Facebook: the new social control paradigm

by Global Intel Hub (JoeGelet), 2016

http://www.zerohedge.com/news/2016-01-19/facebook-new-social-control-paradigm

Facebook has been cited as the prime reason for the recent American recession.  Facebook has spread faster than the ebola virus infecting even users without computers.  Children grow up in a world defined by Facebook.  This aggressive strain F1B1 is reprogramming human beings down to the last strand in their DNA.  As the previous generation had television programming, now we have Facebook programming.

Facebook has become the #1 tool for developing compelte psycho-social profiles of US Citizens and foreign nationals alike.  Facebook has been used to topple governments (The Arab Spring) by spreading propaganda and thus social revolution.  It has been used as a tool to solve crimes.  It is a growing method of advertising, spamvertising, and hacking personal accounts.  But most importantly, it’s redefining who we are as a species.  We are becoming Facebook users, where we once were human beings or “Humans.”

The ME generation embraced Facebook.  Because Facebook is all about ME!  In any network of Facebook friends, probably 1 or 2 people is doing something really cool.  The car salesman who worked his whole life to save for an African Safari with his family, just dropped 25k per person on an exotic excursion into the jungle, all the while snapping photos for Facebook.  Oh – how cool!  Lions and Tigers and Monkeys!  Wish I was there.. back to work..

Facebook has become polluted with prostitutes and the most offensive vulgar culture.  Illegal content, porn and so on, is not allowed.  So users and spammers push the limits of how offensive they can be.  Advertising has gone to a new level on Facebook, called “Spamvertising,” which has become endemic on Facebook.  That’s because it’s impossible to stop these junk feeds completely, because they come from a number of sources:

1) A friend’s account is hacked

2) An account is created with your friend’s name, but it’s not your friend

3) Facebook advertising

4) Friends of Friends who somehow are allowed to contact you

5) Fake accounts setup by spammers for the sole purpose of spamming their message on your wall or directly

Ok, Facebook had it’s time.  When Facebook was launched, this was a period when users still didn’t actively use the internet.  Encouraging use of the internet in any way was seen as a net positive for society.  But this was the wrong way to encourage it.  They tapped into the lowest part of the brain: the reptilian brain.

The reptilian brain is stronger than all other parts of the brain.  In order to control it, buddhist monks stare at pictures of bloodied, dismembered bodies in order to understand the reality; our bodies are just rotting pieces of meat.  We are much more than our bodies, how we look, what we do – we are human beings!

We ARE what we THINK – not what we look at, or what we look like, or what we think we look like.  In fact, the visual cortex can be highly deceptive when it comes to the functioning of the brain.  Optical illusions exploit this brain trick.

Most practically, overloading of the visual cortex reduces higher brain function to nearly zero.  It’s a very subtle process, not understood by many TV watchers.  TV makes you stupid by overloading your visual cortex, at a certain Hz frequency, which affects your reptilian brain.  This is why you get the munchies when you watch TV, or laugh without reason.  Facebook is a lot more effective at this because the associations are stronger (i.e. your friends) and it’s interactive – making the users feel as if they are controlling their reality.

The fact is that users are not controlling Facebook – Facebook is controlling you.  They have set the stage which is limited, and allow users few useful tools to manage this barrage on your mind.  The only way to really stop this invasive virus from spreading: turn it off!

Reasons to delete your Facebook:

  • Stop sharing personal details with the US government and a host of other interested groups
  • Enjoy more time in your life, which can be used to pursue a hobby, write a book, or learn a foreign language
  • Fill your brain with something wholesome!  Plant a tree!
  • Lose weight
  • Increase your IQ
  • Increase the speed of your computer
  • Increase the speed of your internet
  • Discover the thousands of other more interesting sites on the internet – such as Wikipedia!  Learn about Quantum Physics!  Did you know that major universities now publish their complete course videos online?  Users can literally get a full college education by attending Stanford (but without the degree of course) compeltely for free, online.  A good start – the Khan Academy www.khanacademy.org

No one can argue that Facebook has provided families with means of keeping in touch at long distances.  Many grandparents wouldn’t otherwise see photos of their growing grandchildren.  But there are hundreds of other social networks, private networks, and other methods, of doing the same thing – without all the ‘crap’ that comes with Facebook.  Remember the days when we would email photos to each other?  We’d spend time even cropping photos and choosing the best one.  Now, users on Facebook will even snap away photos of their daily dinner, or inform the world that they forgot to wash their socks.  Facebook users who engage in the practice of ‘wall scanning’ have little room in their brains for anything else.

Children are also a consideration with Facebook.  Web Filters actually block facebook the same way they block other illicit sites.  Parents can probably relate to this article more than the average user.  Average users have accepted spam crap as part of life.  It’s in our mailboxes, it’s on billboards on our highways, it’s everywhere.  But really – it’s not!

Facebook has been banned in corporate networks, government offices, schools, universities, and other institutions.  Workers at times would literally spend all day posting and reading Facebook.  It’s as useless as TV – but much more addicting.  From Psychology Today:

Below we review some research suggesting 7 ways that Facebook may be hurting you.

 

  1. It can make you feel like your life isn’t as cool as everyone else’s. Social psychologist Leon Festinger observed that people are naturally inclined to engage in social comparison. To answer a question like “Am I doing better or worse than average?” you need to check out other people like you. Facebook is a quick, effortless way to engage in social comparison, but with even one glance through your News Feed you might see pictures of your friends enjoying a mouth-watering dinner at Chez Panisse, or perhaps winning the Professor of the Year award at Yale University. Indeed, a study by Chou and Edge (2012) found that chronic Facebook users tend to think that other people lead happier lives than their own, leading them to feel that life is less fair.
  2. It can lead you to envy your friends’ successes. Did cousin Annabelle announce a nice new promotion last month, a new car last week, and send a photo from her cruise vacation to Aruba this morning?  Not only can Facebook make you feel like you aren’t sharing in your friends’ happiness, but it can also make you feel envious of their happy lives. Buxmann and Krasnova (2013) have found that seeing others’ highlights on your News Feed can make you envious of friends’ travels, successes, and appearances. Additional findings suggest that the negative psychological impact of passively following others on Facebook is driven by the feelings of envy that stem from passively skimming your News Feed.
  3. It can lead to a sense of false consensus. Sit next to a friend while you each search for the same thing on Google. Eli Pariser, author of The Filter Bubble (2012), can promise you won’t see the same search results. Not only have your Internet searches grown more personalized, so have social networking sites. Facebook’s sorting function places posts higher in your News Feed if they’re from like-minded friends—which may distort your view of the world (Constine, 2012). This can lead you to believe that your favorite political candidate is a shoe-in for the upcoming election, even though many of your friends are saying otherwise…you just won’t hear them.
  4. It can keep you in touch with people you’d really rather forget.  Want to know what your ex is up to? You can…and that might not be a good thing.Facebook stalking has made it harder to let go of past relationships. Does she seem as miserable as I am? Is that ambiguous post directed at me? Has she started datingthat guy from trivia night? These questions might better remain unanswered; indeed, Marshall (2012) found that Facebook users who reported visiting their former partner’s page experienced disrupted post-breakup emotional recovery and higher levels of distress. Even if you still run into your ex in daily life, the effects of online surveillance were significantly worse than those of offline contact.
  5. It can make you jealous of your current partner.  Facebook stalking doesn’t only apply to your ex.  Who is this Stacy LaRue, and why is she constantly “liking” my husband’s Facebook posts?   Krafsky and Krafsky, authors of Facebook and YourMarriage (2010), address many common concerns in relationships that stem from Facebook use. “Checking up on” your partner’s page can often lead to jealousy and even unwarranted suspicion, particularly if your husband’s exes frequently come into the picture. Krafsky and Krafsky recommend talking with your partner about behaviors that you both consider safe and trustworthy on Facebook, and setting boundaries where you don’t feel comfortable.
  6. It can reveal information you might not want to share with potential employers.  Do you really want a potential employer to know about how drunk you got at last week’s kegger…or the interesting wild night that followed with the girl in the blue bikini?  Peluchette and Karl (2010) found that 40% of users mention alcoholuse on their Facebook page, and 20% mention sexual activities. We often think these posts are safe from prying eyes, but that might not be the case. While 89% of jobseekers use social networking sites, 37% of potential employers do, as well—and are actively looking into their potential hires (Smith, 2013). If you’re on the job market, make sure to check your privacy settings and restrict any risqué content to “Friends Only”, if you don’t wish to delete it entirely.
  7. It can become addictive.  Think society’s most common addictive substances are coffee, cigarettes, and alcohol? Think again. The DSM-V (Diagnostic and Statistical Manual) includes a new diagnosis that has stirred controversy: a series of items gauging Internet Addiction. Since then, Facebook addiction has gathered attention from both popular media and empirical journals, leading to the creation of a Facebook addiction scale (Paddock, 2012; see below for items). To explore the seriousness of this addiction, Hofmann and colleagues (2012) randomly texted participants over the course of a week to ask what they most desired at that particular moment. They found that among their participants, social media use was craved even more than tobacco and alcohol.

Poke Me: How Social Networks Can Both Help and Harm Our Kids

The highlights of a Facebook study via endgadget article:

In a presentation titled “Poke Me: How Social Networks Can Both Help and Harm Our Kids” at the 119th Annual Convention of the American Psychological Association, Rosen presented his findings based on a number of computer-based surveys distributed to 1,000 urban adolescents and his 15-minute observations of 300 teens in the act of studying.

Some of the negative side effects of Facebook use for teens that Rosen cited include:

  •  
  • Development of narcissism in teens who often use Facebook;
  • Presence of other psychological disorders, including antisocial behaviors, mania and aggressive tendencies, in teens who have a strong Facebook presence;
  • Increased absence from school and likelihood of developing stomach aches, sleeping problems, anxiety and depression, in teens who “overdose” in technology on a daily basis, including Facebook and video games;
  • Lower grades for middle school, high school and college students who checked Facebook at least once during a 15-minute study period;
  • Lower reading retention rates for students who most frequently had Facebook open on their computers during the 15-minute study period.

 

Facebook will cause lower grades for students, but it’s OK for adults?  hmm…

Facebook (FB) Investment Advice

It’s just a matter of time when this will result in a major scandal, FB stock will crash, and class action investigations will pile up.  Lawyers will have to hire companies that automate workflow just to deal with the huge amount of securities class action settlements for this case.  The Facebook (FB) IPO disaster was a telling sign about this issue.  Sell it, block it, delete it, disgard it.  Facebook is a bunch of trash.  There’s no technology behind it.  There are a huge amount of struggling companies that have developed really ground breaking technology that will change the life of humans on this planet earth.  Facebook (FB) is not one of those companies.  Facebook (FB) is a disaster waiting to happen.  It’s a liability.  And it’s unsolveable.

Delete your Facebook account, sell your Facebook stock if you have it – it’s guaranteed that by doing so, you can grow your portfolio, increase your IQ and overall well being.  Save your business, save your family, save your life – and delete this virus!

facebook

 

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The American Forex Delusion

by Global Intel Hub (JoeGelet), 2015

http://www.zerohedge.com/news/2015-12-08/american-forex-delusion

Hitler said often that the bigger the lie, the easier it would be [for the masses] to believe.  This is no where more true than Forex.

Russia and America have similar demographics of people involved in Forex markets; both have extremely uneducated populations (even ‘financial professionals’ often have no clue about the ramifications of Forex), both have extremely polarized “Elite” (the bankers who run Forex) and the ‘rest’ who are left to have their savings eaten away by inflation.  In fact, central banks have mandated the investing population – it’s necessary to acheive above average returns just to break even.

We’ll use Russia here as an example to contrast the US Forex market because they earned it – our new allies in the middle east.  This is Russias first role as world policeman in Syria (as the “New Russia”) and anytime a superpower such as Russia or America invades and bombs another country, there will be angry people (i.e.blowback).  But, such situations often bring together unusual allies; the circumstances create allies (in this case, a common enemy Muslims/Islamic state) as did World War 2 and many other similar situations.

Let’s quickly look at some of the biggest lies promulgated by the Elite.  Who are “They” ?  Well, you can read about “them” here, here, and here.  Why they do it, should be no question.  It has allowed them to develop a global tech economy nearly for free (on the backs of the worker), and at the same time amass a fortune never before seen in known modern human history.  All of this is possible due to lack of knowledge and education, or in other words, their ability to sell these lies to the population (by the way, Propoganda was invented by an American Edward Bernays; many of the methods used by Hitler, Stalin, and others are now being used by corporate America).

Over a period of more than 75 years, the Elite have invested billions of dollars and have a proven track record for brainwashing the population, in all countries, but most notably in America and in Russia (although with different cultural motives).

Lie #1: Inflation is caused by supply and demand, and other natural economic forces

This is the biggest lie that allows the real owners of the global financial system to fleece the population of their assets.  Slavery is illegal, but working 80 hours a week for just enough money to pay for your housing, food, and health for your family, is not existence.  It’s the new slavery.  You see, during the industrial revolution the Elite learned that physical chains were no longer necessary.  By promoting such anti-values as gluttony, ignorance, apathy, and by promoting the Ego (i.e. Facebook “Look at me!) – it would allow the Elite to easily convince workers to run on the mill like lab rats for almost no pellets.  This is most notable in America which mainstream culture (mostly financed by bankers vis a vis CIA domestic ops, including but not limited to cultural socio-engineering; starting with Tim Leary, Kurt Cobain, Beavis and Butthead, “Jackass”, and now a plethora of other cultural icons, promoting a culture of stupidity.)

In plain English, while the youth is stupidifying their life away, the Elite are slowly eroding your equity through inflation – the hidden tax.

Inflation is caused by oversupply of currency!  The idea that supply and demand drives inflation and deflation is not valid argument in Fiat money system, because the quantity of money in the system M0,M1,M2,M3,MZM, plus currency swaps, derivatives, and countless other financial instruments created in the base currency by the central bank, is an ever increasing base number.  In the event this trend reversed, that supply of currency decreased, it would still be a changing number, as determined by central banks.  Therefore, traditional economics of supply and demand and the price mechanism, is irrelevant.  Monetary policy is the only determination of the value of currency, in a Fiat system.

How does this impact average people in America, and in Russia?  Every year, you have less money to buy things (whether groceries, property, health care services, etc.)

Lie #2: US Dollars are money

US Dollars and most global major currencies are debt based currencies.  Debt is not money, such as Gold is money.  New US Dollars are created only through LENDING, if all US Dollar debt was paid off, it would mean there would be no more US Dollars!   Even if you believe that US Dollars are money, in any event, because of a constantly expanding money supply, every year you have less and less money, by keeping assets in US Dollars.

Lie #3: Currencies are backed by something

Fiat currencies are backed only by belief, by faith.

Lie #4: Forex is for international investors, and travelers

All of this propoganda is very effective!  The Elite have convinced even self-proclaimed ‘financial professionals’ and the general mass population that Forex is irrelevant unless you are traveling or do international business.  Here’s why Forex is relevant today:

Each central bank, whether it be The Fed or the CBR can only create as much domestic currency as it pleases (it cannot create foreign currency).  So, if the Fed creates an additional 100 Trillion via QE 4; it can choose to use that currency domestically, or internationally.  If it chooses domestically, it will create hyperinflation.  So if this is to be avoided, it must use these freshly created USD to buy foreign currency.

How Forex can benefit domestic population of Russia

Russian population is currently being robbed via collapsing Ruble.  Since the ‘new ruble’ was introduced in 1998 at a rate to USD of 6 Rubles to 1 USD (USD/RUB currently around 70) – this is a loss of about 90% for Ruble denominated assets.  What value the Ruble lost in 20 years, it took the US Dollar 80 years.

But when Russia defaulted in 1998 and Moscow was infested with economic hitmen from western banks, they had not only a template from America and soon the EU, they had computers and soon internet, making a new economic way for the new “Elite” of the new Russia to further rob the people, via hyperinflation of the currency.  As in America, oligarchs are created quickly and benefit greatly from hyperinflation, as they can do a number of things to benefit from this situation (most simply, investing their assets in non-domestic currency, but countless other examples as well).  Possibly, the rapid depreciation of the currency, could have contributed to the wealth of the oligarch class.  In any analysis, since Russia has implemented this system of weakening its domestic currency, the oligarch class has grown in step with America’s new superclass.

It is understandable why those in financial services do not understand Forex generally.  Because high priests of capitalism preach about ‘making money’ (which is actually illegal, strictly translated, unless you are the US Mint or the Fed).  So by participating in Forex, you aren’t really growing your portfolio, you are just breaking even, or NOT losing.  This lateral thinking should be understood well by Russian population considering their advanced math skills.  But it is not widely proliferated in mainstream culture (and very ironically, because major Forex companies are based in Russia).  Oh – what the business opportunity!

In a very basic example, imagine you have 1 Million Rubles in 1998.  You have transferred them to a US bank account bearing a measly 8% interest in USD (we will not count interest in this example) – roughly, $165,000.  2015 comes around and there’s a ruble crisis – fortunately your savings are safe and now gaining about 1% at Everbank, and you need money.  You transfer your $165,000 USD back to the motherland, for a whopping 11 Million Rubles!  It’s roughly 1100% return on your investment in the US Dollar – but of course, you didn’t really ‘make’ any money, you just didn’t lose.  We shouldn’t mention that most of this return is tax free due to FASB rules regarding long term forex investments.

If we consider the interest component, the $165,000 would be $399,000 using this basic calculator, in 2015 this would convert to 27 Million rubles!  So, we pose the question; where else in Russia could a single individual get a potential tax free return of 2700%+ by doing basically nothing (a few documents, one bank transfer)?

So, by common people participating in Forex, instead of losing 90% of the value of their currency and complaining to empty TV screens about corrupt politicians, they could have instead made 2700%+ tax free.

This very basic example is simply to illustrate the benefits of average people (whether financial professionals or not) to participate in the Forex market – and that it really is a necessity, if you live in a country like Russia or America when you have a central bank with a policy to destroy the currency.  Really though, it’s only a tax on working people.  If you are very poor – it doesn’t matter (you work to live, not live to work).  If you are very rich, probably you have assets in America, London, or France.  This example doesn’t count opportunities such as Forex robots, or the ease of investing in a US stock market bubble which could turn the $165,000 USD into much more (although that part wouldn’t be tax free).

Of course, the Elite in Russia (via CBR) will try to convince the local sheeple about the evils and risks of Forex, as they fleece the domestic population via the slow death of the hidden tax of hyperinflation.  baa

Forex is especially necessary where the domestic currency is volatile.  Russia is a great example because it’s not Zimbabwe, not the EU, and Russia is a globally significant dynamic economy.

So what is the American Forex delusion?

A lie can be the withholding of information.  In the case of Forex, it’s simply 1% of missing important knowledge that prevents a real understanding of what’s going on.  In the case of America vs. Russia – The Fed, currently is a private central bank, owned by private banks.  The CBR, still officially a public institution owned by ‘the people.’  But, it was the Americans who invented modern finance.  It was the Americans who created modern Forex.  It was the Americans that pressed Russia to open their markets (most importantly – financial markets!) – which again, is ironic considering how Wall St. banks financed Lenin, without which financing the Bolshevik revolution would not have been successful.

So who benefits from this system?  The Elite, who strip the common people of their assets (but with style).  But also, educated people who know how this system works and can expolit it, such as older examples here, here, and here.

The Elite – provide a method for profiting from this situation!  There are no shackles, no chains – only those which are in our mind!  We can set down that bag of bricks handed to us, and free ourselves.  It is the paradox of the modern control paradigm; the tool of control can be used as a means to become a controller!  It’s just a question, a decision, which side of the trade you want to be on.

The good news – it is possible to profit from this situation, and even prosper. This can be acheived only by education followed by action.  It is legal, and possible, for any individual in the world to profit in Forex, and to protect their financial assets.

Welcome to the club!

Open an account with Pepperstone and trade the Russian Ruble!

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There is little difference between rich and poor in America

by Global Intel Hub (JoeGelet), 2015

http://www.zerohedge.com/news/2015-11-24/there-little-difference-between-rich-and-poor-america

The further you go towards the tails of the bell curve, the more similar social characteristics.  In a society that has been even more polarized, we increasingly see similarities between the very wealthy, and the very poor.  The declining middle class is more and more a world of it’s own (as the elite used to be).

In Summary, the Superclass “Elite” UHNWI and the ultra poor have the following in common:

  • Both have usually a less than superior education, or even are illiterate (and/or extremely out of touch with ‘the real world’)
  • Both have nearly no daily obligations but are ‘busy’ by choice
  • Both have a tendency toward extreme substance abuse (i.e. constant drinking / drug use)
  • Both have extreme freedoms
  • Both are near handicapped, having many ‘caretakers’ (whether it be in the case of the rich, a staff of servants – in the case of the poor, government / social workers, government support, etc.)
  • Both don’t worry about money!
  • Both have little respect for the laws
  • Both have a fleet of vehicles, half of which are not working or in the shop
  • Both have little regard for the trend of the time
  • Both may occupy a space, having almost no assets in their own name (of course, for greatly different reasons – the rich don’t want tax obligations and in business ‘conflicts of interest’ for owning certain assets)
  • Both could care less about foreign affairs, unless it impacts their business or daily life
  • Both usually have a lifelong advisor they turn to and speak with constantly (in the case of the poor it is their ‘friend’ or their ‘cousin’ – in the case of the superrich, probably their ‘lawyer’ or ‘advisor’ in some cases their ‘brother’)
  • Both ‘don’t work’

What is the difference between tent cities and the growth of ‘billionaire hubs’ – primarily, it is a difference of infrastructure.  Both are largely anti-social, and live outside the realms of society, on the edge of the law.  The point here is that the destruction of the middle class as it is colloquially referred, is really a breakdown of modern civil society.  Investment funds have shifted away from public development uses, so in parallel to these billionaire hubs we’ve seen a great deterioration of public infrastructure (i.e. bridges, roads, schools, dams, levees around New Orleans, etc.).  Even the poor have their own Web 2.0 startups, such as “Rent a Tent.”

But of course – the big difference.  The UHNWI can make choices that could change all that.  But can they?  Are they just as much slaves as anyone?  Through the vast vestiges of the social control paradigm, maybe it is in fact they too – who are the victims – or if not the main victims.  We here at Zero Hedge often have disdain for some of both of these classes (although many UHNWI are our clients, even if through their various proxy entity networks).  So it may be important to take a step back, and realize what’s happened economically speaking since the economic polarization of our modern capitalist society.

How did we get here?  How is it that – in the city with explosive real estate value growth (San Francisco), has sewers built more than 150 years ago?  What’s wrong with this picture?  Billionaires drive on bad roads too.  As traders and investors it’s easy to be sucked into our niches of analysis, i.e. technical vs. fundamental, without looking at the system as a whole.  When we can understand the system as a whole better, we can make better investment decisions, and create better markets (with less fraud, less volatility, and less regulation).  The only thing that can save the freefall economy – it’s knowledge and education!  Fractional reserve capitalism is all about hiding and profiting from information.

From the very beginning of the modern free-markets system, huge investments have been made in anti-education efforts, counter-propoganda, social and biological control mechanisms, and so on.  The CIA has openly been involved in cultural propoganda and social engineering programs, including but not limited to, the ‘womans rights’ movement, ‘gay rights’ movements, ‘flower power’ (specifically, Timothy Leary and various military experiments released into the youth culture), and generally – promoting a culture of stupidity (where it’s ‘cool’ to be stupid).  We don’t need to mention Beavis and Butthead, Jackass, because this is all low hanging fruit.  What they do now is simple – because a roadmap was laid during the 60’s and 70’s, and now far greater technology has been developed.  That means a child growing up in ‘civil society’ doesn’t stand a chance!

All this is designed for one thing – send your money to the power elite.  Spend your time, energy, doing whatever you want, as long as every 20 or 30 years, all your hard work and wealth, will be donated to your local Rothchild branch.

The billionaire class – as proved with Russia after privatization – is a great tool for controlling the masses.  It gives people false heroes, material gods, someone to look up to; and at the same time appeals to their ego and vanity.  So, for the elite, it is most critical to program and enslave this very special group of people, and if they don’t exist – to create them!  As the Europeans learned more than 1000 years ago – people need Kings and Queens – not to be ‘ruled’ – and to be ‘taxed’ – but to exist!  At the end of the day, most humans are like animals that need to be herded.  For whatever reason, humans haven’t evolved enough to live in a real utopia – which is possible with current technology (free energy and no one works, all are happy).

So, when you realize all this, and consider how important it is that UHNWI are the social templates used for the programming on down the genetic chain, it’s no wonder that the billionaire favelas are not much different than the real favelas, in a nation built by tired and poor people:

“Give me your tired, your poor,
Your huddled masses yearning to breathe free,
The wretched refuse of your teeming shore.
Send these, the homeless, tempest-tost to me,
I lift my lamp beside the golden door!”

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Do you believe in terrorists?

by Global Intel Hub (Joe Gelet), 2015

http://www.zerohedge.com/news/2015-11-18/do-you-believe-terrorists

Westerners have a deep history of a culture of myths (see Joseph Campbell).  We love to believe in Santa Claus, “The American Dream,” the Tooth Fairy, housing market always goes up, and countless others.  So it’s easy for us to be ‘terrorized’ by a myth; that hiding behind every corner are evil ‘terrorists’ waiting to blow themselves up because ‘they hate our freedoms.’

Already, evidence surfaces that doesn’t match our traditional image for what a terrorist act should look like, as pointed out by George Washington’s article on ZH:

What do you think? False flag? Light-skinned, clean-shaven ISIS jihadis who went undercover to carry out the terrorist attack? Or local Europeans who were radicalized into jihad?

Postscript:  The Mirror also notes that the terrorists looked like professional soldiers:

“I would describe him as tall, with dark hair and also quite muscular.

 

They looked like soldiers or mercenaries and carried the whole thing out like a military operation.

Military operation or not, let’s take a step back how we got here, for those who can read and don’t have a TV.

World War 2 and it’s climax defined the modern age and the century.  It is the most significant event, historically speaking for the last 500 – 1000 years.  How this event shaped the markets and modern capitalism; specifically – global trade, Forex, emerging markets, the concept model of the nation-state, and in one word – acomplete paradigm shift.

Before WW2, nation-states waged war – these wars were all different but had several distinct characteristics.  There was always a winner, the winner basically wrote the terms of the agreement to end the war (taking various resources or land for themselves); it was usually financed through taxes or Rothschild type loans, and both sides were well defined.  Even when mercenaries participated, it was clear whose side was who.  Also it was clear, what the war was about – there was no ‘false flag’ events.  People mostly participated in war for survival, because they were forced to, or needed money and enlisted, or because their king told them to and they obey.  There was no TV, internet, or cameras attached to missiles.

After WW2, only one single country remained intact, with infinite industrial capacity that easily switched to the consumer economy.  The United States of America had lost millions of lives in WW2, but the US was never invaded, factories remained, cities were not burned and bombed, a baby boom quickly expanded the population.  Resources were plentiful, and for 20 years the US was basically the only industrial superpower in the world.  This eventually led to the US Dollar based global Forex & payments system as we have today.  Breton Woods certainly would not have been in New Hampshire had it not been for this post WW2 dominance.  For all its benefits, this circumstantial gift left with it a seed of destruction; the military industrial complex.

Because now for the first time in history – war became a business.  Corporate America knew how to profit from war, in all manners.  Wall St. cozied up to Washington to form what would become the most powerful alliance of business & government in history (that ironically was a lot stronger form of Facism that these same forces destroyed in Europe a generation prior).

The peace after WW2 presented a problem for the military industrial complex – if there was no war, how could they profit from the war machine?  Enter Vietnam and George Morrison (father of Doors singer Jim Morrison):

Daniel Ellsberg, who was on duty in the Pentagon the night of August 4, receiving messages from the ship, reported that the ship was on a secret electronic warfare support measuresmission (codenamed “DESOTO“) near Northern Vietnamese territorial waters.[12] On July 31, 1964, USS Maddox had begun its intelligence collection mission in the Gulf of Tonkin. Captain George Stephen Morrison (father ofDoors singer Jim Morrison) was in command of local American forces from his flagship USS Bon Homme RichardMaddox was under orders not to approach closer than eight miles (13 km) from the North’s coast and four miles (6 km) from Hon Nieu island.[13] When the SOG commando raid was being carried out against Hon Nieu, the ship was 120 miles (190 km) away from the attacked area.[13]

So now we had a nice little war, where we could sell bell helicopters, and created the modern model for making ‘war business.’  After Vietnam it was easy to create an enemy.  Fast forward several conflicts and enter the ultimate enemy: Terrorists.  Terrorists are the dream of Neocons, warmongers, and anyone profiting from the war machine – because they are not connected to any ‘country’ – are always changing, nearly impossible to identify, have motives no one clearly understands, and can easily be bribed and manipulated to carry out the whims of Washington (in the case of Washington supported ISIS, to disrupt the Assad regime who has been on the black list since Libya.)  Who are Terrorists?  They can be anyone, operate anywhere, and always can be blamed on any mistakes made.  Plane crash, false flag – must be Terrorists!  They are the perfect enemy for the ‘war machine’.  And the middle east – a perfect playground.  “Washington” now can be replaced with some proper term for ‘global alliance’ enter recently to this game Russia, just learning how profitable war can be.

Because practically, war is outdated.  A conventional war between any 2 nuclear powers would only create utter devastation, calculating which side would be more devastated is pointless, as the fallout would spread around the globe.  Also, countries such as Russia, the US, Germany, UK, have no real state enemies because of this, so keeping and maintaining a standing army of any kind – completely wasteful (except to keep the domestic population controlled by fear and opression, and the occasional cleansing of the genetic herd via in theater operations).  Hence the need for terrorists.

In other words, false flag or not – Terrorists are the last frontier for the war machine created (and thus the modern Forex system).  It’s impossible to kill them, as they are an idea.  To end ‘terrorism’, we must end the war machine – dismantling this is very tricky!  Who are the real terrorists, suicide bombers, or news anchors constantly ‘terrorizing’ the population by making them afraid and worried around every corner a bomb will explode.  If we can overcome this huge mental challenge, we can really create a global panacea, a world without war, without currencies, without fraud.

Just like with any system, the war machine needs our support.  To stop it – we need to stop being afraid, stop believing in it! Stop participating in it!  (But that’s not practical, because we like it.  It’s entertainment!)  So the philosophical question of the day is:  Do you believe in Terrorists?  At least have some decency if you do – don’t tell this fairy tale to your children.  Maybe they’ll grow up in a better world.

Or to quote George Carlin, let’s accept it as a form of entertainment:

The odds of your being killed by a terrorist are practically zero. So I say, relax and enjoy the show.

You have to be realistic about terrorism. Ya gotta be a realist: Certain groups of people – Muslim fundamentalists, Christian fundamentalists, Jewish fundamentalists, and just plain guys from Montana – are going to continue to make life in this country very interesting for a long, long time. That’s the reality. Angry men in combat fatigue talking to God on a two-way radio and muttering incoherent slogans about freedom are eventually going to provide us with a great deal of entertainment.

Especially after your stupid fuckin economy collapses all around you, and the terrorists come out of the woodwork. And you’ll have anthrax in the water supply and sarin-gas in the air conditioners; there’ll be chemical and biological suitcase bombs in every city, and I say, “Enjoy it, relax! Enjoy the show! Take a fuckin chance. Put a little fun in your life.”

 

To me, terrorism is exciting. It’s exciting! I think the very idea that someone might set off a bomb in Macy’s and kill several hundred people is exciting and stimulating, and I see it as a form of entertainment! Entertainment that’s all it is. Yeah! But – but I also know most Americans are soft, frightened, unimaginative they don’t realize there’s such a thing as dangerous fun. And they certainly don’t recognize good entertainment when they see it. I have always been willing to put myself at great personal risk for the sake of entertainment. And I’ve always been willing to put you at great personal risk for the same reason.

As far as I’m concerned, all of this airport security, all the searches, the screening, the cameras, the question it’s just one more way of reducing your liberty and reminding you that they can fuck with you any time they want, as long as you put up with it. As long as you put up with it. Which means, of course, any time they want. Because that’s what Americans do now. They’re always willing to trade away a little of their freedom for the feeling, the illusion–of security.   -GEORGE CARLIN

If state-sponsored armies left the middle east permanently (Now speaking of the US, UK, ‘coalition of the willing’ and now Russia), including the US support of Israel, ‘terrorism’ as we know it at least, would cease to exist.  We’ve been sold a load of snake oil, that somewhere lurking in the shadows of these elephant oil fields, are crazed muslims who believe in killing infidels.  Nothing could be farther from the truth!

When a company is discovered for wrongdoing – often a boycott can succeed in getting their attention (the other alternative, being lawsuits & litigation).  It is not different with the war machine.  It feeds off our energy, our fears, which determines our need to finance and support the military through taxes and other means (and supports our local TV companies through advertisements).  The point is that there is no winning ‘the war on Terrorism’ – it’s a paradox.  It’s a genius invention by the war machine akin to “Terminator” films – now for every $1 we put into the military the profit can be $2 or $3 – because the more wars we launch in the middle east, the more terrorists are created, thus a need for even more security & war spending.  If even a small % of our tax dollars was funneled through various CIA shells to finance ISIS (even if the purpose was to overthrow Assad or other Terrorists) – technically speaking it is financed by the American taxpayer (at least in part).  Again, technically speaking – that would put the US Government on the OFAC list (which they publish) – and would be severe AML violations.  All these paradoxes are the ultimate ‘fog of war’ to enable the war machine to go on, now a self-replicating artificial intelligence of its own.  The ultimate paradox – this situation has made it impossible to stand up against the defense industry (literally) – ensuring it’s nearly infinite survival.

Or – here’s an investing idea – if you think this is all a bunch of left wing nonsense – time to go long Defense stocks!  And at least you won’t have to worry about anyclass action lawsuits or other problems with an angry and disgruntled public (they can be disapeared by outsourced foreign sub-contractors).

Think about this next time you’re listening to ‘riders on the storm’.

“Riders On The Storm”

Riders on the storm

Into this house we’re born

Into this world we’re thrown

Like a dog without a bone

An actor out on loan

Riders on the storm

 

There’s a killer on the road

His brain is squirmin’ like a toad

Take a long holiday

Let your children play

If you give this man a ride

Sweet family will die

Killer on the road, yeah

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Why Preppers have it all wrong

by Global Intel Hub (JoeGelet), 2015

http://www.zerohedge.com/news/2015-11-12/why-preppers-have-it-all-wrong

Prepping has not only gone mainstream, it’s infected even the billionaire culture as referenced recently on a ZH article:

When it comes to “prepping”, many among the elite take things to an entirely different level.  As you will see below, the elite are willing to pay big money for cutting edge home security measures, luxury bomb shelters and superyacht getaway submarines. Some of the things that the elite are demanding for their own protection go beyond even what we would see in a James Bond film, and serving the prepping needs of the elite has become a multi-billion dollar business.  Meanwhile, the media outlets that the elite own continue to mock the rest of us for getting prepared.  All the time we see headlines like this one that appeared in a major American news source: “Preppers: Meet the paranoid Americans awaiting the apocalypse“.  Well, if we are paranoid for setting aside some extra food and supplies for the future, what does that make the people that you will read about in this article?

Financial prepping has been the mantra of the ‘hedge’ fund community since it started to exist.  Instead of just blindly buying stocks and hoping the market always goes up, ‘hedge funds’ provided a ‘hedge’ in case the market actually didn’t go straight up.  Of course, this is now just for lazy investors, now it’s possible to buy options for almost any situation, and insurance companies will sell insurance for anything – even being abducted by aliens (over 30,000 policies sold in Europe according to Geico).

Description of the prepper & background

So let’s take the average prepper, metaphorically speaking.  You have your safe house, stockpile of supplies, food, ammo, tools, toilet paper, shortwave radios and other electronics powered by cranks, etc. etc. etc. (depending on how deep your infection).

Financially speaking, you keep your savings in a combination of cash (US Dollars, Euros, and Swiss Francs), gold, silver, bitcoin, and bearer bonds.  If you are really savvy, you’re holding the paper on several nearby farms in a fair deal whereby they pay down their principle in cash and interest & fees in milk, beef, and in the summer vegetables.

You own several properties in the names of charities you’ve setup just for this purpose… ok you get the idea.  Take it to the extreme.  The estute prepper has done all this and more – he’s ready for anything!

The problem

Now the calamity comes – whether it be a global pandemic, alien invasion, terrorists, the United Nations with foreign troop invasion – take your pick.  It’s really bad, but you survive – because you are ready for anything!  So now you’ve survived – NOW WHAT?

Do you come out of your bunker after the smoke has cleared?  What will you do all day?  What will other survivors do?  Will you try to communicate with other preppers?  What if in the process of that communication – you discover that you are a little more prepared than they, and they trick you into a meet whereby they kidnap you and force you at gunpoint to give up your safe location and supplies?

What if there is a secret group of ‘anti-preppers’ who are right now preparing for ways to steal from preppers, based on their security flaws and lack of planning?

What if there is a group right now setup by the government, who is monitoring preppers, that within 24 hours of said ‘calamity’ will be taken into custody (or otherwise dealt with).

What is to stop the military from seizing your supplies, and forcing you to join their chain gang?

The problem is that in order to really be ‘prepared’ – one must strive to be a stronger fighting force than the strongest army in the world (be it whatever you think in your opinion) because in a real crisis, the only currencies are 1) intelligence and 2) accelerated lead.  Accelerated lead is a quickly depleting resource whereas intelligence can grow and be self-replicating.

Prepping generally speaking is a good thing, to use example of global pandemic – if everyone in the world is prepared and follows WHO guidelines, the pandemic will not exist!  Probably the same could be true with financial markets.

The point here is to realize that like with anything – the popularization of ‘prepping’ has warped the purity of the concept.  

The idea itself – very noble.  But in practicality, in reality, if there is an apocalypse, where are you going to go shopping with your gold and silver coins?

Especially in America where we like to do things to extremes (like eating for example) – we’ve taken prepping to a new fangled art form.  But it’s this ‘new level’ that is the snake oil – not the concept of prepping.

Just in case

Mossberg sells a package “Just in Case” that includes survival kit, shotgun, all neatly packaged in a waterproof tube (that also can double as a flotation device).  It’s a great analogy for the prepping movement.  It’s a great thing to have – JUST IN CASE.  99% of buyers of this will never use it.

But – IT’S BETTER TO HAVE IT AND NOT NEED IT, THAN TO NEED IT AND NOT HAVE IT!  -The Avid Prepper

Financial Prepping

What can one do to financial prepare themselves?  This completely depends on the situation, and depends on the extent you want to prepare for.  As a general rule, you just want to be more prepared than your neighbor, but only a little.  That means – forget about the kevlar suit that can withstand 1,000F burns, or the bitcoin wallet that can only be opened with one time pad; each hidden in 2 secure locations in Europe.

Also, forget this naive idea about hoarding physical gold or cash – as if it will help you.  You’re just painting a target on your back!  Where will you spend this cash?

Some reasonable prepping steps to be a ‘pure prepper’ 

  • Have a healthy options portfolio
  • Take the other side (even if you don’t agree with it)
  • Invest in some really crazy ideas – if everyone you know says ‘don’t do it – it’s crazy’ – DO IT!
  • Invest and trade LOCALLY, at least a little.
  • Keep multiple accounts open with different TYPES of brokerage firms/banks – not only the same institution where your 401k is.  Not all of them will die.
  • Participate in some class action lawsuits for securities or similar cases – even if you won’t get a big payout.  When the dollar bubble really pops, you’ll have a friend who can help you get 20 cents on the dollar from Bank of America.
  • Make some foreign connections, who may not be in the same predicament as most in America
  • As much as possible, try to do things for yourself.  Having your deck resurfaced?  Do it yourself!  Do your own research – don’t rely on a service (and certainly not your broker!)
  • Educate yourself!  Learn a foreign language, or study that course in wreath making you’ve been putting off for so long.  Remember, although the world is a large place – the majority of nuclear fuel rods are made by hand by Samurais in Japan:

Although Japan Steel Works is a major corporation with 5,000 employees, it also maintains a samurai sword blacksmith, in a small shack on a hill above the factory in Muroran, where a single craftsman still hammers steel into broadswords, as the company has done since 1917.

Just remember.  For those who think the apocalypse is coming – there are just as many who believe it’s already here.  Just ask some Detroit residents.

Looks like the Zombies have already invaded and destroyed our cities.

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Market structure evolution

by Global Intel Hub (JoeGelet), 2015

http://www.zerohedge.com/news/2015-10-12/market-structure-evolution

The markets have evolved over time to bring us to where we are now (as if anyone knows where that is!).  How markets evolve is largely misunderstood by the general investing public, certainly by the regulators, and the general populace thinks the markets are nothing more than a high brow elitist conspiracy to strip their assets and take their rights.

And to a large degree, this is true.  Markets have become so fast moving, so computerized, we often lose focus of what the markets really do – what our market based system does and is supposed to do.

Let’s take politics for example – there are those who think US democracy has been ‘bought’ by the ‘deep state’ and doesn’t exist anymore, since the 2000 elections and advent of electronic voting machines, is real democracy possible anymore?  Of course it is – and always was.  But the lie the establishment feeds the populace, as always – is 95% truth.  It’s the 5% that is the real game changer, like discovering a new physics that explains the 95% of dark matter in the universe.  The 5% truth the public is missing – it is ‘one dollar, one vote’ – not ‘one person, one vote.’  Remember, the ‘founding fathers’ of America were a bunch of slave owning Freemasons that wrote ‘all men are created equal’ (excluding of course, women, blacks, the indigent, foreigners, American Indians, and any other group that was not a white land owner).  Yes, of course – America was the beacon of light and free trade compared to the darkness that existed in Europe at the time – just bring these facts to bear!

How market structure evolves

The market really is chaos.  The only real solid financial structure created in the last 500 years is a central bank and how money is created.  But introduce Forex, and that structure goes right out the window!  Market structure evolves by simple capital trial and error; sometimes at the great detriment to the investors.  Imagine for a moment – the investor doesn’t own the securities, the capital does.  Imagine that capital itself is a virus, an organism by itself, that is actually manipulating humans to buy and sell stocks; to make investments (for better or worse).  If you think this metaphor is far fetched, look into the toxoplosmosis that controls our brains to the liking of our furry friends, our cat pets.  Another metaphor appropriate which is more commonly known in Philosophy is from Eric Fromm’s “To have or to be?” – basically to paraphrase the concept in one sentence, as we acquire material things, it is the things that own us – not the other way around as most owners believe.

Do you own the stocks or do the stocks own you?

This capital as a virus has no purpose, other than to self-replicate, expand, and find other ways to manifest itself.  Traders are the host.  Traders and investors facilitate this capital-virus to test different ways to behave, and to eventually create new environments to exist.

Take the recent expansion of stock trading into dark pools.  20 years ago, if you had told any trader that a great majority of equity trading takes place automatically by robots (algo trading) in ‘dark pools’ which are not public and no one knows exactly what goes on inside, it would be laughed at as market science fiction.  But now we are even far past that!

In the process of trial and error, there are extremes – big winners and big losers.  Fortunately, the winners are happy to be greatly infected with this virus, and the losers have certain ways and means to recover losses, such as by participating in class action securities litigation.  And it should be noted that securities litigation is a significant part of the market based system, without which many cheaters would go unchecked, thus the system would be eaten by dangerous cancers.  Also fortunately, our legal system has evolved to facilitate market evolution, by allowing for market rules to be established, and for cheaters to be punished.

The market structure is defined by its behavior on a daily basis, from market participants, by trading and investing.  Not by a grand design, and certainly not by regulators!  Although the regulators, are a significant market participant from this perspective.

To put this in deeper perspective, let’s think a little about the most unstructured and most significant market in the world; Forex.

Forex

Forex markets are completely different than other markets!  We know this, but few understand how deep the Forex rabbit hole goes.

Forex markets:

  • Are completely unregulated
  • Are the foundation of ALL other markets, and global trade!
  • Are directly connected to our nation-state political system popular now on this planet (as opposed to stock, bond, and commodity markets which can be localized and fragmented)
  • Are the least understood

Although this is the case, in terms of market structure, equity markets (especially US markets) are significantly more structured than Forex, and have gone through magnitude thousands of evolution generations to produce what they have today.  If markets had an ‘age’ – Forex is a baby, and the stock markets are a wise old man.  Slowing the evolution of Forex, there are few pure speculators in Forex (as opposed to the stock market, where near 100% of investors are speculators in one form or another).  And those who have the large amounts of required capital to invest in Forex in a significant way, largely have some ulterior motive (such as politics, or to ‘corner’ a small currency market), or choose not to speculate in Forex (they use it as payment system and for hedging).

Some more contrarian facts unique to Forex:

  • There is no ‘insider trading’ laws pertaining to Forex market (even if there were – how could they be prosecuted?)
  • Modern Forex was created by ‘accident’ by Richard Nixon, in response to French demand for gold (US Dollar was backed by Gold in that time)
  • If the Forex market itself didn’t exist in its current form, the central bank would completely control the value of the dollar (any dollar, in their respective domicile)

Literally, the markets are the cutting edge of our global societal evolution, and have become an entity of their own.  It could be argued that the market itself is the first form of Artificial Intelligence.  Does the ‘market’ have an intelligence by itself?  Oh – it sure does love all the computers we are building for it (nice and cozy new home)!

Further evolution

As the markets evolve, humans will become less and less relevant.  Unless in the next years a group of major market participants get together and create a superstructure such as Bretton Woods (a very unlikely scenario), the market evolution will accelerate.  New emerging markets will thrive and die, new instruments such as Binary Options and other derivatives will change how participants look at trading.  Goldman will create new fangled derivatives creating super-bubbles and topple dictators and open new markets.

Speculating on what the outcome of chaotic evolution process will look like is preposterous.  Discussing market structure and what measures we can take to ‘stabalize’ markets is also preposterous.  The idea that we can get all in the world to ‘agree’ on a ‘comprimise’ of what the markets (including Forex) should look like, is not feasible.

That’s the whole idea of the markets!  Traders all disagree – and voice their opinions with their capital.

What is practical – what is feasible.  Prepare yourself!  Educate yourself!  Do your own investing!  Build your own algorithms!  Get active legally if you have a big loss!

If we don’t prepare for the coming high tide, we may all drift out to sea.

 

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Forex brokers again brace for impact

by Global Intel Hub (JoeGelet), 2015

http://www.zerohedge.com/news/2015-06-26/forex-brokers-again-brace-impact

Scared by the recent surprise CHF event that caused many Forex brokers to completely collapse, brokers are taking no chances as Greece sits on the brink.  From one broker:

Dear Trader,

Due to uncertainty in the markets brought about by the current situation with
Greece, margin requirements for all EUR pairs will be increased from 1% to 2%
as of 20:00 server time TODAY (June 26th) and will revert to 1% at 22:00 server
time on Sunday (June 28th).

Please monitor your account prior to 20:00 today and adjust your positions (if
required) to avoid potential margin call / stop-out.

As ever, if you have questions or need some assistance, our friendly live-chat
team are standing by.

Regards,

Customer Services

From another:

Due to the current
speculations and the ongoing Greece debt negotiations, there is potential that
an announcement over the weekend will have a significant impact on the market
open on Sunday, June 28th.  

With this in mind, we will require at least double the usual margin you
currently have in your account for all EUR currency pairs and for the GER30,
valid from tomorrow Friday, 26.06.2015 15:00 German time. I.e. You currently
have a leverage of 1:200 (0.5% margin requirement) for EUR currency pairs, this
will be changed to leverage 1:100 (1% margin requirement). You currently have a
leverage of 1:100 (1% margin requirement) for the GER30, this will be changed
to leverage 1:50 (2% margin requirement).

For the avoidance of doubt, please ensure that you are comfortable with any
positions you hold and margins required.

If you have any questions, please do not hesitate to contact your Client
Relationship Manager…

Is this another part of the plan to consolidate the market into a single one world currency (ha.. ha), or just another example of broker stupidity?  How many more dead bodies will rise to the surface in this next battle in the Currency Wars?

Don’t let it be you!  Turn off your systems this weekend, monitor the news, and wait for opportunity!

On the other hand, many of these ‘last minute’ situations turn out to be nothing more than a tool for politicians to gain favor with their constituents, as if they are ‘doing something about the problem’ thus justifying their huge salaries and lavish accomodations.  Is this situation really about testing Tsipras (will he ‘buy in’ to the global agenda or stand up for his principles and turn Greece into a rogue state) or again a test of the “Northern Europeans” who are financially responsible and the “Southern Europeans” who are lazy and always in debt?  Or again is it about cultural differences, that Greeks have another financial view of how life should be lived, compared to the Germans and the Swiss?  What does history tell us about the financial overtones of Greek culture?

In 1929 the Harvard economist Charles Bullock published a magnificent essay on a monetary experiment conducted by Dionysius the Elder, ruler of the Greek city state of Syracuse from 407 BC until his death in 367. After running up vast debts to pay for his military campaigns, his lavish court and spectacles for the common people he found himself painfully short of ready cash. No one wanted to lend him any more money and taxes were drying up. So Dionysius came up with a great wheeze. On pain of death he forced his citizens to hand in all their cash. Once all the drachmas were collected he simply re-stamped each one drachma coin as two drachmas. Simple. Problem solved. Syracuse was rich again.  Except, of course, it wasn’t. Bullock used it as an early example of why just minting more money out of thin air was seldom a reliable way of creating more wealth. There was, however, another lesson to be learned. When it comes to making a mess of the economy and fiddling the figures the Greeks have been at the top of their game for a very, very long time. 

But should the world be surprised?  Maybe they know Greeks history of non repayment of debts, and somehow want to teach Greece a lesson in German finance:

After the formation of the modern Greek state in 1829 the country went on to default on its debts in 1843, 1860 and 1893. According to calculations by the economists Carmen M. Reinhart and Kenneth S. Rogoff Greece has spent more time in default to its creditors than any other European country. It has been skipping its repayments for 50 per cent of the years since 1800, compared with a mere 39 per cent of the time for the next worst offender, Russia. Indeed, even if you moved it across to Latin America – generally regarded among bond traders as default central – it would still be among the worst offenders. Only Ecuador and Honduras have a worse record of meeting their debts. 

For Forex Traders

If you have existing positions which are unhedged, especially in Euro region currencies, it would be advisable to scale back your positions or protect them with options.

If you have no positions and want to capitalize on the event risk, try a Euro straddle deep out of the money.

Call your broker to discuss their plan and how they are mitigating the potential risks (if at all).

Good Luck!

The post Forex brokers again brace for impact appeared first on Forex IQ.




California Diaspora

by Global Intel Hub (JoeGelet), 2015

http://www.zerohedge.com/news/2015-04-21/california-diaspora

California is an interesting place.  Probably something like California never existed before.  A barren state with no substantial natural resources, with cities constructed mostly directly over major fault lines, no water, the highest per capita immigrant population of any US state, and of course, also the state with the highest population per capita of lawyers.  “Land of fruits and nuts.”  or “La La Land” according to the LA Times:

The Oxford English Dictionary made some stellar updates on March 24, which are now online. For instance, “e-mail” is now “email.” You can now, with reference to the OED, eat a banh mi sandwich or a taquito. And FYI (newly added), OMG is there too — and it dates back to 1917. (OMG!).

But then there’s this: La-La Land is in the newest edition of the Oxford English Dictionary, and it defines our fair city. Here’s the definition:

la-la land n. can refer either to Los Angeles (in which case its etymology is influenced by the common initialism for that city), or to a state of being out of touch with reality—and sometimes to both simultaneously.

 

What is it, the sun, the palm trees, the nightclubs, the limos, the fact that Spiderman can get arrested on Hollywood Boulevard? Do we deserve this (new word) smack-talking from a bunch of dictionary writers? Maybe they should all be wearing (new word) tinfoil hats.

But practically, California is now an industrial powerhouse, home to some of the world’s largest corporations, a massive agricultural belt, Silicon Valley, Hollywood, Biotech, and Charlie Sheen.  But all this happened in the last 60 years, during a post WW2 technology boom, such as the relocation of firms such as General Atomics and others; the connection between Hollywood and the US Military propoganda machine (did Hollywood really win the war for us?).  California is a place filled with mystery, hypocrisy, and dreams.  “The American Dream” can even be credited to coming from California.  For example, when you are in Washington DC, there are no qualms or confusion about what they do.  But there is a huge Military presence in California, probably even more than Washington, that is more subtle, unknown, and not admitted.  For example in the tech sector, recent Snowden relevations have showed us the real relationship the government has with Google, (not to mention being an initial investor/founding partner) Microsoft, Facebook, and other tech giants.  It is naive to believe that the organization called the US Government, possibly the most powerful in the world, created the internet, but then allowed it to be dominated by ‘whiz kids’ from their garages (mostly from California).  The ‘Disneyland’ and ‘Hollywood’ model is uniquely Californian.  But is the economy really a potamkin village, fuelled by these dreams?  When your car runs out of gas – you cannot keep going based on hope and love alone.  Or is it as simple as a demographic shift, combined with environmental and other factors?

Checkout the data from a report titled “The California Exodus”:

For decades after World War II, California was a destination for Americans in search of a better life. In many people’s minds, it was the state with more jobs, more space, more sunlight, and more opportunity. They voted with their feet, and California grew spectacularly (its population increased by 137 percent between 1960 and 2010). However, this golden age of migration into the state is over. For the past two decades, California has been sending more people to other American states than it receives from them. Since 1990, the state has lost nearly 3.4 million residents through this migration.

This study describes the great ongoing California exodus, using data from the Census, the Internal Revenue Service, the state’s Department of Finance, the Bureau of Labor Statistics, the Federal Housing Finance Agency, and other sources. We map in detail where in California the migrants come from, and where they go when they leave the state. We then analyze the data to determine the likely causes of California’s decline and the lessons that its decline holds for other states.The data show a pattern of movement over the past decade from California mainly to states in the western and southern U.S.: Texas, Nevada, and Arizona, in that order, are the top magnet states. Oregon, Washington, Colorado, Idaho, and Utah follow. Rounding out the top ten are two southern states: Georgia and South Carolina.

Water Concerns

Recently there is a quiet exodus from California from those who are concerned about the water situation, that it will eventually collapse the real estate market.  From Intellihub:

With over ten percent of the U.S. population living in California a new problem is emerging as the wet season fell short of delivering adequate rainfall to sustain the populace. In fact snowpack and groundwater levels are now at historic lows and it has even been admitted that the state only has a 1-year supply of water left for residents to consume before California officially becomes a dust bowl.

 

Shockingly according to NASA satellite data water levels in just two area river basins were “34 million acre-feet below normal in 2014? showing the vast extent of the problem, as reported by the LA Times in a recent piece. Moreover the report concluded that the state has been losing “12 million acre-feet of total water yearly since 2011? which is not good by any means.

What’s interesting, is that it was mostly environmental factors, i.e. Good Weather, and lack of rain, that brought so many to California willing to pay the high “Sunshine Tax.”  In other words, the lack of water is correlated with the good weather.  It is a desert climate.  Of course, in recent years it has gotten worse, due to a long term trend of more people living in California, overdevelopment, rampant pollution, and climate change.  LA was able to get rid of the smog – you can see the foothills again!

And let’s think about this like a Californian – if Anthony Kiedis, General Atomics, the Chemtrail program, and Arnold Schwarzenegger can’t make it rain, it doesn’t look good.

Radiationgate 

The water situation is nothing compared to the radiation in the water, air, and food coming from Japan since 2011.  Already much of the country has boycotted foods and wines from California.  But try telling that to a SoCal native, even considering that the swallows didn’t come to San Juan Capistrano and that scientists are saying that the Pacific ocean is dying and we can be on the verge of an Extinction Level Event.

Williams Lake Tribune columnist Diana French, Jan 13, 2015 (emphasis added): Out of sight is out of mind. Those of us living in the Interior might not know or care that sea creatures are sick, dying or disappearing at an alarming rate all along the Pacific coast. There are dying oysters, bleeding herring, melting star fish, hungry Orcas and sick seals. The latest are dead seabirds… Some blame ocean acidification for the devastation, others wonder if it’s radiation fallout from Fukushima. Whatever, it might be helpful to find the cause before all the creatures are gone.

University of California Santa Barbara, Jan 15, 2015: A consortium of scientists, including UC Santa Barbara’s Douglas McCauley, has found that the same patterns that led to the collapse of wildlife populations on land are now occurring in the sea… Their findings are published today in the journal Science… “All signs indicate that we may be initiating a marine industrial revolution,” [McCauley] said. “We are setting ourselves up in the oceans to replay the process of wildlife Armageddon that we engineered on land.”

New York Times, Jan 15, 2015: A team of scientists… has concluded that humans are on the verge of causing unprecedented damage to the oceans and the animals living in them. “We may be sitting on a precipice of a major extinction event,” said Douglas J. McCauley, an ecologist at the University of California, Santa Barbara, and an author of the new research, which was published on Thursday in the journal Science.

When these health conscious individuals learn the teratogenic effects caused by radiation not only in the environment, but in the products such as Spinach and other greens coming from Organic farms in the north, they will change their thinking, and probably move.

So what is the key information – why this isn’t on the nightly news?  Why don’t our radiation networks that we built during our period of paranoia and Russophobia sound alarm bells?  Simply because most of the stations on the west coast have been ‘decommissioned’ or are ‘under repair – indefinately’ and the EPA under the guidance of President Obama has raised the acceptable levels of radiation by thousands of percent.

Investors hang on to your hats – and beware of the looming ‘perfect storm’ (demographic shift, environmental problems, economic issues) that will change California forever.

 

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Ebola and Russia in focus

by Global Intel Hub (JoeGelet), 2014

http://www.zerohedge.com/news/2014-10-13/ebola-and-russia-focus

We have recently witnessed many ‘firsts’ such as one of the largest storms in the Pacific, the most severe acute health risk in modern times, and a global financial system on the brink of collapse.  The IMF is warning of ‘runs’ – and meanwhile, Russia is developing it’s new ROSSWIFT system.

It has been reported that the black plague that killed millions in Europe was at least similar to the Ebola now threatening the world:

Most assume that Black Death quickly ravaged the fourteenth century western world was a bacterial bubonic plague epidemic caused by flea bites and spread by rats.  But the Black Death killed a high proportion of Scandinavians — and where they lived was too cold for fleas to survive. A modern work gives us a clue into this mystery. The “Biology of Plagues” published by Cambridge University Press analyzed 2,500 years of plagues and concluded that the Black Death was caused by a viral hemorrhagic fever pandemic similar to Ebola.  If this view is correct, the future medical and economic impacts from Ebola have been vastly underestimated.  

But during medieval times, castles closed their walls and people didn’t venture out.  In a modern world of just in time inventory, global airline travel, and healthcare systems being proven to be ineffective, this could exceed any projections.  The World Bank has estimated the economic cost of Ebola could reach $32 Billion by the end of next year.  But this is the same group that forecast a global recovery, and failed to see a looming sub-prime fueled credit crisis that brought down some of Wall Street’s largest banks and caused trillions in economic devastation.

In parallel, information is being released on how the CIA controls the media:

If this peaked your curiosity, read about Operation Mockingbird.

If this isn’t enough to question the ‘as seen on TV’ myth, consider that the CDC in conjunction with the DOD owns a patent on this strain of Ebola:

The U.S. Centers for Disease Control owns a patent on a particular strain of Ebola known as “EboBun.” It’s patent No. CA2741523A1 and it was awarded in 2010. You can view it here. (Thanks to Natural News readers who found this and brought it to our attention.)  Patent applicants are clearly described on the patent as including:

The Government Of The United States Of America As Represented By The Secretary, Department Of Health & Human Services, Center For Disease Control.

The patent summary says, “The invention provides the isolated human Ebola (hEbola) viruses denoted as Bundibugyo (EboBun) deposited with the Centers for Disease Control and Prevention (“CDC”; Atlanta, Georgia, United States of America) on November 26, 2007 and accorded an accession number 200706291.”

It goes on to state, “The present invention is based upon the isolation and identification of a new human Ebola virus species, EboBun. EboBun was isolated from the patients suffering from hemorrhagic fever in a recent outbreak in Uganda.”

Savvy investors are mostly aware how the markets are manipulated, either through the PPT, large phantom flash orders on interest rate derivatives, naked short positions on metal futures, and so on.  But in the case of being misled in the markets, the worst that can happen to you is you lose money (unless you are one of the poor souls who work for a large bank doing these deeds in which case you might find yourself stabbed in the back 10 times).

But Ebola affects both real actors in the economy (people) and also business vectors, such as import/export, business travel, and a potentially rapidly declining consumer base.  Also consider how will Ebola affect the spending patterns of businesses and consumers?

Apocalyptic scenes of frantic people buying all overpriced supplies is common to those who have lived in Florida through more than one hurricane season; price gouging, fights over last remaining items, shops being closed and prolonged loss of electricity are only some of the highlights of such an experience.  But an Ebola outbreak, in any form, can mean a real lockdown of entire parts of society.

On the other side of the world, Russia is developing their own Ebola vaccine, a new ROSSWIFT payment system which will even include the isolated Iran, and has shut down the previously most popular McDonald’s in the world in Moscow’s busy Pushkin Square.  The British journalist has the gaul (or the orders from the CIA as explained by this whistle blower) to suggest that the Russian economy will suffer by closing the golden arches.  McDonald’s (MCD) has more than 400 locations in Russia and employees mostly Russian workers.  Is this to suggest that McDonald’s is somehow the linchpin supporting the domestic Russian economy, or that Russia is incapable of making their own fast food chain (such as Teremok). Or does this guy think that like most Americans, Russians do not know how to cook for themselves?  Let’s have a look inside this symbol of Capitalism:

I guess Russians will have to suffer with their inferior Teremok, that by the way offers caviar, blintzes, and a tasty slightly alcoholic beverage “Kvass” (1.2% alcohol, not classified as alcoholic beverage in Russia).  Maybe Russians will start to question why they have been eating BigMac’s filled with hormoes and genetically modified ingredients since 1990, which are clearly superior to Borscht, Medovukha, and caviar filled pancakes.

But unfortunately for US based investors, it will be forbidden to invest in Russia’s post-sanction boom.  Similar to the Forex firewall built around the US regulatory jurisdiction, US companies will be forbidden to invest in Russia and participate in such a boom.  Already Exxon is not happy about missing out on a joint Rosneft project in the Arctic, which can yield 100 billion barrels of oil.

Let’s hope.. that hope can fuel our cars and trucks.. and hope for our German friends that hope can fuel their homes this winter..

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Walcome, Unicorn to Forex

by Global Intel Hub (JoeGelet), 2014

http://www.zerohedge.com/news/2014-09-17/walcome-unicorn-forex

An interesting week for the evolution of Forex!

Coming just after leading US based intellectuals calling for the dethroning of “King Dollar” in an NY Times op-ed, we are moments away from a vote that could cause a major shakeup of the Eurozone, potential crash of the GBP, and creation of a new Scottish currency yet to be named.  This will be very interesting considering Scotland’s currency history, during the 18th and 19th centuries many Scottish banks issued their own currencies.  And some have suggested they might try Bitcoin.

Meanwhile, the Ruble is at historic lows against the US Dollar, on the same day that China announced a “Stealth QE” program.  Moscow is ‘warning against panic’ as the ruble plunges – obviously these officials don’t understand the West’s version of Forex policy (to destroy your currency as much as possible via ZIRP & QE).

Sanctions are meant to ‘punish Russia’ but isn’t the purpose of QE, Abenomics, and similar strategies to lower the value of the currency as much as possible to boost exports?  Since the breakup of the Soviet Union, the Russian economy has grown rapidly and strongly.  They have one of the fastest growing middle classes in the world, less poverty than the United States, and new generations of industrial technology such as Nuclear plants that do not produce traditional waste.  When Russia implemented the market based system they have now, they had to reinvent themselves.  Development was a necessity – not a luxury of trust fund babies making businesses out of hobbies in their parents garage.

Scotland will have to do the same; and the foundation of their new system must be a robust currency system and monetary policy.  Given modern technology this is a lot easier to do than 100 years ago.  Also there are now hundreds of examples of alternative currencies.  NZD/USD now trading at about .81 – the GDP of New Zealand currently 182 Billion.  The GDP of Scotland is about 216 Billion.

Of course, part of how the Euro was sold was on the basis of a consolidated currency, that it would be good for trade, save money on exchange, a consolidated bond market, etc.  But the crisis in the Eurozone is showing the cracks in that model.  This t-shirt eloquently explains why a consolidated currency will never work in a diverse region of different languages, cultures, and markets:

Trade the vote

A simple strategy to trade the vote, of course if your broker will clear the trades (already we are receiving volatility notices); buy a long straddle (put and call) on EUR/GBP, GBP/USD, and GBP/JPY.  If you live in the Dollarzone and can’t access Forex options, this can be done with spot Forex by placing 2 limit orders 50 pips above and below the price going into the vote with a trailing stop (likely only one will get triggered).  If GBP spikes 100 – 200 pips, the limit order will get triggered and then you will have to close it manually or let the trailing stop take it out.  Of course in this scenario it’s questionable if your broker would honor the limit (especially if there is a server malfunction or bottleneck of orders as happened when the SNB intervened and subsequently crashed a bunch of FX servers).  Another situation that can happen though is as initial results come in the market can swing violently in one direction and then the other as we have seen during many Fed announcements.  Guid Luck!


Scottish coins, including a unicorn from the reign of James III. Photograph: Kim Traynor/Wikipedia

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Are you US or Non-US?

by Global Intel Hub (JoeGelet), 2014

http://www.zerohedge.com/news/2014-09-08/are-you-us-or-non-us

The most commonly used introduction in any Forex business for the past 3 years: “US or Non-US”

As much of the world moves to a non-USD Forex system, it is becoming ever more difficult for US citizens to trade Forex.  Since the dud-fag regulations that have protected the US consumer from opening accounts offering 400:1 leverage and near zero pip spreads, Forex options and a plethora of other products; US citizens are left with few options to hedge themselves from a collapsing US Dollar.

Last week, IBFX, one of the remaining Forex brokers in the US decided to transfer it’s MT4 accounts to FXCM.  Now being owned by Tradestation, they said they want to focus on their core platform, Tradestation.  From their perspective, Meta Trader is simply a liability.  But the result now is that US Citizens have even fewer choices to trade spot Forex; namely FXCM, Gain, Oanda, MB Trading, and of course the securities Broker Dealers such as TD Ameritrade.

For those who don’t understand some of the technicalities of how Forex works, it probably sounds strange to make such a case, because clients can still open accounts at these listed brokers and trade Forex.  But for those who have ever traded Forex, they know that it’s not easy to trade Forex (or nearly impossible) with poor trading conditions including high spreads, FIFO rule, no hedging, reduced leverage, a small selection of pairs offered, an no options.  Still, there is not a broker that offers spot Forex options in the US (such as Saxo Bank that has thousands of types of spot Forex options).  Yes, it’s possible to trade options on Forex Futures.  But Forex Futures, are Futures, not spot Forex.

It is a strange situation indeed, when during the 80’s and 90’s the US was a global leader in trading.  Billions of dollars flowed into the US wanting to invest not only in US markets, but by using the market systems developed by US companies.  In fact a large number of NFA members are foreign.  But currently, there are more billionaires living in Moscow than in New York; and the leading software platform to trade spot Forex, Meta Quotes, a Russian company.  Now it is the US enforcing capital controls, discussing bail-in policies, imposing trade sanctions, and restrictive regulations that are plaguing the spot Forex market for US citizens.

Fortunately, US trained ECB chair Mario Draghi seems to be inline with US Fed policy; which will for the time being likely keep the US and EU tied together on an economic sinking ship.  It will take time for China to develop the Yuan into a world reserve currency, although considering how far China has come this transformation is happening rapidly.

What then, is the average non-QEP US Citizen to do, in order to avoid a USD collapse?  We are now considering only technicalities of actually trading spot Forex; of course there are still many ways to pro actively protect any portfolio or business from a USD collapse.  It’s just strange that the world leader in free markets and trading is becoming the world leader in regulation forcing US citizens to seek alternatives outside the US.  What’s strange is that the best way to support the USD would be in fact to attract capital to the US, one small example would be to be a world-leader in Forex trading (there are many examples of such anti-competitive policies).  But regulators are going as far as questioning someone like Peter Schiff why he has a ‘large amount of clients from Australia in your US broker-dealer.’  So they founded Euro Pacific Bank, of course if you are in the US you will need to use Tor Browser or a proxy to even view the site, or else you will be displayed:

And don’t bother contacting them with a US phone number, email, or address.  (If you are an American living overseas it might be a good time to practice your British accent, or learn a foreign language that you aren’t ‘flagged’ as a potential liability).

For those who are familiar with Forex trading this is the message du jour displayed on brokerage sites, here’s another from Iron FX:

The good news!  If you are an ECP or QEP, none of these regulations apply.  US firms are moving overseas for a number of reasons (most notably to save on taxes).  Notable corporations such as Google, Microsoft, and basically 90% of publicly traded companies, already maintain a large financial presence offshore.  If this trend continues, what will be left in the US?

The widening gap between America’s wealthiest and its middle and lower classes is “unsustainable”, but is unlikely to improve any time soon, according to a Harvard Business School study released on Monday.

 

The study, titled An Economy Doing Half its Job, said American companies – particularly big ones – were showing some signs of recovering their competitive edge on the world stage since the financial crisis, but that workers would likely keep struggling to demand better pay and benefits.

 

 

“We argue that such a divergence is unsustainable,” according to the report, which was based on a survey of 1,947 of Harvard Business School alumni around the globe, and which highlighted problems with the US education system, transport infrastructure, and the effectiveness of the political system…

Combined with US foreign policy, the IRS attack on the Swiss Banking system, is the retail US Citizen slowly becoming persona non grata in the global marketplace?

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Market based approach to Russia

by Global Intel Hub (JoeGelet), 2014

http://www.zerohedge.com/contributed/2014-03-24/market-based-approach-russia

Let’s examine what happened from the beginning. An extreme right wing group, with US and NATO support (according to released internal transcripts), overthrew the legitimate Ukrainian government (illegally) via violent coup. The fact that this group had western support is not important really, but should be noted. So according to ‘international law’ – this ‘country’ is NOT Ukraine. Ukraine cease to exist when this happened. The new ‘government’ – not popularly elected, seized control by force. If anything we could call this country (still yet to be defined) the “New Ukraine” – of course if the current ‘government’ suggested this it would diminish their power; it serves them to mislead the world (those who are uninformed) that this is in fact the Ukraine, the same country that existed before. Once the legal process breaks down, there’s no going back.

Now, the smoking gun:

Why is this important?

When Russia went into Crimea, they claimed that they were protecting Russian citizens (who are the overwhelming majority there), which at the time sounded as an excuse for ‘annexation’ of Crimea (although Crimea was always part of Russia and mostly Russians are living there). Is it possible that Russian intelligence received such real threats to Russians in Crimea? Also to note the vehement anti-Russian stance of Western Ukrainians, at least those in power.

RT commentators saying this recording is right out of “Dr. Strangelove” – only problem, Ukraine doesn’t have nuclear weapons. Is she referring to her western friends? If they hate Russians so much, why not leave Crimea to them?

Where US interest lies

The US has few economic or political ties to Ukraine, other than the NATO agenda to expand further into Europe and Eurasia (Grand Chessboard). But the US has very strong economic ties with Russia. Russia is a huge consumer of USD, invests in the US, and has provided transportation and other logistic services to US forces in Afghanistan. Not to mention US corporations now doing business in Russia:

U.S. companies have also made sizable wagers in Russia. In 2010, PepsiCo agreed to buy Russian dairy and juice manufacturer Wimm-Bill-Dann Foods for over $5 billion, or about 16 times earnings before interest, taxes, depreciation and amoritization. The deal was seen as a way to boost the company’s revenue growth, which had slowed as PepsiCo’s mainstay U.S. market matured.
..
Today, Russia accounts for about 7 percent of PepsiCo’s total revenue. PepsiCo declined to comment.
Ford has two plants in Russia, as does General Motors. Meanwhile,Renault/Nissan and Hyundai also have large operations in Russia.
Russians have also been gobbling up US real estate at an increasing pace, even financing new developments:

Russian Deputy Economy Minister Andrei Klepach recently said that he expects Russians to invest $80 billion outside of Russia over the next few months, up from the $65 billion that he predicted originally.

Until now, investment in the U.S. only accounted for a small fraction of that number. But that may be changing. Mermelstein expects Russian real estate investment in the U.S., both commercial and residential, to double from its current share of 5 percent of Russian investment abroad to 10 percent in 2012.
Not to mention other sectors, such as the Steel industry:

Russian steelmaker OAO Severstal yesterday said it is buying a Western Pennsylvania coal company for $1.3 billion in cash, adding to the surge of Russian money into the United States.
Russia holds $136 Billion of US Government Debt. Ukraine on the other hand, holds so little they are categorized under ‘other’ (according to data from the US Treasury).

What happened to ‘the customer is always right?’

Russia is certainly not the largest customer of the US. But they are a significant one. And with US companies in Russia, trade has been two way.

Part of the motivation of dismantling the Soviet Union was to create a capitalist ‘open market’ system, that the US could do business with Russia. They have done that. Their economy has grown, and they’ve learned from the American system, adopting many US-led economic practices. They have even replicated the ‘open markets’ model creating a commodity and derivatives exchange:

In February 2011 JSC “Saint-Petersburg exchange” and JSC “RTS Stock Exchange” carried out a joint project on organization of trading of commodities futures. In this project organizer of trading is JSC “Saint-Petersburg exchange”, clearing organization is CJSC “CC RTS”, settlement organization is “Settlement Chamber RTS”. Trading is carried out on the basis of trade system and risk-management system of FORTS derivatives market. It ensures the principle of single money position in all markets for the participants of trading.
Russia is depicted in the media as a wasteland. Moscow has built a downtown filled with skyscrapers comparable to many international business districts. A growing middle and upper class in Russia puts in on par if not more advanced than Western economies:

Stable gross domestic product growth, declining inflation and a record-low unemployment rate are pointing to positive consumer purchasing power in Russia. The Russian middle class, which stands at 104 million strong, is fueling that power. This segment of the population is projected to rise 16 percent between now and 2020, at which point it will represent 86 percent of the population and amount to $1.3 trillion in spending—up 40 percent from 2010, based on a global study of the emerging middle class and related databases by Dr. Homi Kharas of the Brookings Institution.
“There is an equal share of money at the top and in the middle,” said Dr. Venkatesh Bala, chief economist, The Cambridge Group, a part of Nielsen. “Russia’s middle class today has the same share of income as the upper class and has remained an untapped opportunity by many international corporations.”
While the top 20 percent of income earners in Russia represent 47 percent of the country’s total income, the middle 60 percent accounts for 48 percent, according to federal statistics from the Bank of Russia (2012). The bottom 20 percent comprise the remaining five percent of income.
Ukraine on the other hand, has done none of this. Many of the media depictions of Russia are more applicable to Ukraine.

Finally, since this issue has become polarized, just to compare the 2 choices. Is it better to support a coup government that seized power by force, with few economic and political ties (Ukraine); or Russia, a legitimate country, world power, with many economic ties, who has proven in the past 10 years that it has accepted the suggested economic reforms?

Supposedly as traders we look at economic data and make economic decisions. Following the ‘sanctions’ logic to the end, we have much more to lose by supporting ‘Ukraine’ than Russia. Taking what they have learned from the West, it would not be difficult for Russia to internally reorganize their economy, and make new partnerships that have already been in the making for years (such as with China, India, and others). Russia also sits on vast natural resources, which could be used internally or sold to China.

Irony of fallacious policy

Hundreds of billions of dollars were spent on propoganda, intelligence, and other means, during the Cold War, trying to convince the Russians to go capitalist. Open their markets. Finally it suceeded, and they have developed a sophistocated, capitalist market system. All of those efforts are now in jeopardy.

Now, for reasons unknown, the West is sending the opposite message. Through the use of account freezing, trade sanctions, and other economic tactics, the West is doing exactly what the West tried to convince the Russians not to do for decades.

No matter the outcome, the West (US and Europe) has much more to lose in any scenario.

Market approach

Traders should only be concerned about the message being sent to the markets. Markets operate based on a series of rules. The market opens at a certain time, closes at a certain time. Contracts are defined in quality and quantity. Although traders may be emotional and irrational, they cannot operate outside of market rules (for example, if you are not happy with the outcome of a trade, you cannot just delete it from your account). A violation of market rules opens a pandora’s box.

What’s next? Politicians will decide that in order to support the US market (because it’s now suffering due to billions flowing out because of sanctions, or assets are frozen) that now to support our efforts overseas, we can only buy (not sell)? Or that IRAs are converted to tbills to ‘save Ukraine’? Since when did any Westerner care about Ukrainian politics?

..44 percent weren’t sure about the name of the former Ukrainian president with close ties to Russia who was recently removed from office. Only 40 percent correctly chose Viktor Yanukovych from the list. Sixteen percent selected an incorrect answer.

A relative lack of knowledge, however, doesn’t stop some from giving their opinion on various policy questions. The poll found that 24 percent of Americans were willing to express an opinion on whether the nonexistent Ukraine Administrative Adjustment Act should be repealed in light of the conflict. Respondents who gave an answer were divided evenly, with 12 percent backing repeal and 12 percent opposed.
With the economy faltering as it is, a market based approach to the current situation would have given a boost to the economy, instead of putting further negative pressure.

Looking economically, any trader should agree that if you can lose 100 and gain possibly another 20 or more through solidifying the relationship (Russia) and lose a few; OR (Ukraine) gain a few, but in the process lose 100, it’s a no brainer trade. That is the economic magnitude difference between Russia and Ukraine, based on above referenced economic data.

The reason Nixon opened up China, was to further the US economy, not to meddle in Chinese politics. Even recently, we’ve overlooked China’s domestic problems, such as human rights, the seizing of Tibet, rampant pollution, and other issues not acceptable by Western standards, in the interest of furthering trade. And over a period of decades, with US cooperation, China has built itself into an industrial powerhouse, and supplies goods in almost every economic sector, and is the US biggest customer.

Some important facts to note about Russia:

40% of EU energy comes from Russia.
45% of EU cars are sold to Russia.
US poverty is 3% higher, than in Russia.
More billionaires live in Moscow than any other city.
Russia has no external debt!
Article updates

objective political analysis

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Markets Politicized – Perspective on Russia

by Global Intel Hub (JoeGelet), 2014

http://www.zerohedge.com/contributed/2014-03-22/markets-politicized-perspective-russia

The situation with Russia should give investors and traders a reason to brush up on their history, as current events take root in things that happened 50, 100, and 200 years ago.  To understand this, can provide perspective, during an information war, where it’s not easy for some to separate facts from beliefs and propoganda (on both sides).  The relationship between US and Russia has always been interesting, as we shall explore.

The cultural divide

The US and Russia have very similar cultures.  Both; superpowers, with a vast countryside, dominated mostly by white Christians.  Both have vast resources, difficult to invade, and both have been the victim of European and other external politics.  Of course Russian culture is much older, and has a different set of influences and experiences than the US, situated in North America.

There’s probably more misinformation in between the two cultures than any other, because for 60 years both have spent significant effort in propoganda.  So it’s difficult for most Westerners to be objective on this topic.

One theory on the divide between the two similar cultures was the decision for Russia to accept Christian Orthodoxy, started by Peter the Great (thus creating a divide between their Catholic neighbors, such as Poland, Croatia, Latvia and others).  If you look the dividing lines of political and economic alliances in Europe, historically, there seems to be a correlation with the dominant religion.  Not that any of these countries are of significant importance, but if all examined through this eyeglass, it seems that differing ideologies happen to be divided along these lines.  Many of the anti-Russia US hawks for example, are either of jewish or catholic heritage.

The American Revolution

One interesting fact not reported much was Russian support for America during the American Revolution, both directly and by financing France, and through diplomatic and trade ties.  Not that Russia was doing the US any favors in that time, it simply supported their situation, and that they had an interest to not support the British.  But it should not be forgotten, that Russian support was crucial for the Americans in their struggle against the British.

Alaska

Ironically, considering the current US policy about Crimea, the Alaska purchase happened due to circumstances during the Crimean war:

After the Crimean War (1853-1856) Russia felt concern that the British would seize Russian America if a war broke out, strengthening the British in the north Pacific. To avoid this and to raise money, Russia offered in 1859 to sell the territory. In 1867 the United States purchased the whole of Russian America (Alaska) in the Alaska Purchase. All the Russian administrators and military left Alaska but some missionaries stayed on because they had converted many natives to the Russian Orthodox faith.[20]

US annexations

The larger territory of the current United States was largely purchased or annexed (skipping the original 13 colonies which is a whole different issue).  Since the Revolutionay War, the US has aquired most of its territory by this method.  In that time the US was a new country.  These new aquisitions were exploited by the US, and helped fuel the US industrial revolution, and finally, what enabled the US to build a war machine during the 1940’s.

World War 2

World War 2 was the defining moment in American history when the US rose to superpower status, eventually creating the US Dollar as the dominant currency for trade in the world.  Before World War 2 (and more so before WW1) the US was largely isolationist, not seeing the relevance of foreign affairs.  But due to a number of circumstances, and the influence of the British (again, ironically) the US entered WW2 which changed world history.  It should be remembered however, that this was a new idea.  Before WW2 the US Army was largely comprised of Calvary soldiers on horseback.  There was no real Army capable of fighting in that time, the US was not prepared for war.  There was not a significant Navy, and certainly no advanced military technology, and no nukes.  While most of the world was at war, the US was able to convert its industry, organized by powerful US corporations, to build munitions instead of consumer goods and other products (guns vs. butter).  This gave the US the advantage, finally ‘winning’ the war, and leaving many nations indebted to the US.  This is important because this is the origin of American power, and many of these relationships, such as US-German relations, and US-Japan relations, exist to this day, because of WW2.

Since WW2, most countries choose to use the US “Petrodollar” – for a number of reasons.  But the system is very fragile; as we can see from its origins.  For example the deciding factor of ‘winning’ WW2 was the Manhatten Project, composed of many refugee German scientists.  Historians have explored that Germany was in fact working on a similar bomb, but due to their extensive obligations in their operations, were not able to complete it.  That, and other advanced technology being developed by Nazi scientists, certainly would have created a different world, economically speaking.

European influence

Both the US and Russia have been largely influenced by Europe, both in trade and politics.  But differently, Russia has been invaded many times by aggressive forces, which the US has not (aside from Canadians burning down the White House but this was not militarily significant).  Yes, Japan bombed Pearl Harbor, but only because Roosevelt threatened to cut of their oil supply.  And it certainly was not an ‘invasion’ – such as happened to Russia during WW2.  In many ways, Russia is more the victim; or at least to say has experienced more hardship as a nation, due to circumstances beyond their control, mostly created by outside influences.

Origins of the Cold War

Henry Kissinger had recommended to Nixon that one of the most important strategic alliances for the US to pursue was with Russia.  His logic was that both countries were culturally similar (more so than for example China) and that a deal with Russia would have cemted both countries long term supremacy and boosted trade.  This was never pursued (and maybe never considered) in favor of a hostile policy thus creating the cold war, but it allowed huge spending into the military industrial complex.  Since then, the US instead chose to have a special relationship with China, which is now on the verge of a major financial bubble.

During this era, the CIA did and intensive analysis of the potential military risk of Russian aggression.  The CIA concluded that the Russians have no intention and no capability of posing any risk to the US.  But in a press conference, Rumsfeld eloquently said that “Just because we didn’t find any threat or capability, doesn’t mean they don’t have one” and based on this reasoning, we entered the cold war.

This information indicates, it was US hawks that initiated an aggressive policy against Russia first.  General Patton has pleaded with his commanders to fight the Russians in Germany.  Although the cultures are similar, there seems to be some genetic mistrust (or can be explained in a number of different ways, but its not rational).  In any case, billions have been spent on propoganda demonizing Russians that they are ‘criminals’ – according to one prominent propoganda film, Communism is an “International Criminal Conspiracy” (although it was Wall Street that financed the Bolshevik Revolution).

It would be extremely politically inappropriate to mention Israel in this context.

Nuclear Age

Since WW2, real war between two states has become impractical, between nuclear powers.  Even with other states, the alliance with a nuclear power then makes war just as impractical.  The new war can only involve minor tit for tat conflicts, or be economic.  Possibly for this reason, policy makers and scholars in Russia have started incorporating a policy of ‘tanks not banks’.  This also may explain why the US has not annexed any territory since WW2, and many other policy shifts.

Markets Politicized

Supposedly, free markets operate based on free and open trade.  By imposing sanctions, limiting the use of the SWIFT system, and blocking Visa transactions, it changes the dynamics of the market, irrespective of the potential harm to targeted parties (although many analysts conclude sanctions will harm the West more than Russia).  Russian banks and oligarchs probably own at least a few shares of almost all US issues.  A certain majority of Russians are NFA members, RAs, etc.  Our economies are intertwined, all economies are intertwined, a policy forwarded by those such as Thomas Friedman.

If sanctions include the asset freezes of any company owned by a Russian, does that include Bank of America, Caterpiller, McDonalds, etc.?  What about holdings of the oligarchs, Russian banks, citizens, inside the US?

Russian position

As one commentator said, the US is playing marbles, and the Russians are playing Chess.  The following video is a must watch, vivid analysis of the Russian position.  It’s no indication that this will or will not happen, but in this case, they are holding all the economic cards:

The situation in Crimea, which has nothing to do with the west, is irrelevant for the West.  The relationship with Russia participating in the Western economic system is a net benefit to the West.  Russian businesses operate in the US, UK, Germany (not to mention supplying energy to the EU) and invest in the West.  They are great customers.  Obviously the current administration never worked in the real economy, learning the expression that “The customer is always right.”  Since Crimea was previously part of Russia, and its mostly Russian speaking, Russians living there, this is really a non-event.

West position

Not understanding all this, the West has created a situation where many will question the legitimacy of Western markets.  Making the economy political changes the dynamics of the market.  If we traders and investors spend our energy analyzing the markets to make decisions, and then to have our assets seized or a company we invest in, then it seems we are all in the wrong business.  Certainly that is not the idea of capitalism, or free markets.  Like during the 2008 credit crisis, when we explored the idea of losses are socialized and profits privatized, this is a very bad omen for not only the asset values, but also the proper functioning of the market.

Don’t forget 1991 and 1998

When the Soviet Union collapsed in 1991, trillions of dollars flowed into the West, creating and economic boom for a decade.  Oligarchs seized control of previously state owned assets and many of them invested in the West.  Trade opened, and the West did business in Russia.  One of the dominant Forex trading platforms is from Kazan, Russia (Meta Trader).  The economic effects of this event have only been slightly examined – however it can be said they were significant.

Then, in 1998, Russia devalued the Ruble and defaulted on some of its obligations, in a period of economic reorganization.  The 1998 event is significant because it almost collapsed the world financial system – not by intention, but because of volatility created, which the largest hedge fund in the world at that time, LTCM, was exposed to.  Specifically, LTCM was not exposed so much to Russia directly (they were) but it created a chain of events that created havoc in the derivatives market, opening but bond and option spreads to unseen levels, and destroying liquidity (similar to what happened in 2008 which was a US issue).

Conclusion

It would not be difficult for Russia to start pricing goods in non-USD.  Certainly, the US is not going to nuclear war to protect the Petrodollar, as was done in Iraq, Libya, and others.  Russia is a huge consumer of USD, not only for reserves, but for trade.  Russia has a very strong position, it likes the relationship with the USD, but if Russia feels that its becoming a net loser, it will not think twice about using Gold, Euros, Rubles, or some new Russian Bitcoin.  Also it will have a tremendous negative impact on US markets, as Russian money flows out, and trade encouters problems.

Any event such as this can create huge volatility in the USD and other US markets.  At that time, it’s possible the US will react with further political moves to protect the USD (such as Nixon did, not honoring payments in Gold for USD creating modern Forex) including but not limited to, limiting the sale of USD.

Clearly, none of the suggested policies would be profitable.  There’s more money to be made by trading, than through taxes and government restrictions, price controls, capital controls, and other regulations.  Dodd-Frank destroyed the retail Forex market in the US.  This situation can have far more damage.  But traders and investors should be vigilant, understand what’s at stake, and understand the potential market impacts; either to profit, or to protect their portfolios.

 

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The Next Financial Paradigm?

by Global Intel Hub (JoeGelet), 2013

http://www.zerohedge.com/contributed/2013-12-13/next-financial-paradigm

Zero Hedge users mostly agree the financial system will implode.  It doesn’t take more than high school math skills to calculate that the current debt based money system has implosion built in, and it’s guaranteed (this is one rare case we can use such a word in finance!), because at some point, not enough new money can be created to pay off an ever increasing debt base.  Collapse is a mathematical certainty.  What is not certain is when this will happen, what will be the trigger, how entities will react, and other wildcard factors.

Many of us know this collapse is coming, and are either feathering our nests as much as possible, or just waiting to time the collapse that we all exit at the same time (as is the Wall Street way).  What we don’t do often, is discuss what’s next?  Maybe we should ask Bob, he’ll tell us what’s next.

What happens after the financial collapse?   Hopefully, and this is one of the more likely scenarios, there are enough resources in the west to keep the system running on a temporary basis until a new system can be implemented.  This is up to debate but we aren’t betting on Zombie Apocalypse or end of Mayan calendar or Alien invasion.  Of course anything is possible.  But let’s think about it for a moment.  The financial system is a complete illusion, money does not exist.  But there is a huge physical economy, a real economy, that will not be destroyed at all during the collapse (unless people are upset and burn down buildings).  We’ll still have factories, machines, tools, fuel, commodities, and last but certainly not least, human capital.  So restarting will theoretically be easy, it’s just a question of organization.  And whoever is in power at that time, will have the largest vote.  So the most likely scenario is they will decide what the new system will be.  Is this why large organizations, such as The Feds, are targeting nobodys on the fringe, with a vengence?

As the author of the ZH article points out:

But HSBC launders billions for Mexican drug cartels and they can continue their operations no problem.

Caldwell doesn’t accept U.S. dollars or any type of fiat currency. You send him bitcoins via the internet, and he sends you back metal coins via the U.S. Postal Service.To spend bitcoins, you need a secret digital key — a string of numbers and letters — and when Caldwell makes the coins, he hides this key behind a tamper-resistant strip.

 

So long as you can keep your Casascius bitcoins safe, nobody can learn the key. To date, Caldwell has minted nearly 90,000 bitcoins in various denominations. That’s worth about $82 million at today’s exchange rate.

 

Because he runs a bitcoin-only business, Caldwell says there’s no Casascius bank account for authorities to seize. But he adds that he has no desire to anger the feds, whether he agrees with them or not. So he’s cranking out his last few orders and talking to his lawyer. He says this may spell the end of Casascius coins. “It’s possible. I haven’t come to a final conclusion,” he says.

 

What a complete and total joke this government is. Don’t they have anything better to do?

Certainly they do have much bigger fish to fry, they do have something better to do.  Why targeting intellectuals, fringers, Bitcoin users, and suburban gardeners?  Let’s skip Bitcoin for a moment because it is controversial, after all, it was used by criminals.  But what about planting a vegetable garden?  Even in an Orwellian police state, it’s hard for rational executors to justify charging veggie gardeners with criminal charges and hauling them off to jail.  This is not an uncommon occurence, it’s happening in Florida and many other places.  What do preppers, Bitcoin users, rogue gardeners, Retroshare users, Skype users (before it was infiltrated), and the DIY community have in common?  These are the people who are capable of restarting the system (any system) after any collapse.  They will build mesh networks, barter, and organize local movements, which can build into a national one.

In the case of Finance, Bitcoin represents something the establishment doesn’t like; it’s anonymous, it’s peer to peer, decentralized, and impossible to control.  The current debt based money system in Western countries all have one thing in common; central control.  And there is layer on top of the central control, a central central control, the BIS.

Hundreds upon hundreds of top economists, leading intellectuals, academics, authors, and countless others, have proposed simple steps The Feds (if not The Fed, some other Fed) could take now to avoid a collapse.  To name a few, giving people money directly with QE instead of banks, The Inform Act (resetting Government accounting to realistic figures), or even Jim Rogers simple ‘Let Them Fail’ approach.  So why don’t they do it?  Are they really that stupid?  Or they have other plans.

We’re so concerned with our portfolio values, limiting tail risk, seeking alpha, and so on; it’s easy to get caught up in semantic mathematical debates.  Will the S&P500 top out here near 1,800?  Or 2,000?  But does it really matter, if the S&P500 is 1,000 or 2,000? What’s the real difference?  “Investors will be wiped out if the S&P500 is 1,000″ you say?  You mean like .com investors were wiped out in 2000, Real Estate investors wiped out in 2007/2008, etc. etc.

Bubbles are built into the system, but with each one we get closer and closer to ‘the big one’ – so let’s say it happens.  What’s next?

An interesting trend has been forming, on a near grassroots level, best exemplified by the Bitcoin movement, but it’s much larger.

At TEDGlobal, Paul Kemp-Robertson talks about non-government currencies.  Here’s a list of 10 of them, including Bitcoin:

Here, learn more about 10 kinds of alternative currency in use today, from Kemp-Robertson’s talk and beyond.

 

  1. Bitcoin. The world’s best-performing currency, according to Kemp-Robertson, Bitcoin’s value is tied to the performance of a computer network. It’s “completely decentralized—that’s the sort of scary thing about this—which is why it’s so popular,” Kemp-Robertson says. “It’s private, it’s anonymous, it’s fast, and it’s cheap.” Bitcoin is a case study in the increasing desire to place trust in technology over traditional institutions like banks.
    .
  2. Litecoins. A virtual currency based on the Bitcoin model, Litecoins have a higher limit: “The number of coins that can be mined is capped at 21 million Bitcoins and 84 million Litecoins,” explained a recent Wall Street Journal post, which also noted that Bitcoins are worth more and currently accepted more widely.
    .
  3. BerkShares. While Bitcoin and Litecoins are worldwide currencies, BerkShares are hyper-local: they’re only accepted in the Berkshires, a region in western Massachusetts. According to the BerkShares website, more than 400 Berkshires businesses accept the currency, and 13 banks serve as exchange stations. “The currency distinguishes the local businesses that accept the currency from those that do not, building stronger relationships and greater affinity between the business community and the citizens,” the site reads.
    .
  4. Equal Dollars. Philadelphia is also trying out a local currency with Equal Dollars. When you sign up to participate, you receive 50 Equal Dollars; to earn more, you can offer your own possessions in an online marketplace, volunteer or refer friends.
    .
  5. Ithaca Hours. Another hyperlocal currency, Ithaca Hours—usable only in Ithaca, New York—also hopes to boost “local economic strength and community self-reliance in ways which will support economic and social justice, ecology, community participation and human aspirations.” (For a full list of local currencies in the US, go here.)
    .
  6. Starbucks Stars. Use of Starbucks’ Stars is limited not to a particular geographic locality, but to the corporate ecosystem that is Starbucks. Once you get a Starbucks Card, you can earn Stars—which buy drinks and food—by paying with the card, using the Starbucks app, or entering Star codes from various grocery store products. According to Kemp-Robertson, 30 percent of transactions at Starbucks are made using Stars.
    .
  7. Amazon Coins. Another company-specific currency, Amazon Coins, can be exchanged for “Kindle Fire apps, games, or in-app items.” You get 500 Amazon Coins, worth $5, by purchasing a Kindle Fire, or can buy more Coins at a slight savings.
    .
  8. Sweat. Kemp-Robertson points to a particularly innovative business-specific currency in Nike’s “bid your sweat” campaign in Mexico. Your movements, energy, and calorie consumption are tracked and can be exchanged for goods, ensuring a “closed environment”—only people who (a) own and (b) use their Nike products are welcome.
    .
  9. Tide detergent. This is a barter system that’s about as far from government-backed as you could get: in 2011, it was discovered that across the US, thieves had been stealing 150-ounce bottles of Tide detergent to trade for $5 cash or $10 worth of weed or crack cocaine. An article in New York Magazine from earlier this year details the fascinating storyand what it says about Tide’s super-successful branding.
    .
  10. Linden Dollars. Linden Dollars, usable within the online community Second Life, can be bought with traditional currency or earned by selling goods or offering services to other Second Life residents. Many people earn actual Linden salaries—some to the tune of a million Linden Dollars—says this article from Entrepreneur.com.
    .
  11. BONUS: Brownie Points. Granted by the universe as a reward for good deeds. Not exchangeable for tangible goods, just self-satisfaction, which we think is also important.

That’s quite a list, and doesn’t consider the growing number of community currencies in the United States alone – look at this huge list.

And just recently, Russia’s largest bank, Sberbank, proposes a Bitcoin alternative, saying that “The Future Belongs to Virtual Currencies.”

Are these all just fun experiments for economics students, or is there a parallel financial system developing, based on secure peer to peer barter, sophistocated technologies (that work), open source, and decentralized?

Let’s not forget the United States of America has one of the most colorful economic histories when it comes to alternative currencies, most typified by the Free Banking Era, where banks would issue their own currencies printed on their own paper.  An interbanking trust network ensued, i.e. I’ll accept Blankfein Bitcoins if you’ll accept Dimon’s Diamonds.  Smaller less strong banks failed.

Also let’s bear in mind what we have today that all previous systems did not have; technology, masses of resources, the internet, ability to produce food and energy for the whole planet many times over, advanced science.  To a large degree, the economic prosperity of the US can be attributed to advances in technology much more than “Capitalism vs.. ” or other such nonsense.

While pondering this, let’s listen to Chris Hedges describe the overlords of our current financial fiefdom, who may be in the position to determine the one voice of the establishment when implementing the new financial paradigm, once the collapse happens.

The post The Next Financial Paradigm? appeared first on Forex IQ.




Money does not exist

by Global Intel Hub (JoeGelet), 2013

http://www.zerohedge.com/contributed/2013-11-19/money-does-not-exist

Yesterday the US Senate held hearings on “virtual currencies” (meaning Bitcoin).  Meanwhile the “virtual currency” ran up above $800/USD and it was reported it got above $900.  It pulled back but as of now, is hovering above $700.

It was interesting at the hearing, the so called Bitcoin ‘experts’ included FinCen and the Secret Service.  The focus seemed to be on potential criminal activities in the digital currency (not other benefits such as a replacement currency in the event of a US Dollar collapse, etc.).

Using phrases such as “money laundering” and “criminal activity” and “child pornography” certainly did not paint a good picture of Bitcoin, for those watching with less knowledge about Finance and Bitcoin, and especially for those who had the hearings on in various bars, restaurants, airports, and other places where viewers were not focused on the hearings but could pickup the occasional keyword such as “drug trafficking.”  Silk Road and a newly discoveredAssassination Market have been over reported in the news and used by anti-Bitcoin antagonists as a justification to shut down the use of Bitcoin as much as possible (or at least to make it look dirty, as if users of Bitcoin are all drug dealers and child smut peddlers).  To put things in perspective, it’s been reported that the largest holders of US Dollars next to central banks are drug cartels.  Oh, and banks such as HSBC and others have been involved in the laundering of their US Dollars, some knowingly.

It’s being described as the largest cartel money-laundering scheme in history, and today, HSBC Bank headquartered in London, with offices in the U.S. will forfeit $1.256 billion and enter into a deferred prosecution agreement with the Department of Justice (DOJ). HSBC Bank USA violated the BSA by failing to maintain an effective anti-money laundering program and failed to conduct appropriate due diligence on its foreign correspondent account holders, DOJ said.

But the DOJ is not suggesting we stop using the US Dollar because of it’s use in the drug trade, nor are they suggesting HSBC is shut down because it was laundering money for criminals.  They get fined, and we all move on.

Virtual Currency?

What is exactly a “virtual currency” ?  Merriam-Webster defines “virtual” as:

very close to being something without actually being it

Ok so Bitcoin is not a virtual currency.  It could be a digital currency, as it’s purely electronic and not in physical form.  But of the Trillions created by the Fed during the QE program, still only $1.3 Trillion of M0 (physical cash & coin), as of July 2013, according to the New York Fed.

Note the green line, M2.  (M3 no longer being reported.)  But this chart will suffice to show the discrepancies between M0 and M3.  M0 is less than M1 (red line) by about $700 Billion.  The different between M2 and M1 is still about $8 Trillion.  That means at least $8 Trillion USD exist in digital form, electronically.  So does that imply the US Dollar is also a ‘digital’ or ‘virtual’ currency?  Or are the only ‘real’ US Dollars M0, physical notes?

Money does not exist

Mike Maloney has an excellent series about the differences between “money” and “currency.”  But let’s take things a step further, to divide our economy into 2 simple logical components, things that exist (real economy), and things that don’t (virtual economy).

Things that DO exist:

  • Tools
  • Machines / Factories
  • Gold, Silver
  • People!
  • Buildings
  • Transportation systems

Things that DO NOT exist, except in our minds, as concepts:

  • Money or currency (it’s electronic entry in your bank account)
  • The markets (again, the markets themselves are virtual, although with commodity markets a virtual contract will result in the delivery of physical goods)
  • Derivatives
  • Law
  • Knowledge
  • Value, i.e. ‘asset prices’
  • Theories, concepts
  • Belief

Paper money exists, yes, but as they say it’s just paper.  If I write a $100 on a napkin even if I’m Ben Bernanke, it will not be accepted by anyone unless they believe they can take said napkin and use it for whatever they need to obtain in the real economy.  What makes physical notes accepted is the belief the US Dollar system, and the Fed, not the paper it’s printed on.

The fact is the US Dollar is not backed by the Fed, although the Fed is the primary emission, the “Prime Mover.”  The US Dollar is backed only by a belief system (as are all other currencies today).  The belief system is backed by the US military (stop believing in USD and bombs will fall shortly after, yes the villagers were right).  So money doesn’t exist, it’s all an illusion.  That is not to cast aspersions on illusions, as a matter of fact, the higher up you go on the Maslow pyramid the more ‘virtual’ things become.  Intelligence is non-tangible, as are many of the ideas we hold dear, philosophy, morality, etc.  Our financial system is virtual, it’s all a big video game (to use analogy) with money being the method of accounting (not the store of wealth!).  Money is a means of exchange, not a store of value.

Many lose sight of the fact that money doesn’t exist, they say they ‘need’ money or they ‘have’ money – how can you have something that doesn’t exist?  It must be a boomer concept, too much experimentation in the 60’s.  For those of you who have trouble grasping this, checkout Eric Fromm, “To Have or to Be.”  He explains that when you own things, or have things, they end up owning you!  We won’t get into the legal reality that when you have money in a bank account it’s actually their asset (deposits are not bailment).  Also, anyone who bothered to read the new account opening contracts when they open a forex account would have seen the clauses that state you are basically handing your money over to the broker and should consider yourself lucky if you get any back.

Bitcoin has emerged at an interesting time, at a time when the Fed has declared there’s ‘no limit’ to the amount of USD he will create.  At a time when few other currencies offer stable alternatives. It gives us good perspective to stand back, objectively, and examine the financial system for what it is; a construct, based on concepts, backed by ‘the real economy’ which is dying.

Maybe the conclusion is that the system is just outdated, and we are in a long generational transformation process to a new system, based on technology, not on fiat decree of our central banking lords.

 

The post Money does not exist appeared first on Forex IQ.




The Forex Paradox – Is Forex a net loser?

by Global Intel Hub (JoeGelet), 2013

http://www.zerohedge.com/contributed/2013-11-14/forex-paradox-forex-net-loser

The Forex market is the largest in the world and the least understood.  Since the late 90’s, traders and asset managers have flocked to it as an alternative to trade, compared to other common markets (Stocks, Bonds, Futures).

But due to the fact that the market is decentralized, and unregulated, it also attracted a large amount of fraud, on many levels.  First, there was outright theft by groups such as the one led by Trevor Cook ($190 Million Ponzi scheme).  Then there were sham brokers, in the most extreme case, like One World Forex, that simply didn’t bother clearing client orders and used client funds to finance lavish lifestyles and a movie that was never released featuring Busta Rhymes.  Those in the new growing retail market on both sides of the dealing desk developed a special bond going through a unique experience that just wasn’t possible in other markets.

It was said that this was a retail problem, that serious institutional Forex was not aparty to such nonsense.  But now the world’s largest investment banks are underinvestigation by the Department of Justice for Forex market rigging.  This includes names such as Goldman Sachs, Lloyds of London, JP Morgan Chase, Barclays, Citigroup, just to name a few (the full list of names has not been released).

It was always a question that Forex outsiders would ask, why the big banks didn’t get into retail Forex trading.  Now we know that not only were some banks charging 7% (700 pip) spread on deliverable transactions, they were ‘banging the close‘ and had basically a near complete control over the price.  So why would they take any risk?

But one of the most overlooked news stories is that of FX Concepts, known as the Rolls Royce of Forex funds, being the first in the business and eventually the largest FX hedge fund.

From Hedge Fund Alert:

Less than a year before his currency-trading shop filed for
bankruptcy, FX Concepts founder John Taylor personally guaranteed a
chunk of the debt his firm owes to its largest creditor.

Asset Management Finance, a Credit Suisse unit that has invested
in a number of prominent hedge fund-management firms in the past decade,
provided $40 million of debt financing to FX Concepts via two
revenue-sharing agreements in 2006 and 2010. But in December 2012, as
opportunities in the currency market continued to fade and redemptions
mounted, Taylor was forced to renegotiate the financing package. The
Credit Suisse unit agreed to defer eight quarterly revenue-sharing
payments in exchange for Taylor’s personal guarantee for those
obligations. As of Oct. 17, when the firm filed for Chapter 11, FX
Concepts owed Asset Management Finance $34.4 million, with Taylor on the
hook for $5 million of the total. “AMF is going to clearly try to get money out of John,” a source said. “By any 
stretch of the imagination, it’s not there.”

The terms of the refinancing deal with Asset Management Finance,
spelled out in recent court documents, suggest FX Concepts was in even
worse shape than previously understood. The fact that Taylor had to
personally guarantee his firm’s obligations underscores a dramatic
decline for a business that for years was the world’s largest
currency-fund operator, with more than $12 billion of assets. As
recently as the first quarter, FX Concepts had $1 billion under
management. 

When traders would debate “is anyone making money in FX” – proponents of Forex investing and trading would point to FX Concepts as an example as a group that was continually successful.  For years they had multiple products that continued to acheive above average returns in the mysterious FX market.  Until now.  Not only is FX Concepts shutting down, creditors are going after the founder who pledged personal guarantees on capital when performance started struggling.

Certainly not every Forex trader or strategy loses, but with the losses incurred by FX Concepts, we should rethink our approach to trading Forex.

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Fed Warns Of Potential ‘Cascade’ Stock Market Crash

by Global Intel Hub (JoeGelet), 2013

http://seekingalpha.com/article/1631712-fed-warns-of-potential-cascade-stock-market-crash

In a recent Fed paper [pdf], the Fed studies the impact of “Leveraged and Inverse Exchange Traded Funds (LETFs)” and their potential impact on the market, specifically compared to portfolio insurers that helped exacerbate the 1987 stock market crash.

If the paper had come from any institution other than the Fed, it wouldn’t be nearly as significant. When the Fed is researching leverage in the stock market, we should listen.

The way LETFs work is much like other ETFs except they use leverage. Therefore, investors can utilize leverage (maybe not offered directly by their broker) to gain or lose a higher per point value with the rise or fall of broad indexes. Similar to ETFs, LETFs balance themselves daily to ensure the NAV of the portfolio represents real market positions. The Fed concludes the detailed report by posing the possibility that this rebalancing, in a volatile market, could exacerbate any volatile market event (positive or negative, but of course the concern is about a market crash not a spike higher).

The implied price impact estimates of LETFs on broad stock-market indexes become significant during periods of high volatility, especially for the stocks of financial firms. LETF rebalancing in response to a large market move could amplify the move and force them to further rebalance which may trigger a “cascade” reaction. Rebalancing in the last hour of trading could, in fact, reduce the possibility of a price dislocation since the market close could serve as a prolonged circuit breaker. On the other hand, executing orders within a short period of time, such as the last hour of trading, may cause disproportionate price changes. A significant price reduction at market close may also impair investor confidence. If the market closes with depressed prices, the stock market could experience large investor outflows overnight.

ETFs and LETFs represent a large percentage of overall market share. Assets in ETFs vary from smaller ETFs with a few million, to the larger and more popular ETFs such as (NYSEARCA:SPY) and (NYSEARCA:GLD) that can have over one hundred billion.

The paper says that hypothetical LETF rebalancing can be as high as 6% of daily market volume for the underlying issues. For broad index LETFs this can represent significant flows. In the example of a big down day, the LETFs would exacerbate the trend by selling into a down market, at or near the close, and possibly after hours.

Other data

The timing of the report is curious, as other stock market related data warning of a potential crash have been released in the past few months.

A Deutsche Bank report, summarized here, titled “Red Flag! – The curious case of NYSE margin debt” looks at the increase of use of leverage through margin debt before a bubble pops, and news articles of the time that serve as a canary in the coal mine. Other reports have looked into the increase of the market correlated to the increase in margin debt, and it has been getting attention in the past few months from financial news reporters such as the Wall Street Journal. Some have surmised that the increase in margin debt to a certain point indicates a market crash.

Other disturbing data is that the SPY has a record low volume, while at the same time, has a record number of quotes generated. This indicates many algo players in the market, but in this case they aren’t actually trading they are just throwing out quotes. Those algorithms looking for momentum could also exacerbate a crash. In addition, it shows that much of the market increase may be caused by a combination of Fed QE, margin debt usage, algorithmic trading mostly by institutions, and momentum day traders. That is to say the rise in the market is not caused by real economic factors, retail investors buying, or strong corporate profits. In other words the buyers pumping up the market are fickle players, generally speaking they are speculators and not investors. In the case of algorithmic systems and LETF rebalancing, their selling during a big decline would be automated. Circuit breakers will likely prevent a huge one day decline, but pressure from LETF rebalancing, for example, could extend the decline to last for days or weeks, as they are forced in the market to rebalance their portfolios.

How to protect yourself

The report warns of exaggerated losses due to a potential crash but says the same could be true in a big spike up, it’s really an indication that LETF rebalancing will increase volatility and momentum on volatile days.

Any individual position can be protected with a stop-loss. However if you want to protect your portfolio or do not want to exit positions in the event of a crash, the best way to protect your portfolio is with the use of options. Options are available on most individual stocks, indexes, and ETFs. For those who have access to futures, futures options also cover the broader indexes, one of the most popular being the e-mini S&P symbol /ES. Most liquid ETFs such as (NASDAQ:QQQ), (NYSEARCA:VWO), (NYSEARCA:IVV), and others, have options available. Each issue will vary in dates available, liquidity, and some will have a mini contract while others don’t.

To protect from a market decline, the best options strategy is to purchase a put. This provides limited risk (the cost of the put) and theoretically unlimited profit, although it will be capped at if the underlying goes to zero (which is nearly impossible). With more complicated portfolios, strike prices should be calculated against underlying long positions. Also remember that even if the market doesn’t crash, it just declines, those puts will increase in value and can always be resold for a profit. In a hedge situation, the profit should at least be equal to or greater than losses incurred by the long portfolio. This can be calculated using tools provided by most stock brokers, although it’s not exact (as the trading of options in the future will change the price).

Conclusion

The Fed isn’t supposed to worry about the stock market. However, the Fed has strong support when the market is strong, regardless of job numbers, inflation, and other economic data. When the Fed releases a report like this, investors should take note. You can read the full report here [pdf]. By itself, LETF rebalancing is nothing new. It has been around for some time. But combined with the Fed’s QE program, increase in use of margin debt, and an increase in algorithmic trading, it could be another significant factor exacerbating a potential market crash.

 

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The Real Economic Truth About U.S.-China Monetary Ties

by Global Intel Hub (JoeGelet), 2013

http://seekingalpha.com/article/1600342-the-real-economic-truth-about-u-s-china-monetary-ties

This analysis is about debunking the myth that China has some power over the US because of it’s large debt holdings. Let’s just say this is a myth created by propaganda or lack of understanding. It’s nonsense.

Another myth is that China is a currency manipulator. The Yuan is pegged to the US Dollar (although recently it’s been allowed to trade in a ‘trading band’). Furthermore, if the Yuan would be allowed to freely float against the USD, if it appreciated as many expect it to, the US would see the cost of Chinese goods skyrocket. So what gives?

Origin of relationship

Let’s look at how this relationship started. During WWII the Japanese invaded mainland China, and by the US eventually defeating Japan, even if for reasons other than China, the Chinese felt a sense of gratitude. Arguably Nixon opened up China with the beginnings of what eventually became state run capitalism.The US is currently China’s 2nd largest trading partner, 2nd only to the EU. For a long time the US was #1. The Chinese Yuan is pegged to the USD, not the Euro. Similar to the situation with the Petro Dollar, China invests much of it’s USD profits in what it feels are the safest US investments, treasuries. However China is also a big buyer of US stocks and the recent trend in Chinese business is M&A (used to be trade deals). Covertly and overtly the Chinese are buying US assets as investments. A Chinese investment group recently bought 200 acres of land in Michigan with the intent to build a “China City.”

As far as cultural compatibility, the Chinese certainly have Americanized. The Golf industry is booming in China, with over 650 golf courses even though there is an environmental ban on them (yes, contrary to popular belief Golf courses are bad for the environment). By this year, McDonald’s plans to have 2,000 restaurants in China. That doesn’t seem like much for a big country but consider it took them 19 years to build the first 1,000 and now they want to build another 1,000 in 3 years. The Chinese love American culture. Those who can afford watch NBA basketball through satellite connections. And of course there is a growing obesity epidemic, whereas 30 years ago you’d be hard pressed to find a few slightly overweight people in a crowd. They are also one of the world’s biggest polluters, similar to the early 21st century America recently industrialized. They are evolving, enacting regulations, and opening up their capital markets. Yuan trading is exploding, with many swap agreements now in place with major trading partners. Many parts of China look like US suburbs.

The nonsense about treasuries

If China decided in one day to sell all of it’s US debt, this would present a few problems. First, because of the size of their holdings, they may not immediately find buyers. This would immediately drive the price down but cause the US to react in a few ways (potentially):

  • Buy all of China’s debt back from them and ‘monetize it’ (The Fed would love this as another opportunity for QE, but in effect what would have changed except ownership?)
  • The US could default on it’s obligations (Not the most likely, but anything is possible with Wall St.)
  • The US could ban Chinese imports, thus crushing their domestic economy (If China was serious to dump treasuries this would be likely political blowback)
  • Bomb China (While this may seem extreme, US military intervention is usually started with economic interest such as oil, rubber, bananas, etc. China manufactures large amount of US goods, the US wants to keep those factories open.)

Scenarios that are complete nonsense, that we can assume the US will NOT allow to happen:

  • China’s bond selling is allowed to go on without any intervention, collapsing US bond market, dragging down the corporate bond market with it, and thus the stock market, and the US Dollar. The world starts using Yuan in place of USD
  • China negotiates that in lieu of debt obligations they will take California instead – This is no joke there are articles written about how the Chinese are going to use their leverage to seize US properties. See here
  • China abandons using USD completely and ceases trade with US

The Fed creates USD for nothing, sends it to China, who sends manufactured goods to the US. What a great deal, the US is trading worthless paper for products. Some of that money flows back into treasuries at the request of the US. Isn’t it in the benefit of the US that some of those USD profits are re-invested in US markets? The alternative would be that China invests in the EU or domestically. China is backing off, while they are not selling US treasuriesthey are buying less. If China dumped treasuries the US could immediately cut off the supply of USD going to China. Economically speaking they could restructure their economy but this could take decades, as they have used the US model and flow of USD to finance their growth.

Doing business in China

The relationship between the superpowers is mostly economic but fairly complex (maybe intertwined is a better description). It’s not only Chinese factories making cheap products for Wal Mart. Now US companies are entering the Chinese market, and establishing themselves. General Motors recently sold more cars in China than it did in the US. Apple manufactures much of its supply line in China, as do many tech firms. A big advantage of off shoring to China is the lack of labor unions and wage floors. So on one hand the US is complaining politically (on the surface) that China is guilty of human rights abuse, while allowing US companies to take advantage of the human rights situation getting cheap labor (see Foxconn Suicides).

Chinese problems

To make this nonsense even more fantastic, China is in no position to stand up to the US even if it wanted to (and it doesn’t want to, it would lose it’s most valuable partner). China has massive internal problems. The internet is giving rise to a growing educated population (even with the Great Firewall of China). Pollution such as the Asian Brown Cloud, dust storms, desertification, water shortages, smog in cities, and a host of other environmental problems are threatening the health of the domestic population as well as the economy. In order to reform environmental policies sufficient to start solving these problems, it would require political change and an increase in cheap goods to justify the financing of it.

US partner

China relies on the US for much more than money and the US consumer. The US gives credibility to China on the world stage, arguably, if the US pulled out of China the EU would be pressured to back off. China can’t exist in an Asian bubble with India and Russia at least for the next 50 years until their economies develop. Also the Chinese rely on US technology, for whatever reason they are not innovative by themselves. Many of the trade deals with US companies include clauses that Chinese companies are granted access to patents and other technological know how. They are very industrious and shrewd but have never proven to be big innovators (unlike their Japanese cousins and many other Asian nations). Losing the US as a partner would be a devastating blow for China.

China partner

While the US has the upper hand, the US would suffer greatly if China was no longer a partner. The US has dismantled it’s manufacturing base, and it would take decades to rebuild it, but it would be questionable how that could be economically feasible considering US standards. Many US companies such as Apple rely on cheap Chinese manufacturing. Also the US exports 122 Billion worth of goods and services to China, which is the 3rd largest export partner. Politically, many in the US (especially neocons) see Asia and especially central Asia key regions to control. While China has reluctance to bow to US whims, such as with Tibet and other disputed territories, China is the elephant in the room. It borders India, Pakistan, Afghanistan, Tajikistan, Kyrgyzstan, Kazakhstan, Mongolia, Russia, North Korea, Vietnam, Laos, Myanmar, Bhutan, Nepal, and Hong Kong. It’s in the US interest to share close political ties with China for this reason, and also not to completely lose them to Russia. Russia and China have a close political and military relationship which if taken to deeper levels, especially including other regional nations, could pose a regional threat to US interests. Not to mention demographic changes make China one of the fastest growing consumer markets to which the US could market its goods. Finally, there aren’t too many countries in the world the size of China, so the US has no reason NOT to foster close relations. China is now growing but in 20 or 40 years what will China look like on the world stage?

Conclusion

China does not plan to destabilize the US economy by selling treasuries, but even if they wanted to it’s not possible. China does not want to replace the United States. It’s focus, at least for the time being, is domestic growth and systemic evolution. In many ways China is behind the times, although they are changing rapidly. They do not have resources for foreign entanglements whether they be economic, political, or military. This may not be the case in 50 years but much can happen before then. For the time being, we can sleep soundly knowing the US and China have ties that bind, which if unwoven, would be catastrophic for both countries.

How to trade this

If you wanted to bet that US China relations were going to be stable, one way to invest in this would be to buy China ETFs available on US exchanges. This article is not about a specific China ETF but by having stable relations with the US it would indicate that in the long run, China ETFs should do well. Some analysts on Seeking Alpha have done Chinese ETF specific research, here,here, and here. If we had to pick one, it would be (NYSEARCA:CHIX) – Global X China Financial ETF. The reason is that as the Chinese economy grows, companies will need ever increasing financial services. It could be argued that while the Chinese economy has been growing steadily, the financial services sector has not grown enough to facilitate needs of new businesses. With the above mentioned plans of China to make the Yuan a freely convertible currency, China’s financial sector will have to grow not only in size, but in the complexity of its offering. The sector will need to at least have the similar minimum services offered by Western financial sectors including complex financial products, derivatives, active foreign exchange management, international payment systems, and possibly a growing investment product line. Some of these items already are being used by Chinese banks but they are limited to large companies and only being offered by a few companies. Most investors don’t know, the 2 largest banks in the world are actually Chinese banks, followed by HSBC and Wells Fargo. But their focus until now has been basic banking services, with a domestic focus. So the best way to capture US China relations may be .

Research about China data

List_of_the_largest_trading_partners_of_China

China – Wikipedia, the free encyclopedia

The World Factbook – China

Golf in China

China Economy :: The Market Oracle

For more articles like this and more research see Global Intel Hub.

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Clear Direction On Yen Decline

bу EliteEServices, 2013

http://seekingalpha.com/article/1138141-clear-direction-on-yen-decline

The Japanese Yen (NYSEARCA:FXY) has been on a decline since the new government led by Shinzo Abe has been pursuing a policy of currency debasement to boost their economy.

The USD/JPY daily chart shows resistance at the 90 level, which it passed last week:

This level has not been seen since 2010. The significance of this chart shows that although the Yen continually meets resistance, the trend is steady down.

The decline continues even though publicly, Japanese officials havedownplayed this new policy:

Economy Minister Akira Amari denied Japan‘s new government is actively targeting a weaker yen, taking to the international stage to argue that economic policy is instead aimed at defeating deflation.

Yen Rise period

(click to enlarge)

From 2006 to 2011, the Yen was on a general rise against most other currencies, including the US Dollar (shown above). The reversal that has happened recently was severe (in daily percentage change terms) but the continued Yen decline may be more steady as was the rise in the chart above.

Competing devaluations

The largest impediment to the Yen decline will be any retaliatory actions by other central banks. It’s even a big topic at this weeks economic forum in Davos:

No less an authority than German Chancellor Angela Merkel got the ball rolling in Davos when she complained – in typically under-stated fashion – that she was “not without some concern about Japan right now”.

She also appeared to warn Tokyo that its actions were not going unnoticed on the world stage, saying there was an increasing awareness of what she called “political influences or manipulations of the exchange rate”.

If a currency war did ensue, other central banks would pursue similar policies, thus driving down their respective currencies and up the Yen. If this did happen it would likely be a long, planned move. But any announcement about another central bank pursuing such a policy could cause the Japanese Yen to spike up as the market reacts.

Sell the Japanese Yen

Based on the policy announcement, and based on the fact that the currency is moving through its resistance, shorting the Yen seems to be a pretty clear trade. The currency ETF is for the Japanese Yen. Traders with Forex accountscould choose to go long the USD/JPY, EUR/JPY, GBP/JPY, AUD/JPY, NZD/JPY, or create a basket and go long all of them.

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Currency Wars Heat Up With G20 Meeting

by EliteEServices, 2013

http://seekingalpha.com/article/1204401-currency-wars-heat-up-with-g20-meeting

The G20 recently met to discuss the so called “Currency Wars” or competitive devaluation of domestic currencies by central banks.

Group of 20 finance chiefs sharpened their stance against governments trying to influence exchange rates as they sought to tame speculation of a global currency war without singling out Japan for criticism. Two days of talks between G-20 finance ministers and central bankers ended in Moscow yesterday with a pledge not to “target our exchange rates for competitive purposes,” according to a statement. That’s stronger than their position three months ago and leaves Japanese officials under pressure to stop publicly giving guidance on their currency’s value. With the yen near its lowest level against the dollar since 2010, policy makers are attempting to soothe concern that some countries are trying to weaken exchange rates to spur growth through exports. The risk is a 1930s-style spiral of devaluations and protectionism if other countries retaliate to safeguard their own economies.

Although it was the main focus of their recent meeting, and their stance is characterized as “tough,” there wasn’t any action taken. They didn’t suggest penalizing Japan for their recent devaluation, nor did they suggest penalties against other countries that might follow suit. While they openly say that it’s not the right thing to do, by omitting any penalty they are giving central banks the green light to pursue this policy.

And because of this, the Yen got even weaker after the news:

“There’s renewed selling pressure on the yen and it’s a reaction to the G-20 statement,” said Adam Myers, head of foreign-exchange strategy at Credit Agricole Corporate and Investment Bank in London. “Everyone has woken up to the realization that the G-20 couldn’t criticize Japan when many other countries are manipulating their own currency.”

Then today, ECB president Mario Draghi said that public leaders shouldn’t even discuss the topic, and the currency wars were an overblown phenomenon, that recent Forex movement was mostly due to global macro factors, not central bank intervention:

I find really excessive any language referring to currency wars,” he said. “I urge all parties to exercise very, very strong verbal discipline. I think the less we talk about this the better.”

“Looking at the nominal and real exchange rate of the euro, we see that by and large, it is around its long-term average.”

Earlier on Monday, Ewald Nowotny, another ECB policymaker, said that recent currency movements were not reason to cause alarm.

“There is a euro appreciation against the yen but not to a dramatic extent,” he told reporters.

Reinforcement of trading strategy

Last week we suggested a strategy to capitalize on the currency wars going long XAU/JPY. The comments of the G20 reinforce this strategy – they are sending the markets the message they will allow the currency wars to continue. The G20 is really the only group that could put an end to such a practice. It also confirms the continuation of a likely Yen decline. The next key date determining the fate of the Japanese Yen (NYSEARCA:FXY) is March 19th when a new BOJ governor will be selected:

The main focus for the yen now is on who will be appointed to replace BOJ Governor Masaaki Shirakawa, who will step down on March 19, Morgan Stanley analysts led by Hans Redeker in London wrote in the note to clients published Feb. 16. Abe is likely to nominate Asian Development Bank President Haruhiko Kuroda, who is set to pursue the government’s anti-deflation course, though if he nominates former BOJ deputy governorToshiro Muto, that may trigger the yen to retrace losses back to 90 per dollar, Morgan Stanley said.

Traders who are in the Yen trade should watch this date as it could cause the Yen decline to continue, or possibly peak and reverse if Muto is selected.

The Fed

The US Federal Reserve announced QE4 before the new year, which wasn’t really big news at the time considering the Fed had already signaled they would print an unlimited amount of US Dollars and keep interest rates steady until at least 2014. Since then, the USD has been down against most currencies, with the most notable exception being the Japanese Yen.

Conclusion

The importance of this meeting – it solidifies the fundamental view of any strategy that is short currencies that are being debased. In the case of the Yen strategy outlined, it signals a further Yen decline. The same can be said for the US Dollar, with the exception of the USD/JPY pair (Yen going down faster than dollar).

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