Thursday, November 15, 2018

The EU: Beggining Of The End Or End Of The Beginning?

Where to EU?  What started as a lofty and noble idea to establish an enduring  peace in the continent most guilty of global blood letting is turning into a low, cheap and acrimonious scuffle about Polish plumbers and Italian bravado.

Cheap it may be, but the current fight amongst member states is, nevertheless, dangerous.  And the reason is not what the fight is about, but because of what is missing at the very foundation of the EU. To wit, a common fiscal policy mechanism and a common defense structure.

What are the two most important elements of an empire?  A strong global currency and a strong military with global reach.  The EU seemingly has the first, but in the absence of a common fiscal policy structure it actually doesn't, and has zero common military.

Therefore, if the EU is to survive and even thrive it urgently needs:
  1. A European Department of Treasury / Ministry of Finance AND
  2. A European Army
Just think of Rome without its legions and aurii or the British Empire without a pound sterling and the Royal Navy.

Tuesday, November 6, 2018

Barrels, Boats, Bitcoins, Brexit, and Other Bubbles

This blog is founded on the premise that ALL bubbles burst, sooner or later.  The rule of thumb is pretty simple: to paraphrase the old Crazy Eddie TV ad, if prices are INSAAAAAANE then the bubble is to pop sooner rather than later.

And there is always some form of loony "fundamental" hype which pops up as "analysis" to goose things along and provide that last HURRAH that produces forced short position liquidation.

Cases in point:
  •  Peak Oil!,  the theory that global oil production was about to peak and head inexorably down.  A large number of innocents were caught up in this, even publishing thousands of articles in The Oil Drum, a site which propagated the scientific version of the hype.  Oil zoomed to $145 per barrel and then melted down to $35.
 Image result for crude oil prices chart

  • No Boats!, the notion that the world didn't have enough boats to carry the increasing cargo needs of China and other developing nations.  Spot charter rates for large Capesize ships went as high as $150.000/day, and prices for new vessels skyrocketed to almost $200.000.000.  There was a flood of newbuildings just as the economy went south and charter rates sank to$7.000/day.  Image result for capesize ship prices chart
  • Bitcoins Are Best!, the belief that "regular" money was somehow unsafe and would eventually become worthless as a storehouse of value and wealth, whereas computer-generated cryptobits had rarity going for them.  Duh... anyone with a computer could come up with a catchy name, generate a new crypto and go to town mining away - and did.  
  • Rule Brittania!, the idea that, somehow, in this globalized world a (now rather smallish) former empire can become Great again all by itself.  This is different from the aforementioned cases, obviously ongoing - and Britons are ultimately sensible people. So, who knows.. they may yet come to their collective senses.
  • Make XXX Great Again!, the wave of global populism is still in its early stages, I'm afraid, and has a lot of room  to grow and become a poisonous bubble before it too - hopefully - bursts.

Thursday, November 1, 2018

Remember Chavez?

Way back in 2002 a most unusual man was elected President of Venezuela: Hugo Chavez. Remember him?  People may forget now, but he was the first 21st Century example of a Reactionary Populist to gain power in a major (almost) Western nation.  You may argue that Venezuela was not a truly Western nation and you aren't far wrong - but you aren't too right, either. It was then one of the wealthiest countries in South America and had (still has) vast reserves of crude oil.  Why did Chavez gain power? Massive income and wealth inequality. The masses were poor and the rich were massively wealthy.

Hugo Chávez salute.jpg

 Hugo Chavez, First Of Many...

Fast forward to today.  Populism is increasingly prevalent across the West: USA, Brazil, Germany, Great Britain, France, Italy, Poland, Hungary, Turkey, all now have populist leaders or strong populist parties rising fast (eg AfD in Germany). The same cause applies as in Venezuela: income and wealth inequality - real, perceived or threatened.  The latter applies to Germany and Great Britain in particular, where the economy is doing well but your Average Johann and Joe feels threatened by the "unwashed masses" of illegal economic migrants (Germany) and poorer EU citizens "stealing their jobs" (Great Britain).

Should we be concerned? Is another Mussolini or Hitler on the rise?

I believe the political ideology clash is no longer between Left and Right.  Rather, it is Rationalism versus Populism, or to put it in personal terms Merkel vs. Trump.  Unfortunately, Ms. Merkel - who is certainly to blame for lots of issues but is certainly no Populist -  effectively just resigned. And that's really bad news for us Rationalists...