Elaine Meinel Supkis
Alas, the Nobel committee that always gives the economics prizes to the Americans, gave it to Americans but not me. Sigh. But..the G7 European dwarves, led by Grumpy Germany, demanded the dollar go up in value. Depression Japan smirked. Russia is rich and Europe is very grumpy about this. Congress passed draconian war profiteering laws only it won't be enforced since they refuse to impeach Bush and Cheney, leaders of the profiteers. And Japan continues to cut itself away from the crashing American economy all the while, claiming they are depressed as hell which is why they have so much liquidity in the US but are removing it to...the Dragon, China and Russia. Sovereign wealth is liquid, not fozen at all.
Leonid Hurwicz, Eric S. Maskin and Roger B. Myerson, all from the U.S., won the Nobel Prize in economics for theories that help set rules for transactions ranging from auctions to elections.
The three will share the 10 million kronor ($1.56 million) prize for ``having laid the foundations of mechanism design theory,'' the Royal Swedish Academy of Sciences said today.
Mechanism design theory has been used in labor negotiations, taxation and in designing systems for auctioning such things as government bonds.
``The theory allows us to distinguish situations in which markets work well from those in which they do not,'' the Royal academy said in Stockholm today. ``It has helped economists identify efficient trading mechanisms, regulation schemes and voting procedures.''
I have rather annoyed feelings about this prize. Aside from not getting it myself. For example, when I figured out the 'carry trade', no one ever talked about what it really was and suddenly, everyone was talking about it in public. Namely, it was kept secret like so many other tools used in the money magician's kits. Also, I was one of the first people to explain to the Chinese, how to be a true capitalist. Namely, I taught them about Sovereign Wealth. For that alone, I deserve a prize. Or to be shot, heh.
I also am the creator of the idea, 'No one is a better capitalist than someone raised to be a communist.' This is simple: they understand the concept of labor adding value. And using capital on labor-enhancing projects.
I am annoyed with today's prize because ever since these very clever computer whizzes came along, things have gotten much worse thanks to them. Are elections fairer? Do they reflect the will of the people? What is the point of all sorts of clever counting systems if all the democracies are utterly corrupted by money, the use of raw power, ballot box dumping or cutting people off the voting registers, coups, assassinations and international interference? The US election process is hopelessly corrupted at this point.
Then there is finances: using clever number crunching and charts, people can all do the same thing in exploiting WEAKNESSES within all systems. This causes the system with various weak points to bleed red ink or the weak part takes over and throws off the true nature of the intended system turning a system set up to be strong into hollowing it out and destroying the entire aparatus such as the entire banking system or the mortgage system or government bonds systems, etc. By pulling the levers and having computers spit out numbers, clever ghouls and demons can exploit every flaw in every system and then use it to fill their own bank accounts which are, naturally, all offshore at various former British Empire islands which now only swear fealty to Queen Elizabeth II. Well, we could have a Nobel Prize and give it to HER. She is nobility, after all. The Arab money kingdom of the UAE deserve a Nobel Prize, too. They are nobels! And all the tiny European prinipalities that survived WWI and WWII can also get the Nobel Tax Haven Prize. For they are all sitting right at the apex of the world's banking systems! They can write a theory paper about all this: 'How Daddy Got Me Rich By Running Pirate Coves On My Own Properties.'
We can then all imitate this. I own a slice of a small mountain. I can declare this place the Duchy of Falkenfelsen. The name of my farm is due to the family of falcons that live on the top of the mountain and who hunt all the time high in the sky, scaring my chickens. We even hunt foxes here so this qualifies us for royal power. Indeed, I come from this class in the first place, we had castles in England before a little dispute with King Charlie.
So: my proposal is, we all imitate the very rich royals on this planet and declare ourselves royals rather than citizens of democracies. Then we can all set up our tax-free havens. And instead of paying taxes for navies, etc, we can all hire Blackwater mercenaries. As I drive to Albany to go shopping, they can gun down anyone driving nearby or in the way as I roar through stop lights, etc. My mercenaries can also go out collecting loot for me while I play international FOREX games. I need some export item, though. Got to think about this some more. Need some servile serfs, too. Hmmm...difficulties arise faster and faster.
Back to math and magic money: the Nobel Prize winners are part of the machinery which is totally out of control. Computers have sped up the wealth-creation process but they also threaten the system because of speed of movement of magic creation mechanisms. Right now, for example, the media and the magicians are all pretending there is no liquidity suddenly. It 'froze up.' But it didn't freeze up at all, it stopped flowing into one set of investment schemes and suddenly began to flow elsewhere as we see in China or Arab oil nations. It is flowing to raw materials like the oil in Russia.
Language remains the key tool for money making spells. This is why they have to also use false words and conjure up false images to fool people while they manipulate things to get rid of old magic tools while not losing so much money as they drop these tools. It is a game of hot money running from hot potatoes. Right now, they want to dump all the money needed for loans to businesses in the US/EU/UK empire so they can use their loot to chase down profits in the raw materials markets like gold, oil and food. Then the key profit item is to move all this loot back into safe royal pirate coves!
Ed and Elaine Brown tried this option. They declared themselves a sovereign state. Note that the government spent a tremendous amount of money and miltiary power to get these two 'sovereigns'. The fact that the government was so intent on this proves to me that their refusal to protect us from excess taxation here at home is due entirely to corruption at the core since they refuse to surround and raid tax havens just off shore like Bermuda or the Cayman Islands.
A Reverse Minsky Journey:
My short answer is that liquidity is not a pool of money but rather a state of mind. This answer is usually greeted with derision, or with accusations that I’ve forgotten everything we all learned about money supply (or was that money stock?) growth in college, floating into some kind of existential lacuna. Neither is true, though I do admit that I’ve never had much fondness for high-church monetarism, while having ever greater respect for what has become known as behavioral economics.
At the macro (systemic) level, liquidity is not about how many pieces of paper with pictures of dead presidents on them we have in our wallets, but rather about how much utility we derive from having them in our wallets. Or, as the cliché went in my youth in rural Virginia, liquidity is about whether the dead presidents are burning a hole in our wallets, or our pockets, as it were.
In today’s loosely regulated, globally integrated banking and capital markets, liquidity is about borrowers’ and lenders’ collective appetite for risk,
McCartney repeats the bizarre idea that money appears due to feelings. Of course, if this were true, we would all be trillionaires. But when the people who control the making of magic money fall for the lure of infinite free money magic making, they create a monster called 'inflation' as well as another monster: the utter loss of Sovereign Wealth. This is so tricky to understand, few Americans can see where the actual connection between money and magic lies: one has to have some sort of LABOR to exploit in order to gain access to this magic money making machine. If you make NOTHING all you get is INFLATION. If you tap into labor and then use it to make something, mine something or grow something, you have the basis of wealth. So one has to be very chary of asking the money machine for too much money or one ends up in debt. Royals throughout history have fallen into this trap.
The Chinese Yuan dynasty fell into this trap when clever Chinese pre-Nobel Prize winners explained to the Mongols how to make paper represent the wealth of future crops produced by Chinese peasants. From that point forwards, royalty has discovered this wonderful concept. Often, they sell off future tax revenues. The Spanish kings sold off 100 years of taxes in order to fund their various armadas.
For it can easily be shown that the assumption of arithmetically equal probabilities based on a state of ignorance leads to absurdities. We are assuming, in effect, that the existing market valuation, however arrived at, is uniquely correct in relation to our existing knowledge of the facts which will influence the yield of the investment, and that it will only change in proportion to changes in this knowledge; though, philosophically speaking, it cannot be uniquely correct, since our existing knowledge does not provide a sufficient basis for a calculated mathematical expectation. In point of fact, all sorts of considerations enter into the market valuation which are in no way relevant to the prospective yield.
Nevertheless the above conventional method of calculation will be compatible with a considerable measure of continuity and stability in our affairs, so long as we can rely on the maintenance of the convention.
All systems are set to be stable and continuous. Only the cruel contradiction in all this is, the only way to profit from any system when one wants to milk it for easy money via clever number crunching and seeking of favors and funny quirks, this destabilizes the whole system and it crashes with a boom which we call 'The Great Asian Currency Crisis' or 'The Great Depression' or 'The Dot Com Collapse', etc. These crashes come like clockwork. Usually, there is a war and oil jumps in price or some kingdom or duchy declares sudden bankruptcy when the rulers discover they have no more tax revenues to cover interest rate costs on their mountains of debts! Or the valuation of goofy systems that produce very little labor-value-added wealth are called into question when someone tries to extract just one more thin mint (Monty Python's 'The Meaning of Life'---a great movie).
Warning: this video has some disgusting moments. Do not watch on a full stomach.
'Changes in knowledge' is verbage for 'oh, oh, everyone has figured this scam out and now it is going to crash'. The Monty Python skit is appropriate for us today: the Chinese, Japanese and Germans are the waiters who ask us to eat just a little more.
A former Master of the Universe like Henry Paulson doesn't often find himself on the defensive. At international meetings this week in Washington, he will be.
Under pressure from European governments to abandon his hands-off approach to financial regulation and the depreciating dollar, the U.S. Treasury secretary and former Goldman Sachs Group Inc. chief executive officer may be forced to accede to the first while resisting the second.
Paulson is Goldman Sach's Darth Vader. But the Death Star is blowing up! Imagine the insurance costs! He has to get the Death Star back into action so it can sail around the galaxy, threatening to invade and destroy all Muslim nations and threaten the Chinese Jedi Knights. Yoda bin Laden is making this very difficult. OK: I have a huge beef here. Namely, the G7 dwarves love to pretend money is NOT MANIPULATED. OK? It is TRADED honestly on the open FX markets. See? OK! And the value is due to people thinking it is worth something relative to all other currencies! Right?
WRONG! It is manipulated like crazy by all governments which is why the dwarves are furious that China has figured out how to do this in a new way that was pioneered by Depressed Dwarf, Japan! The EU is the victim of Japan and China working with Russia to run up the value of the euro. Japan would dearly love to run up the value of the dollar but dare not because the US had secret meetings with Japan concerning all this and so they agreed to conspire to keep the value of the dollar low so America can export to... EUROPE! HAHAHA.
``Sales of German exports are falling off drastically in the U.S.,'' says Anton Boerner, president of the Berlin-based BGA association of wholesalers and exporters. ``We've stepped beyond the pain threshold.''
France has been particularly vociferous in advocating action to stem the euro's rise, with Finance Minister Christine Lagarde, 51, even pushing the European Central Bank to sell the currency. She has also called on Paulson to say ``loud and clear'' that he still backs a strong dollar.
Now, Gemany loves strong currencies. So Europe fell into this strong currency trap set in Asia with US connivance. I warned the Germans about this some time ago. Well, as Asia expected, sales from Europe to the US markets fell! Who filled the gap?
HAHAHA. China and Japan! Whoopsie! Now Europe wants back its trade surplus with the US. So they are now attacking the biggest of the G7 dwarves, Bloody Dwarf, demanding he make the dollar stronger. So the G7 dwarves, instead of being united, are squabbling. I am amazed they didn't invite the Dragon to their Dwarf hammering sessions. But I bet the Dragon is amused to death, watching them fight each other. Of course, encouraged by Depressed Dwarf, they will all turn on the Dragon who does lots of trade with everyone and demand the Dragon strengthen the yuan. No one will call on Japan to raise interest rates!
months in Hong Kong trading as oil rose to a record above $85 a barrel, vaulting the state-owned oil producer over General Electric Co. to become the world's second-largest company.
The stock climbed 13 percent, valuing Beijing-based PetroChina at HK$3.36 trillion ($434 billion), compared with General Electric's $420 billion. Asia's biggest company is closing in on Exxon Mobil Corp.'s $518 billion value.
As China grows in wealth, it is interesting to see the hysteria coupled with our tax haven bankers all demanding governments manipulate currency values even more openly and outrageously. Either they should shut down the FOREX markets or issue a report detailing how they manipulate it so the poor people playing this stupid game have some clue as to who is doing what, where. I mean, seriously, they want more openess for SWF? But not for their own currency manipulations? And note how Bernanke told Paulson about his impending manipulation and Paulson may have rushed out the door to broadcast it to his Goldman Sachs buddies? Arrest them all.
Nomura Holdings To Close U.S. Mortgage Business
TOKYO (Dow Jones)--Nomura Holdings Inc. (8604), Japan's largest investment bank by market capitalization, said Monday it would close its New York-based residential mortgage-backed securities business, marking the latest fallout from the ongoing turmoil caused by the meltdown of subprime mortgages in the U.S.
ON THE RADAR: Aug Service-Sector Index Seen Boosting Domestic Demand Issues
TOKYO (Nikkei)--Stock market participants are eagerly awaiting Wednesday's release of service-sector activity index figures for August, hoping the government data will provide buying incentives for slumping domestic demand-focused shares.
Gold Price Hits 23-Year High On U.S. Econ Concerns, Weak Yen
TOKYO (Nikkei)--The domestic retail price of gold jumped 19% on Monday from the beginning of the year to 3,003 yen per gram, surpassing the 3,000 yen mark for the first time in 23 years.
BOJ Fukui Cites Need For Vigilance Amid Global Subprime Risks
TOKYO (Nikkei)--Bank of Japan Governor Toshihiko Fukui said Monday the central bank will continue keeping a careful eye on developments in international financial and credit markets as well as the global economy, citing the lingering effect on Western economies of the market turbulence created by the U.S. subprime loan crisis.
You can bet, the Bank of Japan is keeping a wary eye on our market turbulence! And they admit gold is strong due to THEM. And inflation runs along nicely in various upper-tier sectors of the Japanese econmoy while the working class is literally stuffed into small boxes and starved to death. What a role model for the world. And Nomura is running away from the toxic US CDO markets. This is the 'lack of liquidity' they talk about so much. No one wants these stupid pieces of paper so there is no money for buying them and this is why our bankers, who must keep all this off their books so they can create more wealth out of thin air by giving loans they can't afford to give, well....this is all leading to an impending collapse of the system unless they can palm off all these papers onto our government which can't collect taxes due to all the tax havens.
I am very upset about this since they did spend lots of time and energy intimidating and then arresting Elaine and Ed Brown who were imitating these tax havens. We could have a global war game whereby our navy is sent supposedly to protect all these tax havens as they do this for free right now, and our navy will suddenly send the Marines ashore and they will rush into the counting houses of all the international businesses there and simultaneously, the Secret Service will raid Manhattan and Delaware glass towers. Then we can look into the books of these very secretive organizations. Once we confiscate all their tax liabilities, we can reorganize along Chinese lines, our economy and take back our industrial base. Somehow.
The House overwhelmingly passed a measure Tuesday that would prohibit “war profiteering” by contractors.
The bill (HR 400), sponsored by Neil Abercrombie, D-Hawaii, would ban fraud against the United States or “a provisional authority” — such as the Coalition Provisional Authority that governed Iraq in 2003 and 2004 — in connection with a war, military action, or relief or reconstruction activities. It passed by a vote of 375-3.
Time to impeach our war leaders who are the biggest sponsors and holders of stocks in war-profiteering tax haven loving corporations! Especially Cheney. He still holds lots of Haliburton stocks. And of course, while we are at it, we can arrest them and charge them with war crimes and crimes against humanity. But this won't happen thanks to the US doing the dirty work of a host of foreign powers such as Saudi Arabia. The US is spending money fiendishly in the Middle East and the Sunni kings hope this will keep Iran pinned down and it makes profits for them as they ring up more and more debts for the US which is losing money to the tune of half a trillion dollars, trying to occupy Iraq and pin down Iran Kitty. This costs the kings nothing.
Meanwhile, the US and Europe are trying to intimidate and harass Mother Russia. From the BBC:
Last year, the number of so-called "high net worth individuals" - people whose spending power exceeds $1m (£500,000) - in Russia rose 15.5% - compared with an 8% swelling in their number globally, according to the Merrill Lynch and CapGemini World Wealth Report.
Similarly, President Vladimir Putin's confident swagger on the international stage is that of a man who has delivered what his people want: stability, prosperity and national pride.
"There's been a fantastic transfer of wealth to Russia," observes Accenture energy analyst, Mark Spelman.
In just four years, Russia's GDP has almost trebled, from $345bn in 2002 to $984bn in 2006, in dollar terms (partly due to economic growth, but also because the value of the rouble has soared). The economy is now growing at almost 7% per year - up from less than 5% four years ago.
Inflation, meanwhile, has slipped from almost 16% in 2002 to single-digit figures.
The G7 talked a lot about Russia and Putin. This is why Condi was sent there to spread imperial love this week. And as usual for her, she came back with absolutely nothing except Putin's sign on her back saying, 'Karate Kick Me'. Russia is growing 7% a year, China is growing 11% a year and the US/EU/UK Axis is growing at between 1.5% to 2.5 % a year. This is bad news for us. At this rate, Russia and China will both dominate the planet. In just 10 years.
Agrees Global Insight Russia analyst Natalia Leshchenko: "Living standards are slowly beginning to improve, also for the poorest, and that's why Putin is popular."
Note the 'also for the POOREST' part. This is the key to generating an improving society, this is how sovereign wealth grows: when it spreads to the lowest levels, this releases tremendous human energy and commerce rises. The US and Japan are trying to strangle the bottom levels and hope that if they kill off their own consuming classes, they will be able to park the profits in huge off shore tax havens and then laugh as they run off to the lastest Bilderberger bash or WTO rounds.
At the grassroots level, big-spending Russians are often scoffed at. One particularly stark example was seen in Austria last winter, when luxury hotels in the alpine resort Kitzbuhel agreed to limit the number of Russian visitors to one in ten.
And the Russians are so much like us, in nearly all particulars. This is why we must treat them as equals, they are our mirror image. I am married to a half Russian, half Italian. And his boisterous ways amuse me. Energetic and emotional. High strung and proud. Yes, we must treat Russia as equals. And then there are the Chinese. My family has married into the Chinese and we have a lot of respect for their love of learning, their loyalty and hard work, mastering intellectual matters. The US and Europe would do much better if we frankly faced reality and ceased trying to pretend to be a huge empire that spits out orders.
What is the impact of all this money supply growth? An incredible shrinking dollar.
While we can intellectualize about it, you really need to travel abroad to see the impact. Doug Kass is in Italy this week, and he is astonished at how feeble the dollar is overseas. The price of the Euro against the U.S. dollar really hits home once you leave the USA. He notes that those that have been "non plussed by the continued erosion of our currency will have a jolt of reality" when going abroad.
Some spending figures from Rome:
Dinner for two last night in Roma? $320 (U.S.)
Price of refueling an empty tank in my auto on Thursday? $175 (U.S.)
Hotel per night? $850 (U.S.)
Bellini? $24 (U.S.)
Dry Cleaning of shirt I poured Chianti on? $20 (U.S.)
Two days in Roma? Priceless!
This entire article is a good read. Rithholtz is not blinded by the ballyhooing in the media. He also will never see the Nobel Economics prize, either.