In this orwelian world, democracies are dictatorships

I think we are well past over the Huxley world we lived up until 11-Sep-2001, and we are deep into the Orwelian world of today.

I recently saw much evidence of this in the latest Spanish demonstrations asking to surround the Parliament. There is a law in Spain that makes it mandatory for police officers to clearly display their ID when they are working. Well, the Government issued a order for them to hide it in these demonstrations. There are two orwelian laws that they are about to pass:

• It will be banned to film police officers in the course of their work, which includes demonstrations.
• Publicly insulting or harming a government official will be punishable by jail and by the State taking over private assets.

Another example of no-law in Spain is the following: 4 years later, the Spanish government decides to create a bad bank, taking bad Spanish brick (it would still be good if German credit still flowed into it to turn the lives of mortgage takers and their children into collateral). The name of the new bank is Sareb, God know what that means. The point is, a savvy speculator notes down the name of the bank as soon as he knows it, and registers the Internet domains sareb.com and sareb.es to force the authorities to negotiate. It turns out that they are free and legal ownership is granted. A few weeks ago, the people in charge realize they need a domain, and that sareb is taken. What do they do? They forcibly take ownership with no compensation, in the name of the common good!

So there you have it, we have mindless people who can't make the simplest plan and they have to circumvent law, or evoke "the common good" to steal from somebody, instead of registering the domain before releasing the name to the public.

This attacks on the law are not free. They constitute a toll to high to bear for a civilized country. This state of lawless, or alegality, of legal insecurity, harms businesses and trade, and brings poverty.

Meanwhile, Spanish people are still distracted, they still buy the congenial optimism their politicians sell them, the little drop of subjective hope that their brains need to go on and prevents them from picking up a shovel and hit some politician on the head, which is what they a really need. The ad, depicting the usual suspects of the poorly artistic TV soaps, realities and the rest of wave-populating garbage, have them recite some puny facts which are supposed to be a basis of pride for a Spaniard, such as 7 Nobel laureates (!!), 1st place in organ donation (!!) and a lot of airports (like Ciudad Real and Castellon, which host no flights and had to be closed, not even Ryanair wanted to leave their passengers in the middle of nothing, just for the glory of the politicians and constructors, who took public money to build something nobody needed and nobody wanted).

The internet boards are full of supporters of this ad. They claim they need fresh air in the middle of all this negativity. This class of optimism doesn't help. This promotes inmovilism, invokes national pride on a bunch of facts that either have nothing to do with the situation or are a direct cause of it, like the construction of useless airports with the money of everybody. But if you tell them this ad is following a dictatorial guideline to prevent the masses from acting, you will be confronted. The human brain is like that, and mass sentiment scales it. You cannot have a negative mass sentiment, people would suicide, you can only have positive mass sentiments, such as what this evokes, or Hitler filling Nurenberg. This is a direct consequence of societal evolution. Society has evolved a lot in 5000 years, but the human brain is essentially the same. They react to somebody shooting, but they can't react the same way to somebody stealing billions, even though the consequences are far more reaching.

Crisis Trivia

I am back, sorry for the long delay, I have been really busy.

One of the things that I have been up to is a trivia game engine, which as a first example features a financial, economic and political trivia game called Crisis Trivia, featuring questions that all of us would love, such as types of gold coins, the hunt brothers, our beloved Ben Bernanke, the Rothschilds, and many more!

I have set up a separate blog to talk about it and the follow-up games I may come up with.

Please check out
androidtrivia.blogspot.com

PD: I will be commenting on the recent events with normality, I hope

The exit out of the crisis is hyper-inflationary and (possibly) a full-scale war

Following the BCE's decision to purchase eurozone bonds in the open market, Zerohedge posted the following thougts some days ago:

We will mince no words: Mr. Draghi has opened the door to hyperinflation. There will probably not be hyperinflation because Germany would leave the Euro zone first, but the door is open and we will explain why. To avoid this outcome, assuming that in this context the Eurozone will continue to show fiscal deficits, we will also show that it is critical that the Fed does not raise interest rates. This can only be extremely bullish of precious metals and commodities in the long run. In the short-run, we will have to face the usual manipulations in the precious metals markets and everyone will seek to front run the European Central Bank, playing the sovereign yield curve and being long banks’ stocks. If in the short-run, the ECB is the lender of last resort, in the long run, it may become the borrower of first resort!

Argentina prohibited the hoarding of foreign currencies, are trading is done under heavily government surveillance and even Paypal has canceled operations with Argentinian customers. Their currency is in free fall and the government's stance is to preserve the status quo of the elite in the country by stealing wealth from their citizens via a constant monetization of their corruption. Now the Iranian rial is failing too.

Here's what you need to do to avoid the trap that some very intelligent guys who feed on well-passed history (by Charles Hugh Smith from Of Two Minds)

Hedging Against Capital Controls: Opening an Account Overseas 
As financial insecurity and instability rise, hedging becomes increasingly important as a means of capital preservation. One potential hedge is diversifying one's liquid capital by holding some cash in a "safe haven" foreign bank account.
Two signs that fear and instability have reached critical mass are capital flight and capital controls. Capital flight is people and enterprises moving their capital (cash and liquid assets) to an overseas "safe haven" to avoid devaluation of the currency or confiscation of their capital/assets. (Devaluation can be seen as one method of confiscation; high taxes are another.)
Capital controls are the Central State's way of stemming the flood of cash leaving the country. Why do they want to stop money leaving? If we think of each Central State as a neofeudal fiefdom, we understand the motivation: citizens are in effect serfs who serve the State and its financial nobility. If the serfs move their capital out of the fiefdom, it is no longer available as collateral for the banks and a source of revenue for the State.
Once capital has drained away, borrowing and lending shrink, cutting off the revenue source of the banks (financial nobility). Since financial activity also declines as cash is withdrawn from the system, the State's "skim"--transaction fees, sales taxes, VAT taxes, income taxes, wealth taxes, etc.--also declines. Both the State and its financial nobility are at increasing risk of decline and eventual implosion as capital flees the fiefdom.
The Central State imposes capital controls as a means of Elite self-preservation. Sudden devaluations are a way of impoverishing the citizens that also happen to enrich those who transferred their wealth into another currency, a mechanism described here three years ago in The Royal Scam (August 3, 2009).
Those in the know transfer their wealth into another currency before it's illegal, and once the devaluation makes everything in the country much cheaper, they transfer their wealth back into the new currency and buy up all the assets on the cheap.
History shows that the State will "change the rules" overnight to protect itself and its Elites. Capital controls include such measures as limiting the amount of funds that can be transferred out of the country; limiting the amount of gold that can be taken out of the country; barring all transfers of funds overseas; limiting all IRA, 401K and retirement funds to owning government Treasury bonds, and so on.
The U.S. banned private ownership of gold above a few ounces in 1933 as a form of capital control, forcing citizens to keep their capital in cash that could circulate and (supposedly) boost economic activity. (Did it work? Obviously not.)
Central State bureaucracies and Elites can become very creative at expropriating citizens' cash and assets once they feel threatened by a loss of faith in their legitimacy and competence, i.e. capital flight.
For many decades, a Swiss bank account was the standard way that the wealthy hedged the risks of capital controls. As a result of the Federal government's efforts to catch tax cheaters and money laundering, Swiss bank accounts are no longer easily available to Americans.
The most basic hedges against capital controls and devaluation are owning physical gold/silver and diversified holdings of other currencies held in overseas "safe havens." We can see these hedges against instability and insecurity in action around the globe: wealthy Chinese are transferring capital overseas at a furious pace and buying gold, and Spanish citizens have been flying to London to open bank accounts so they can transfer their money out of Spain and Spanish banks. Should Spain leave the euro, the transfer into their traditional currency would amount to a forced devaluation of their cash.
The massive flight of capital out of Spain has been widely reported in the financial media, and it raises an important question for anyone with cash to safeguard: what happens if capital controls become possibilities in the U.S. or Canada?
The idea that the amount of money that could be withdrawn or transferred from your private accounts might be strictly limited may seem farfetched at the moment, but if history teaches us anything about financial crises, it is that the rules are changed overnight to protect the Central State and vested interests.
We cannot control economic, financial and political instability; all we can do is hedge the risks by diversifying our assets and taking control of what we can control.
Readers of my book An Unconventional Guide to Investing in Troubled Times(print edition) (Kindle version) know that I consider hedging and local control to be essential strategies going forward, and I invite you to check out the book if you want to read more about hedging strategies.
I have explained why I think that What Will Be Scarce: Liquidity and Reliable Income Streams (August 30, 2012). Having capital that is liquid (easily converted into legal tender or moved to safety) and income streams that are reliable, i.e. that are not speculative or dependent on the Central State and are under your own control, are key assets that cannot be replaced.
Over the course of the past few months, New Zealand correspondent Michael Reps and I have been discussing the issue of foreign bank accounts providing a hedge against capital controls, and he has established a way for Americans to open an account in New Zealand with Westpac, a bank with a verifiable history and reputation. (The service is not free to set up, but very little of financial value is free.)
In the spirit of discussing possible hedges that are available to “the rest of us,” i.e. the bottom 99.5%, I have asked Michael to explain the service in a Q&A format. As is my policy, I receive no commission from Michael’s service or any other service mentioned on the site except a no-cost-to-you commission on Amazon purchases and BullionVault investments made via links in the sidebar.
I present this discussion not as a recommendation to take any particular action, but as an invitation to pursue your own research into overseas accounts and hedging in general.
As with any financial decision or transaction, do your own due diligence. This means understanding all the risks and all the potential benefits. Read financial statements, obtain regulatory filings, ask questions, verify what you are told, and so on. Each nation's banking laws and legal system are different. Assume nothing.
There is no perfect hedge. Every hedge has risks. Physical gold can be stolen, expropriated at the border, etc. Any currency can be devalued. Property held overseas can be expropriated by a "new" government. The list is endless.
A hedge is not the same as a speculation, though each has risk. All hedges are imperfect, and so diversification is a key strategy in hedging. The purpose of a hedge is to preserve capital, not score gains as in speculation. An overseas account is a utility, not a means of wealth creation.
I am not an expert in international banking or tax laws, but it is common knowledge that U.S. citizens are required to disclose foreign accounts and report all income regardless of its origin, i.e. all income earned anywhere on the planet must be reported to the IRS. The purpose of an overseas account is not tax evasion, it is capital preservation/hedging, and so having accounts in nations that have tax treaties with the U.S., transparent reporting and rule of law is a definite plus in terms of compliance.
Holding cash in an overseas account in another currency exposes you to the risks of foreign exchange (FX) fluctuations. It is possible to hold other currencies in the U.S., and U.S. dollars in a foreign account. (I use "overseas" and "foreign" interchangably, but obviously an account opened in North America may be foreign but not overseas.) The point is that having a foreign account offers a different sort of hedge than owning a foreign currency.

Impressions from a Spaniard in Greece

The following is a first person account from a Spanish citizen who was in Greece and that I found on an Internet board (here it is Google-translated):

Walls full of graffiti and political posters, tiles and marbles busted by the unrest, police in every corner of the city, swaths of people sleeping on the streets, people in Syntagma asking for money to pay for medical treatment, dark and empty streets at nine of the night, as there is no open local. All have closed. Groups of 30 people near the University drugging entire families searching containers, roller shutters banks protected, fully burnt buildings, fire barricades Eksarheia, immigrants escaping from the police ...These are just some of the things I have seen in just 11 days by Athens. I will not roll up because literature is not my strong point, but I've been traveling the country steadily for Anno and a half, and although by then Greece was already in crisis and had always been a troubled country, the transformation that is leaving the country is something brutal.Citizen picks up food parcels from the NGO Doctors of the World
The feeling I have is like this is a failed state, a project that has failed, I come to mind videos of the 60's propagandists, showed that the ideal of family within the capitalist system, happy, going to work, enslaved ... We take a walk through Athens and although still a western town with its colorful lights, their McDonalds ... the feeling you get is to be living in a different reality, one can see the ravages of the crisis and how poverty and misery left in each of the corners.Luckily, the image I have is that the Greeks are at all times resisting to have their head down and always try to keep going, but the situation is very hard, and any time something could explode spontaneously. Regarding speed and indefinite strikes, one of the people with whom I could talk these days I see happening in the near future, because there is still work, involving more sectors of society, etc.. but is working on it and everyone is convinced that they will win.Just do not say you can do it alone and will need our help because everyone sees the crisis as an international thing, only has primed them first and more brutal.

En général, l’art du gouvernement consiste à prendre le plus d’argent qu’on peut à une grande partie des citoyens, pour le donner à une autre partie. 

In general, the art of government consists in taking as much money as possible from one party of the citizens to give to the other. 

Voltaire

Remember, remember the 25th of September…

Mehr als ein ganzes Jahr seit den ersten griechischen Demonstrationen musste aber vergehen, damit die spanische Bevölkerung nicht nur ein flüchtiges Mitgefühl für sie entwickeln, sondern auch etwas Ähnliches dessen, was sie duldeten, erleben konnte, d.h. Angst, Gefahr... Seit geraumer Zeit war es ja vorauszusehen, dass diese Situation vor den Türen der Spanier bevorstehen würde (genauso wie vor anderen), da sie sich aus schon mal hier besprochenen ökonomischen Gründen nicht mehr behalten kann.

Spanien ist gröβer als Italien bzw. Griechenland und ihre Banken und Politiker hatten seit der Regierung, auf deren Spitze José María Aznar stand, und ihrer Nachfolger das rechtliche Zugeständnis des Volks daran, das Bauwesen unabzählbar unendlich zu viel mittels vom fraktionalen Reservesystem unterstützter Hypothekendarlehen und billiger illegaler Arbeitskräfte, deren Zuschüsse sich eben von der verzinslichen Staat- bzw. Spanienverschuldung in Abhängigkeit befanden, Ansporn zu geben. Deswegen ergab es bereits seit Jahren eine Überlastung der gesetzlichen spanischen Krankenversicherung (heutzutage steht sie aus dem Aus und verweigert die Betreuung den spanischen Staatsbürgern ab 26 Jahre alt, die früher nicht in der Lage waren, die Sozialversicherungsbeiträge zu entrichten) und 2009 natürlich unangemessen teuere auf der Spitze Wohnungspreise, und zwar eine Blase, deren Bezahlung die Spanier ab jetzt durch das von bloβ Politiker abgesprochene Rettungspaket in Kauf genommen haben, um den Banken statt den Staatsbürgern Hilfe zu leisten. Sie hätten vielleicht die Isländer imitieren können, aber nein. Einige sind bereit, diese Kosten und diejenigen, mit denen die Staatsausgaben und die Politiker bzw. die königliche Familie zu ihrem Wohlstand das spanische Konto absichtlich belastet haben, zu übernehmen.

Angesichts dieser genannten Tatsachen wird es allerdings schwierig, sich die Sonderrechten der Oberschicht der Politiker und gespenstiger Bankenführer anzueignen, was ihr leider unglücklicherweise am 25. Oktober versuchtet, auszuführen. Infolgedessen sollte man bei der sehr gewalttätigen Polizeiprügelei nicht schockiert werden, mit der die Fortdauer solcher Sonderrechten eindeutig gewährleistet ist. Kein Wunder, dass es so passiert ist! Darüber hinaus wurden mit Schiβpulver geladene Luftgewehre schon seit der 15M-Demonstration am Mai eingesetzt.

Daraus könnte man folgern, dass ein Kampf ohne Schutzschild zu keinem Gewinn gehört, denn man wird zuerst der Polizei unterliegen. Aber das Wichtigste ist es, zur Kenntnis zu nehmen, dass unsere versprochenen Rechte so schnell aufgelöst werden können, indem sie auf die Oberschicht übergehen.

Du kommst aufgrund der Existenz 7.000 Millionen Menschen auf der Erde nicht in Betracht.

A warm welcome to Evey Hammond

I would like to extend the warmest welcome to Evey Hammond, a very special person to me.

She kindly agreed to co-author the blog, so she will be reporting sentiment and opinions from Germany, primarily in the German language.

Let the Spanish 10Y go to shit

This is a story for any bond manager that still holds Spanish 3Y or 10Y...


As you know, I am living in the piggest of the PIGS. There was an illegal (and you can differentiate illegal from immoral, right?) demonstration scheduled for yesterday. People were called to surround the parliament in Madrid, to let politicians know that people is onto them, that bipartidism is a scam and so is this representative democracy.

Demonstrating anywhere near the parliament is illegal (of course...). Prior to Sept. 25th, government spokespersons compared the citizens call to surround the parliament to the military putsch in '81. Also, I believe the Catalonian independence movement is orchestrated as a smoke courtain to prevent public attention to focus on this occupy movement. I say that because people have been charged with rebellion against public institutions (see the video of police identifying suspects of "talking to more than 20 people in a public park" some days ago and the charge notification below), but none of the Catalonian politicians behind the presumed Catalonian independence have (and what is the most rebellious act than declaring the independence). None of the mainstream Spanish media spent more than 5 minutes talking about the demonstration, but there were a lot of news shows and pseudo-intellectual political debates about the independence.

Earlier that day, different police departments were ordered to stop buses going to Madrid as long as they could. They even got dogs in the buses so as to detect drugs, and treated citizens as if they were criminals.

 

The demonstration, however, was such a success that the Spanish authorities had to legalize it in order not to fill up Spanish prisons. This was not a demonstration of the tipical dog-flute guy with long and unclean hair: many senior citizens were participating.

First, some rioters (I don't know whether they are police insiders or not) broke the fence that acted as security perimeter.

 

However, the rest of the evening was pacific, until it was time for the pigs of the parliament to go to their publicly-funded, luxurious rat holes, so that everything was set up to dissolve the demonstrators. As you can see in the following video, a lot of masked guys (infiltrated police, as you will see later) with red flags approach the riot police in an attacking attitude. They were even scolded by a legitimate female demonstrator. The police then charges against them and then indiscriminately against any demonstrator.

The next video is a compilation video. You can see that the police take a guy. They later bate him up, with some of the riot police putting their shields so as to prevent outside viewers from seeing the torture, and left him paraplegic for the rest of his life.

There is proof that the riot police was involved in the riot attacks that shed blood on an otherwise pacific demonstration. In the next video you can hear "comrade! comrade! I am a comrade! ... Yes, this is a comrade, take it easy!".

After the demonstration, the riot police even got into Madrid's main train station, and indiscriminately charged against both demonstrator and commuter. The best part: you can see thse guys in yellow, they are not police, they are just the station security! This country is sick!

You can even see here threating members of the press (yes, official press!). At the end of the video, when the journalist ask the police officer to identify himself, by giving his police number, he refuses telling him "I'm gonna give you something else".

People took refuge anywhere they could. In a restaurant, "Cafeteria Prado" on Paseo del Prado 16, the owner prevented the police from entering his premises, thus protecting demonstrators. These two pictures are Pulitzer-worthy:

 

 

I am going today with some friends to pay my respects to this guy in his restaurant. I hope I find it open, since there is also a follow-up demonstration (illegally) scheduled for today, in protest for yesterday's repression.

What I want you to see, Spanish 10Y bond holder, is that this situation is no longer sustainable. Spanish people were co-responsible of the housing bubble and didn't give a fuck about industrial loss to China, as long as the State funded their services with public debt, and banks gave them mortgages with no guarantees. Spanish people must learn, suffer, and then build something real with sweat and blood. Get your money out of there, protect the people, protect your money.

Watch this!

Youtube user GGPGrey produces a high quality entertaining videos that might teach you something that you don't know. He has a unique style that will make you love it. You can recognize some elements from the Monty Python, Star Wars, Futurama...

The City of London:

Death to pennies:

 5 Historical Misconceptions Rundown:

Enjoy

A concerned citizen's manifesto

I am strongly opposed to welfare lounge socialism which promotes free rights to everybody as if natural resources had nothing to do with how much seven billion people can consume. Rights are meant to be conquered, as our grandparents did. We are not more intelligent than them, nor are we more pretty or unique.

I am witnessing a constant wealth transfer, a decimation of the middle class and the techofeudalism it leads to. As a consequence, as a citizen of the troubled country of Spain, I proclaim the following manifesto:

1. I shall break every law that is written by any politician. I am not bound to them.
2. I shall evade taxes as much as I can. I have the intrinsic right to defend myself against burglary.
3. I shall convince anybody that it is a patriotic duty to harm any politician if they can.
4. I shall support a civilian government. I want to live in a society of pair, pursuing knowledge and sharing the best of each other.
5. I shall agree on confiscating all their properties and use them to offer the German citizens free vacationing resorts as the only means of paying current public and private debts. It is only the taxpayer the one that has suffered the course laid out by irresponsible politicians whose properties are to be confiscated.
6. I shall not share my talent with the current society until people wake up and rise against this tyranny. I owe ignorant people nothing.

In PIGS land #4, signed, the Analytic Bastard.

Cristiano Ronaldo's butt could belong to the ECB

Despite the fact that I don't like soccer, it was brought to my attention something very funny: the European Central Bank (ECB) could become the new owner of soccer players Cristiano Ronaldo and Kaka. In 2009, the Spanish soccer club Real Madrid was granted a credit of EUR 76.5 million with Caja Madrid, later integrated in Bankia, to recruit both superstars. With Bankia's bailout, the  ownership of both players could end up in the hands of the ECB. The result of this bailout, the entities within Bankia, including Caja Madrid, have lost all their financial assets. Among these assets, Bankia owned an asset securitization fund called "Corporate Assets Madrid V, FTA", which included the credit lent by Caja Madrid to Florentino Perez's club for the transfer of Kaka and CR7. This fund was given by Bankia as collateral so that it could be eligible to participate in the ECB's weekly liquidity auctions that have bought Bankia the much needed liquidity to be able to continue operating. At the present time, the fund no longer belongs to Caja Madrid.

The agreement signed between Real Madrid and Caja Madrid for the reception of the loan, was dated June 23, 2009 and maturing on July 3, 2014, after payment of three installments of 25.5 million on July 3, 2012, 2013 and 2014, and is payable by image rights of both players, which always was the basis on which Florentino Perez justified the return on their huge investment.

Under the present circumstances there are two reasons why the ECB could take over the rights of Cristiano Ronaldo and Kaka: one is that Real Madrid soccer club committed a non-payment of amounts agreed, and two, that Bankia turns insolvent. The club will try to avoid the first one at all cost in spite of the spectacular revenue fall this season. The second one is more than likely should the outflow of Spanish bank depositors.

Back when the deal was closed, the (educated) public opinion was outraged by the favorable conditions of the loan since it coincided with the closing of the credit tap to individuals and small businesses. Today, this agreement may turn against Florentino Perez if the situation spirals into chaos, which right now can not be excluded. And if it does, would have to see what happens with both players, which could ultimately end up changing team and joining the European Central Bank, or more accurately, they could appear as an asset on the central bank's balance sheet.

  
The New York Times puts ACS, the construction company whose president is also Florentino Perez, as an example of the problem of private debt in Spain, which is even worse than the government debt (sovereign) that threatens to place the country in a decade of stagnation. The newspaper cites the case of ACS, "a company with a debt of 9,000 million, double its current market value, and tucked into a frenzied campaign to sell assets and to distance himself from the situation affecting the Spanish economy." "Just as he has used debt to accelerate his company’s remarkable growth, he has borrowed heavily to sign prominent Real Madrid players — from the British star David Beckham to the current Portuguese sensation, Cristiano Ronaldo."

So there you go guys. Some central banks used to back their currency with gold, some others back it with soccer players that make covers on teen magazines.

Alpha, omega, oil

Something is moving in the East. It is something that they don't show on mainstream TV news. It is related, of course, to oil.

Like the prominent magician David Copperfield, your politicians want you focused on the Syrian script even by having Hilary Clinton say that it is natural that Al-Qaeda and the US share similar interest (!!!). What is happening offstage can only be seen as a direct preparation for WWIII. The increasing US interest in the Caucasus region reflecting in meddling in conflicts there, specifically in the Armenian-Azerbaijani conflict.

Some report that US will back Azerbaijan with the intention of having the join the country join the NATO and provide access to its oil fields, therefore encircling Russia and having a Northern access to Iran when the time comes (this renders any theory of imminent Israeli attack on Iran useless).

-[T]he United States and their allies in NATO are facing the fast of the overthrow of Bashar Al Assad’s regime in Syria after which they will set about Iran and then the CIS countries including Russia. For this reason. the strengthening of ties with countries neighboring Iran and Russia meets the US interests.

News.Az interviews political scientist Vafa Guluzade

What can you say about reports that the Pentagon-assigned package of military aid to Azerbaijan will be some $10M to go for improvement of the opportunities of marine forces on war on terror?

It is yet another proof that the United States views Azerbaijan as a very important state with which it is developing a geostrategic partnership in the region. Development of US-Azerbaijani relations meets the interest of both states. And the assignment of $10m to Azerbaijan by the Pentagon testifies to the US interest in deepening military cooperation with our country. The logical outcome of this cooperation will be Azerbaijan’s admission to NATO.

Could you specify terms of the announced admission of Azerbaijan to NATO?
I don’t want to specify terms but I would say that it is about a middle term perspective. The matter is that at the current stage the United States and their allies in NATO are facing the fast of the overthrow of Bashad Assad’s regime in Syria after which they will set about Iran and then the CIS countries including Russia. For this reason. the strengthening of ties with countries neighboring Iran and Russia meets the US interests.
In this case, can the military aid to Azerbaijan by the United States raise concerns in Iran?

Undoubtedly, it can. But it will not affect the US plans, based on their own interests, rather than the interests of Iran or any other country. Openly speaking, Iran is well aware of the US plans to conduct a military operation against it and it is preparing to resist this military operation. As for Azerbaijan, we merely cannot stay aside from US plans related to Iran.

Do the US plans envisage shift of powers in Armenia? There are no doubts that they do. The United States is planning to reduce Armenia’s dependence on Russia and Iran for which they seek to bring their protégé to power in Armenia. The issue is about who it will be and which events will promote implementation of the US plans. Russia is unable to resist these US plans regarding Armenia, since it has no serious resources in terms of army or economics. Additionally, Russia will face the issue of resisting the plans of the United States and their allies in NATO, while in these conditions, Russia will have no time for Armenia.

How would that scenario, you are speaking of, influence the resolution of the Armenian-Azerbaijani conflict over Nagorno Karabakh? The impact will be a most positive one. The Armenian-Azerbaijani conflict over Nagorno Karabakh will be settled in case the indicated US plans come true. The main obstacle on the way to its settlement is Russia…

Tension is on the air. History is never how the victor tells it, nor how you study it on the books or how you see it on TV. What happens behind the scenes is an inherently inverse problem, much like Plato's cave.

Primary actors are preparing for the next large war in the region, which will be a prelude to WWIII. It would be wise to pile up gasoline containers.

Robert Johnson, Chris Hedges, George Carlin

I found these very educational videos that I fell I need to put on the blog.

Robert Johnson, Former Senate Economist, Executive Director of the Institute for New Economic Thinking, and a Senior Fellow and Director of the Global Finance Project at the Roosevelt Institute, speaks about the problems in today's corporate capitalist society. This is a part of Culture Project's "Conversation on Economy", filmed on July 25, 2012 at the IMPACT Festival.

Christopher Lynn Hedges (born September 18, 1956) is an American Pulitzer Prize-winning journalist, and war correspondent specializing in American and Middle Eastern politics and societies. His most recent book, written with the cartoonist Joe Sacco, is Days of Destruction, Days of Revolt (2012). The book, a New York Times best seller, shows the consequences of unregulated capitalism by reporting from "sacrifice zones", the poorest pockets of the United States such as Camden New Jersey and the coal fields of southern West Virginia "that have been offered up for exploitation in the name of profit".

George Denis Patrick Carlin (May 12, 1937 – June 22, 2008) was an American stand-up comedian, social critic, satirist, actor and writer/author, who won five Grammy Awards for his comedy albums.[22]  Carlin was noted for his black humor as well as his thoughts on politics, the English language, psychology, religion, and various taboo subjects. Carlin and his "Seven Dirty Words" comedy routine were central to the 1978 U.S. Supreme Court case F.C.C. v. Pacifica Foundation, in which a narrow 5–4 decision by the justices affirmed the government's power to regulate indecent material on the public airwaves. Here, George Carlin in a very-well composed speech about politicians and the Elite:

Educate yourself!

Spanish bailout scheduled for October, 22nd

I found this on a Spanish-language Internet board, from a poster with excellent track record. The post reads (I leave it mostly Google-translated, it's so funny):

I just spoke to an officer and another Austrian ejpañol in Brussels, who has visitilla to me. I have confirmed this date for redemption formal, just after Galegas elections. Terms of rescue:

1. Pensions KO
2. Unemployment benefits KO, will be left very reduced
3. Government deficit will be reduced to 3% of GDP, regions not meeting to immedately lose self-governance.

It is remarkable that Merkel has agreed the bailout to be requested after the Basque and Galician regional elections. It is even more remarkable that the short-selling ban from the CNMV (Spanish SEC) ends on October, 23rd, as per the 3-month ban establised on July, 23rd. Mainstream media also hint this date, referencing consulting firms. Goldman Sachs even says Spain is to officially announce it next week, with the following agenda:

September 12: German constitutional court gives its blessing to the ESM. Although we expect some procedural riders to be attached to the decision, this would allow German ratification to be completed and the ESM to be established in relatively short order.

September 13-14: Spain to make formal request for EFSF support at the Eurogroup meeting. With a large (and uncovered) redemption looming at the end of October (and under pressure from other Euro area governments), we expect Spain to move towards seeking support.

Second half of September: Conditionality required by EFSF will have to be accepted by the Spanish authorities, presumably requiring a parliamentary vote. In parallel, approval of other Euro area countries for the provision of EFSF support will need to be obtained: in some countries (notably Germany), this will also require parliamentary approval.

By end-September / early October: Memorandum of Understanding (MoU) codifying conditionality is signed, formalising the availability of EFSF support for Spain. At this point, the necessary conditions established by Mr. Draghi for ECB purchases of sovereign debt will have been met, well ahead of
large Spanish bond redemption.

There you go guys, with uncle Benny printing like mad across the pond, risk is on again. Bankia is up 100% from lows. Buy, buy, buy!!!

Spanishtan chronicles

I recently heard this tale from a Spanish acquaintance:

A few days ago, at the McDonalds (btw, shitty place)
I was eating some shitburger while noises start coming to my ear and since I was alone, I eavesdropped the gossip of others.
It turns out that a former employee of McDonald had gone to eat there and of course, she and her female ex-coworkers grabbed a place so that they could catch up what had been going on with their lives.
At one point a McWorker asks her:
- "Hey sista, wearin' new tits?"
- "Yeah, you see, I got operated a few months ago"
- "And how's it like, how much it costs?"
- "Very well sista, I notice that guys look at me more, paid EUR 6000 in the clinic XXX"
And a few minutes later they departed and the one wearing silicone told them: "Hey, you need someone? I am still unemployed and all that..."

Why the hell a girl who is unemployed spend EUR 6,000 in increased breast size but is so desperate to  return to McDonalds to ask for a job.

I read once on Zerohedge that the large Spaish demonstrations in June were against IMF and the Troika. I argue that those sistas don't have the slightest notion of what the IMF is.

Retrocinema: Network (1976) and Rollover 1981 (1981, obviously)

Like a quality historical library, one must have works that capture the essence of their time. In this post, I comment on two movies released within a span of 5 years from each other, that reflect very well the feelings, fears, values and fashions of their time.

Network tells the story of the news anchorman Howard Beale, who is about to retire. His share had been constantly dropping and the death of his wife had affected his personal life, so the only thing he had left was his job, which would also be taken away from him.

All of it drives him mad, and he becomes the people's prophet against the adversities of the recessionary seventies. When disclosing a deal with the Saudis, Beale faces the chairman of the corporation, who changes his mind into telling people they are not sovereign individuals but part of a continuum that serves a corporative world with no values whatsoever. This is not greeted by the masses and Beale's audience drops, sealing his fate.

A very seventies movie, with a very disappointing and unfinished ending, it however shows how soon values were pragmatically discarded.

On the other hand, with Wall St. and economic woes being more known to the public, Rollover 1981 is a movie that will engage the finance enthusiast, especially hard money advocates. It portraits an finance executive who, again, discloses a deal with the Saudis for them to turn all their dollars to gold without the market noticing it. Notice that the dollar was at its weakest, and the US was immerse in an estanflationary spiral until P. Volcker took over and raised interest rates precisely in 1981. It is remarkable that the facts occurring in this movie apply even more today than in 1981. From a very well written user comment on IMDB:

This is an unusual film: an adult thriller about the danger of fiscal manipulation. It's also unusual in that it remains relevant, perhaps even more so than when it was released; no less a person than renowned investor Warren Buffet has recently been warning of the dangers of having so much U.S. debt held by countries whose political agendas may not always require a stable or strong U.S. economy.

But is it a good film? With some reservations, I would argue that it is. Director Alan Pakula and cinematographer Giuseppe Rotunno have done a very good job of shadowing the action; rarely does anything take place in strong light, and then almost always when the action either involves the Saudis (the first meeting between the cartel and Lee Winters, played by Jane Fonda, for example) or serves their interests (e.g. the death of bank inspector Mr. Fewster). The locations, large and small, take on their own lives; the World Trade Center becomes a monolithic anthill, and there is a wonderfully ominous shot of the arrangement for Lee Winters's death being made by two men amid a crowd on a descending escalator which captures powerfully the essential isolation of the individual amid the crowds, and thus wordlessly encapsulates the underlying political concern of the film. The 720 degree pan just before the film's ambiguous coda is a marvel, one of those things which looks quite simple until one realizes the amount of work that must have gone into making it work smoothly. [...]

The screenplay handles the difficult task of dramatizing monetary transactions well; it is less effective when portraying the love scenes, especially the initial motivation for the central affair. But the climactic confrontation between Hume Cronyn and Kris Kristofferson is spot on; rarely does a character reveal moral bankruptcy as starkly as does Cronyn's, yet his words and his delivery both demonstrate his utter unawareness of the truth about himself. Indeed, the script generally manages to be both clear (albeit complex, requiring attention) and straightforward without becoming preachy or overly didactic.

 Two highly memorable films that I strongly recommend

Understanding debt

Via QuantNet and the Crooked Timber, I found interesting information about a former Yale professor that was allegedly fired in 2005 because of his anarchist political views. David Graeber has just published his book "Debt: The First 5,000 Years" which offers an infuriating insight according to the reviews, including one in the FT. He is currently professor at the London University.

Other interesting interviews include the one in nakedcapitalism.com, an insightful review of Graeber's book by Benjamin Kunkel at LRB, a 6-page article on David Graeber in Businessweek and an hour-long interview broadcasted by C-Span's BookTV.

From the nakedcapitalism.com interview:

So really, rather than the standard story – first there’s barter, then money, then finally credit comes out of that – if anything its precisely the other way around. Credit and debt comes first, then coinage emerges thousands of years later and then, when you do find “I’ll give you twenty chickens for that cow” type of barter systems, it’s usually when there used to be cash markets, but for some reason – as in Russia, for example, in 1998 – the currency collapses or disappears.

Also interesting are a 2002 essay by Graeber in New Left Review and an interview by Charlie Rose five years back.

The FT review includes an interesting paragraph about debt forgiveness and modern creditor protection which I agree 100 percent on:

But in the western world today, governments are intent on protecting creditors, not debtors. What makes the west an outlier, in other words, is not just the presence of credit cards or the existence of virtual credit, but the reluctance of leaders to countenance programmes of widespread debt-forgiveness of the type that used to be found in Mesopotamia.

Can we really blame creditors with an honest heart? It is true that for every sad story of someone getting sick and getting into debt, you have stories of irresponsible spending. Does the citizen deserve to be protected from a self inflicted injury? One can say that there is no moral misconduct of creditors when grating loans. However, this is tricky because there are two overlooked but important points:

• Asymmetric information: lenders are a group of highly skilled individuals that resort to 300 hundred years of mathematical probability, whose organizations are vast collectives of actuaries, quants, fianncial analysts and executives with a lot of relationship to power spheres.
• Fiat money and fractional reserve banking. Inflation depletes the individuals' ability to get in business by their own means and forces them to resort to lenders. At the same time, these lending institutions have an easy access to credit at cheaper rates.

That is what bankruptcy is for. Bankruptcy was pretty revolutionary when it came about. It allows people to make mistakes and in get out of them. If you have too much debt, simply go bankrupt. You won't be able to get a loan and it will mark your credit, but maybe you need a 7 year cooling off period to get your life in order.

He carried out an interesting discussion about his book. Here is an especially stimulating piece:

This summary of my economic theory traces how industrial capitalism has turned into finance capitalism. The finance, insurance and real estate (FIRE) sector has emerged to create “balance sheet wealth” not by new tangible investment and employment, but financially in the form of debt leveraging and rent-extraction. This rentier overhead is overpowering the economy’s ability to produce a large enough surplus to carry its debts. As in a radioactive decay process, we are passing through a short-lived and unstable phase of “casino capitalism,” which now threatens to settle into leaden austerity and debt deflation.

This situation confronts society with a choice either to write down debts to a level that can be paid (or indeed, to write them off altogether with a Clean Slate), or to permit creditors to foreclose, concentrating property in their own hands (including whatever assets are in the public domain to be privatized) and imposing a combination of financial and fiscal austerity on the population. This scenario will produce a shrinking debt-ridden and tax-ridden economy.

The latter is the path on which the Western nations are pursuing today. It is the opposite path that classical economists advocated and which Progressive Era writers expected to occur, given the inherent optimism of focusing on technological potential rather than on the political stratagems of the vested rentier interests fighting back against the classical idea of free markets and economic reforms to free industrial capitalism from the surviving carry-overs of medieval and even ancient privileges and essentially corrosive, anti-social behavior.

Today’s post-industrial strategy of “wealth creation” is to use debt leveraging to bid up asset prices. From corporate raiders to arbitrageurs and computerized trading programs, this “casino capitalist” strategy works as long as asset prices rise at a faster rate than the interest that has to be paid. But it contains the seeds of its own destruction, because it builds up financial claims on the assets pledged as collateral – without creating new means of production. Instead of steering credit into tangible capital formation, banks find it easier to make money by lending to real estate and monopolies (and to other financial institutions). Their plan is to capitalize land rent, natural resource rent and monopoly privileges into loans, stocks and bonds.

Another author with views on debt is Michael Hudson, who has published his new book, The Bubble and Beyond.

See also http://jacobinmag.com/2012/08/debt-the-first-500-pages/

Update: I just found out an oldie entry from mathbabe's blog regarding Graeber's latest book which I will draw a few conclusions from:

1) Debt came before money, often in the form of gift giving (you can read about this in his interview with Naked Capitalism)

2) In ancient cultures, and even in more recent cultures before the introduction of money, there were typically two separate spheres of accounting: the first was for daily goods like food and goats, which worked on the credit system, and the second for rearranging human relationships. Here there were things like dowries and symbolic exchanges of gold, meant to acknowledge the changing human relationship, but not as a “price” per se – because it was understood that you couldn’t put a price on a human.

3) Money as we know it is intricately tied in with slavery because it was when a person became a thing that could be sold for profit that we had a sense of price and when these two separate spheres were united. In particular the existence of money also implies the existence of a threat of violence. Moreover, it is this “decontextualizing” of people from their homes, their communities, and families who are forced into slavery that allows us to measure them with a dollar value, and in general it is only through pure decontextualizing that we can have a money system. It is this paradigm, where everyone and everything has no context, that economists rely on to describe the standard game theory of economics.

4) There are three social structures that people come into contact with in their daily lives and in which they give each other things: communistic, reciprocal, and hierarchical. For example, among parents and children, it is communistic; among a CEO and his workers it is often hierarchical, and among two strangers at a market it is reciprocal.

Silver bears: a compilation

The Canadian trader/blogger SGS has taught us while amusing us with his original silver bears video series. I remember how anxious I was waiting for the new episodes. His unique sense of humor was the perfect framework to present the conspiracy to the layman, the amateur and the professional. Economists wished to know what is contained in these videos.

Though I want to take the conspiracy with suspicion, I reckon there is much sense in what they say about protecting paper assets through monetary metals suppression. I just say that if Mickey Mouse is left with a mess to clean and he finds a magic wand, he just uses it, doesn't he? "I do it because I can".

Here is a compilation of all eight bears videos:

El concursante (film)

El concursante (Rodrigo Cortés - Red Lights) is a Spanish humor/drama film and filmed within six weeks during 2007.

The Argentinian Martin Circo Martin (Leonardo Sbaraglia) is a Professor of Economic History in Madrid who wins a TV quiz about his field. Overnight millionaire with a winning prize valued at EUR 3 million he gets expensive items, such as a luxury car, a plane, a villa... The problem comes with maintaining the prizes, and the huge taxable capital gains under the Spanish IRS's eye.

This fragment, gems of gems in Youtube, starts with a desperate Mr. Circo visiting an alternative Economist called Edmundo (Chete Lera), looking for the missing piece. Edmundo, a sort of obscure Bernrd Senf, first kicks him out but then he accepts to speak with him because Mr. Circo "looks like a bad Economist". Then the lesson starts after Mr. Circo is asked what his goal with the talk is and he responds with "I want to know..." This is when you know you love the film.

The film is entirely on Youtube, if you have some notions of Spanish, it is a must. Of course, this gem has gone unnoticed.

Marc Faber video

Inflation, deflation, the Fed, ECB and the usual suspects, get farmland folks!

An interesting video, watch and listen:

Children of cheap oil

You are not unique. You don't have any inherent human rights despite what politicians or accommodated philosophers tell you. You are part of a massive hive of 7bn humans wandering over the surface of an antinatural outcome.

You are the result of two billion years’ accumulated energy reserves.

You witness impassively at everyday's miracles. You consider a right to own a wonderful machine that allows you travel miles, and in your mind, food grows in the supermarket and you say there be light just by clicking a button on the wall, as if you were God.

You spend your time in paradise drinking tasteful beverages while watching unconsequential spectacles on a magical screen made thousand of miles away by the magic hand of modern slavery, and briefly wonder what happens when slavery comes and touches your door.

You are children of cheap oil.

And now you are old shale mud. Your light is waning, you can no longer travel miles by pressing a pedal and steer a wheel with the assistance of a computer, and your favorite shows suddenly turn boring.

Without your mother, without your energy, you will barely move, food will again be a rare commodity, and your towns will become a dump of once wonderful machines that will be stopped forever.

And then, everything will be over.

Update on the statistical arbitrage on wheat/corn

Some days ago, I proposed a statistical arbitrage strategy to play the what/corn spread. I raised the issue when the spread stood at USD100 and at the peak of USD130. Today it stands at little over USD50. A nice point to unwind both positions (long corn/short wheat). We see that this kind of spread betting offers more safety than pure directional betting.

Though pressure prices is relieved, I am very concerned with the situation as reported by ZH. The incidents related to dough are alarming. I think this is the least thing we needed. And our youngsters are exclusively focused on kissing vampires are that kind of crap.

God has mercy on us sinners

Spanish town of Coin issues local currency

And it couldn't turn more ironic.

Coín, a town in the province of Malaga, southeast Spain is using a local currency to boost the economy. Apparently, citizens are happy with the results.

The currency, called "the Coin", named after the issuing town, allows exchanging goods and services produced within the town. A person can at most hold 200 Coins.

I want to see the faces of the ones that laugh at local currencies when their beloved central bank-backed pieces of paper get inflated to aleph null.

Watch your back Draghi!