economists' abstracts. 

Sort of makes you wonder if there is a pattern here?

Dr Peter G Kinesa
March 19, 2013  

The Fate of Island Nations