"His master said to him, ‘Well done, good and faithful servant; you have been faithful over a little, I will set you over much; enter into the joy of your master.'"
Please take a look at Jonathan Chevreau’s column today; he reviews Peter Grandich’s, Confessions of a Wall Street Whiz Kid. Grandich was a Wall Street legend who realized the emptiness of his quest for material wealth. Here is an excerpt:
Early on, Grandich’s church-going was mostly for show and to accommodate his Catholic wife. But when he said his newborn daughter was healed by prayer in the 1990s, he began taking his religion more seriously. He “started to believe in God on a real, daily basis,” even though he viewed himself as a “sinner . and a big one, at that.”
Despite his wealth, he felt like most Americans that he was living beyond his means, so “super-downsized” his high-net-worth lifestyle.
Subject to approvals, China’s Sinopec is buying Daylight Energy (DAY.TO) for $10.08, which closed at $4.59 CDN Friday. Here is another example, like Petrobakken, where Mr. Market doesn’t know what something is worth, but another industry giant does. I feel sorry for those who bought at $11.74, the 52 week high. You win some and you lose some.
But I’m not that happy, because this is Canada’s future, and I don’t think we should sell our assets to foreigners at enterprise value but at a significant premium. But hey, it will bring capital into Canada and it will create jobs, and so I am happy about the short term help it will bring.
Of course, there is a far simpler explanation [for the dump of 56 billion in US treasury debt]: the dreaded D-day in which foreign official and private investors finally start offloading their $2.7 trillion in Treasurys with impunity (although not with the element of surprise – China has made it abundantly clear it will sell its Treasury holdings, the only question is when), has finally arrived.
The dollar is back by the United States government, while gold isn’t backed by anything, and therefore it is a more comfortable investment, according to this very pretty Canadian reporter:
Actually, the US dollar is backed by the balance sheet of the Federal Reserve bank. See this post for another explanation of international monetary policy.
One of my kitties decided to stay out all night, and consequently I had trouble sleeping and found myself wide awake in the wee hours of the AM. So I turned to Market Watch and Bloomberg News to see the latest. First I turn to John Markman of Market Watch who claims that Timothy (I-forgot-that-I-had-to-pay-taxes) Geitner has cooked up a scheme that will save Europe (Geithner’s plus-sized euro bailout is stealth QE3). :
The plan, cooked up by U.S. Treasury Secretary Tim Geithner, is to persuade European leaders to vastly expand the size of the emergency bailout fund known as the EFSF, or European Financial Stability Facility. His proposal, and I’m not making this up, would use leverage — i.e., borrowing — to increase the size of the already borrowed money in the fund by up to 10x. … snip
This is a little hard to believe, but it’s the truth. The funds from euro-zone countries in the EFSF have already been borrowed. And now the plan espoused by Geithner is to use that money as collateral to borrow as much as ten times more. The guy does not get enough credit for his evil genius.
The ECB said Sept. 15 it will coordinate with the Fed and other central banks to provide three-month dollar loans to banks to ensure they have enough of the currency through the end of the year. The Fed bears no foreign-exchange or credit risk on the swap lines because the Frankfurt-based ECB is its counterparty.
So let’s get this straight: The Federal Reserve will lend money to the Europeans. This money will come from where? It will become a new line on Fed balance sheet and will thus increase the adjusted money base. This has become known as quantitative easing. The money won’t be printed, and so nobody will see wheel barrows cash in the market places of Europe as they did in the Weimar Republic. No, it will just be line in a balance book, electronically created from nothing at all (see Niall Ferguson, The Ascent of Money, 30-31, quoted in this post).
Now the best explanation of global monetary policy is in Corner Gas, season 3, episode 1, which is actually an allegory of banking in our times: Oscar has made some bad bets in his stock picking game with Hank, who is beating him hands down. They each started with $10,000 of fictional money, but Oscar’s picks have gone South. But he’s seen the news about Ark Research’s insider trading, and he believes that knowledge will help him defeat Hank. He decides to bet big on Ark Research, but he is in desperate need of liquidity. So Oscar (a.k.a., the European banks) goes to his son Brent (i.e., the Federal Reserve Bank) and asks for $10,000 from his fictional money tree. Brent says, Why can’t you do it yourself? Did a fictional hooligan steal your make-believe ladder? No, Oscar says, that would be against the rules. Without rules nothing makes sense, he claims. With rules, this makes no sense, Brent responds. The monetary policy part of the clip begins at 0:39. (@7:08 Oscar explains that he lost all the money and he can’t pay Brent back, and that is exactly how the loan to Europe is gonna go down).
In a book entitled, The Better Angels of our Nature, Harvard Professor Pangloss (Steven Pinker) says we are living in a more humane world today (see his article “Violence Vanquished“).
Well, I beg to differ. He argues that violent death is less frequent than in previous periods in human history, and that the number of people who die peaceably in their sleep all over the world is at a higher percentage than ever before. True, because he’s only counting those who manage to make it out of their mothers’ wombs without first suffering a violent genocidal demise. That’s only 4 out of 5 people. So stay out of your mother’s womb. It is a game of Russian Roulette (I prefer my chances with six shooter). But also, we are now on the verge of war breaking out all over the globe (starting with Egypt, Libya, Yemen, etc.) caused by economic instability. Apparently, the Christian Century published similar drivel, just before the outbreak of World War I. Today, with global instability caused by monetary policy, the doctrine of Total Depravity is gaining traction.
Pangloss pictured right: click on picture to watch video at Market Watch
The Righteous Investor 