Joe's Investo-Blog

…Especially for Currency Issuing Soveriegn States

Escaping the Sovereign Debt Trap: The Remarkable Model of the Commonwealth Bank of Australia

http://www.globalresearch.ca/PrintArticle.php?articleId=20473

by Ellen Brown

The current credit crisis is basically a capital crisis: at a time when banks are already short of the capital needed to back their loans, capital requirements are being raised. Nearly a century ago, the Commonwealth Bank of Australia demonstrated that banks do not actually need capital to make loans – so long as their credit is backed by the government. Denison Miller, the Bank’s first Governor, was fond of saying that the Bank did not need capital because “it is backed by the entire wealth and credit of the whole of Australia.” With nothing but this national credit power, the Commonwealth Bank funded both massive infrastructure projects and the country’s participation in World War I.

President John Adams is quoted as saying, “There are two ways to conquer and enslave a nation. One is by the sword. The other is by debt.” The major conquests today are on the battlefield of debt, a war that is raging globally. Debt forces individuals into financial slavery to the banks, and it forces governments to relinquish their sovereignty to their creditors, which in the end are also private banks, the originators of all non-cash money today. Read more…

Banks, Currencies, Economics, Financial Crises, Inflation/Deflation Banks, collapse, Currencies, debt, deflation, Economics, exchange rates, history, IMF, inflation, The Fed, trade, US treasury

There Is No Such Thing as a Sovereign Budget Deficit.

By Mike Whitney

Deficits create demand. Demand generates spending. Spending generates economic activity. Economic activity generates growth. Growth generates jobs, increases government revenues, reduces deficits and ends recessions.

Simple, right?

When consumers have too much debt, they will not spend no matter how low interest rates are. This is not theory, this is fact.

If the government cuts spending at the same time as consumers, then overall spending declines and the economy slips into recession. This is what the deficit hawks want–a return to recession. This is politics, not economics.

KEYNE’S KOAN: Increasing the deficits, lowers the deficits
Read more…

Economics, Financial Crises, Inflation/Deflation, Politics Asset Allocation, collapse, Currencies, debt, deflation, Economics, EU, exchange rates, fiscal policy, history, IMF, inflation, monetary policy, Politics, Regulators, trade

What the Peoples Bank of China Can and Cannot do with its Foreign Currency Reserves

http://mpettis.com/2010/02/what-the-pboc-cannot-do-with-its-reserves/

February 22nd, 2010 by Michael Pettis

China did not reduce its dollar holdings
Beijing is not Washington’s banker
Can PBoC reserves protect China?
Balance sheet mismatches
Are there no winners and losers?
Wealth is transferred within China

It is a real toss-up as to which generates more bizarre comment in the international press: Beijing’s long-feared dumping of US Treasuries, or the use and value of the PBoC’s central bank reserves. The revelation last week that Chinese holdings of US Treasury obligations fell in December by $34.2 billion, to $755.4 billion, generated a frisson of fear and excitement, leading one prominent newspaper to worry that “If there is one thing that gets investors twitchy, it is the fear that China is losing its appetite for US government bonds.”

And shouldn’t they get twitchy? After all this reduction in Chinese holdings of Treasury bonds comes from the USG’s TIC data, so it must be true that China is dumping dollars, right?

No need to twitch, it means no such thing. Read more…

Banks, Bonds, Currencies, Economics, Financial Crises Banks, Bonds, collapse, Currencies, debt, Economics, exchange rates, fiscal policy, inflation, monetary policy, The Administration, The Fed, trade

To My Clients:

Our accounts are up 24.1 % for the year 2009.

Our accounts, together with the stock and bond markets, have performed quite well this past year despite large holdings in each account of low yielding T-bills and Treasury bonds. It is still quite difficult to find reasons not to continue our successful defensive strategies of the past three years in which we’ve been quite fortunate to obtain positive returns in each year.

The credit crisis is far from over, and although there are indications that the recession is coming to an end, it also appears that it will be a far from robust recovery. The best that can be said of the economy is that it has stopped declining. Employment continues to lag and will continue to be a severe drag on any recovery. In spite of the Federal Reserve’s efforts to stimulate monetary growth, it is not happening, as banks remain fearful of lending and continue to leave their reserves on deposit at the Fed. What little stimulus we are seeing seems to be finding its way into the financial markets so far, with little to show in the real economy.

The dollar has been declining for most of this past year with only recent signs of a turnaround. This has contributed to our Read more…

Asset Allocation, Banks, Bonds, Currencies, Economics, Financial Crises, Gold, Inflation/Deflation, Markets, Portfolio Management Asset Allocation, Banks, Bonds, Currencies, debt, deflation, economy, exchange rates, Gold, inflation, monetary policy, performance, Portfolio Management, stock market, strategy, The Fed, trade

Is Santa Claus a member of the WTO? Patrick Thomas, the U.K. Embassy’s policy adviser for trade and agriculture, and Tom Barry, first secretary, economics at the U.K. Embassy in Washington, look at the trade implications of St. Nick’s actions. Thomas and Barry blog at http://blogs.fco.gov.uk/roller/economic.

Dear Santa:

It is with regret that I am serving you with a Section 415 Cease and Desist order in the matter of delivery of gifts and/or presents on the occasion of the Night Before Christmas on behalf of Mr. and Mrs. Dean (hereafter “My Parents”).

My Parents note the following violations of international trade rules which constitute a prima facie case of unfair competition in the delivery of but not limited to balls, teddy bears and games:

Anti-Dumping. The low price of zero dollars you charge is clearly below marginal cost. This seems to be a flagrant attempt to attain market share. No doubt you have your eyes fixed on Easter and Halloween, to say nothing of birthdays.

Labor standards. You have never accepted international standards for your workforce. Your elves toil for impossibly long hours and appear to subsist entirely on leftover cookies. My Parents have serious concerns about the long-term health effects of the “magic dust” which you pump into your workshops to enhance productivity.

Environmental standards. Your production methods are extremely carbon-intensive. My Parents are not convinced that your base in the North Pole is sustainable given the long-term decline in Arctic sea ice.

Intellectual Property. Santa-brand Tickle-Me-Elmo dolls are an unauthorized reproduction of the real thing.

Transportation costs. We regret your genetic modification of reindeer in respect of flight, and, in at least one case, red noses.

In light of these concerns, it is My Parents’ view that I would be better off without any such “free” presents and that my arguments against such were “naive.”

Merry Christmas.

Yours

Johnny (aged four and three quarters)

Economics Humor, trade