Sunday, June 23, 2013

Roll the Dice

Regulars in the schoolyard are always betting on things. "I bet you...", "I bet it...", I bet that..." ring out with every assertion. But grown ups don't do that. Do they?

Not in our modern 'Free Market' with its tightly controlled and regulated banks and exchanges, its Governments fine-tuning fingers in every pie, Shirley? People in London look to Big Ben to sound the hour, but does another Ben toll for the Marketplace?

How much is that company worth? You can look at its PE, debt, market spread, sovereign risk, and discounted cash flow, but in the end, it’s the Ben Factor (BF) which dominates all companies, metal prices, and sovereign currencies in the West.

Ding Dong 'The Ben' is here.

The Dow, the S&P500, the ASX, TSX, FTSE have all become giant roulette wheels, but people stopped betting on the roll of the dice, and bet instead on whether the dice have six sides and six numbers. They bet on what the croupier will do next. How is his mood? Will he keep using the dice with three sixes, or switch back to the one with two? Will he say he’s using the slower dice, but secretly roll a more loaded one? Who checks the dice?
Jo Nova asks at:

Watch out ! He's going to Tweak !!

Respected commentators in the mainstream media report these events with straight faces, as if it is normal that economic activity in a free market depends on the King-maker-called-Ben. A bureaucrat 
Millions of investors have effectively stopped assessing company profits, and they place bets instead on money supply. Will The Ben keep printing money at the same rate? Will it get harder to get loans? Will consumers stop buying things they don’t really need? Will consumers just stop? Can the BF manage an exponential rise with tweaks and announcements, opening the flow of the IV drip while telling the patient he is using less medication?

How long will the placebo effect keep working?

The Ben hath spoken, and said that in future, if the economy is looking better, he might slow the printing of $85 billion US dollars a month, some indefinite non-specified day. All that was … obvious. But, world-wide investors and traders hang off the words, trying to second-guess what the BF banality implies. No one will say it, but everyone knows that it the rate of the flow of easy cash so much as slows, all hell will break loose. Balanced on this thin veneer of pretence, stocks, metals and whole national currencies change direction within minutes.
 A Commenter on Jo's piece says:
So the REASON that money printing has any effect at all it because it is not distributed evenly. The new money is injected strategically and made available to some people but not others. One way this happens is reserve banks buying government bonds at stupidly low interest rates, another way this happens is via the banking industry getting access to easy money at lower interests than you or I could borrow.
By injecting money in some places and not others you create a distortion in the normal price structure of the economy. Over time, economic activity adjusts to account for this price distortion and life goes on. This was first documented by Richard Cantillon and is known as the “Cantillon Effect”.  
You get the same result when someone prints counterfeit dollars in a secret room under their house, the only difference is that central banks are a little bit more upfront about it.
A.N.Other says: 
Importantly none of these policy changes were done malevolently but from a deeply held desire to improve living standards;
the problem is they just didn’t realise the ideas were wrong.

And they still don’t understand that money printing and stimulus doesn’t work. It’s a total ignorance of Say’s law, apart from other facts, that underlies the whole shambles.
Nixon was the one who killed it when he reneged on the gold standard during 1971. Since then everyone has been living beyond their means, and Australia is headed for the same train smash.
But get the book – it’s occasionally repetitious, but details the process in detail. 
Solution is to get back to the gold standard – it is how nation states balance the international trade imbalances. But once off the goal standard everyone started to manipulate their currencies for nationalistic reasons.
One final point – Keynesian deficit funding only works in a closed system, or an autarkic state, hence the relentless move to a world-wide global system – which I why I suspect the central planners are trying to implement a type of energy based medium of exchange – carbon price.

So, what does the Tavern-Keeper hear from down in the cellars where the Grail is kept?

Ask: Whom Does The Grail Serve? 


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