Please, click here to read this article in pdf format: september-17-2010 In the last 48 hours, the most relevant event is undoubtedly the decision by Japan’s Ministry of Finance to intervene in the FX market and weaken the JPY vs. the USD. There is a lot of speculation (in fact, this is not new, since [...]
Please, click here to read this article in pdf format: september-17-2010
In the last 48 hours, the most relevant event is undoubtedly the decision by Japan’s Ministry of Finance to intervene in the FX market and weaken the JPY vs. the USD. There is a lot of speculation (in fact, this is not new, since the intervention was being heavily speculated since August) as to what should be the right amount of Yen to dump to investors for the intervention to generate results. Some speculate with trillions… There is also research on whether or not the new money should be sterilized, on how it will affect interest rates (the Bank of Japan sells JPY for Treasuries) and there is also a general agreement that under the current macro conditions, no other central bank will coordinate with Japan to help with the intervention. We will not deal with the technicalities of this, for the reader has abundant material available elsewhere.
What we want to draw collective attention to is the bigger picture here. With the intervention, the Yen will be increasingly backed by the sovereign debt of a bankrupt nation. The more successful Japan is in devaluing its currency, the higher the percentage will be, of such debt backing the Yen. This should not surprise anyone but as G. Orwell wrote, sometimes the first duty of intelligent men is the restatement of the obvious. So, let’s restate it: If the Euro is increasingly backed by distressed sovereign debt and liable to banks that finance distressed Euro sovereigns, and if the US dollar is explicitly financing US fiscal deficits, the intervention to weaken the JPY (by also financing US deficits), leaves gold as the last reserve of value. And its price is certainly telling us that this is the case. Some see the Euro as the natural winner here, on a relative value basis (i.e. it has already cheapened), but we doubt reserves will reverse to the Euro zone.
As we wrote in our last letter (and in many others too), the problem the world faces is of a general distortion in relative prices. This distortion causes stagnation, as prices cannot play their role in the allocation resources. Hence, we should not expect productivity increases. We should not expect economic growth. Instead, we will see a massive deterioration in purchasing power in the developed world as a lower amount of goods being produced is chased by a higher amount of debased currency.
The first that comes to our mind is that under this context, even though the ongoing monetary policy is inflationary, stocks should not necessarily protect us from the upcoming monetary/sovereign crisis. The effects of the crisis are not neutral. We will not see asset price appreciations precisely because of the uncertainty of increasing interventionism (at a global scale). The path of least resistance is to take all that amount of debased currencies and exchange it for gold. We’ve seen this happen before, time and time again, in developing economies, when these lose their national currencies. First, their citizens see asset prices rise, but soon stagnation sets in and everyone loses purchasing power. Misery reigns and only those who managed to exchange their savings for a foreign currency can survive by speculating with the price distortions. Of course, they are later blamed for the crisis by politicians. We fear the (developed) world is going to see another round of this pathetic play.
We would like to leave with a very visual chart here: The ratio of gold to oil (Long gold/Short oil) since the beginning of the century (source: Bloomberg). It’s worth more than thousands of words…
Martin Sibileau
February 10th, 2012 at 4:42 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 10th, 2012 at 5:25 PM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 10th, 2012 at 6:16 PM
Links…
[...]Sites of interest we have a link to[...]……
February 10th, 2012 at 7:26 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 10th, 2012 at 7:50 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 11th, 2012 at 11:37 AM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 11th, 2012 at 1:48 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 11th, 2012 at 2:24 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 11th, 2012 at 2:59 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 11th, 2012 at 3:46 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 11th, 2012 at 5:10 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 11th, 2012 at 5:42 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 11th, 2012 at 8:12 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 11th, 2012 at 8:38 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 11th, 2012 at 9:27 PM
Links…
[...]Sites of interest we have a link to[...]……
February 11th, 2012 at 10:05 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 11th, 2012 at 10:55 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 12th, 2012 at 7:22 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 12th, 2012 at 10:19 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 12th, 2012 at 10:47 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 12th, 2012 at 11:38 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 12th, 2012 at 11:43 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 12th, 2012 at 11:54 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 12th, 2012 at 1:06 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 12th, 2012 at 1:36 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 12th, 2012 at 1:36 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 12th, 2012 at 2:06 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 12th, 2012 at 2:46 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 12th, 2012 at 3:44 PM
Links…
[...]Sites of interest we have a link to[...]……
February 12th, 2012 at 3:57 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 12th, 2012 at 5:39 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 12th, 2012 at 6:38 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 12th, 2012 at 6:52 PM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 12th, 2012 at 7:14 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 12th, 2012 at 7:37 PM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 12th, 2012 at 9:13 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 12th, 2012 at 9:49 PM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 13th, 2012 at 3:24 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 13th, 2012 at 3:38 AM
Links…
[...]Sites of interest we have a link to[...]……
February 13th, 2012 at 3:46 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 13th, 2012 at 5:13 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 13th, 2012 at 5:41 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 13th, 2012 at 5:57 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 13th, 2012 at 7:02 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 13th, 2012 at 7:19 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 13th, 2012 at 7:36 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 13th, 2012 at 7:57 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 13th, 2012 at 9:09 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 13th, 2012 at 9:48 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 13th, 2012 at 4:47 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 13th, 2012 at 5:28 PM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 13th, 2012 at 5:43 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 13th, 2012 at 6:34 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 13th, 2012 at 6:38 PM
Links…
[...]Sites of interest we have a link to[...]……
February 13th, 2012 at 7:15 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 13th, 2012 at 8:15 PM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 14th, 2012 at 3:04 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 14th, 2012 at 3:16 AM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 14th, 2012 at 6:57 AM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 14th, 2012 at 7:12 AM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 14th, 2012 at 8:18 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 14th, 2012 at 8:34 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 14th, 2012 at 9:31 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 14th, 2012 at 10:29 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 14th, 2012 at 11:19 AM
Gems form the internet…
[...]very few websites that happen to be detailed below, from our point of view are undoubtedly well worth checking out[...]……
February 14th, 2012 at 1:14 PM
Great website…
[...]we like to honor many other internet sites on the web, even if they aren’t linked to us, by linking to them. Under are some webpages worth checking out[...]……
February 14th, 2012 at 6:02 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 14th, 2012 at 7:23 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 14th, 2012 at 7:51 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 15th, 2012 at 3:30 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 15th, 2012 at 4:11 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 15th, 2012 at 4:37 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 15th, 2012 at 8:56 AM
Related……
[...]just beneath, are numerous totally not related sites to ours, however, they are surely worth going over[...]……
February 15th, 2012 at 9:15 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 15th, 2012 at 9:45 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 15th, 2012 at 10:14 AM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 15th, 2012 at 10:35 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 15th, 2012 at 5:09 PM
Links…
[...]Sites of interest we have a link to[...]……
February 15th, 2012 at 5:42 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 15th, 2012 at 5:57 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 15th, 2012 at 6:18 PM
Sites we Like…
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]…
February 15th, 2012 at 6:52 PM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 15th, 2012 at 7:22 PM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 15th, 2012 at 8:19 PM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 16th, 2012 at 12:02 AM
Sites we Like……
[...] Every once in a while we choose blogs that we read. Listed below are the latest sites that we choose [...]……
February 16th, 2012 at 12:50 AM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 16th, 2012 at 4:18 AM
Websites we think you should visit…
[...]although websites we backlink to below are considerably not related to ours, we feel they are actually worth a go through, so have a look[...]……
February 16th, 2012 at 4:26 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 16th, 2012 at 9:02 AM
Visitor recommendations…
[...]one of our visitors recently recommended the following website[...]……
February 16th, 2012 at 9:07 AM
Cool sites…
[...]we came across a cool site that you might enjoy. Take a look if you want[...]……
February 16th, 2012 at 9:38 AM
Websites you should visit…
[...]below you’ll find the link to some sites that we think you should visit[...]……
February 16th, 2012 at 10:12 AM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 16th, 2012 at 5:37 PM
Recent Blogroll Additions……
[...]usually posts some very interesting stuff like this. If you’re new to this site[...]……
February 16th, 2012 at 6:46 PM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 16th, 2012 at 7:44 PM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 16th, 2012 at 8:34 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 16th, 2012 at 8:48 PM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 17th, 2012 at 3:25 AM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……
February 17th, 2012 at 3:46 AM
Links…
[...]Sites of interest we have a link to[...]……
February 17th, 2012 at 3:52 AM
Websites worth visiting…
[...]here are some links to sites that we link to because we think they are worth visiting[...]……
February 17th, 2012 at 4:39 AM
Read was interesting, stay in touch……
[...]please visit the sites we follow, including this one, as it represents our picks from the web[...]……
February 17th, 2012 at 7:47 AM
You should check this out…
[...] Wonderful story, reckoned we could combine a few unrelated data, nevertheless really worth taking a look, whoa did one learn about Mid East has got more problerms as well [...]……
February 17th, 2012 at 7:53 AM
Links…
[...]Sites of interest we have a link to[...]……
February 17th, 2012 at 10:02 AM
Sources…
[...]check below, are some totally unrelated websites to ours, however, they are most trustworthy sources that we use[...]……
February 17th, 2012 at 10:50 AM
Recommeneded websites…
[...]Here are some of the sites we recommend for our visitors[...]……
February 17th, 2012 at 2:07 PM
Online Article……
[...]The information mentioned in the article are some of the best available [...]……
February 17th, 2012 at 2:44 PM
Check this out…
[...] that is the end of this article. Here you’ll find some sites that we think you’ll appreciate, just click the links over[...]……
February 17th, 2012 at 4:38 PM
Blogs ou should be reading…
[...]Here is a Great Blog You Might Find Interesting that we Encourage You[...]……