Baltic Dry Index. 2444 -232 on the week
LIR Gold Target by 2019: $3,000.
Banana republic, here we come.
Paul Krugman.
Nobel laureate and leading Keynesianist Paul Krugman has come out strongly against the Republican Party’s policies on the US economy. Since at the present time they are likely to be the big winners in November’s elections, this is important for holders of US dollars outside of the USA. Those inside the USA are trapped in a dollar system, where virtually all their wealth and savings are denominated in and wrapped up in dollars. For most there is no realistic way of meaningfully reducing that exposure. With the home as the main asset, for many there is not sufficient transferable saved wealth to meaningfully reduce dollar risk. Many others simply have too little saved wealth to even start, though purchasing some silver bullion coins to a maximum of about 10% of wealth is an imperfect option for some, or investing some wealth in an overseas precious metals fund is another option, but that carries with it other risks, not least lacking the comfort and security of US investor protection schemes.
From London, neither US party’s economic plans really make sense it seems to me, though for once I have to agree with Mr Krugman, on the likely outcome of the latest Republican attempt at courting the voters. Rather like as in the UK’s May general election where no party told the truth about the economy and what was necessary to reform it, this November’s election is being fought over a pretend US economy that doesn’t exist. 2011 is shaping up to be the year of the great unravelling. Trillion dollar deficits forever, can only come at a price of a dollar turning into a Peso.
“Paper money eventually returns to its intrinsic value -Zero.”
Voltaire.
Downhill With the G.O.P.
By PAUL KRUGMAN Published: September 23, 2010
---- For these days one of America’s two great political parties routinely makes equally nonsensical promises. Never mind the war on terror, the party’s main concern seems to be the war on arithmetic. And this party has a better than even chance of retaking at least one house of Congress this November.
Banana republic, here we come.
On Thursday, House Republicans released their “Pledge to America,” supposedly outlining their policy agenda. In essence, what they say is, “Deficits are a terrible thing. Let’s make them much bigger.” The document repeatedly condemns federal debt — 16 times, by my count. But the main substantive policy proposal is to make the Bush tax cuts permanent, which independent estimates say would add about $3.7 trillion to the debt over the next decade — about $700 billion more than the Obama administration’s tax proposals.
True, the document talks about the need to cut spending. But as far as I can see, there’s only one specific cut proposed — canceling the rest of the Troubled Asset Relief Program, which Republicans claim (implausibly) would save $16 billion. That’s less than half of 1 percent of the budget cost of those tax cuts. As for the rest, everything must be cut, in ways not specified — “except for common-sense exceptions for seniors, veterans, and our troops.” In other words, Social Security, Medicare and the defense budget are off-limits.
So what’s left? Howard Gleckman of the nonpartisan Tax Policy Center has done the math. As he points out, the only way to balance the budget by 2020, while simultaneously (a) making the Bush tax cuts permanent and (b) protecting all the programs Republicans say they won’t cut, is to completely abolish the rest of the federal government: “No more national parks, no more Small Business Administration loans, no more export subsidies, no more N.I.H. No more Medicaid (one-third of its budget pays for long-term care for our parents and others with disabilities). No more child health or child nutrition programs. No more highway construction. No more homeland security. Oh, and no more Congress.”
The “pledge,” then, is nonsense. But isn’t that true of all political platforms? The answer is, not to anything like the same extent.
http://www.nytimes.com/2010/09/24/opinion/24krugman.html?src=me&ref=homepage
I’ll end this weekend’s update sharing, with permission, an email from a reader in Canada relaying a message from this year’s Autumn equinox holiday in China. My thanks to Ian and John.
- It is now approaching the mid autumn festival in China. People have a couple of weeks off and factories slow right down. - it is traditional to eat moon cake ( typical moon cakes are round pastries, measuring about 2 to 4 inches in diameter and 2 inches thick. A thick filling usually made from lotus seed paste is covered in a 2to3mm crust and contains yolks from salted duck eggs)
- it is customary to present cakes to friends, family and business people. So there is an unbelievable range of high end gift boxes of these cakes
- every time I have been to China at this time I have been given boxes as big as 2 1/2ft x 1 1/2 ft of assorted cakes - they weigh a ton!
- funny thing is - of all the people I have met in China - I only know two that actually like them. They are pretty rank in taste
Here's the thing:
Haagen Daz introduced an ice cream moon cake. They sold 20million during the festival and could not keep up with demand A box set in China now ranges from rmb270 to rmb988 (usd40 to 147)
There’s a market there for our western manufacturers, but who is making products the Chinese to buy for Moon Day? Moon Day Scotch and moon cake, Moon Day biscuits and cake, Moon cheesecake, chocolate cake, you get the idea. China now has a middle class of some 400+ million, that’s over 100 million more than the entire US population. (India’s is approaching 300 million.) Where are our old style entrepreneurs? With business slow in the west and the Chinese lunar New Year in 2011 starting February 3rd bringing in the year of the Rabbit, there’s probably still time for the quick to try to make money.
"Paper money polluted the equity of our laws, turned them into engines of oppression, corrupted the justice of our public administration, destroyed the fortunes of thousands who had confidence in it, enervated the trade, husbandry, and manufactures of our country, and went far to destroy the morality of our people."
Pelatiah Webster. Political Economist.
Have a great weekend everyone.
GI.
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