Saturday 18 August 2018

Weekend Update 18/08/2018. Why It Matters. “Trust Me.”


“Should you find yourself in a chronically leaking boat, energy devoted to changing vessels is likely to be more productive than energy devoted to patching leaks.”

Warren Buffett.

This weekend, why electing good government matters. Why populist socialists find out that there isn’t a tooth fairy, pixie dust, or a magic free money tree.  Why deficits do matter. Why the socialism of Comrade Agent Corbyn’s New UK Communist Labour Party always ends in disaster.  The tragic downside of when the wheels come flying off the socialist, wealth envy, delusional economy.

Sadly when the end comes, it affects nearly everyone by destroying their fiat money savings, their pensions, lifestyle, health care, and all too often, society.

Below, reasons to be very concerned. Where we are all headed next decade, if we don’t get back to adult economics and sound government. Where we are all headed if we don’t bring about a major reform of the world’s fatally flawed, fiat money, dollar reserve, trading system.

Barely two months in to an escalating Trump trade war and rising fiat currency disorder, our increasingly fractious world is headed towards a monetary calamity next decade.  Assuming that is, that Trumps trade wars and arbitrary sanctions, don’t pull it forwards into this decade.

Never has an appropriate holding of fully paid up physical gold and silver been more critical, yet never since the Great Nixonian Error of Fiat Money began in August 1971, has the gold and silver insurance policy been more complacency shunned.

“Shortly after taking the Treasury post, Connally famously told a group of European finance ministers worried about the export of American inflation that the dollar "is our currency, but your problem." “ He was wrong, it’s everyone’s problem now.

August 18, 2018 / 1:00 AM

Maduro orders 96 percent devaluation in hyperinflation-stricken Venezuela

CARACAS (Reuters) - Venezuela’s president Nicolas Maduro announced on Friday a single exchange rate pegged to his socialist government’s petro cryptocurrency, effectively devaluing by 96 percent in a move economists said would fan hyperinflation in the chaotic country.

In one of the biggest economic overhauls of Maduro’s five-year government, the former bus driver and union leader also said he would hike the minimum wage by over 3,000 percent, boost the corporate tax rate, and increase highly-subsidized gas prices in coming weeks.

“I want the country to recover and I have the formula. Trust me,” Maduro said in a nighttime speech broadcast on state television.

But economists expressed doubts that Venezuela’s cash-strapped government, which faces U.S. sanctions and has defaulted on its bondholders, would succeed.

Venezuelans will see their meager salaries further erodedand companies will struggle with major increases to both taxes and the minimum wage, they said.

“Amid this aggressive devaluation and monetary expansions due to salaries and bonuses, we are expecting a much more aggressive stage of hyperinflation. All the more so in a context where the elimination of excessive money printing is not credible. The worst of all worlds,” said Venezuelan economist Asdrubal Oliveros of consultancy Ecoanalitica.

The International Monetary Fund has predicted that inflation in Venezuela would hit 1 million percent this year.

After a decade-long oil bonanza that spawned a consumption boom in the OPEC member, many poor citizens are now reduced to scouring through garbage to find food as monthly salaries amount to a few U.S. dollars a month.

Hundreds of thousands of Venezuelans have emigrated by bus across South America in one of the region’s worst migration crises.

“World champions in economic disasters!” opposition leader Henrique Capriles tweeted after Maduro’s announcement. “No Venezuelan deserves to live this tragedy or that these incapable people destroy our nation!”
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Turkey: the perils of Erdogan’s power grab

Critics say the roots of the crisis lie in the sidelining of critics and the weakening of institutions
17 August 2018
 
Recep Tayyip Erdogan had never even heard of a pastor from North Carolina called Andrew Brunson until last spring, according to one senior Turkish official. It was during a briefing ahead of a visit to the White House, the official claims, that the Turkish president first encountered the name of the evangelical preacher who has been trapped in the Turkish court system and whose fate has triggered a diplomatic meltdown, thrust Turkey into a currency crisis and sparked fears of global contagion.

-----“The pastor Brunson case is just one example of the dysfunctional nature of the Turkish judiciary,” says Faruk Logoglu, a former Turkish ambassador to Washington and a senior member of the main opposition party. Mr Brunson has been accused of espionage and abetting terrorists — charges he calls “slander”. “If there had been a speedy trial, a proper trial, maybe he would have been convicted — I don’t know. But the case would have been closed.” Daron Acemoglu, an MIT economist and co-author of the book Why Nations Fail, argues that the origins of a currency crisis that has seen the lira plunge by a third against the dollar this year, also lie in the disembowelling and disempowerment of bodies such as the central bank. Mr Acemoglu says that they are vital to “create the right kind of economic dynamism and create the buffers for any kind of fluctuations”. He adds: “The buffers are not there in the Turkish case.”

The Turkish lira had been steadily declining this year even before the crisis that erupted when Donald Trump announced sanctions at the start of August on a fellow Nato member state in a bid to force the release of the jailed pastor. But the extreme swings since the row began — falling as much as 17 per cent in a single day last week — have wreaked havoc. Warehouses filled up with stock as businesses struggled to set prices. Families cancelled holidays because they could no longer afford to buy euros. 
Even Turkey’s football clubs were affected, in an echo of the problems facing Turkish companies struggling with foreign currency debt. “The top players’ salaries cost €2m or €3m a year,” said a panicked executive at one of the country’s biggest teams. “All our revenues are in lira.”

---- But over the past decade, much of the growth has been powered by cash that flooded the markets after the global financial crisis. Instead of funding investments in productive, high-tech sectors that could boost Turkey’s exports, the money was funnelled mainly into construction and consumption. When Mr Erdogan took power there were 53 shopping malls in Turkey, according to Turkey’s Council of Shopping Centres. Today that figure is 403. One result has been an increase in inflation. Another has been a surge in imports, causing a larger trade deficit that needs to be financed with inflows of foreign money. With foreign direct investment down sharply in recent years, most of that funding comes from “hot money” flows that can change direction sharply at a moment’s notice.
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Opinion: Turkey has torn up the playbook on dealing with emerging-market crises

Published: Aug 17, 2018 4:09 p.m. ET
LAGUNA BEACH, Calif. (Project Syndicate) — Whether by accident or design, Turkey is trying to rewrite the chapter on crisis management in the emerging-market playbook. Rather than opting for interest-rate hikes and an external funding anchor to support domestic-policy adjustments, the government has adopted a mix of less direct and more partial measures — and this at a time when Turkey is in the midst of an escalating tariff tit-for-tat with the United States, as well as operating in a more fluid global economy.

How all this plays out is important not only for Turkey, but also for other emerging economies that already have had to cope with waves of financial contagion.

The initial phases of Turkey’s crisis were a replay of past emerging-market currency crises. A mix of domestic and external events — an over-stretched credit-led growth strategy; concerns about the central bank’s policy autonomy and effectiveness; and a less hospitable global liquidity environment, owing in part to rising U.S. interest rates — destabilized the foreign-exchange market.

A political spat with the U.S. accelerated the run on the Turkish lira USDTRY, +3.2826%  by fueling a self-reinforcing dynamic. And all of this occurred in the context of a more uncertain and — aside from the U.S. — weakening global economy.

In keeping with the traditional emerging-market-crisis script, Turkey’s currency crisis spilled over onto other emerging economies. As is typically the case, the first wave of contagion was technical in nature, driven mainly by generalized outflows from Turkey’s currency and bond markets. The longer this contagion continues, the greater the concern that it will lead to more disruptive financial and economic outcomes.

As such, central banks in several emerging economies — as diverse as Argentina, Hong Kong, and Indonesia — felt compelled to take counter-measures.

What has followed is what makes this episode of emerging-market crisis different, at least so far. Rather than sticking with the approach taken by numerous other countries — including Argentina earlier this year — by raising interest rates and seeking some form of support from the International Monetary Fund, Turkey has shunned both in a very public manner, including through strident remarks by President Recep Tayyip Erdoğan.

----The question is whether this response will be enough to act as a circuit breaker, thus giving the Turkish economy and its financial system time to regain their footing. This is particularly important because continued currency turmoil would tip the economy into recession, raise inflation, stress the banking system, and increase corporate bankruptcies.

With this comes the toughest question of all for the government: Can it bring about recovery without reneging on its pledge not to raise interest rates or approach the IMF? It is possible, but not probable.

Absent additional measures, it is unlikely that a critical mass of corrective steps has been attained in Turkey.
More

August 17, 2018 / 8:11 AM

For Greece's austerity-hit elderly, bailout 'will never end'

ATHENS (Reuters) - With two euros in his pocket, Yorgos Vagelakos, an 81-year-old retired factory worker, scouts the farmer’s market in his working-class Athens neighbourhood for anything he can afford.

Like most pensioners, he was hit hard by Greece’s economic crisis. Over eight years, the country’s international bailouts took aim at its pension system and more than a dozen rounds of cuts pushed nearly half its elderly below the poverty line.

Now, the country is looking to the end of its third and final rescue package next week [nL5N1V71XX], but for Vagelakos, there is little to cheer about.

“For the oranges I’m going to buy I’ll pay you next week,” he tells a vendor at the market. Half his money has already gone to a few bunches of grapes.

“Two euros next week. Will you be here?” he asks, picking up his bag of fruit. The response is affirmative, and he jokes:

“Well then I won’t come so I won’t have to pay you!”

Reuters first interviewed Vagelakos in 2012, when Greece signed up to a second bailout that saved it from bankruptcy and a euro zone exit. Back then, he was going to the market with 20 euros in his pocket. His monthly income, including his pension and benefits, had been cut to about 900 euros from 1,250 euros.

Today it is down to 685 euros and debts are growing, he said.

With unemployment reaching almost 28 percent at its peak, a quarter of children living in poverty and benefits slashed, many families grew dependent on grandparents for handouts during the downturn. Vagelakos can no longer support the families of his two sons and can barely cover his and his wife’s needs.

“I wake up in the morning to a nightmare,” he said. “How will I manage my finances and my responsibilities? This is what I wake up to every morning.”
More

August 16, 2018 / 11:17 AM

If rupee slump persists, it can hurt India's Modi

NEW DELHI/MUMBAI (Reuters) - The rupee’s plunge to a record low has worried a wide cross-section of India’s society: companies, importers, those going on vacation and students planning to study overseas. But if the weakness persists, Prime Minister Narendra Modi’s job could become a lot harder just before big state and national elections.

India is a big buyer of everything from crude oil and electronics to gold and edible oil, and its import bill was expected to cross $600 billion in the fiscal year ending in March 2019, from about $565 billion in the previous year.

The 9.3 percent fall in the rupee INR=D2 this year has already led to a surge in local prices of goods with an imported component. July was the ninth straight month in which India's inflation was higher than the central bank's medium-term target of 4 percent.

The currency fell to a fresh low of 70.40 to the dollar on Thursday.

----Besides the next general election due by May, three big BJP-ruled states in India’s heavily populated northern plains go to the polls over the next four months.

Satish Misra, senior fellow at the Observer Research Foundation in New Delhi, said although the rupee slide was a result of several factors, it was affecting the image of the Modi government.

“As prices shoot up and products become costlier, the middle class will begin to get angry,” Misra told Reuters. “Since the middle class is the opinion maker, the BJP will suffer electorally.”

The government has said the depreciation is due to the economic woes in Turkey that has dragged down currencies of emerging market countries around the world.

“Recent developments relating to Turkey have generated global risk aversion towards emerging market currencies and the strengthening of the dollar,” said senior cabinet minister Arun Jaitley.
More
Finally, compare and contrast policing in Canada and America. You really couldn’t make this sort of thing up. Oh America!
Police who tasered an 87-year-old grandmother while she was collecting dandelions say they did so "rather than using deadly force".”

Concerning the difference between man and the jackass: some observers hold that there isn’t any. But this wrongs the jackass.

Mark Twain.

Canada schoolgirls stopped by police after planning adventure to London

The teenagers had a hand-drawn map that showed "home" as the starting point and the English capital as the final destination.
Friday 17 August 2018
Two Canadian schoolgirls were stopped in their tracks after sneaking out of a sleepover and planning to travel to London.
The girls, aged 10 and 12, were in their pyjamas and carrying a hand-drawn map when they boarded a bus in British Columbia just before midnight.
Their map shows "home" as the starting point and the UK capital as the final destination.
Bus driver Ed Boleak alerted police when the two girls boarded his service in the city of Burnaby.
Officers from nearby Vancouver came to collect the girls and return them to their "anxious parents".
Metro Vancouver Transit Police posted on Facebook: "See something out of the ordinary on your bus?
"Let Transit Police know!
"Transit Operator Ed Boleak did exactly that on Monday night when two pajama-clad children, ages 10 and 12, boarded his bus in Burnaby just before midnight.
"Ed contacted Transit Police, and Constable Cho and Constable Cantera arrived to pick up the children and bring them home to their anxious parents.

87-year-old woman tasered by US police while cutting dandelions in Georgia

Police say the grandmother was using a knife so they tasered her "rather than using deadly force to stop the situation".
12:38, UK, Friday 17 August 2018
Police who tasered an 87-year-old grandmother while she was collecting dandelions say they did so "rather than using deadly force".
A worker at the Murray County Boys & Girls Club in Chatsworth, Georgia, called 911 after seeing Martha al Bishara, who does not speak English, using a knife to cut the flowers in the club's grounds near her home.
Ms al Bishara, who is originally from Syria and speaks only Arabic, needed the dandelions to prepare a salad for her 71-year-old husband.
When officers arrived with guns drawn, they struggled to make themselves clear.
"We began trying to communicate with her, telling her of course to drop the knife," said Chatsworth police chief Josh Etheridge.
"We didn't know if she just didn't understand us or was having some type of issue."
Police say they dropped their own knives on the ground to signal what they wanted Ms al Bishara to do.
Mr Etheridge said the use of a taser was justified, adding: "An 87-year-old woman with a knife still has the ability to hurt an officer."
He said the taser was deployed "rather than using deadly force to stop the situation".
Ms al Bishara was put in handcuffs and arrested.
Her granddaughter, Martha Douhne, said she "obviously did not look violent".
The pensioner has been having trouble sleeping since being tasered and is scared to go outside.
"She thought she got shot," Ms Douhne told NBC.
"We have never really told her about stun guns or Tasers, and so she doesn't know what that is."
The officer who tasered her remains on duty, and the force is reviewing the situation, Mr Etheridge said.

"By a continuing process of inflation, governments can confiscate, secretly and unobserved, an important part of the wealth of their citizens. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency. The process engages all the hidden forces of economic law on the side of destruction, and does it in a manner which not one man in a million is able to diagnose."

Lord Keynes. 

The monthly Coppock Indicators finished July.

DJIA: 25,415 +213 Down. NASDAQ: 7,672 +259 Down. SP500: 2,816 +166 Down.
All three slow indicators moved down in March and have continued down ever since. For some a new bear signal, for others a take profits and get back to cash signal 

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