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‘Apocalypse’ Krugman Ignores Keynes And Comrade Lenin’s Warnings
Market Update July 23, 2014
Geopolitical tension appears to be supporting gold at the $1,300/oz level and above support at the 100-day moving average at $1,302/oz. The 50 and 200 day moving averages are also key levels of support.
Gold is down 1.5% for the month after the another peculiar bout of concentrated selling last week. It is in lockdown in a very tight trading range. According to Reuters, the spread between its highs and lows for the month is the narrowest since August 2009 at $53.30/oz.
Worries over tougher sanctions on Russia and their potential impact on fragile Eurozone growth saw equities make very tentative gains while the euro fell. German bond yields dipped back towards record lows, with conflicts in Ukraine and the Middle East supporting demand for government bonds.
The European Union yesterday threatened to restrict Russia’s access to capital markets and sensitive energy and defense technologies.
‘Apocalypse’ Krugman Ignores Keynes And Comrade Lenin’s Warnings
Paul Krugman’s latest missive in The New York Times again attacks those who warn about the risks of a new debt crisis and the ramifications of radical, ultra loose monetary policies.
Krugman says that the recent concern about “debts and deficits” was a “false alarm.” He attempts to paint those who were concerned about the debt crisis as scare mongers. He sarcastically says that “the debt apocalypse has been called off.”
This is a meme that Krugman uses frequently as seen in headlines like ‘Addicted to the Apocalypse’,
and ‘Apocalypse Fairly Soon.’ He uses this meme to try to link those concerned about the debt crisis and the current monetary response to it as alarmist doom and gloom merchants and irrational people who believe the “end of the world” is nigh.
It is a way to attack the straw man rather than sticking to the facts and having a more reasoned debate.
It is ironic as Krugman himself became quite apocalyptic in his warnings during the Eurozone debt crisis. He warned that “things are falling apart in Europe,” of a “gigantic bank run” and of an “emergency bank closing.”
Not only did he warn of a massive bank run and emergency bank holidays but he warned of the euro breaking up and Italy returning to the Italian lira and even warned of France returning to the French franc.
Krugman was wrong then, as indeed were many of the people he criticizes. However, the crisis is far from over and reared its head in Portugal in recent days and there is a long way to go before this crisis reaches its conclusion.
He has also been quite apocalyptic himself regarding global warming. He has warned that “utter catastrophe” looks “like a realistic possibility,” and that the “rise in global temperatures that will be little short of apocalyptic.”
When it comes to the apocalypse, Krugman likes to have his apocalyptic cake and eat it too.
Krugman continues to advocate printing currency as one panacea to our economic ills. There is much groupthink on this topic amongst western central banks and policy makers and many share Krugman’s views.
Krugman is right that so far the record debt levels in the U.S. and throughout much of the western world and the currency printing response have not led to inflation or stagflation.
However, it is very premature to completely discount the risk. History clearly shows printing money on the scale that we have witnessed in recent years ultimately leads to inflation, and sometimes hyperinflation.
Lenin rightly warned that the "best way to destroy the capitalist system is to debase the currency.” History confirms this.
Krugman has great respect for Keynes and yet Keynes shared Lenin's concerns. "Lenin was certainly right. There is no subtler, no surer means of overturning the existing basis of society than to debauch the currency" warned Keynes.
In a time of cozy Keynesian consensus, plurality of opinion is important and it is worth remembering this important warning from the past.
Krugman, has been one of the most vocal gold bears in recent years and his opinion on gold has lacked nuance and ignored the academic and historical record.
As ever, a historical perspective and a long term perspective is important. Only time will tell who was right and who was wrong. Until then, it remains prudent to have an allocation to physical gold in a diversified portfolio.
Discusses banking fundamentals, how expanding money supplies in the past have led to booms followed by busts. It concludes with a chapter that dismembers the Fed. (Any discussion today about banking mandates a discussion of the Fed.) If this book had been used as a college text over the last two decades and discussed honestly in classrooms, fractional reserve banking and the Fed would already be history.
India potentially can double its growth rate and accelerate poverty reduction, said Bank Group President Kim during a visit to the country. He met with new Prime Minister Modi and pledged $15-18 billion in support over the next three years. Read More »
Jesse Litvak, former senior RMBS trader at New York investment bank Jefferies, was sentenced to two years in federal prison for defrauding the government related to TARP, securities fraud, and making false statements to the federal government, announced the Special Inspector General for the Troubled Asset Relief Program.
To report allegations of fraud, waste, abuse, mismanagement, or misrepresentations involving the taxpayer-funded Troubled Asset Relief Program, call (877) SIG-2009 or send confidential information to SIGTARP via an online Hotline form.
Audit reports and quarterly reports to Congress about the management and transparency of TARP programs are posted here.
SIGTARP welcomes comments and suggestions. You may reach us at the phone number and mailing address below:
Phone: (202) 927-8940
Mail: Office of the Special Inspector General for the Troubled Asset Relief Program
"The US/UN imposes additional sanctions upon top Russian firms, Time Warner rejects Rupert Murdoch's $80 billion dollar bid & US Marine Corps General: James Amos says Iraq's "not done with us". The war drums are beating faster and faster!"
The Securities and Exchange Commission today adopted amendments to the rules that govern money market mutual funds. The amendments make structural and operational reforms to address risks of investor runs in money market funds, while preserving the benefits of the funds.
Today’s rules build upon the reforms adopted by the Commission in March 2010 that were designed to reduce the interest rate, credit and liquidity risks of money market fund portfolios. When the Commission adopted the 2010 amendments, it recognized that the 2008 financial crisis raised questions of whether more fundamental changes to money market funds might be warranted.
The new rules require a floating net asset value (NAV) for institutional prime money market funds, which allows the daily share prices of these funds to fluctuate along with changes in the market-based value of fund assets and provide non-government money market fund boards new tools – liquidity fees and redemption gates – to address runs.
“Today’s reforms fundamentally change the way that money market funds operate. They will reduce the risk of runs in money market funds and provide important new tools that will help further protect investors and the financial system,” said SEC Chair Mary Jo White. “Together, this strong reform package will make our markets more resilient and enhance transparency and fairness of these products for America’s investors.”
With a floating NAV, institutional prime money market funds (including institutional municipal money market funds) are required to value their portfolio securities using market-based factors and sell and redeem shares based on a floating NAV. These funds no longer will be allowed to use the special pricing and valuation conventions that currently permit them to maintain a constant share price of $1.00. With liquidity fees and redemption gates, money market fund boards have the ability to impose fees and gates during periods of stress. The final rules also include enhanced diversification, disclosure and stress testing requirements, as well as updated reporting by money market funds and private funds that operate like money market funds.
The final rules provide a two-year transition period to enable both funds and investors time to fully adjust their systems, operations and investing practices.
Norm Champ, director of the SEC’s Division of Investment Management, said, “Today’s adoption of final money market fund reforms represents a significant additional step to address a key area of systemic risk identified during the financial crisis. These reforms are important both to investors who use money market funds as a cash management vehicle and to the corporations, financial institutions, municipalities and others that use them as a source of short-term funding.”
The SEC today also issued a related notice proposing exemptions from certain confirmation requirements for transactions effected in shares of floating NAV money market funds. Additionally, the SEC re-proposed amendments to the Commission’s money market fund rules and Form N-MFP to address provisions that reference credit ratings. The re-proposed amendments would implement section 939A of the Dodd-Frank Wall Street and Consumer Protection Act of 2010, which requires the Commission to review its rules that use credit ratings as an assessment of credit-worthiness, and replace those credit-rating references with other appropriate standards.
The rules adopted today will be effective 60 days after their publication in the Federal Register, and the re-proposal will have a 60-day public comment period following its publication in the Federal Register.
LONDON -- Talks to reach the first settlement in the currency-rigging
probe are accelerating, with Britain's markets regulator preparing to
reach a deal with a group of banks this year, people with knowledge of
the talks said.
The Financial Conduct Authority is in talks with banks including
Barclays Plc, Citigroup Inc., JPMorgan Chase & Co., and UBS AG, said
the people, who asked not to be identified because the discussions are
private. Royal Bank of Scotland Group Plc and HSBC Holdings Plc may also
be part of the group settlement, one of the people said.
The FCA is trying to fast-track the process and may levy any fines in
the coming months, three of the people said. The watchdog is seeking to
keep the scope of the deal narrow to speed up the settlement, two of the
The talks are still continuing and an agreement may stretch into next year, the people added.
Representatives of the banks and FCA in London declined to comment on the talks.
Regulators and prosecutors are scrutinizing allegations that dealers
at the worlds biggest banks traded ahead of their clients and colluded
to rig the WM/Reuters rate, a benchmark that pension funds and money
managers use to determine what they pay for foreign currencies.
More than 25 traders have been fired, suspended, or put on leave after the allegations emerged last year.
U.K. prosecutors at the Serious Fraud Office opened a criminal
investigation into alleged fraudulent conduct in currency markets this
The revolving door in U.S. government regulation has never spun faster
Submitted by cpowell on Wednesday, July 23, 2014. Section: Daily Dispatches
U.S. Swaps Regulator O'Malia to Head Bank Lobby Group
By Douwe Miedema and Michelle Price
Reuters Wednesday, July 23, 2014
A member of the U.S. Commodity Futures Trading Commission will become
the new head of a bank lobby group that is fighting the derivatives
regulator in court over a crucial new rule curtailing Wall Street.
The International Swaps and Derivatives Association said on Wednesday
that Scott O'Malia, a Republican who often voted against new CFTC
policy in the wake of the financial crisis, will become the trade
group's next chief executive.
O'Malia will start his new job as of Aug. 18, ISDA said. The news came only days after O'Malia said he planned to leave the CFTC as of Aug. 8. ... ... For the rest of the story: http://www.reuters.com/article/2014/07/23/us-regulator-derivatives-swaps...
Once Bitten, Twice Shy, Except When It Comes to FraudFinancial
criminals go to great lengths to hunt down and size up their prey, but
to the con man, nothing can top the "sucker list" of people who have
already fallen for a scam.
Peltz's Efforts to Shake Up PepsiCo Gets Backing of Big Pension FundThe California
State Teachers' Retirement System, known as Calstrs, has sent a letter
to a senior PepsiCo director, urging the food and beverage company to
put Nelson Peltz on its board.
Deutsche Bank Shares Waver on Reports of Regulator's LetterNews reports of
the criticism by regulators is a setback for Deutsche Bank in its
efforts to convince investors and the public that it is remaking itself
to be more ethical and less risky.
Reuters Breakingviews: Deutsche Bank's Renewal Still a Work in ProgressPersuading
investors that the bank holds itself to higher standards than before the
financial crisis is starting to look like a generation's work, Dominic
Elliott writes in a Reuters Breakingviews column.
Former Trader at Jefferies Sentenced to 2 YearsJesse C.
Litvak, a former senior trader at the Jefferies Group, was sentenced was
to two years in prison by a federal judge in New Haven, Bloomberg News
Private Equity Giants With a Taste for Auto Body ShopsBlackstone is
buying a majority stake in an auto repair chain, Service King Collision
Repair Centers, from Carlyle, though Carlyle will still be a significant
Carlyle Is Said to Be Raising New Brazilian Buyout FundInvestors
including Banco do Brasil and Brazilian pension funds have participated
in a first-step $170 million fund-raising effort, according to a person
with direct knowledge.
Former Trading Regulator Scott O'Malia to Lead Derivatives GroupScott D.
O'Malia, formerly a commissioner on the Commodity Futures Trading
Commission, has been named chief executive of the International Swaps
and Derivatives Association.
Law Firm Spans Both Sides in Bank DealIn an unusual
role, the law firm Sullivan & Cromwell advised both sides in the CIT
Group's $3.4 billion acquisition of OneWest, providing regulatory
counsel, Ellen Rosen of Bloomberg News reports.
AvantCredit Raises Financing to Lend to 'Midprime' BorrowersThe online
lender has raised a $75 million round of equity financing led by Tiger
Global Management, as well as a $200 million credit facility led by
Victory Park Capital.
Europe to Question Online Search ProvidersEurope's
data-protection regulators will question the operators of some of the
world's largest search engines on Thursday about how they are carrying
out a recent court ruling, which gives individuals the right to request
that links leading to information about themselves be removed from
search results. Google has said it has received more than 80,000
requests for links to be removed.