Gold prices are dropping like a rock and what this means

The price of gold was almost $1800/oz at the beginning of October.  (Short time high: $1791.75 on 10/4/2012).  As recently as 12/12/12 it was at $1716.25.  But since then it has continued to drop and is now (12/21/12) at $1651.50.

It is unlikely to go below $1550/oz, as there is support at that level.  But still, this raises the interesting question - why would people abandon gold, which has intrinsic value, and just hold cash, which the Treasury and Federal Reserve can create at will?

The answer I think has 2 parts.  First, this is a signal that another recession is happening.  The drop in the price of gold is similar to that which happened in 2008.  On 3/7/08, gold was at $1011.25/oz.  It was still as high as $903.50 on 10/8/08, just after the financial crash.  But then it quickly dropped to $712.50 on 10/24/08.   So in just over 2 weeks, it dropped 22%.

But still, why would people abandon gold?  Long-term it obviously is a very good investment, but in the short-term, people would prefer to hold cash.  They can always shift back to gold once the threat of a recession is over.

But can't the Fed just print money at will to offset the demand for cash?  Again in the long-term they can and will kill the dollar.  But again we are speaking of the short-term.

So the second part of the answer is that the Fed cannot create enough money in the short-run to head off a recession.  I've studied this question extensively, and I don't necessarily want to repeat my thinking, but the main way that money is created is through deficit spending.  And because of the fiscal cliff, deficit spending will be reduced.  This doesn't necessarily mean that the money supply will be reduced, but it does mean that the rate of increase will slow.  The economy is so sick that the main thing keeping it afloat is the spillover from government spending, and now that "crutch" will partially be taken away from it.

But isn't the Fed printing money at the rate of $85 billion/month?  Supposedly yes, but that isn't enough.  Any new money that goes to purchase Treasury bonds doesn't help at all, because Treasury bonds are already treated as a kind of money.  (I account for this in my M4 measurement).  The $40 or $45 billion that they are spending to purchase mortgage-backed-securities does increase the money supply, but almost all of this goes to banks that already have excess reserves, so the money won't find its way into the general economy (M2).

So cash, for which there is a huge demand (not to spend but to hold onto) is becoming more valuable in the short-run.  That is called deflation.  We are heading into the Great Recession, Part II.

So what is the solution?  It depends on your point of view.  As a country we are very divided.  If you have a neo-Keynesian point of view, like Paul Krugman, then we need more government spending to offset the oncoming recession to kick the can down the road some more.  But if you are a fiscal conservative, then there is no problem at all.  Bring the recession on.  It is inevitable, and is needed to cleanse some of the waste.

Yesterday, the fiscal time bomb went off, as was predictable far in advance.  It will take a little time for this to be apparent.  But a recession is now inevitable.  So sell that gold and hang onto cash for about the next 6 months.  It will be a wild ride, but we will be better for it later.

The Great Spanish Crash

World's largest building being built in Chengdu

"The Global Centre will house offices, conference rooms, a university complex, two commercial centres, two five star hotels, an IMAX cinema, a "Mediterranean village", a skating rink and a pirate ship, among other attractions.
About 400,000 square metres will be devoted to shopping, most of the outlets high-end luxury brands.
Despite Chengdu being around 1,000 kilometres from the sea the complex has a marine theme, with fountains, a huge water park and an artificial beach, accented by the undulating roof, meant to resemble a wave."

Read more: http://www.businessinsider.com/new-century-global-centre-chengdu-china-2012-12

What causes hyperinflation? Quasi-fiscal deficits

"What causes hyperinflations? The answer is: Quasi-fiscal deficits! Why have we not seen hyperinflation yet? Because we have not had quasi-fiscal deficits!

What is a quasi-fiscal deficit? A quasi-fiscal deficit is the deficit of a central bank. From Germany to Argentina to Zimbabwe, the hyper or high inflationary processes have always been fueled by such deficits. Monetized fiscal deficits produce inflation. Quasi-fiscal deficits (by definition, they are monetized) produce hyperinflation.

The only losses that can meaningfully affect central banks stem from flows (i.e. deficits), like net interest losses. These losses result from paying a higher interest on their (i.e. central banks’) liabilities than what they receive from their assets. These losses leave central banks no alternative but to monetize them, in a deadly feedback loop. They are like black holes: Once trapped into them, there is no way out, because (fiscal) spending cuts are no longer relevant, unless they produce a surplus material enough to offset the quasi-fiscal deficits. And that, by definition, is impossible."
--http://www.zerohedge.com/news/2012-12-19/guest-post-what-causes-hyperinflations-and-why-we-have-not-seen-one-yet

Comment:  This makes a lot of sense.  And since the Fed Reserve makes a profit each year (most of which goes to the Treasury), by this definition hyperinflation is impossible.

So if this is true, what would cause quasi-fiscal deficits?  Either bad assets (like defaulted mortgages) that don't pay interest, or borrowing in a foreign currency that has higher interest rates than can be earned domestically.  With the Fed's ballooning balance sheet, having bad assets is a distinct possibility. 

Donald Trump to build towers in Rio slum

See http://www.dailymail.co.uk/news/article-2250346/The-Donald-brings-Trumpesque-flair-Rio-plans-erect-2-6billion-towers-city-slums.html
"The buildings together will make up the largest office complex in Brazil, once complete, with pedestrian tunnels and bicycle paths included, according to the project's consortium of developers, which is headed by the Trump Organization. Construction on the first two of the five planned towers will begin in the second half of next year, officials declared at a press conference in Rio on Tuesday. Those towers are expected to be finished ahead of the 2016 Olympic games, which Rio is hosting."

Science is for girls too!

See also: http://aftermath2022.blogspot.com/2012/06/science-is-for-girls-too.html

Cursed project in Saigon

Saigon One Tower

See: http://www.bloomberg.com/news/2012-11-25/vietnam-empty-office-towers-show-dreams-turned-to-rubble.html

The Saigon One [aka Saigon M&C] project was originally conceived in the 1990's.  "In 1997, just after the hotel's foundations were laid, the Asian financial crisis broke out and put what was hoped to be a temporary hold on the project. A lack of capital has left the site dormant ever since [as of 2005]. The new owners estimate the cost of the mall and 40 story tower at USD$60 million."

Construction began again in 2008, and it was supposed to be completed in 2010, with a construction budget of $228 million.  But as of January 2010, only a few floors had been built. Finally in late 2010 and early 2011, construction picked up speed.  By mid-2011, it topped out at 42 floors, but construction halted.  Now it may never be completed.

"On the bank of Ho Chi Minh City’s Saigon River, the construction site for the 40-story Saigon M&C Tower is deserted except for two security guards. Today, ropes dangle from the first six floors, originally designed to incorporate a 23,000-square-meter commercial space, while glass paneling is incomplete on the remaining floors." --Bloomberg

Economic collapse in Vegas

By G4T

Bear Rescue Mission

Khartoum

Sudan's newest development

Should Liberia and Sierra Leone merge?

This is just a thought.  Both are English speaking countries.  Liberia has a population of about 3.7 million in an area of 111,000 km².  Sierra Leone has a population of 5.5 million in an area of 72,000 km².

Here are some differences:  Sierra Leone was a British colony and was founded as a home for former British slaves. It has a unicameral Parliament. It is a member of the Commonwealth of Nations. It has a per capita GDP of $366/person.  It is primarily Muslim (71%).  Its currency is the Leone.

Liberia was founded by freed African-American slaves.  It has a bicameral Congress (Senate and House of Representatives). It has a per capita GDP of only $297/person.  It has a primarily Christian population (85%).  Its currency is the Liberian dollar.

Both countries are part of the West African Monetary Zone, which proposes to use the Eco as a common currency, starting in 2015.

======================
Also, on a similar note, why are Togo and Benin separate countries?  Both speak French and received their independence from France in 1960.  They both use the same currency, the West African CFA franc. It is absurd that they are separate.

  

Equatorial Guinea has a new capital

See: Revealed - the new capital city built deep in the jungle by 'dictator' of Equatorial Guinea

New city to be built near Changsha

See: Hunan to build ginormous city from scratch
KPF Releases Masterplan for Chinese City Built From Scratch

"A new city in the West Changsha Pioneer Zone in Hunan Province, Meixi Lake is centered around a 3.85 kilometer‐long lake. Upon completion, the city will be home to 180,000 inhabitants, and will provide residents, workers and visitors sustainable neighborhoods for living, working, recreation, culture and entertainment." 

Zhengzhou thinks big

 

Zhengzhou, capital of Henan province, has one of the world's largest convention centers, larger than Vatican City.  It is building Zhengdong New Area, which will be twice the size of Manhattan island.

See:  Cities think big - but can they all really win?

What is the half-life of M4?

M4, my own economic measurement, was at 20172.4 on 11/30/2012. 

When was it at half this amount? On 12/31/04, it was at 10089.7.  So the half-life is right at 8 years.  So we can expect it to be about double the current level in about 8 years, in 2020.  And double again in 2028 and then again in 2036.  Somewhere in that range is where the fun begins, in my opinion.

Cities 201-250

This is a continuation of the previous list here.  Unlike the previous lists, this is more subjective, based on cities that weren't included in the previous lists.

201. Karachi, Pakistan
202. Kolkota, India
203. Dhaka, Bangladesh
204. Lagos, Nigeria
205. Kunming, Yunnan, China
206. Taiyuan, Shanxi, China
207. Xiamen, Fujian, China
208. Nanchang, Jiangxi, China
209. Geneva, Switzerland
210. Luanda, Angola
211. Mecca, Saudi Arabia
212. Ankara, Turkey
213. Prague, Czech Republic
214. Warsaw, Poland
215. Monaco
216. Curitiba, Brazil
217. Gold Coast City, Australia
218. Kyiv (Kiev), Ukraine
219. Cape Town, South Africa
220. Strasbourg, France
221. Macau
222. Zhongshan, Guangdong, China
223. Budapest, Hungary
224. Panama City, Panama
225. Edinburgh, Scotland, UK
226. Baotou, Inner Mongolia, China
227. Taizhou, Zhejiang, China
228. Bucharest, Romania
229. Linyi, Shangdong, China
230. Bangalore, India
231. Medellin, Colombia
232. Handan, Hebei, China
233. Muscat, Oman
234. Durban, South Africa
235. Dongying, Shandong, China
236. Yancheng, Jiangsu, China
237. Ahmedabad, India
238. Luoyang, Henan, China
239. Pune, India
240. Jiaxing, Zhejiang, China
241. Hyderabad, India
242. Almaty, Kazakhstan
243. Yangzhou, Jiangsu, China
244. Nairobi, Kenya
245. Ho Chi Minh City, Vietnam
246. Katowice, Poland
247. Nanchang, Jiangxi, China
248. Cangzhou, Hebei, China
249. Wellington, New Zealand
250. Chennai, India

Here are probably the next 25 cities:
Anshan, Liaoning, China
Jinhua, Zhejiang
Tai'an, Shandong
Baoding, Hebei
Krakow, Poland
Manama, Bahrain
Isle of Jersey
Talinn, Estonia
Port Louis, Mauritius
Reykjavik, Iceland
Lausanne, Switzerland
Addis Ababa, Ethiopia
Lyon, France
Bern, Switzerland
Abuja, Nigeria
Isle of Man
Benidorm, Spain
Hamilton, Bermuda
Almaty, Kazakhtan
Bratislava, Slovakia
Montevideo, Uruguay
Algiers, Algeria
Casablanca, Morocco
Kinshasa, DR-Congo
Lahore, Pakistan

Top 40 Skylines

This is someone's subjective list of the top 40 skylines in the world:

1. Hong Kong, China 
2. Chicago, USA
3. New York, USA
4. Shanghai, China
5. Singapore, Singapore 
6. Tokyo, Japan
7. Toronto, Canada 
8. Kuala Lumpur, Malaysia 
9. Shenzhen, China 
10. Seattle, USA
11. Dubai, UAE
12. Seoul, South Korea
13. Sydney, Australia 
14. San Francisco, USA
15. Frankfurt, Germany 
16. Pittsburgh, USA
17. Sao Paolo, Brazil
18. Dallas, USA
19. Guangzhou, China
20. Houston, USA
21. Atlanta, USA 
22. Rio De Janeiro, Brazil 
23. Chongqing, China 
24. Melbourne, Australia
25. Philadelphia, USA
26. Johannesburg, S. Africa
27. Osaka, Japan
28. Panama City, Panama 
29. Miami, USA 
30. London, England
31. Las Vegas, USA
32. Boston, USA
33. Minneapolis, USA
34. Los Angeles, USA
35. Bangkok, Thailand
36. Calgary, Canada
37. Montreal, Canada
38. Jakarta, Indonesia 
39. Perth, Australia 
40. Paris, France 

Source: http://www.diserio.com/top15-skylines.html

M4 up 0.77% in November

As of 11/30/2012:
M2 = 10,263.9
Public debt = 11,553.2
Fed held = -1,644.7
-----------------------
Total as of (11/30/2012):  20172.4

This is up 155.8 or 0.77% in November.  It is interesting that this number is less than the government deficit in November.

For those who are just reading this, "M4" is what I call my measure of money.  I think it is going to go up about 1% every month into perpetuity.  As long as it goes up less than 1%/mo., we are doing fine.

I'm not seeing much Fed purchases yet.  Straight quantitative easing (purchases of Treasury securities) has no impact on M4 because it is just trading one form of "cash" (T-bills) for another form.  Purchases of MBS on the other hand does result in an increase in M4.

Taxes were less than 50% of gov't spending in November

In November 2012, the FedGov spent $334bn, but took in only $161bn taxes, leaving a deficit of $172bn, which it borrowed.
 

Kyle Bass says Japan will go ballistic in 12 to 18 months

I'm not saying that I am smarter than Kyle Bass, but I disagree.  He has been wrong before on Japan.  I think Japan will succeed in devaluing its currency to may 100 yen to the dollar, but that doesn't mean the debt bomb is going to go off.

See also: The Yen as a reserve currency

Where the rich people live

"New data from WealthInsight shows that Beijing and Shanghai each have more multi-millionaires now than Los Angeles. The study measures the segment of the population worth $30 million or more, known in wealth-industry parlance as "ultra-high-net-worth individuals."
Beijing has 1,318 people in that group. Shanghai has 2,028. Both are higher than Los Angeles, which has 950 people worth $30 million or more.
New York still towers over the others when it comes to the ultra-highs, with 2,929 people worth $30 million or more. But the BRICS are catching up. Sao Paulo, Brazil, has 1,310 ultra-highs – more than San Francisco, Washington and Miami combined. Moscow is now on par with Chicago when it comes to ultra-highs, while Mumbai has more than Dallas.
The number of ultra-highs in secondary BRIC cities like Puna, Fuzhou and Chongqing could nearly double over the next four years."
--http://www.cnbc.com/id/100289964

Lanzhou

Chinese developers are planning to flatten 700 mountains to make way for a new town in the north-west of the country. The nation's most ambitious "mountain moving" project is slated for a patch of desert the outskirts of Lanzhou in the Gansu province and is estimated to cost £2.2bn, according to the Guardian.
--http://www.telegraph.co.uk/news/worldnews/asia/china/9728795/China-700-mountains-to-be-levelled-to-make-way-for-new-town.html 

See also: Internet vigilantes call out Lanzhou mayor in bling scandal

Our Dear Leader proposes to abolish Congress

Congress is superfluous.  All they do is block our Dear Leader's proposals.  It should be turned into a rubber stamp body where they can pontificate on upcoming legislation, before our Dear Leader signs them.

Seriously, the most important power that Congress has is the power to control the purse strings. And the administration wants to abolish this power.  "The proposals from the White House – the first to use hard numbers – include a $1.6 tn tax increase, a $50bn stimulus package and new presidential powers to raise the federal debt limit without congressional approval."
--http://theconservativetreehouse.com/2012/11/29/dear-leaders-fiscal-cliff-proposal-1-6-trillion-in-tax-hikes-50-billion-in-stimulus-spending-obama-can-raise-debt-limit-without-congressional-approval/

Will Congress vote for its own demise?  We shall see.

What Japan should do

Japan needs a weaker currency.  Here is what it could do.

1.  Set up a unit (Unit A) to openly buy dollars on the open market with newly created yen, in fairly large amounts.  Say $2 billion/day (about 160 billion yen/day).  This should gradually weaken the yen.
2.  Give the money to Unit B, to buy up useful assets, say US government debt and gold.

This would have the effect of causing a little inflation.  However, it would also cause interest rates to rise, causing the deficit to soar.  This would also help bondholders, who should be happier with more interest.  It would also make Japanese debt worth less.

3.  Now, these assets should be given to Unit C, which would sell them to buy Japanese debt. Hopefully there would be enough assets here to counteract the rising interest costs. 

The net-net effect should be 1) a weaker currency, which would help exports, and get Japan out of the slump it is in; 2) debt which is cheaper to pay back, because of the weakened currency. 3) the deficit is taken care of with the additional assets purchased.  Boom, problem solved.  With higher inflation and interest, the bank could engage in normal operations (raising interest rates) to control inflation.

So, from the standpoint of a foreign investor, it would be dumb to buy yen right now.  And Kyle Bass will get his short on the debt.  But the Japanese economy won't collapse, to the contrary, it should recover to normal.

The Yen as a reserve currency

Here is a random thought.  What if the yen could replace the dollar as a reserve currency?

Exhibit 1:  As I have repeatedly shown, Tokyo is the top city in the world, above New York and London.  Two other Japanese cities, which are always ignored - Osaka and Nagoya - are more important cities, financially speaking, than the top Chinese city, Shanghai.  Japan is the top creditor nation in the world.  (China, with Hong Kong, is #2).  The US is the top debtor nation in the world with the UK as #2.  The largest foreign owner of US government debt is China, and #2 is Japan, and Japan will soon be the biggest because China has stopped buying US debt.

Exhibit 2:  The JGB is known as the "widowmaker" and that status is likely to continue.  Even though the Japanese debt is enormous, the interest rates on bonds is lower than US bonds (Japanese 30-year: 1.92% vs. US 30-year: 2.76%).  Although the interest rates on both will inevitably rise, the Japanese have more room to rise.  Even though the Japanese invented quantitative easing, the yen continues to be a very strong currency.  Its value has increased from 100-yen to the dollar in 2009 to 80-yen to the dollar today.  (Although recently it has been weakening from 79.5 to 82.5).  As anecdotal evidence (not worth much), at least one person has the opinion that the US will go down before Japan.

Exhibit 3: The Japanese Yen will be the default reserve and trading currency for the Asian countries (Singapore, Malaysia, Thailand, Vietnam, Indonesia, Philippines, Brunei, Cambodia, Laos, and Myanmar, China, Japan, South Korea, and Taiwan).

Exhibit 4:  The Chinese yuan is nowhere ready to be a reserve currency.  This would take massive and numerous changes which China does not have the desire to do.  The Chinese economy may soon be slowing down or experiencing a bust, and the government is too insular.  Until the yuan is ready, the yen (and to a lesser extent, the Australian dollar) may act as a proxy.

Counter-argument:  Japan is crippled with the economic disaster of Fukushima.  It has an aging population, and recently its current account deficit turned negative.  However, these problems do not overshadow the previous factors.

Conclusion:  The yen may replace the USD as a reserve currency.  

See also:  Could the Australian dollar be a reserve currency?

==============

From: http://www.easyforexnews.net/wp-content/uploads/2012/05/Global-Research2.pdf
"The yen can lay claim to being the only true safe haven currency. Japan has USD 3.1tr of net overseas assets and the large government debt is almost entirely held by domestic investors. ...Although the liquidity of the dollar means that it can sometimes behave as if it were a safe haven currency, it remains vulnerable to loss in overseas confidence in its public finances. There are other countries which have large holdings of overseas assets, but they cannot be considered viable alternatives to the yen because they are either too illiquid (NOK, SGD) or too closely controlled (CHF) to offer a genuine safe haven."

=============
Update:  Kyle Bass thinks the yen will blow up in 12-18 months because Shinzo Abe will do everything in his power to create inflation.  Japan is now running $100 billion/month trade deficits. And then when inflation reaches 3% the whole thing will blow up.

It could be, but Bass has been wrong before on Japan.  A weaker yen may help the Japanese economy.  And even at $100 billion/month, Japan has so high a surplus, it will take a while to burn through it.  Something to watch though.  And so maybe it isn't such a good idea to buy yen if it will be weakened further.

The three and a half class society

See: http://www.oftwominds.com/blogoct12/three-classes10-12.html

This is an interesting post.  The numbers don't exactly add up but the concept is solid.

The half-class ("upper class") is the upper 0.5%, who earn $1 million or more per year,  who own most of the wealth in the country and who benefit the most from the growth in the national debt.  Most of their income is in the form of passive income, such as capital gains and dividends.  There are about 750,000 people in this category.

The first class ("upper middle class") is the next 19.5% (or 24.5%), who with the upper 0.5%, pay 85% of all income taxes.

The second class is the lower middle class, which is the bottom 75% (or 80%) of workers.  This is defined as people who pay some, however small, amount of income tax, in addition to social security tax.  A single person who makes more than $9,750 or a married couple who makes more than $19,500, falls into this class.  They pay only 15% of all income taxes.

The third class is the poor, who pay no income tax, and are dependent on government handouts. 

The most important class here is the first class, who do most of the important work and pay most of the income taxes.  If they rebel, then the whole system collapses.

Flash crash in gold

Source: http://www.kitco.com/charts/livegold.html

This morning, gold crashed from $1740/oz to 1708 before returning to about 1717.  At 8:22am this morning, NY time, it dropped $15/oz in 2 seconds.   I'm baffled by the sudden move.  What would make anyone panic enough to dump a bunch of gold in exchange for ... dollars?  Are US dollars seriously a better asset than gold?

Silver and oil also dropped.

Update:  24 tons of paper gold were dumped at 8:20am.

Even More Cities

These are cities with an estimated GDP of between $50 billion and $70 billion.  This is a continuation of the previous list here.

148. Nantong, Jiangsu  [69]
149. Shijiazhuang, Hebei [68]
150. Changchun, Jilin, China 67
151. Providence RI [66]
152. Salt Lake City UT [66]
153. St. Petersburg, Russia [66]
154. Ottawa, Canada [66]
155. Xi'an, Shaanxi, China [65]
156. Memphis TN [65]
157. Marseille, France [65]
158. Richmond VA [64]
159. Calgary, Canada [64]
160. Bogota, Colombia [64]
161. Lyon, France [64]
162. Kuala Lumpur [63]
163. Fuzhou, Fujian, China [62]
164. Weifang, Shangdong, China  [62]
165. Changzhou, Jiangsu, China [61]
166. Jacksonville FL [60]
167. Edmonton, Canada [60]
168. Daegu, South Korea [60]
169. Rotterdam, Netherlands [60]
170. Xuzhou, Jiangsu [59]
171. Louisville KY [59]
172. Wenzhou, Zhejiang, China  [58]
173. Daqing, Heilongjiang, China [58]
174. Oklahoma City OK [58]
175. Luxembourg [58]
176. Zibo, Shandong  [57]
177. Raleigh-Cary NC [57]
178. Shaoxing, Zhejiang  [56]
179. Delhi, India [56]
180. Kaohsiung, Taiwan [56]
181. Glasgow [56]
182. Lima, Peru [56]
183. Helsinki, Finland [56]
184. Hefei, Anhui [54]
185. Turin, Italy [54]
186. Birmingham AL [53]
187. Porto Alegre, Brazil [53]
188. Ordos, Inner Mongolia  [52]
189. Jining, Shandong [51]
190. Honolulu HI [51]
191. Auckland [51]
192. Recife, Brazil [51]
193. Lille, France/Kortrijk, Belgium [51]
194. Cairo, Egypt [50]
195. Guadalajara, Mexico [50]
196. The Hague, Netherlands [50]
197. Fortaleza, Brazil [49]
198. Salvador, Brazil [48]
199. Caracas, Venezuela [48]
200. Omaha-Council Bluffs NE-IA [48]

Chengdu

Chengdu

"By the end of this year a fifth of all computers in the world will be manufactured in Chengdu, the ancient Sichuan capital of western China.

The great leap forward has come with lightning speed, and spans the gamut of hi-tech industry. The three state-telecom giants -- China Mobile, China Unicom, China Telecom -- are together spending $4.7bn to create the world's largest cloud-computing base at the city's Tianfu software park.
...
Intel has since shifted the bulk of its operations from Shanghai, which already has Californian wage costs in pivotal sectors. It now produces half the global supply of laptop chips from its Chengdu operations.
The big names of the computer industry have followed in a sudden migration. Dell and the China's Lenovo came in 2011. Foxconn has cranked up operations from nothing to 80,000 workers in barely two years. Last month it built 80pc of Apple's worldwide output of iPads at eight cavernous galleys outside the city.

"
--http://www.telegraph.co.uk/finance/comment/9701910/Hi-tech-expansion-drives-Chinas-second-boom-in-the-hinterland.html

More Top Cities

This is a continuation of the latest list, and includes all cities with a GDP of $70 billion/year or more.  It also arbitrarily values the Chinese currency at 5 yuan = $1.  The number in brackets is the estimated GDP.  European cities are bolded, and Chinese cities are italicized.

101. Kyoto (Osaka), Japan [101]
102. Shenyang, Liaoning [100]
103. Mumbai [100]
104. Zurich [97]
105. Cologne, Germany [96]
106. Athens [94]
107. Brasilia [94]
108. Sacramento [93]
109. Columbus, OH [93]
110. Tel Aviv/Jaffa [92]
111. Changsha, Hunan [91]
112. Las Vegas [90]
113. Sapporo, Japan [90]
114. Kobe, Japan [90]
115. Tangshan, Hebei [89]
116. Jakarta, Indonesia [89]
117. Dublin [89]
118. Santiago, Chile [88]
119. Leeds, UK [88]
120. Stuttgart [87]
121. Busan, South Korea [87]
122. Yantai, Shandong [87]
123. Austin, TX [86]
124. Tehran, Iran [86]
125. Manchester, UK [85]
126. Dongguan, Guangzhou [85]
127. Jeddah, Saudi Arabia [85]
128. Milwaukee, WI [85]
129. Bridgeport-Stamford-Norwalk, CT [85]
130. Manila [84]
131. Johannesburg/East Rand/West Rand [83]
132. Sendai, Japan [83]
133. San Antonio, TX [82]
134. Nashville, TN [81]
135. Virginia Beach/Norfolk, VA [81]
136. Adelaide, Australia [81]
137. Zhengzhou, Henan, China [80]
138. Hartford, CT (ex. Springfield, MA) [79]
139. Ji'nan [Jinan], Shangdong, China [78]
140. Bangkok, Thailand [75]
141. Naples, Italy [75]
142. Belo Horizonte, Brazil [75]
143. Harbin, Heilongjiang, China [73]
144. Amsterdam, Netherlands [72]
145. New Orleans [71]
146. Incheon, South Korea [71]
147. Quanzhou, Fujian, China [71]

Honorable Mention:
These need more research. They were all in the top 100 on one of the lists, but are not even in the top 145 here.
Xi'an, Shaanxi, China
Delhi, India
Cairo
Karachi
Changchun, Jilin, China
Kuala Lumpur
Kunming, Yunnan, China
Kolkota, India
Taiyuan, Shanxi
Dhaka
Lagos
Xiamen, Fujian, China
Changzhou, Jiangsu, China
Hefei, Anhui
Xuzhou, Jiangsu
Fuzhou, Fujian
Luanda, Angola
Ankara, Turkey
Kaohsiung, Taiwan
Nanchang, Jiangxi
Geneva, Switzerland
Auckland
Prague
Warsaw
Monaco
Krakow
Cape Town
Bucharest
Panama City
Bangalore
Muscat
Lima
Bogota
Ahmedabad
Durban
Medellin
Pune
Hyderabad
Almaty
Ho Chi Minh City
Wellington, New Zealand
Budapest
Caracas
Honolulu
St. Petersburg, Russia
Glasgow
Edinburgh
Guadalajara

Market forces will bring down the American Eagle

"Just when the adverse market reactions will occur cannot be predicted. But when they do so, the U.S. economy will be crushed by an avalanche of unstoppable magnitude.
Once creditors determine that U.S. Treasury’s are no longer the safest form of investment available, demand for those Treasury’s will decline, interest rates will rise, and the cost of servicing the debt will explode.  Even a modest 1 per cent interest rate increase, for example,  would wipe out all the deficit reduction included in last year’s Budget Control Act.  In other words, all the pain envisaged in the fiscal cliff would provide no deficit relief at all.
In reality, if market forces move against U.S. Treasury’s they would not impose a 1 per cent cost. Interest rates would increase more likely to 5 or 6 per cent per annum on the initial tranche. Such penalties would require massive and immediate cuts to Social Security Medicare and National defense and most likely would take Medicaid right off the federal accounts. Even the Congressional Budget Office projects that, under the most likely scenario, in 30 years from now,  net interest payments on the U.S. national debt will amount to $3.8 trillion per annum in real 2012 dollars. That is more than total government spending in 2011."
--http://charlesrowley.wordpress.com/2012/11/26/when-market-forces-bring-down-the-american-eagle/

Buzludja

This shows the inside of the ruins of the former communist headquarters in Bulgaria, called Buzludja.  It is a very interesting building, and an amazing example of modern ruins.  It was abandoned in 1989 with the fall of communism.

An analysis of the mess we are in

I think Rush Limbaugh described it best.  People are voting for Santa Claus.  There are now more people dependent on the government than those supporting it.

So here are the categories of the dependents:
1.  The Destitute.  These are people utterly dependent on the government who would be dead within 2 months if their government dole was cut off.  These people receive TANF, Food Stamps, welfare, Section 8 housing, tax credits, Medicaid, disaster relief and other government aid.  There are now 47 million people on food stamps, and 62 million receiving Medicaid as of 2009.  This class of people did not exist until 1964 until Johnson introduced his War on Poverty.  The exact number of these people is unknown because there are multiple overlacking programs.  The question of race is an undertone here, but it should be noted that only 22% of food stamp recipients are black.
2.  The Entitled.  These are people who cannot be considered destitute, but receive government assistance, and generally feel like they "earn it".  These are people receive Social Security, Medicare, and tax credits.
3.  The Providers.  These are generally middle-class people who provide services to the Destitute and the Entitled and have an interest in seeing the numbers rise.  This includes landlords (who receive Section 8 payments), and workers at grocery stores, liquor stores, nursing homes and medical facilities.  A large proportion of health care costs (say 50%) are paid to providers.  This would also include government bureaucrats who oversee the process.
4. The Military-Industrial Subcomplex.  There are about 1.1 million military members on active duty, and about 22 million veterans.  In addition, there are numerous civilians who are employed by the military and the VA. Add it government subcontractors. 

What is the dollar amount of these categories?  While this can only be a very rough guess, and there is some overlap, these are approximate numbers:
1. HHS & DoA = $1023 bn.
2. SSA = $829bn
4. DoD & VA = $817bn.
Category 3 - Providers is not split out separately, because they receive money from these other sources. 
These total $2669bn, a very large percentage (about 75%) of total government outlays.

A quick and dirty analysis of the situation indicates that these numbers all need to be cut by 1/3 to 1/2, which would mostly fix the deficit problem but which would cause other social problems (riots?).  This becomes unthinkable.  Is now the time to do the cuts?

I guess the bigger question, which I perpetually ask is, how long can this situation (having trillion dollar deficits) go on?  The US is very fortunate in being the world reserve currency, and the world has an appetite for Treasury bonds. It would be fair to say that the financial system is subsidizing our social-welfare system. The interest rate on 30 year bonds is about 2.9%.  (I think a fair interest rate of 30 year bonds would be about 5% but I digress).

So the short answer, is that there is no problem at the moment.  As long as the 30 year bonds are below about 4%, then they are cheap and the government should take advantage of the situation.  So, logic says, kick the can down the road for a few years and see where we are then.  How about raising the debt ceiling to exactly $20 trillion, and agree that it will not be raised again until we have a new president in 2017?

Debt Ceiling History

Here is a short history of the debt ceiling.  All numbers in billions.

8/5/1997: raised $450 from $5500 to $5950
6/28/2002: raised $450 from $5950 to $6400
5/27/2003: raised $984 from $6400 to $7384
11/19/2004: raised $800 from $7384 to $8184
3/20/2006: raised $781 from $8184 to $8965
10/1/2007: raised $850 from $8965 to $9815
6/30/2008: raised $800 from $9815 to $10,615
10/1/2008: raised $700 from $10,615 to $11,315
2/17/2009: raised $789 from $11,315 to $12,104
12/28/2009: raised $290 from $12,104 to $12,394
2/12/2010: raised $1900 from $12,394 to $14,294
8/2/2011: raised $400 from $14,294 to $14,694
9/8/2011: raised $500 from $14,694 to $15,194
1/30/2012: raised $1200 from $15,194 to $16,394

This latest debt ceiling will be reached about 12/31/2012, but through extraordinary measures, the Treasury will be able hold out through about mid-February 2013.

The Wonderful One-Hoss Shay

"Have you heard of the wonderful one-hoss shay,
That was built in such a logical way
It ran a hundred years to a day,
And then of a sudden it — ah, but stay,
I’ll tell you what happened without delay,
Scaring the parson into fits,
Frightening people out of their wits, –
Have you ever heard of that, I say?
...
...
What do you think the parson found,
When he got up and stared around?
The poor old chaise in a heap or mound,
As if it had been to the mill and ground!
You see, of course, if you’re not a dunce,
How it went to pieces all at once, –
All at once, and nothing first, –
Just as bubbles do when they burst.
End of the wonderful one-hoss shay.
Logic is logic. That’s all I say."
--http://www.legallanguage.com/resources/poems/onehossshay/

That is our financial system.  We believe that it is IMPOSSIBLE for the US Treasury or Federal Reserve to ever default.  The US dollar is invincible - it will never fail.  Until the day when it all collapses at once.  But that is inconceivable.  Which makes the day it inevitably collapses a much worse event then it otherwise would be.  But can we kick the can down the road for the next 50 years? If so, then it's not our problem.

The Fed is only buying the debt, not monetizing it

"There many myths about Fed policy over the past few years, but the biggest one has to be that the Fed has been monetizing the national debt. This simply is not true, but it does not stop some folks from making this claim. ... how can they can say this with historically-low U.S. treasury yields and muted inflation expectations? Surely, if the Fed were truly monetizing the debt we would be seeing a 1970s-repeat in the bond market, but we are not."
--http://macromarketmusings.blogspot.com/2012/11/the-biggest-myth-about-fed.html

Response (not mine):

"K. So over the past week, the Fed closed on $60 billion in MBS purchases from the Primary Dealers. At the same time, the Treasury floated $45 billion in unscheduled Cash Management Bills, for which the Primary Dealers were almost the exclusive buyers.

Each month the Treasury floats about $70-80 billion in net new debt. Each month the Fed closes on the purchases of about $70-80 billion of MBS from the Primary Dealers, who then use that cash to fulfill their obligation to purchase the new Treasury debt.

But the Fed isn't monetizing the debt. No sirree Bob. No it's not. Why not? Because you said so. And you're an economics professor. That's why.

Lee Adler
The Wall Street Examiner
http://wallstreetexaminer.com"

So the Treasury sells debt to the Primary Dealers.  And the Primary Dealers, after a short delay, sell it to the Fed.  But it's not monetization until Simon says it is.

An electronic currency would allow negative interest rates

Right now, interest rates can't go below zero, because if they did, people would just stuff the paper currency under their mattresses. But if there were no paper currency, if it was entirely electronic, then banks could charge negative interest rates.

 "The trouble with paper money is that the rate of interest people earn on holding paper money puts a floor on the interest rate they are willing to accept in doing any other lending. For the US, I proposed making the electronic dollar the “unit of account” or economic yardstick for prices and other economic values, and having the Federal Reserve control the exchange rate between electronic dollars and paper dollars to make paper dollars gradually fall in value relative to electronic dollars during periods of time when the Fed wants room to make the interest rate negative."
--http://qz.com/29598/how-the-electronic-deutsche-mark-can-save-europe/

"So why can’t the Fed just lower the federal funds rate further? The problem may surprise you: it is those green pieces of paper in your wallet. Because they earn an interest rate of zero, no one is willing to lend at an interest rate more than a hair below zero."
--http://qz.com/21797/the-case-for-electric-money-the-end-of-inflation-and-recessions-as-we-know-it/

To do this would require a new type of currency.  Say goodbye to the greenback - its days are numbered.

Architecture in China

Here is an amazing series of photos about architecture in China and Hong Kong.

The men who crashed the world

This looks interesting. I haven't watched it yet.

Why hasn't hyperinflation happened yet?

I like this guy.  He isn't into hype but he also isn't swallowing the Keynesian koolaide.

The reason we don't have hyperinflation is: 1) because we have a bond market denominated in our own currency, and 2) because the US dollar is the world reserve currency.  So before we would have hyperinflation we would have interest rates soar on our bond markets.  And also we would see foreigners abandon the dollar.

It's fun to spend other people's money

"Treasury Secretary Timothy Geithner said the U.S. "absolutely" should get rid of the debt ceiling as soon as possible.  "It would have been time a long time ago to eliminate it," Geithner told Bloomberg TV on Friday. "The sooner the better." Geithner did not commit to personally doing anything to eliminate the nation's legal limit on borrowing. When pressed on the issue, Geithner told Bloomberg TV: "This is only something only Congress can solve. Congress put it on itself."  "Only once, last summer, did people decide to use it to threaten default on the American credit for the first time in history as a tool for political advantage," he continued. "And that's not a tenable strategy for the country....Geithner said he doesn't plan to keep his job much longer. He told Bloomberg TV that he's agreed to stay as treasury secretary "until mid-January."

--http://www.presstv.com/usdetail/272865.html

Geithner is an idiot.  Without a debt ceiling, there would be no constraints at all on spending. We no longer use budgets. I think we should get rid of Turbo Tax Timmy as soon as possible.  Although his replacement probably won't be any better.

The impact of quantitative easing

There is a theory that I read (I don't remember where), that quantitative easing has no impact at all, because it is only a change on the Fed's balance sheet.  I disagree.

So let me set the stage.  There are two types of money, type A and type B.  (There are actually more but I want to keep this simple).  Type A is central bank money.  Cash in your hand is type A.  Bank reserves parked at the Fed are also Type A.  Type B is bank liabilities.  Your checking account is type B.  They are interchangeable.

Now consider two different scenarios.  First, a bank, call it TBTF Bank, owns a 30 year treasury bond for $1 million that they agree to sell to the Fed.  The Fed writes them a check for $1 million.  (It would actually be a wire transfer, but bear with me).  The check is type A.  TBTFB would deposit is in its account with the FRB, and this would be excess reserves.  In this scenario, it is true that QE would have no impact.  The excess bank reserves serve the same purpose as the bond did and the only difference is the reserves pay less interest.

Second scenario.  A hedge fund owns a bond that they sell to the Fed for $1 million, and they get a check.  The hedge fund doesn't have a bank account with the Fed.  The check is type A.  The hedge fund deposits it in their account with TBTF bank.  So what happens here?  The bank in turn deposits the $1 million in their account at FRB.  So the bank's assets (the FRB deposit) and their liabilities (the hedge fund deposit), both go up by $1 million.  Type A money goes up by $1 million, but so does type B money.  So the Type B money goes up dollar for dollar with the type A money.  The hedge fund is now free to buy stocks or whatever else they want with the money.

Conclusion:  Quantitative easing (the expansion of the central bank's balance sheet) increases the money supply dollar-for-dollar, unless it results in excess reserves being stored with the central bank.

Military Purge

"The Obama Putsch regime is now consolidating power and is purging the military of any flag officers that either have inside information that could blow the lid off the regime and/or men that they fear could organize a junta or counter-coup. And, as with Rohm and the SA, the modern American flag officer corps, as I have said many, many times, is a hive of sickening moral degenerates. Almost ALL flag officers today are adulterous fornicators who can be blackmailed exactly like Petraeus."
--http://www.barnhardt.biz/

That's the best explanation for what is going on.  Does anybody really think this is about a few emails?

The hit-list:
Africom General Carter Ham
Marine Corp Gen. Joseph Dunford
Navy Rear Admiral Charles M. Gaouette
CIA Director (Gen.) David H. Petraeus
Marine Corp Gen. John R. Allen
Army Brig. Gen. Jeffrey Sinclair - ("You can take this to the bank - Brig. Gen. Jeffrey Sinclair has been humiliated in headlines coast to coast - "FORCIBLE SODOMY" ad nauseam - because someone very high up the chain of command wants him destroyed, utterly and completely.")
Navy Cmdr. Joseph E. Darlak - for "failure to ensure the proper conduct of his wardroom officers" during a port visit to Vladivostok in September.

Drunk guy tries to explain the fiscal cliff

Too funny!

D minus 40

The fiscal cliff is still looming, and nothing has been done yet.  There are numerous issues and they really come as a package.

Intrade sees only 20% chance the debt limit will be raised before December 31, 2012.  So there you go - an asteroid is headed straight for earth, and there is an 80% chance it will hit.  What do you do?  Nothing, it probably won't hit YOUR house so who cares?

==========
The Democrats have drawn a line in the sand and insist on higher taxes for the wealth (over $250,000).
"A leading Democratic senator has said her party should be willing to go off the fiscal cliff in order secure tax rises on the wealthy, raising the stakes in year-end budget negotiations." If the Republicans will not agree with that, we will reach a point at the end of this year where all the tax cuts expire and we’ll start over next year,” said Sen. Patty Murray [D-WA], who was co-chair of last year’s deficit supercommittee, on ABC’s This Week. “And whatever we do will be a tax cut for whatever package we put together. That may be the way to get past this.”
--FinancialTimes


"Right now, if Congress fails to come to an agreement on an overall deficit-reduction package by the end of the year, everybody's taxes will automatically go up on Jan. 1," President Obama explained Friday. "Everybody's -- including the 98 percent of Americans who make less than $250,000 a year. ... It would be bad for the economy and would hit families that are already struggling to make ends meet." Obama was describing the "fiscal cliff," over which he and other Democratic leaders have already said they would be happy to jump.
--WashingtonExaminer 

Republican leader Sen. Mitch McConnell [R-KY] is also drawing a line and insisting on NO new taxes for anyone.
"One issue I’ve never been conflicted about is taxes. I wasn’t sent to Washington to raise anybody’s taxes to pay for more wasteful spending and this election doesn’t change my principles. This election was a disappointment, without doubt, but let’s be clear about something: the House is still run by Republicans, and Republicans still maintain a robust minority in the Senate. I know some people out there think Tuesday’s results mean Republicans in Washington are now going to roll over and agree to Democrat demands that we hike tax rates before the end of the year. I’m here to tell them there is no truth to that notion whatsoever."
--BreitBart 

Who will blink first? And will they be willing to hike the debt limit without an agreement on taxes?

============
Here are the taxes that will rise on Jan. 1:

"1. Bush-Era Tax Cuts: this includes the return of the current 10/15/25/28/33/35% individual tax rate brackets to the pre-2001 rates of 15/28/31/36/39.6%, the return of the tax-rate on long term capital gains and qualified dividends from 15% to 20% and 39.6%, respectively, and the return of the limitation on itemized deductions and phase out of personal exemptions.
2. Obama-Era Tax Cuts: on January 1, 2013, several provisions that benefit the lower classes — most notably the increased child tax and earned income credits and the expanded education credits — are slated to expire.
3. The Estate Tax: the estate tax exemption and tax rate are currently at $5,120,000 and 35%, respectively. Come January, they will return to $1,000,000 and 55%.
4. Expiration of the AMT Patch: The most recent patch raised the AMT exemption for 2010 and 2011 from $45,000 to $74,450 for MFJ. In 2013, this will reset to $45,000, pulling tens of millions of taxpayers into AMT.
5. Temporary Payroll Tax Cut: For 2011 and 2012, the employee’s share of Social Security tax was cut from 6.2% to 4.2%. This rate cut expires at year end.
6. Obamacare Taxes: Starting in 2013, taxpayers earning more than $250,000 will pay an additional 0.9% tax on their wages and 3.8% on their unearned income (interest, dividends, capital gains.)
7. Extenders: There are a host of provisions set to expire at year end that regularly do so, before Congress retroactively resuscitates them. Foremost among the “extender” provisions are the R&D credit and the personal deduction for state and local income taxes.
When these changes kick in, federal tax revenue is anticipated to increase by $438 billion over 2012."
--http://www.forbes.com/sites/anthonynitti/2012/11/12/the-fiscal-cliff-for-dummies-part-2-a-closer-look-at-the-economic-implications-of-extending-the-bush-tax-cuts/2/

The people have spoken.  Let it be done.

Collapse 101

Prof. Ann Barnhardt gives a must-watch 2.5 hour presentation on the coming economic collapse.  Watch it and write a 2-5 page report summarizing it and whether you agree or disagree.

Benghazi fallout

There are now 5 top officials who were fired or resigned because of Benghazi (or perhaps not):

Africom General Carter Ham.  Fired because he disobeyed an order (from whom? Petraeus? Panetta? Dempsey?) to stand down.
Marine Corp Gen. Joseph Dunford.  Involvement unknown, but he was relieved of duties at the same time as Gen. Ham.  He will be sent to Afghanistan.
Rear Admiral Charles M. Gaouette.  Officially relieved of command "pending the outcome of an internal investigation into undisclosed allegations of inappropriate judgment".  However, there are rumors that he was fired for assisting General Ham.
Sec. of State Hillary Clinton.  She took full responsibility for the failure and will be retiring shortly after the 2nd inaguration.
 CIA Director David H. Petraeus.  The official reason for his resignation was because of an extramarital affair with Paula Broadwell.  His sudden resignation will conveniently keep him from testifying about Beghazi next week.

At least they got the guy who was really responsible:  Nakoula Basseley Nakoula who, one day after the election, was sentenced to one year in prison for offending Muslims.

And don't forget about the dead guy:  Christopher Stevens, but he's just a rich white guy so who cares, right Obama?

==============
Update:   "The FBI has found between 20,000 and 30,000 pages of  "potentially inappropriate" e-mails between Gen. John R. Allen and Jill Kelley, the 37-year-old Tampa woman allegedly threatened by David Petraeus’s mistress. ... In his statement, Panetta said Allen would remain as commander of U.S. and NATO forces in Afghanistan for now, “while the matter is under investigation and before the facts are determined.” But his time there may be short. Panetta has also asked the Senate to expedite the confirmation of his likely successor, Marine Gen. Joseph Dunford."


What a wicked web we weave ....

M4 up 1.35% in October

Oct. 31 2012 Monetary Supply:

M2 (as of 10/29/12): 10257.3
Public Debt (as of 10/31/12): 11411.5
Less Owned by Fed (as of 10/25/12):  -1652.2
----------------------------
Total Monetary Supply (as of 10/31/2012):  20016.6   

I am now calling this number M4, for back of a better term.  The total on 9/30/2012 was 19749.4,
so this is up 267.2, or 1.35% in October (up from 0.30% in September).  This is a lot for only 1 month, and in normal circumstances we would be seeing price inflation. 

FEMA refugee/prison camp in NJ

OCEANPORT — As he lights up a Marlboro and takes a slow drag before exhaling, Brian Sotelo is a man who has finally reached his breaking point.Anger drips from every word as he peers out at the tops of the white tents rising over the trees in the distance. The depth of despair in his eyes is difficult to fathom.
And he makes it clear he’s was not going down without a fight.
We stood and talked in the cool morning air a short distance up the road after security at the front gate threatened to have our cars removed outside the entrance to what Sotelo’s identification tag calls “Camp Freedom,” even though it more closely resembles a prison camp.
A Seaside Heights resident who was at Pine Belt Arena in Toms River with his wife and three kids a half-hour before the shelter opened as superstorm Sandy approached last week, Sotelo was part of a contingent shifted on Wednesday to this makeshift tent city in the parking lot across Oceanport Avenue from Monmouth Park.
“Sitting there last night you could see your breath,” said Sotelo. “At (Pine Belt) the Red Cross made an announcement that they were sending us to permanent structures up here that had just been redone, that had washing machines and hot showers and steady electric, and they sent us to tent city. We got (expletive).
“The elections are over and here we are. There were Blackhawk helicopters flying over all day and night. They have heavy equipment moving past the tents all night.”
Welcome to the part of the disaster where people start falling through the cracks.
No media is allowed inside the fenced complex, which houses operations for JCP&L’s army of workers from out of the area. The FEMA website indicated on Monday that there had been a shelter for first responders, utility and construction workers to take a break, although the compound now contains a full-time shelter operated by the state Department of Human Services.
Sotelo scrolls through the photos he took inside the facility as his wife, Renee, huddles for warmth inside a late-model Toyota Corolla stuffed with possessions, having to drive out through the snow and slush to tell their story. The images on the small screen include lines of outdoor portable toilets, of snow and ice breaching the bottom of the tent and an elderly woman sitting up, huddled in blankets.
All the while, a black car with tinted windows crests the hill and cruises by, as if to check on the proceedings.
As Sotelo tells it, when it became clear that the residents were less than enamored with their new accommodations Wednesday night and were letting the outside world know about it, officials tried to stop them from taking pictures, turned off the WiFi and said they couldn’t charge their smart phones because there wasn’t enough power.
“My 6-year-old daughter Angie was a premie and has a problem regulating her body temperature,” Sotelo noted. “Until 11 (Wednesday) night they had no medical personnel at all here, not even a nurse. After everyone started complaining and they found out we were contacting the press, they brought people in. Every time we plugged in an iPhone or something, the cops would come and unplug them. Yet when they moved us in they laid out cable on the table and the electricians told us they were setting up charging stations. But suddenly there wasn’t enough power.”
All of this is merely the last straw for a 46-year-old on disability, with two rods and 22 staples in his back.
“The staff at the micro-city are providing for the needs of all the evacuees,” said Nicole Brossoie, spokeswoman for the Department of Human Services. “Each day there is transportation to the pharmacy for prescription medications, if needed. There are ADA (handicapped-accessible) toilets and showers on site.
“There were concerns with the heat when evacuees first arrived. Those issues were resolved within a couple of hours by adding more heaters.”
Sotelo’s seen the home he rents on Kearney Avenue even though residents have yet to be allowed back, having been enlisted as a driver for the Red Cross.
He was on the barrier islands the day after the storm, as a matter of fact. There had been a foot of water in his place. That’s it. And now he’s left to wonder why he’s still not allowed back.
Even without gas or electric, he figures it has to be better than this place.
“Everybody is angry over here. It’s like being prison,” said Sotelo, who grew up in Wayne. “I’ve been working since I was 10. I’ve been on my own since I was 16. And for things to be so bad that it’s pissing me off, that tells you something.”
After a night of restless sleep in which his cot actually broke at one point, landing him on the floor, what Sotelo wants are answers and action. He wants to go home, and until that happens he wants a little respect.
Finally, he tosses his cigarette butt aside and sidles back into the driver’s seat of his car, ready to head back through the gates of the encampment, as confused and frustrated as ever about his future.
--http://www.app.com/viewart/20121109/NJNEWS/311090027/Oceanport-sandy-shelter

Who is Pamela Geller?

See: http://atlasshrugs2000.typepad.com/

The probability of a recession is at 20%

See: http://research.stlouisfed.org/fred2/series/RECPROUSM156N
http://politicalcalculations.blogspot.com/2012/11/a-rising-probability-of-recession-in-us.html

It's never been this high before and not gone into a recession.  But the data is only updated once a month.  So check back at the beginning of December and see where we are at.  If it goes any higher, its 2008, or at least 2001, all over again.

==================
Here is another index that can show in real-time a recession happening: the number of publicly traded dividends cutting dividends.   This is something else to watch in December.

==================
Here is another index that supposedly shows a recession is coming: collapse in new orders 
"the October Y/Y Plunge of -8.1% in this major indicator was the biggest drop since 2009".  I don't think this shows a recession yet, but if it continues it will.

=================
Update: 12/10/12.  The recession indicator was a temporary spike.  It went back down.  So we are not in a recession yet.

October deficit was $113 billion

Revenue is up 20 bn over October 2011, but Outlays are up 35 bn.

See the latest Monthly Budget Review.

Chairman

Xi Jinping (习近平) is the new Secretary-General of the Chinese Communist Party (中国共产党).

"I think you got it wrong. As of yet he has (just) been named secretary-general (秘书长) of the 18th party congress (i.e. the main secretary at the meeting itself), not CPC secretary-general. Reread the tweet you are referring to. Also, I believe the top CPC position of 主席 is officially translated as Chairman, not secretary-general.

Sorry, I also got it wrong with the titles. The top CPC position is not 主席 but 总书记. Nevertheless, as of now, he has still only been named 秘书长 of the 十八大, not the 总书记 of the CPC."
--http://shanghaiist.com/2012/11/07/xi_jinping_appointed_cpc_secretary.php

So here are the words for the day:
共产党  Gongchandang = Communist Party
中国共产党  Zhongwen Gongchandang = Chinese Communist Party
中共 Zhonggong = abbreviation for Chinese Communist Party
主席  zhu-xi = chairman/president
总书记  zong-shu-ji = General Secretary (or Secretary-General or First Secretary)
秘书长 mi-shu-chang (or mishuzhang) = Secretary General
十八  shiba = 18
十八大 shibada =  18th Congress
中共十八大 Zhonggong shibada = Chinese Communist Party 18th Congress

This seems a little confusing:
总 zong = general
书记 shuji = secretary.  This person keeps records and performs clerical work.
秘书 mishu = secretary. This could refer either to a clerical position or the head of a department, like Secretary of State.
长 chang = long, great
党委书记 = party secretary.  The person in charge of a local committee of the communist party.

So which word should be used?
总书记 should be translated "General Secretary".  This is the highest ranking official in the communist party, and currently is Hu Jintao.  Before 1982, the highest ranking official was called "Chairman" (主席).

But to make this more confusing, there is another title called "President" (主席)of China, which is a ceremonial role for the head of state, roughly similar to how it is in France.  This position is also currently held by Hu Jintao.

The Vice President (副主席)fu zhu-xi is another ceremonial role, currently held by Xi Jinping.

The head of government is called the Premier (总理 zongli) aka Prime Minister, and this is currently held by Wen Jiabao.  The Premier is assisted by multiple Vice Premiers (副總理 fu zongli).

The Secretariat of the Communist Party is its permanent bureacracy, and it reports to the General Secretary.  It is made up of multiple members, who are ranked by precedent, with the First Secretary (no link) being the top ranked.  The First Secretary is currently Xi Jinping.  (I think the First Secretary is next in line to the General Secretary).

The Politburo oversees the Communist party of China, and has about 25 members. The Politburo Standing Committee consists of nine members, including the four previously named. 

The National Congress is the highest body of the Communist party that meets every five years.  It is run by the Central Committee (with about 350 members), of which the Secretariat, previously mentioned, is the working executive body.   The Standing Committee is an expanded de facto legislative body of about 150 members.  The Standing Committee also has a judicial function, so it has some parallels with the old House of Lords.  It is lead by a Chairman, currently Wu Bangguo, which is a position analagous to the Speaker of the House.

The General Assembly of the National Congress has almost 2300 members, and is meeting right now in Beijing at the Great Hall of the People.  It elected as its leader Xi Jinping, no surprise.  The title of the leader is 秘书长.  But how should this word be translated?  As "Secretary-General".  The UN Secretary-General 联合国秘书长 is Ban Ki-Moon.

So Xi Jinping was elected Secretary-General of the General Assembly of the 18th National Congress of the Communist Party of China.  But Hu Jintao remains, for now, the General Secretary of the Central Committee of the Communist Party of China.  Got it?

One can't have their Dow and redistribute it too

Obama supporters were ecstatic and partied hearty last night.   The stock market reacted by dropping like its hot. 

"It seems like only last night everyone was celebrating more hope, if not much change. Now comes the hangover. The Dow Jones intraday drop is now 2.23% (and rising), greater than the biggest drop so far in 2012 record on June 1. The last time the market plunged as much: literally one year ago, or November 9, 2011. Sadly, it appears that one can't have their Dow Jones Industrial Average and redistribute it too."
--http://www.zerohedge.com/news/2012-11-07/dow-jones-industrial-average-celebrates-four-more-years-biggest-drop-year

Apple is down 3.4% today already.  Gold is up 2%; silver is up 3%.  Ironically, treasuries rose as a result of the flight to safety.

Obama Style

Hopefully, he will have time to make more videos like these.  Its more his style than being president.

Has the Social Security trust fund peaked?

Intragovernmental holdings were at 4859 bn on 10/2/2012 and have been lower ever since.  The most vivid example is between 10/30/12 and 11/2/2012.  On both dates, the total debt was almost the same (16204 and 16206), but the trust funds dropped by 37 bn and the debt held by the public rose by 39 bn.

If this number has peaked, then Debt Held by the Public must rise to account for the decrease.  The Treasury is using one credit card (debt held by the public) to pay for the other (intragovernmental holdings).

======================
Update:  I previously thought that 10/18/2011 was a high.  At that point, intragovernmental holdings were at 4744 bn.  So even if this isn't the peak, we are near it.

Fastest growing cities

These are cities with population of 750,000 or more, that are growing at a rate of 2.50% or more annually, during the years 2010-2015.  There are no cities from the US, Europe or India on this list

1. Yamoussoukro, Cote D'Ivoire 7.27
2. Ougadougou, Burkina Faso 6.52
3. Lilongwe, Malawi 5.08
4. Blantyre-Limbe, Malawi 5.06
5. Abuja, Nigeria 5.01
6. Huambo, Angola 4.64
7. Luanda, Angola 4.62
8. Jinjiang, China 4.61
9. Sana'a, Yemen 4.51
10. Hanoi, Vietnam 4.45
11. Kathmandu, Nepal 4.44
12. Vientiane, Laos 4.39
13. Niamey, Niger 4.35
14. Kampala, Uganga 4.31
15. Dar es Salaam, Tanzania 4.30
16. Kabul, Afghanistan 4.26
17. Kananga, DR Congo 4.26
18. Mbuji-Mayi, DR Congo 4.22
19. Kisangani, DR Congo 4.19
20. Lubumbashi, DR Congo 4.15
21. Bamako, Mali 4.11
22. Lomé, Togo 4.00
23. Nairobi, Kenya 4.00
24. Kinshasa, DR Congo 3.96
25. Mombasa, Kenya 3.86
26. Conakry, Guinea 3.84
27. Matola, Mozambique 3.84
28. Kigali, Rwanda 3.84
29. Yinchuan, China 3.76
30. Klang, Malaysia 3.75
31. Maputo, Mozambique 3.73
32. Lufeng, China 3.70
33. Cotonou, Benin 3.69
34. Hohhot, China 3.66
35. Xiamen, China 3.59
36. Mogadishu, Somalia 3.59
37. Zhongshan, China 3.57
38. Xuzhou, China 3.56
39. Huaibei, China 3.52
40. Zunyi, China 3.52
41. Handan, China 3.50
42. Yangzhou, China 3.50
43. Antananarivo, Madagascar 3.47
44. Da Nang, Vietnam 3.47
45. Dongying, China 3.37
46. Huludao, China 3.36
47. Sulaimaniya, Iraq 3.34
48. Hamah, Syria 3.34
49. Xining, China 3.31
50. Johore Bharu, Malaysia 3.25
51. Lagos, Nigeria 3.22
52. Zhenjiang, Jiangsu, China 3.19
53. Wenzhou, China 3.19
54. Benin City, Nigeria 3.13
55. Khartoum, Sudan 3.12
56. Yaounde, Cameroon 3.11
57. Taizhou, Jiangsu, China 3.10
58. Kumasi, Ghana 3.08
59. Douala, Cameroon 3.07
60. Aba, Nigeria 3.04
61. Wuhu, Anhui, China 3.04
62. Jos, Nigeria 3.04
63. Ogbomosho, Nigeria 3.04
64. Ilorin, Nigeria 3.03
65. Puning, China 3.02
66. Zaria, Nigeria 3.02
67. Accra, Ghana 3.01
68. Santa Cruz, Bolivia 3.01
69. Maiduguri, Nigeria 3.01
70. Daqing, China 3.00
71. Port Harcourt, Nigeria 3.00
72. Freetown, Sierra Leone 2.99
73. Jiaozuo, China 2.99
74. Abidjan, Cote D'Ivoire 2.98
75. Kaduna, Nigeria 2.97
76. Ciudad de Guatemala, Guatemala 2.97
77. Quanzhou, China 2.95
78. Mosul, Iraq 2.94
79. N'Djamena, Chad 2.93
80. Ho Chi Minh City, Vietnam 2.93
81. Port-au-Prince, Haiti 2.93
82. Nay Pyi Taw, Myanmar 2.92
83. Hims (Homs), Syria 2.91
84. Kano, Nigeria 2.89
85. Dakar, Senegal 2.89
86. Ibadan, Nigeria 2.88
87. Rahshahi, Bangladesh 2.86
88. Phnom Penh, Cambodia 2.86
89. Ürümqi (Wulumqi), China 2.86
90. Islamabad, Pakistan 2.83
91. Quetta, Pakistan 2.82
92. Hengyang, China 2.79
93. Khulna, Bangladesh 2.78
94. Tegucigalpa, Honduras 2.77
95. Lusaka, Zambia 2.77
96. Addis Ababa, Ethiopia 2.77
97. Fuzhou, Fujian 2.77
98. Irbil, Iraq 2.74
99. Peshawar, Pakistan 2.74
100. Hyderabad, Pakistan 2.73
101. Jieyang, China 2.73
102. Panjin, China 2.73
103. Gujranwala, Pakistan 2.72
104. Multan, Pakistan 2.72
105. Shaoxing, China 2.71
106. Yingkou, China 2.71
107. Chittagong, Bangladesh 2.70
108. Rawalpindi, Pakistan 2.69
109. Sharjah, UAE 2.69
110. Ningbo, China 2.69
111. Yancheng, Jiangsu, China 2.68
112. Baoding, China 2.67
113. Weifang, China 2.67
114. Faisalabad, Pakistan 2.65
115. Lianyungang, China 2.65
116. Zaozhuang, China 2.62
117. Zamboanga, Pakistan 2.61
118. Jingzhou, China 2.59
119. Tangshan, Hebei, China 2.59
120. Mandalay, Myanmar 2.57
121. Halab (Aleppo), Syria 2.57
122. Harare, Zimbabwe 2.57
123. Taian, Shandong, China 2.57
124. Brazzaville, Congo 2.55
125. Dhaka, Bangladesh 2.53
126. Bengbu, China 2.53
127. Huainan, China 2.52
128. Jiamusi, China 2.52
129. Xiangtan, Hunan, China 2.52
130. Xinxiang, China 2.52
131. Karaj, Iran 2.52
132. Lahore, Pakistan 2.51
133. San José, Costa Rica 2.50

Source: http://www.unhabitat.org/pmss/listItemDetails.aspx?publicationID=3387

Chengdu Eco-City

http://www.businessinsider.com/china-is-building-a-nearly-car-free-city-2012-11#a-system-of-electric-shuttles-will-make-cars-unnecessary-5

An optimistic view of money pumping

I have something to say and I'm not sure how to start so I will just dive in and hope it makes sense.

We have a very complex economic system and it is not clear how it should be designed in a utopian world.  There are problems with a strict gold standard and it did not stop the great depression from occurring.  Maybe a floating or targeted gold standard would be better.  But during a crisis would you abandon or relax it?  And are we still in such a crisis, if we were on a targeted gold standard, that would justify relaxing it?

The Keynesian theory is clearly nonsense.  It says savings is bad, spending is good, debt is good, government debt and deficits are very good, and government spending is very good.  The problem with our current system is that it is debt-based.  In order for money to be created, debt must be created; for example, a mortgage.  But what about the money to pay the interest - where does it come from?  So in order to just stand still, the system must take on more and more debt.  And if this process of taking on more debt ever stops, then the whole system starts to unwind, and it doesn't stop until you get back where you started from.  It could result in a 90%+ devaluation of all property over an extended period of 30+ years.  And while I am advocating some devaluation, this is unduly punitive.

Right now, the government and the Fed are cooperating to pump a huge amount of money into the system.  The final numbers for October aren't out yet, but there could have been $300 billion created just in October.  In normal times, this would be very inflationary.  But the truth is that these are not normal times.

So let me try to paint a positive view of things.  What is happening could lay a foundation for an extended period of prosperity.  Interest rates are very low.  If this continues then this mostly takes care of the problem of not having money to pay the interest on debt.  And the money that is being created could be building a solid "base" for the economy.  It's good that there are lots of excess reserves parked at the Fed.  The system is still based on debt, but it is not as obnoxious because the Fed is acting as intermediary.  While this could lead to inflation, it doesn't have to.  And maybe the Fed has some clue and is monitoring the situation and when inflation starts to break out it while stop the expansion and raise interest rates.

So can I pretend I live in a utopian world?  Who knows what the Fed is thinking, they don't really explain things.  So in my world, I would like to see a targeted gold standard.  For example, the current target would be $1700/ounce.  I would like to see this increase at a rate of 6-7% per year.  (This is based on the rule of 72.  An increase of 7%/year would result in a doubling in 10 years).  So next year it should be at about 1800. There needs to be a little "loosening" each year to provide for interest, and provide a little buffer.  So if gold increased beyond this amount, the Fed should sell gold.  If the price dropped then the Fed should buy it.  Like open market operations, but with gold instead of with government bonds.  I know this doesn't actually happen, but it provides a way of measuring things.

So let's try to be optimistic and give money pumping a chance. But also monitor the situation.

Breakdown in New Jersey

"More than 1,000 New Jersey gas stations are unable to sell fuel due to power outages and delivery problems, according to the head of one of the state's gas station associations.  Sal Risalvato, executive director of the New Jersey Gasoline-Convenience-Automotive Association, which represents 1,500 stations, told us by phone that 75 percent of his members have shut down fueling."

This is what it looks like when our modern civilization breaks down.  Everything depends on gas and electricity.  Without those we are dead.  The biggest problem is gas.

Refineries are shut down because they don't have power.  Gas trucks can't get to the stations because they are blocked by trees and flooding.  The stations can't pump without power.


Source: http://www.freerepublic.com/focus/f-news/2953263/posts

Here's a crazy idea.  Let's bring back horses and buggies.

Guess who's back ... tell a friend

M3 is back!  The website nowandfutures.com has reconstructed M3 using public information, with a proprietary tweak.  Only the Eurodollars amount is unknown, and it represented only 3% of the total.   I don't understand the formula, but most of it is taken from 4 public sources: M2, Institutional Money Market and two weekly reports from the Fed – H.8 and H.4.1.

Here are M3 amounts, using the last date that is in a quarter, starting with 2008.
2007-12-31 13217.70
2008-03-31 14083.09
2008-06-30 14219.85
2008-09-29 15838.96
2008-12-29 16548.56
2009-03-30 16554.70
2009-06-29 16419.11
2009-09-28 16325.43
2009-12-28 15953.31
2010-03-29 15866.70
2010-06-28 15508.50
2010-09-27 15719.64
2010-12-27 15976.30
2011-03-28 16257.76
2011-06-27 17149.10
2011-09-26 16959.77
2011-12-26 16892.36
2012-03-26 17081.06
2012-06-25 17325.76
2012-09-24 17384.79

Source:  nowandfutures.com

It might be interesting to come up with a calculation using only the public data.

=========
Update: I think this is too complicated.  Institutional money market funds are mostly invested in treasuries, and repos use treasuries as collateral, so if you were to include these you would have to back out the amount of treasuries to avoid double-counting.  It's easier just to take my other calculation, M2 + debt held by the public.

Money pumping

I'm working on a new economic theory which I call Total Monetary Supply, for lack of a better term.  This is based partially on a theory called Monetary Sovereignty, which claims that the debt doesn't matter, since it will never be paid back.  So the actual ratio of debt to GDP is also immaterial.  The only thing that matters is the possibility that inflation could get out of control.

The number as of 9/30/12 was 19749.   But what was it before the crisis of 2008?  I want to pick a date at the end of a month, where the total debt held by the public and increase in M2 was less than 50 billion for that month.  It looks like a good date is 6/30/2008.

Total Monetary Supply as of 6/30/2008:
M2 (as of 6/30/2008) 7713.2
Public Debt (as of 6/30/2008) 5285.1
Less Debt owned by Fed (as of 6/26/2008)  478.8
-----------------
Total Monetary Supply as of (6/30/2008):  12519.5

So the total monetary supply has increased 7230 in just over 4 years.  Just to be clear, that is over $7 trillion dollars.

Compare the GDP numbers:
GDP as of 9/30/2012:  15776 bn
GDP as of 6/30/2008:  14295 bn

Compare the price of gold:
Gold as of 9/30/2012:  $1775/oz
Gold as of 6/30/2008: $930/oz

How many ounces of gold could be purchased (assuming enough was available) with the total monetary supply?
On 9/30/2012: 11.1 bn
On 6/30/2008:  13.5 bn

So even though the monetary supply vastly increased, its actual value in gold decreased.

The obvious points are that: 1) Inflation is actually occurring right now as we speak.  It is almost 1% per month. 2) It's not showing up in price indexes, because it is not being spent.  Very wealthy people are receiving most of this increase and they are just sitting on it. Some of it is going into the stock market.  3) The only way to protect yourself is to buy gold.  Duh.

Rogue UBS trader loses $2.3 billion; 10,000 UBS employees get fired

"Kweku Adoboli, the former UBS AG (UBS) trader on trial over a $2.3 billion trading loss, said his girlfriend encouraged him to confess his losses to managers while another trader on his desk told him to flee the country."
--http://www.businessweek.com/news/2012-10-30/adoboli-s-girlfriend-told-him-to-confess-ubs-trading-loss

 "UBS, the Swiss bank, announced plans on Tuesday to eliminate up to 10,000 jobs and cut costs in a major overhaul that will squeeze its earnings in the short term.  ... The pullback in the firm’s investment banking operations follows a number of scandals that have engulfed the division. That includes a $2.3 billion trading loss connected to the activities of a former trader, Kweku M. Adoboli, and potential fines related to the manipulation of the London interbank offered rate, or Libor."
--http://dealbook.nytimes.com/2012/10/30/ubs-to-cut-10000-jobs-in-major-overhaul/

"It was only when the UBS bankers had their passes refused that they realised they could be out of a job. Instead of being allowed into the bank’s City headquarters the traders were whisked to special offices on the fourth floor where they were handed an envelope containing details of the redundancy process.

“It was like a scene out of the Village of the Damned up there,” said one of the bankers.

“They said we would be getting two weeks paid leave and then we will be told what is to happen. I expect we’ll just get a call from human resources or lawyers telling us how much we are worth. We won’t be able to talk to our bosses.”

Turned away from their offices, the bankers congregated in The Railway Tavern, one of the only pubs in the area to open at 8am."
--http://www.telegraph.co.uk/finance/newsbysector/banksandfinance/9643500/UBS-bankers-in-London-head-for-the-pub-after-being-turned-away-at-office-door.html