Randolph Duke: Now, some of our clients are speculating that the price of gold will rise in the future. And we have other clients who are speculating that the price of gold will fall. They place their orders with us, and we buy or sell their gold for them.
Mortimer Duke: Tell him the good part.
Randolph Duke: The good part, William, is that, no matter whether our clients make money or lose money, Duke & Duke get the commissions.
Mortimer Duke: Well? What do you think, Valentine?
Billy Ray: Sounds to me like you guys are a couple of bookies.
Randolph Duke: I told you he'd understand.
Trading Places, 1983
At the end of the glorious film Trading Places, Billy Ray Valentine and Winthorpe exact sweet revenge on the Duke Brothers by beating them at their own game on the Wall Street trading floor and taking them from fabulous wealth to ruin in a matter of minutes. After subjecting Billy Ray and Winthorpe to a ruthless “social experiment” for a bet worth just one dollar, it is a supremely satisfying conclusion. The greedy financiers who played fast and loose with a system they thought they owned were taught a hard lesson.
Ah, but.
It occurs to me a 21st century remake of Trading Places would be rather problematic, would it not? That satisfying ending might be somewhat ruined when the government decide Duke & Duke are “too big to fail” and provide them with a huge taxpayer funded “rescue”, resulting in Duke & Duke remaining in business and within months are gambling recklessly with investors money again and paying themselves huge bonuses. And laughing their tits off at the stupid pathetic proles paying for it all.
An ending that would, quite rightly, leave the audience furious, don’t you think?
Monday, 7 September 2009
Sunday, 21 June 2009
Inflation targeting totally sucks balls, man
The more you think about what inflation targeting actually means as an economic policy, the more you realise how utterly absurd it.
Question: why is the price that we pay for all our goods and services, right now, so sacrosanct?
Let’s think about it. The remit of the Bank Of England is to set monetary policy so that the inflation rate, as measured by the Consumer Prices Index, is around 2%
The government likes to tell us that this is the level that achieves “stable prices”, which is odd because it actually means the value of money halves every generation. But hey, that’s another story. Anyway, the stats boffins go out there and measure prices in the shops of a basket of goods that the average consumer is deemed to buy (incidentally this basket of goods is forever changing, if nothing else because some things we can buy today didn’t even exist 50 years ago) then weighted (for example, a 100% increase in the price of a box of matches is treated as less important than a 100% increase in the price of petrol) and from this you get an index. There are various indices derived from this data, the present government has moved away from the Retail Prices Index (which rather oddly includes mortgage payments and so is ridiculously distorted by changes in interest rates) to the Consumer Prices Index (CPI).
So if you thought “2% inflation” means a straightforward 2% rise in prices, as you can see above it’s not as simple as that. It’s actually very difficult to determine what it means to talk about a “general price level” at all.
But no matter, let’s assume our inflation index is a worthwhile measure of price changes in our economy. OK, if the BoE has to target 2% CPI each year, what does that logically mean? Well, what they are saying is, today’s price level, whatever it is, is miraculously “correct” and next years price level, if 2% higher than this years (as they will do their level best to engineer with their monetary policy) will also be correct! And the year after, it will, oddly enough, be right for the price level to be another 2% higher. And so on. With the value of our money getting eroded all the while. On a fixed income? Oh look, in real terms you’re 10% worse off after 5 years! Brilliant!
It’s absurd to target the general price level and doing so is the cause of the current crisis.
Thanks to the Chinese industrial revolution, many of our goods have been falling in price in the past decade, and all other things being equal (i. e. without government interference), inflation should have been negative, but the BoE relaxed monetary policy to prevent the overall level of price rises ever falling below that sacred, mysteriously correct 2%.
The Bank deliberately engineered inflation in direct opposition to the economic fundamentals; in fact the government requires them to do this!
And so we ended up with a load of artificially cheap money with, to put it crudely, no where to go. Like squeezing on one end of a balloon, the funny money inflated into property and equities on a massive scale, balanced by the fall in consumer goods prices, so the Bank and the government could argue with a perfectly straight face inflation was “subdued” when house prices had tripled in just 10 years!
And notice how failure to hit the target in any year is “written off” in the targeting game. For example. the BoE has allowed inflation to exceed its 2% target for 20 months (and counting). And supposedly, we are going to see inflation below 2% in the next few years. But doesn’t that simply balance out the fact that it was above target previously? So it’s not a big deal? Well, they don’t seem to see it that way. Has to be 2% always, folks! Never, but never, let prices fall, even to correct a previous increase! See what I mean? As an economic policy it is literally nonsense. And there is absolutely no sign of them even thinking they need to look for an alternative.
Which means that to “cure” the credit crunch, they are repeating the idiotic monetary policy errors that got us into this mess in the first place. Which totally sucks balls.
Question: why is the price that we pay for all our goods and services, right now, so sacrosanct?
Let’s think about it. The remit of the Bank Of England is to set monetary policy so that the inflation rate, as measured by the Consumer Prices Index, is around 2%
The government likes to tell us that this is the level that achieves “stable prices”, which is odd because it actually means the value of money halves every generation. But hey, that’s another story. Anyway, the stats boffins go out there and measure prices in the shops of a basket of goods that the average consumer is deemed to buy (incidentally this basket of goods is forever changing, if nothing else because some things we can buy today didn’t even exist 50 years ago) then weighted (for example, a 100% increase in the price of a box of matches is treated as less important than a 100% increase in the price of petrol) and from this you get an index. There are various indices derived from this data, the present government has moved away from the Retail Prices Index (which rather oddly includes mortgage payments and so is ridiculously distorted by changes in interest rates) to the Consumer Prices Index (CPI).
So if you thought “2% inflation” means a straightforward 2% rise in prices, as you can see above it’s not as simple as that. It’s actually very difficult to determine what it means to talk about a “general price level” at all.
But no matter, let’s assume our inflation index is a worthwhile measure of price changes in our economy. OK, if the BoE has to target 2% CPI each year, what does that logically mean? Well, what they are saying is, today’s price level, whatever it is, is miraculously “correct” and next years price level, if 2% higher than this years (as they will do their level best to engineer with their monetary policy) will also be correct! And the year after, it will, oddly enough, be right for the price level to be another 2% higher. And so on. With the value of our money getting eroded all the while. On a fixed income? Oh look, in real terms you’re 10% worse off after 5 years! Brilliant!
It’s absurd to target the general price level and doing so is the cause of the current crisis.
Thanks to the Chinese industrial revolution, many of our goods have been falling in price in the past decade, and all other things being equal (i. e. without government interference), inflation should have been negative, but the BoE relaxed monetary policy to prevent the overall level of price rises ever falling below that sacred, mysteriously correct 2%.
The Bank deliberately engineered inflation in direct opposition to the economic fundamentals; in fact the government requires them to do this!
And so we ended up with a load of artificially cheap money with, to put it crudely, no where to go. Like squeezing on one end of a balloon, the funny money inflated into property and equities on a massive scale, balanced by the fall in consumer goods prices, so the Bank and the government could argue with a perfectly straight face inflation was “subdued” when house prices had tripled in just 10 years!
And notice how failure to hit the target in any year is “written off” in the targeting game. For example. the BoE has allowed inflation to exceed its 2% target for 20 months (and counting). And supposedly, we are going to see inflation below 2% in the next few years. But doesn’t that simply balance out the fact that it was above target previously? So it’s not a big deal? Well, they don’t seem to see it that way. Has to be 2% always, folks! Never, but never, let prices fall, even to correct a previous increase! See what I mean? As an economic policy it is literally nonsense. And there is absolutely no sign of them even thinking they need to look for an alternative.
Which means that to “cure” the credit crunch, they are repeating the idiotic monetary policy errors that got us into this mess in the first place. Which totally sucks balls.
Wednesday, 17 June 2009
You fucking liars
... our Great Depression is our lives. We've all been raised on television to believe that one day we'd all be millionaires, and movie gods, and rock stars. But we won't. And we're slowly learning that fact. And we're very, very pissed off.
- Tyler Durden, "Fight Club"
We have had to listen to so much continuous bullshit hand wringing about the looming “horror” of falling prices (I just hate it when things get more affordable, don’t you?) since the credit crisis hit, yet we are now into, wait for it, the 20th month of inflation being above the 2% target.
Can we hit a full two years of the Bank of England failing to do its job? It’s very possible.
It would seem, apparently, that they “overestimated” the deflation “threat”.
Yeah right.
Because they didn’t know that a 30% devaluation of the pound would be highly inflationary (don’t forget that while Britain is word class at churning out loads of chavs, estate agents and corrupt MPs it’s not so good at making useful stuff like tvs and washing machines which all need to be imported and a devaluation increases import prices).
They didn’t know that printing money raises prices higher than they otherwise would have been.
They didn’t know a massive fiscal deficit is inflationary.
OF COURSE THEY FUCKING WELL DID.
They are a bunch of lying cheating spivs who are fucking honest savers up the ass with their cheap credit money printing WANK economic policy. And I’m sick of the Keynesian liars in the press and on TV supporting this disastrous monetary policy that punishes the one single group who are blameless in this crisis: prudent savers.
They want inflation. They love it. They know our economy is just a weak, pathetic ponzi scheme that an extended period of zero inflation or even falling prices will expose for all to see. And then the game will be up, and too many ordinary people might start to wonder who is really benefitting in this country from our constant toil at shit jobs we don't even like.
- Tyler Durden, "Fight Club"
We have had to listen to so much continuous bullshit hand wringing about the looming “horror” of falling prices (I just hate it when things get more affordable, don’t you?) since the credit crisis hit, yet we are now into, wait for it, the 20th month of inflation being above the 2% target.
Can we hit a full two years of the Bank of England failing to do its job? It’s very possible.
It would seem, apparently, that they “overestimated” the deflation “threat”.
Yeah right.
Because they didn’t know that a 30% devaluation of the pound would be highly inflationary (don’t forget that while Britain is word class at churning out loads of chavs, estate agents and corrupt MPs it’s not so good at making useful stuff like tvs and washing machines which all need to be imported and a devaluation increases import prices).
They didn’t know that printing money raises prices higher than they otherwise would have been.
They didn’t know a massive fiscal deficit is inflationary.
OF COURSE THEY FUCKING WELL DID.
They are a bunch of lying cheating spivs who are fucking honest savers up the ass with their cheap credit money printing WANK economic policy. And I’m sick of the Keynesian liars in the press and on TV supporting this disastrous monetary policy that punishes the one single group who are blameless in this crisis: prudent savers.
They want inflation. They love it. They know our economy is just a weak, pathetic ponzi scheme that an extended period of zero inflation or even falling prices will expose for all to see. And then the game will be up, and too many ordinary people might start to wonder who is really benefitting in this country from our constant toil at shit jobs we don't even like.
Monday, 18 May 2009
“Trying to fucking con me you robbing cunt?” (Quantitative Easing Pt II)
He that is of the opinion money will do everything may well be suspected of doing everything for money.
Benjamin Franklin (1706 - 1790)
Money is so familiar to us it’s one of those things in life you don’t really think about, but the current financial crisis presents a rare opportunity to gain insight into the shockingly fraudulent underpinnings of our entire monetary system.
In all but the most primitive of economies, individuals will tend to have wants that exceed their own means to produce. For example, a hunter may need clothes, but his cloth manipulating skills may fall well below his hunting abilities. In this circumstance, the hunter could find someone good at making clothes, who are not good at catching food. The hunter gives the shirtmaker a leg of deer. In return the shirtmaker gives the hunter a shirt.
Barter has occurred.
So far so good. See the problem, though. You need to find someone who wants what you produce in order to swap it for something they produce. Not too convenient. You’re going to waste a lot of time playing the swapsies game. OK, so how about if we find something that everyone values already, make it portable, and work out what our produce is worth in terms of this proxy item? And of course, gold is a great choice, valued for itself as it is nice to look at, doesn’t rust and is rare. Make it into convenient to carry parcels (coins). Now decide how many coins a shirt, a piece of meat etc is work. Need a shirt? Just hand over the coins, you don’t need to have something that the shirtmaker wants. The value of the claim to a real resource is stored in the coins and the shirtmaker can hand them to someone else when they want something to cook for their dinner.
Simple. Ingenious. That’s what money has to be. Portable, widely accepted. A store of value.
Additionally, in the case of the gold coins, that money is worth something even without any claim on goods and services, i. e. it has intrinsic value.
Not so our modern money (or fiat money as it is called)
The “value” of our money is by government decree. Those pieces of paper and low quality metals in your wallet, or for that matter, electrons in a banks computer, are nearly worthless in of themselves. What gives modern fiat money value is the claim on goods and services it represents. If those goods and services do not exist, it does not have value.
Which brings is to the monetary policy of the government being pursued via their cronies in the Bank of England.
Their “quantitative easing” strategy, which let’s be clear is simply a modern equivalent of running the printing presses to create new money out of thin air, illustrates they don’t understand what money should be about at all.
The rationale of QE (that it can boost the economy when interest rates can be reduced no further because they are at or near zero) is easily demolished by a little thought experiment.
Take our simplified example above, where we only have the shirtmaker and the hunter (an entire economy consisting of just two individuals and two products). Let us further say that they are using modern, fiat money that has no intrinsic value, just like ours.
Now add a twist. The shirtmaker is also the monetary authority in this tiny economy. Yes, he holds the keys to the financial printing press! And one day he says, “Actually, I can’t really be bothered making shirts anymore. I’d like to just sit around and chill. What I’ll do is, I’ll turn on the printing press, print off a couple of crisp tenners to buy the leg of deer from the hunter, I get to eat, he gets his money and I’ve had to do fuck all in return. Sweet!”
So along comes the hunter. He has a leg of meat ready to sell and a couple of tenners ready to buy a shirt. He puts the leg of deer on the counter. “That’s twenty quid please, and here is twenty quid for a new shirt.”
The shirtmaker, sorry Central Bank Governor hands over twenty quid and reaches for the leg of meat. “Oh, by the way, sorry, I don’t make shirts anymore so I’ve got nothing to sell. You can put your money away”.
“Whoa, “, says the hunter, quickly putting the leg of deer back in his bag “so what am I supposed to spend my twenty quid on?”
“Erm.” Says the central bank governor. “Er…humph. Yes…well…Ah, I should say…er…in these difficult times I’m increasing liquidity in the financial system and -”
“Trying to fucking con me you robbing cunt?”, says the hunter. “Well, at least I won’t starve. Good fucking day to you.”
What happened? The shirtmaker, in his new role as central bank, created money with his printing press that was not backed by the creation of a real resource. Because there are only two players in this hypothetical economy, the attempted con job is immediately obvious to the innocent party in the tiny economy and the “Quantitative Easing” fails.
Just because our monetary systems is computerized and consists of millions of individuals making millions of transactions, Quantitative Easing (printing money) is a total rip-off in exactly the same way as the simplified scenario above, it’s just the fraud is much better disguised in the vast complexity of our economic system and they hope we won’t notice. With lots of economic entities involved, you don’t get outright refusal to accept the new money of course. The printed money ripples through the economy and devalues the purchasing power of the currency via higher prices. Those who got the newly created money first (can you guess who?) gain at the expense of those who get it last (can you guess who?)
So let’s all ask the Bank of England governor:
“Trying to fucking con me you robbing cunt?”
Benjamin Franklin (1706 - 1790)
Money is so familiar to us it’s one of those things in life you don’t really think about, but the current financial crisis presents a rare opportunity to gain insight into the shockingly fraudulent underpinnings of our entire monetary system.
In all but the most primitive of economies, individuals will tend to have wants that exceed their own means to produce. For example, a hunter may need clothes, but his cloth manipulating skills may fall well below his hunting abilities. In this circumstance, the hunter could find someone good at making clothes, who are not good at catching food. The hunter gives the shirtmaker a leg of deer. In return the shirtmaker gives the hunter a shirt.
Barter has occurred.
So far so good. See the problem, though. You need to find someone who wants what you produce in order to swap it for something they produce. Not too convenient. You’re going to waste a lot of time playing the swapsies game. OK, so how about if we find something that everyone values already, make it portable, and work out what our produce is worth in terms of this proxy item? And of course, gold is a great choice, valued for itself as it is nice to look at, doesn’t rust and is rare. Make it into convenient to carry parcels (coins). Now decide how many coins a shirt, a piece of meat etc is work. Need a shirt? Just hand over the coins, you don’t need to have something that the shirtmaker wants. The value of the claim to a real resource is stored in the coins and the shirtmaker can hand them to someone else when they want something to cook for their dinner.
Simple. Ingenious. That’s what money has to be. Portable, widely accepted. A store of value.
Additionally, in the case of the gold coins, that money is worth something even without any claim on goods and services, i. e. it has intrinsic value.
Not so our modern money (or fiat money as it is called)
The “value” of our money is by government decree. Those pieces of paper and low quality metals in your wallet, or for that matter, electrons in a banks computer, are nearly worthless in of themselves. What gives modern fiat money value is the claim on goods and services it represents. If those goods and services do not exist, it does not have value.
Which brings is to the monetary policy of the government being pursued via their cronies in the Bank of England.
Their “quantitative easing” strategy, which let’s be clear is simply a modern equivalent of running the printing presses to create new money out of thin air, illustrates they don’t understand what money should be about at all.
The rationale of QE (that it can boost the economy when interest rates can be reduced no further because they are at or near zero) is easily demolished by a little thought experiment.
Take our simplified example above, where we only have the shirtmaker and the hunter (an entire economy consisting of just two individuals and two products). Let us further say that they are using modern, fiat money that has no intrinsic value, just like ours.
Now add a twist. The shirtmaker is also the monetary authority in this tiny economy. Yes, he holds the keys to the financial printing press! And one day he says, “Actually, I can’t really be bothered making shirts anymore. I’d like to just sit around and chill. What I’ll do is, I’ll turn on the printing press, print off a couple of crisp tenners to buy the leg of deer from the hunter, I get to eat, he gets his money and I’ve had to do fuck all in return. Sweet!”
So along comes the hunter. He has a leg of meat ready to sell and a couple of tenners ready to buy a shirt. He puts the leg of deer on the counter. “That’s twenty quid please, and here is twenty quid for a new shirt.”
The shirtmaker, sorry Central Bank Governor hands over twenty quid and reaches for the leg of meat. “Oh, by the way, sorry, I don’t make shirts anymore so I’ve got nothing to sell. You can put your money away”.
“Whoa, “, says the hunter, quickly putting the leg of deer back in his bag “so what am I supposed to spend my twenty quid on?”
“Erm.” Says the central bank governor. “Er…humph. Yes…well…Ah, I should say…er…in these difficult times I’m increasing liquidity in the financial system and -”
“Trying to fucking con me you robbing cunt?”, says the hunter. “Well, at least I won’t starve. Good fucking day to you.”
What happened? The shirtmaker, in his new role as central bank, created money with his printing press that was not backed by the creation of a real resource. Because there are only two players in this hypothetical economy, the attempted con job is immediately obvious to the innocent party in the tiny economy and the “Quantitative Easing” fails.
Just because our monetary systems is computerized and consists of millions of individuals making millions of transactions, Quantitative Easing (printing money) is a total rip-off in exactly the same way as the simplified scenario above, it’s just the fraud is much better disguised in the vast complexity of our economic system and they hope we won’t notice. With lots of economic entities involved, you don’t get outright refusal to accept the new money of course. The printed money ripples through the economy and devalues the purchasing power of the currency via higher prices. Those who got the newly created money first (can you guess who?) gain at the expense of those who get it last (can you guess who?)
So let’s all ask the Bank of England governor:
“Trying to fucking con me you robbing cunt?”
Sunday, 19 April 2009
Scrappage, cont.
Well, let's hope the Chancellor reads this before he finalises his budget plans:
http://news.bbc.co.uk/1/hi/business/8003508.stm
Yep - it looks like that "successful" German scrappage scheme has had undesirable knock on effects!
Who'd have though it, eh?
http://news.bbc.co.uk/1/hi/business/8003508.stm
Yep - it looks like that "successful" German scrappage scheme has had undesirable knock on effects!
Who'd have though it, eh?
Monday, 13 April 2009
Scrappage crappage
Michael Cunningham: Your mother and I have decided to help buy you a new car.
Arnie Cunningham: That's what everyone wants isn't it? Well, fuck you. I'm fixing up Christine.
The credit crunch has certainly revealed some of the most stupid economic "management" you'll ever see, but the nonsense just keeps on coming.
A huge howler approaching in the next budget is the so called "scrappage" scheme. Whether this scheme is implemented will provide the ultimate yardstick into just how clueless these morons running the economy are.
What is "scrappage"? The basic outline is, any car owner taking their car aged 9 years or more to be scrapped will be given a voucher to the tune of £2000 that they can spend on a new car.
But is that what everyone wants?
1) That £2000 is paid for by everyone, in higher taxes (deferred to the future if they fund it by borrowing now as they presumably will) or inflation (if they fund it with some of that "quantitative easing") whether they use a car or not. Fair?
2) Secondhand values are distorted upwards, as they will now have a falsely allocated state subsidised "voucher value" - so a low income person who wants a cheap motor would have to pay more. Fair?
3) People who were quite happy with their old car, now rush to buy a new one to get the subsidised price. That means they don't spend money on other purchases they would otherwise have made - so the car industry gains at the expense of other businesses. Fair?
4) All of our mass market cars are made by foreign owned firms, so most of the benefit will go to foreign business (there will be only a small spin off benefit to some British firms). Fair?
5) These car firms handing round the begging bowl for taxpayers help are the first to complain about government interference, taxation and "red tape" during the good times but now they want our money, and lots of it. Fair?
Now, don't think for a second government ministers won't be made aware of how this interference in the market will cascade through the economy. They might be stupid, but one thing they are not is ill informed. So if they do go ahead and introduce this horrendous scheme, you know that they have ruthlessly chosen to help the car industry at the collective expense of the whole country and indeed the poor. Shitters.
We'll see in the budget whose side they are on. And if you hear a lot of talk from the chancellor about "the environment", watch your wallet.
Tuesday, 7 April 2009
Expense…justified
So Jacqui Smith’s husband has been watching porn at the taxpayer’s expense? A disgrace, is it?
Erm…
Ooooh. That is fucking rank.
I say, at a cost of £0.00000000000001 per taxpayer you can have this one my friend.
Wank on, Dick, wank on.
Erm…
Ooooh. That is fucking rank.
I say, at a cost of £0.00000000000001 per taxpayer you can have this one my friend.
Wank on, Dick, wank on.
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