Spanish government bonds have reached record low yields to maturity...
... while totally ignoring the unsustainable growth of the Spanish government debt:
How would you call it? A conundrum, paradox, anomaly, absurdity, puzzle, insanity, lunacy? I call it an epic moral hazard induced by the European Central bank.
Bad news: the U.S. Federal debt reaches wartime levels.
Yet the Federal debt service is cheap—its total size relative to GDP is comparable to the 1960's or 1970's when the total debt was much higher in proportion to GDP. In theory, higher supply of bonds should make their prices plummet, whereby making interest rates higher and the debt service more expensive.
How is it possible that the opposite is true?
It's no conundrum, but the Fed hyper-expansive policy. There's simply too much money in the financial markets. Insurance companies, pension funds and other institutional investors simply must buy some securities for the money they manage. It's the surplus of cheap money that makes prices of the Treasury bonds so high and the Federal debt service so surprisingly cheap.
In other words, anyone who holds U.S. Treasury securities subsidises the government in Washington D.C. Also, that's why the Fed is going to be very shy to raise interest rates. A strong hike might derail the government finance. Monetary policy becomes fiscal policy. Ouch. That's not in the textbooks. A correct monetary policy shouldn't look like this.
Being just in Italy, I don't think it's a particularly expensive country, especially when compared to London. However, Italian government bonds are extremely expensive to my taste with yields falling to the rock-bottom levels. Note that low bond yields mean high bond prices:
Would you buy a 10-year bond of a government with a huge debt yielding as little as 2.64 per cent per annum? No, me neither.
This is a much more beautiful picture. The gothic cathedral in Siena. Wonderful:
Any nation, which elects dangerous fanatics as its leaders, will carry the bitter consequences.
German federal elections, November 1932:
Hitler's NSDAP gained less percentage of votes than Hamas did in 2006:
Learning may be a painful process. Palestinians are learning (rather slowly) that they made a grave mistake by having voted for the Hamas madmen. Regrettably, many innocent people are dying during the learning process of Palestinian democracy.
It's been two years since Mario Draghi said in his now-famous speech in London:
“Within our mandate, the ECB is ready to do whatever it takes to preserve the euro. Believe me, it will be enough.”
The ECB director was bluffing then. The ECB hasn't done anything special to save the euro. It wasn't even necessary to do anything. The euro was never under any threat at all. No country may be expelled from the eurozone against its will. No country has ever wished to leave the eurozone, too since it would take a lot of risk.
Thus, the euro has been perfectly stable even during the most dramatic moments of the European financial crisis.
Meanwhile, the eurozone stock markets (EMU) have significantly appreciated:
Yet in the time frame from the beginning of the financial crisis, the non-euro European stock markets have outperformed significantly.
Disclaimer: Past performance is no guarantee of future returns, and that sort of boring legal stuff, you know it all anyway.
A highly compelling article in Der Spiegel about France is here. This is only a short quote:
This is good, too:
France is a rich country. Otherwise, she could not run the most expensive welfare state in the world.
However, with the government debt reaching 93 per cent of GDP, France can't afford to continue with her extremely generous welfare policy. Otherwise, the downfall will materialise sooner rather than later.
This is compelling:
The impunity with which Indira Gandhi and her Congress henchmen amended the Constitution via the 38th – 42nd Amendments is something which sadly lives with us to this day even with the present Constitution. Indira Gandhi was only following in her father Jawaharlal Nehru’s footsteps, who with the very first amendment, had set the precedent of modifying the Constitution to suit the Government’s whims. The first Amendment put restrictions on freedom of speech, trade, and equality before law.
Through the 42nd Amendment, the Preamble was changed to “sovereign, socialist secular democratic republic” from what it used to be prior to that — “sovereign democratic republic.”
Source: Indira Gandhi’s ‘socialist’ mistake needs to be fixed
However, I can't agree with the following:
Unfortunately, socialism cannot be a goal mandated by the state. To be successful, it can only be the natural outcome of a truly democratic state.
The truth is that socialism never works. No matter if democratic or not, socialism has failed always and everywhere where it has been tried. There is not a single counterexample of a well-working socialist state. Do not even try to name Sweden. It's a highly taxed country, but still a safely capitalist one. There's not one functioning socialist economy in the whole world. There has never been, and there will never be one.
Imagine there's no resistance to evil. Imagine what would have followed if our grandfathers didn't fight against it.
Imagine what might have followed if Churchill supplied Nazi Germany with vital resources; and if F.D.R. tried to broker a cease-fire agreement between Britain and Germany.
There's nothing attractive in war for people like you. War means destruction. War is bad. War is ugly even if it's waged in the name of noble ideals. No sane person loves war.
Still, sometimes it's vital to fight against evil. Or at least oppose it. Albert Einstein said, “The world is a dangerous place to live, not because of the people who are evil, but because of the people who don't do anything about it.”
I recently calculated my own version of the "shadow" inflation using solely official data. (CPI subindices provided by the St. Louis FRED; no connection to ShadowStats.) The result surprised me:
The red line is an unweighted average of Consumer goods, New vehicles, Services, Fuel, Food, Transportation and Medical care CPI subindices. Although not fully "scientific" (admittedly, one could play with a more appropriate weighting) it works surprisingly well.
My Real CPI (I avoid the term "shadow" to avoid confusion with ShadowStats) has basically copied the official CPI index until the late 1990's. It has, however, diverged since then.
The following chart shows another version of the Real CPI, which includes property prices as measured by the Case-Shiller index.
Note that the widest divergence between the real price inflation and the CPI occurred in the years 2004-2006 when the American property bubble was being inflated. Since August 2006 to April 2014, however, the difference in average annual inflation has been negligible. The volatility of the Real CPI was higher as it is largely composed of volatile items.
Now what? I believe my Real CPI is a more realistic measure of inflation than the officially published CPI. Of course, I can't influence the U.S. economic policy, but perhaps I'll be able to detect another bubble burst ahead of time. (If so, my efforts will pay generously.)
Not all of them, of course:
Ismail Haniyeh, according to reports in the past few years, has become a millionaire. In 2010, Egyptian magazine Rose al-Yusuf reported that Haniyeh paid for $4 million for a 2,500msq parcel of land area in Rimal, a tony beachfront neighborhood of Gaza City. To avoid embarrassment, the land was registered in the name of the husband of Haniyeh's daughter. Since then, there have been reports that Haniyeh has purchased several homes in the Gaza Strip, registered in the names of his children - no hardship, as he has 13 of them.
According to sources in Gaza, Haniyeh's wealth, like others high up in Hamas, came primarily from the flourishing tunnel industry. Senior Hamas figures, Haniyeh included, would levy 20 percent taxation on all of the trade passing through the tunnels.
The Egyptian street has become inflamed with anger directed against Hamas over the last three years, partly due to what appears to be its financial gains at the expense of the Egyptian people. The tunnels in Rafah saw a flourishing fuel-smuggling industry from Sinai. The fuel subsidized by the Egyptian government was entering Gaza at a low price, but being sold for eight times that. Those who made the greatest profits from the sale of the fuel were Hamas members, even as Egypt often reported shortages for its own people.
The political leader Khaled Mashal is another member of the organization who used Hamas funds to his own ends. In 2012, a Jordanian website reported that Mashal had control of a massive $2.6 billion, in large part deposited in Qatari and Egyptian banks. This is likely Hamas' accumulated assets from years through donations, as well as its investments in various projects in the Arab and Muslim world. It is also known that, among other things, Hamas has invested in real estate projects in Saudi Arabia, Syria and Dubai. And, according to reports, Mashal did not always separate Hamas money and his own.
Here's more. Cool people, the Hamas leaders, aren't they?
A white male with some professional experience in finance and investing.