Time to raise interest rates, time to stop false BRICK economy

SuperV

http://www.finextra.com/news/fullstory.aspx?newsitemid=22911

" The Futures Industry Association (FIA) says its members have been "shocked and outraged" by the leaking of confidential oil trading data by a US senator."

"Explaining his decision to leak, Sanders says: "This report clearly shows that in the summer of 2008 when gas prices spiked to more than $4 a gallon, Goldman Sachs, Morgan Stanley, and other speculators on Wall Street dominated the crude oil futures market causing tremendous damage to the entire economy. The CFTC has kept this information hidden from the American public for nearly three years. That is an outrage."

SuperV

As the world is at the brink of JAD (just another depression) Obama tries to invest US$450 in ... bricks.

That was a successful strategy 80 years ago as roads were an exception, not a rule. Economic multiplicator of motorways were probably in the range of 10s in some countries. As the history teach us, that was not the case in all countries.

So, for an investment in infrastructure to become an economy driver, it has to have a high multiplicator. Do motorways or buildings have such a high multiplicator? No. Airports? Not always as South Korea shows with its ~40 empty airports.

So, what is the answer?

SuperV

"The UK looks set to take the European Central Bank to court over its proposals to only allow clearing houses that operate within the Euro-zone geographical area to trade in some of the securities denominated in the single currency.

Read more: http://www.economicvoice.com/uk-treasury-set-to-sue-ecb-over-clearing-houses/50023700#ixzz1Y2gk1ygF

"
Financial markets don't create new value, they redistribute it. Unfortunately, at the moment there isn't enough of new value created...

SuperV

"The debt markets have been warned. A key rate setter-for China's central bank let slip – or was it a slip? – that Beijing aims to run down its portfolio of US debt as soon as safely possible.


"The incremental parts of our of our foreign reserve holdings should be invested in physical assets," said Li Daokui at the World Economic Forum in the very rainy city of Dalian – former Port Arthur from Russian colonial days."


http://blogs.telegraph.co.uk/finance/ambroseevans-pritchard/100011987/china-to-liquidate-us-treasuries-not-dollars/


This is a change of attitude - West doesn't know to keep in check its obligations. So, as we know, we will take over...


And there are 20 new Bsc engineers in China for each new Bsc engineer in the whole EU...

SuperV

Getting back to a point of the thread - no new wealth creation, no new or old jobs as others do actively work on new wealth creation.

The window for QEfRD will expire in the next 12-24 months.

SuperV

"Full details of how such a colossal sum could be lost by one bank have yet to emerge, but what is certain is that the pressure to perform can drive traders to extraordinary lengths in their desire to succeed. According to a Canary Wharf-based prop trader whom I interviewed: "To be a pure, driven trader you've got to have balls of steel, a stinking horrible personality, and be a nasty person, a risk taker and a gambler." Such characteristics are actively encouraged by bank bosses in their employees, he told me, and in a dog-eat-dog environment such as that, it is little wonder that extreme situations emerge."

"But those are the breaks. You pays your money into the banking system by the bucketload – retail savers and corporate investors alike – you takes your choice. And the vogue choice is still rampant capitalism – rogue trader, warts and all."

http://www.guardian.co.uk/commentisfree/2011/sep/15/return-rogue-trader-ubs

Forgotten only one thing that even Adam Smith mentioned - that "animal spirits" must be curtailed for new wealth to be created.

SuperV

"The former Prime Minister said EMU's malaise is at root a banking crisis, not a debt crisis. "The European banks as a whole are grossly under-capitalised: they have liabilities far in excess of American banks. We have now got the inter-play with sovereign debt because we socialised the liabilities," he said. "

http://www.telegraph.co.uk/finance/financialcrisis/8768575/Gordon-Brown-fears-euro-crisis-worse-than-Lehman-as-1930s-beckon.html

Wealth creation has to be recreated - as a centre of a wheel. Without wealth creation, wheel will lose its shape and stop turning. Wealth creation has to be a real one, not a kind of Madoff.

As so much Wealth Creation Facilities and Skills has been lost, a big investment cycle in Wealth Creation Facilities and Skills is needed.

In the next 12, most 24, months a possibility to create money for R&D will disappear.

SuperV

BoE talks about QE. They will most probably purchase already inflated assets. That will just increase the bubble, not solve the problem.

QE has to provide funds for new wealth creation, not for life supporting of old assets. Old assets value is obvious much lower than what it seems to be. Even in FIAT currencies. The outcome will be that their price will be the right one after many QE for their bubble support. But that will destroy even a remote chance for recovery.

If there is a moment to act it is now!

p.s.
Those believing that FTSE just dropped below 5k after few years should adjust that value for inflation in the last few years. Another nasty surprise...

SuperV

Did anyone mention insider trading?

SuperV

QEs in Developed World as it is defined today are too small and will be spent on giving life support to existing, old, already overpriced assets. The value of those assets is based on FIAT currencies that are based on a strength of the whole economy, not just investors.

Idea that somehow QEs will trickle into some new wealth creation doesn't hold water as the whole economic environment has changed. Some of assets holders will recognise that fact (some already did) and will move forward. The most will try to save what they have no matter what is the cost. They will fail. As they are majority, they will take economy with them down.

Unless there is a significant investment in real wealth creation the bubbles will disappear and even a small support they provide will vanish.

The needed investment for an economy is in the range of 30-50% of GNP that an economy in the next 3-5 years. In the US case that is the size of the military budget.