Thursday, 29 August 2013

12:21 – AEP has this to say about the collapsing BRICS economies: Emerging market rout is too big for the Fed to ignore: The US Federal Reserve has told Asia, Latin America, Africa and Eastern Europe to drop dead.

It’s not, you know. Too big to ignore, that is. No matter how this plays out, the world’s economy is going to take a big hit. It’s the Fed’s responsibility to minimize the effect on the US economy, and the hell with Brazil, India, China, and the rest. And, although the Fed has made pretty much nothing but mistakes for the last several years, in this case they’re making the best of a horrible situation by winding down so-called Quantitative Easing while there’s still at least a glimmer of a hope that it’s not too late. Too late for the US, that is. It’s already too late for the eurozone, and the BRICS are toast. Brazil is already a walking dead man, with India and China not far behind. They all hoped to avoid the so-called “middle income trap”. None of them managed to do so, and now they’ll pay the price. And a heavy price it’s going to be.


Work continues on building and shipping science kits. This month is shaping up well, at roughly twice the revenue of August 2012. That’s been helped along by a couple of large bulk orders, but even without those we’re doing pretty well.

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20 Responses to Thursday, 29 August 2013

  1. Lynn McGuire says:

    Too big to ignore, that is. No matter how this plays out, the world’s economy is going to take a big hit.

    When will this happen? I must admit that I do not totally understand the problem. Is this because morons here in the USA are buying foreign bonds based on foreign currencies?

    Will it spark WW III, the USA against the world? Will we blink or tell everyone else to stuff it?

  2. MrAtoz says:

    There is a bigger crisis: Workers walked out of a McDonald’s in Detroit demanding $15/hour. WTF, over?

  3. Ray Thompson says:

    Like Detroit is a hot bed of employment opportunities. The reason they are walking out is because they are stupid to understand economics. They get $15.00 an hour. A Big Mac is not $9.00. No one buys Big Macs at that location. The location closes. They are out of a job. $8.75 an hour (or whatever minimum wage is now) is better than $0.00 an hour.

  4. Lynn McGuire says:

    OK, this article is helping me to understand the BRICS article: “Albert Edwards Storms Out Of The Gate With Calls For 450 On The S&P, Sub-1% 10 Year, And $10,000 GOld”
    http://www.zerohedge.com/news/2013-08-29/albert-edwards-storms-out-gate-calls-450-sp-sub-1-10-year-and-10000-gold

    “It has been a while since Albert Edwards updated the world on his macro and market thoughts. He finally does so today with a tour de force on the crash in the emerging markets, which for him exposes the “idiocy of one of the key investment themes since the 2008 Great Recession – namely that with developed economies burdened with excessive debt and in the throes of multi-year deleveraging, investing in emerging markets would not only produce superior returns but was also less risky. Regular readers will know we have long railed against this idea, having dubbed the BRIC story a Bloody Ridiculous Investment Concept.””

  5. MrAtoz says:

    Wait until Obummer grants all the illegals amnesty. “Would you like queso with that burger señor?”

    I read an article arguing that most fast food places aren’t where teens work after school anymore. It’s all older people and second jobs. I guess that means a burger maker should get $15/hr. Because OLDER! It’s worse than the auto union workers getting big bucks for turning the same nut for 30 years.

  6. Ray Thompson says:

    It’s worse than the auto union workers getting big bucks for turning the same nut for 30 years.

    It’s worse than the auto union workers getting big bucks for cross threading the same nut for 30 years.

    There, fixed it for you.

  7. brad says:

    Something that has always bothered me about the banking and investment situation: What the devil are banks doing with their own investment departments? This is where banks borrow money from the central bank, and then use the money to go play lottery in the investment markets. Depending on the size of the bank, this apparently ranges from simple trading in stocks and bonds, through the middle ground of options and other leverages products, all the way to high-speed trading for the big boys.

    The thing is: the core business of a “bank” is (or ought to be) to be a place people deposit and borrow money. Yet this customer service has become nothing but an annoying side show to the mid-size and large banks. This was the problem for the last banking crisis and – if there really is another one coming – will be central to that problem as well.

    Or is my (admittedly limited) understanding of the investment business missing the target?

  8. OFD says:

    Take a look sometime at what the banks, and for that matter, the Fed, have for actual cash reserves on hand in ratio to what they have out and about. It’s miniscule. If there is ever a run on them, that will be it, Game Over. The masses so far simply operate on trust in these big institutions but they’re in for a very rude surprise someday fairly soon.

  9. bgrigg says:

    So France is the only “ally” Obama can muster to take action against Syria. If that isn’t convincing enough proof to stop the escalation, I can’t think of any better.

    Wasn’t France responsible for the modern states of Syria and Lebanon in the first place? How many former French administered countries have ended up as corrupt hellholes? And if anyone has been paying attention to the corruption cases in Quebec, I include La Belle Province. They might not be on the same scale as Vietnam or Algeria, but then the Anglo element has tamed them somewhat.

  10. Lynn McGuire says:

    Russia moved their only aircraft carrier into the Med (back in June). Now they are sending additional cruisers to the Med. That does not bode well.
    http://www.theblaze.com/stories/2013/08/29/report-russia-now-sending-warships-to-the-mediterranean/
    http://www.businessinsider.com/russia-deploys-admiral-kuznetsov-carrier-2013-6

    There is an old game called Chicken. The Russians play it very well. There may be a few more surprises up their sleeves.

    BTW, France has been a very good ally in the War on Some Terror. They used their only aircraft carrier, the Charles D’Galle, for Afghanistan air operations several times now. The tours have been six months long which is very debilitating to a aircraft carrier and crew.

  11. Miles_Teg says:

    They didn’t play it well in 1962…

  12. Dave B. says:

    There is an old game called Chicken. The Russians play it very well. There may be a few more surprises up their sleeves.

    I hope that Obama and Putin are both wise enough to know the difference between the Reset button and the Launch button.

  13. Lynn McGuire says:

    They didn’t play it well in 1962…

    We were playing chicken in our own swimming pool. They dragged it out for 13 days (excellent book, Bobby Kennedy would have been a good president):
    http://www.amazon.com/Thirteen-Days-Memoir-Missile-Crisis/dp/0393318346/

    And some experts believe that the Russians won the propaganda battle. I would say a tie at best.

  14. Lynn McGuire says:

    Take a look sometime at what the banks, and for that matter, the Fed, have for actual cash reserves on hand in ratio to what they have out and about. It’s miniscule. If there is ever a run on them, that will be it, Game Over. The masses so far simply operate on trust in these big institutions but they’re in for a very rude surprise someday fairly soon.

    There is no cash at the central banks, only spreadsheets and pieces of paper reputedly worth billions XXXXXX trillions of dollars.

  15. brad says:

    There is no cash at the central banks

    But there are printing presses (well…electron presses)

  16. Miles_Teg says:

    Whereever the Cuban Missile Crisis was being played out the implications were global. I’ve read that a pep talk from SAC to aircrew in the clear was monitored by the Soviets (as was intended) and they ordered the missile cargo boats to stop dead. So SAC were better at Chicken than the Sovs.

  17. Chuck W says:

    Short of launching nuclear war, Russia could not possibly have won in the Cuba debacle. Although we might one day be brought to our knees through financial means, our host has been quite right that nobody could physically invade us without suffering incredible losses along with complete and utter failure. That includes Cuba, which is close enough to be a territory. We rule Cuba, whether Fidel and his brother like it or not. Too bad for the Cubans—their lives could be so much better if Fidel and Raúl would give it up.

    I learned from my time in East Berlin, that Russians are so like Americans, that—although we both wanted our way during the Cold War—neither of us would have started a nuclear war. Neither of us is dumb. It is going to be some backward, uneducated Islamic country that does that—not Russia or the US.

    And we are strong enough financially that—even through economics—it would take a long time to strangle us. But nothing could be finer, IMO, for other countries to force the appreciation of our currency by devaluing theirs. That would not only stop inflation, but reverse it. It is not the interest rate that is so important, as has been proved by Japan being at zero for more than a decade, causing primarily stagnation; it is our government throwing your money and mine into bottomless pits by taking the value of the dollars you and I have saved and then shaving purchasing power from each dollar every day since that bastard Nixon first permitted it by Executive Order on 15 Aug 1971.

    My occasional breakfast at McDonalds has risen dramatically since I returned in 2009, and the price has risen at least 3 times this year alone. Last price rise was just 2 weeks ago to $4.69. My recollection is that it was $2.80-something when I first started buying it on my way to video work for the day, back in 2010. I just pulled out a receipt from 2 years ago, when it was $3.21. That is pretty serious inflation, and McDonalds is not a retailer getting away with gouging.

    I do not much care what the problems we face are, because there are always going to be some, if not many, but the loss of the purchasing power of our savings is not one that should be tolerated—at all. Hooray, if other countries are willing to help solve that problem for us.

  18. Miles_Teg says:

    No one would win a nuclear war. Even if the US had, by some miracle, launched a successful disarming strike against the USSR the fallout would have been catastrophic for the Northern Hemisphere.

    In the late Fifties the top Soviet leadership held a conference in which it was decided that nuclear war with the US was simply not on, for the obvious reasons. I think the buildup on both sides was just due to inertia, and the fear that if Side A didn’t develop MIRVs, an ABM system, whatever, the other side would.

    I was always afraid that nuclear war would start by accident, I’ve read reports of computer malfunctions in the US system that might have lead to catastrophe, and in 1983 an alarm sounded in an air defence bunker near Moscow that could have lead to war if the Soviet officer monitoring the system hadn’t reacted sensibly. (See https://en.wikipedia.org/wiki/Stanislav_Petrov). According to the book, Petrov should have reported the warning to his superiors. The Soviets were in such a heightened state of paranoia at the time that they expected a US attack and might have launched on warning. Fortunately we didn’t get to find out.

    Another near miss in the Cuban Missile Crisis: https://en.wikipedia.org/wiki/Vasili_Arkhipov#Involvement_in_Cuban_Missile_Crisis

    In retrospect, I don’t think a deliberately started nuclear war was ever contemplated by either side, especially after the USSR developed a worthwhile arsenal of its own, but there is always scope for accidents and misunderstandings.

  19. Chuck W says:

    In high school debate, my partner and I won regional championships on the question of banning nuclear arms by positing that tension in the world would ultimately result in someone pushing the button accidentally. A lot of judges (teachers) bought that argument.

  20. Miles_Teg says:

    I’m all for banning nuclear weapons, in principle. But you have to be sure that the other side/s have *really* got rid of theirs before you get rid of yours.

    The most stabilizing thing you can do is get rid of missiles with multiple warheads. If there is a verifiable regime in place for checking that the other side/s have only one warhead per ICBM/SLBM then an attempted disarming first strike becomes pointless.

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