February 15, 2016

Stop worrying and love the asset slump

Posted in Sunday Business Post · 78 comments ·
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The markets are collapsing. “Oh my God, what are we going to do?” should be a perfectly reasonable reaction.

But why not take the view that the collapsing markets are a good thing for you and me?

The link between overvalued financial assets, the pampered traders this casino enriches, and the rest of the economy has become at best tangential.

In the old days, the share price of a company reflected the underlying performance of the company. The price of a government bond reflected the underlying creditworthiness of the country. This is no longer the case, so let the markets have their hysterical fit, and ignore them!

Their travails should be welcomed with the contempt that most of the casino reserves for the rest of us.

I am going to list the various reasons the stock markets are worried and see whether we should be worried too. If not, who cares?

First, the markets are falling because they are worried about the collapse in the price of oil.

But that’s good news for us, the consumers who benefit from cheaper oil, so bring it on. The second reason, which is related to the first, seems to be the knock-on effect of the oil slump on the activities of funds from the rich oil countries.

They are selling good assets – stocks in the US and Europe – to pay for their falling oil revenue. Well if this is a problem, it’s their problem. Why should we worry if a few sheikhs see a few zeroes disappear off the end of their bank accounts? Sure, if you own upscale property in London, you might worry, but most people need not.

Another reason bandied about is China, and what is likely to happen next over there. Here again, the frenzy has been a little worked up.

The Chinese economy is slowing down, as it should, but even if it goes into a tailspin, the impact on the rest of the world from a Chinese slump should be even cheaper Chinese imports.

From the perspective of the average westerner, this is an issue, but no reason to panic. The next problem for the markets is the notion that the Chinese will have to devalue their currency and this might prompt tit-for-tat devaluations in Asia.

So what? Currencies go up and down all the time. What is the big deal now?

If you are in the US, many market traders are pointing their finger at the Federal Reserve, saying that the Fed inflated a massive stock market bubble by cutting rates to zero and then kept them at zero too long.

The traders say this caused a bubble, and that the Fed then raised rates and caused asset prices to fall. This is essentially true, but can a central bank subsidise the avarice of the already wealthy again and again?

The Fed told the markets over a long period it would eventually raise rates; is it the Fed’s fault that some held on until the last minute, trying to squeeze every last dollar out of the increase in stocks and were caught holding the bag when they fell down? Aren’t they supposed to be the experts?

Yet another reason identified by some traders and speculators is that all this was the result of negative interest rates, which the central banks of Europe and Japan have deployed recently.

At negative interest rates, banks can’t make money because they can’t charge enough interest margin for loans they lend to punters – and the central bank doesn’t pay them for depositing money.

Some investors are saying this is why bank shares are plummeting. But if the problem on the banks’ balance sheets is that there is too much debt and they can’t make enough profit now to generate the capital to set aside against these debts, then they surely they should sort out the debts?

Furthermore, the problem for the banks is that the regulators reacted to the 2008 collapse by saying that the banks had to raise enough capital to make sure they had buffers in the case of another slump in the economy.

However, what we call bank capital is no more than an accounting trick: liabilities minus assets. But if the banks overstate their assets and understate their liabilities, the bank can look like it has buckets of capital. We know well what happens if the assets fall in value and a few more loans go bad.

Suddenly the “capital” disappears and bank shares fall. Normally, however, the banks’ shares fall when financial investors “suspect” that capital may be insufficient rather than after the event – and this is what is happening now.

But for the average European, the banks haven’t been lending in the past few years even when their share prices stabilised, so what difference does this all make to you?

Another reason being bandied about by the financial markets is that the emergence of Bernie Sanders, Donald Trump, Marine Le Pen and the imminence of Brexit in Britain have all created political uncertainty and this uncertainty is unnerving speculators.

Well, the phenomenon that is described by speculators as “uncertainty” is actually described by most of us as “democracy”. Deal with it.

In truth, the main reason the markets are falling is that – at the margin – financial markets have become a series of highly leveraged bets by very wealthy hedge funds.

Because they are taking bets with borrowed money, the whole system is very unstable.

Once one panics they all do because they have to report their profits/losses every month and they are endemically short-term.

In the years ahead, politicians have to cut these guys astray. We simply can’t run a world economy that is hostage to the balance statements of hedge funds.

Let them panic, let prices fall, and let them pick up the pieces.

Ultimately, hedge funds have absolutely no economic value to society, and if they all went bust, the global economy would be none the weaker. Indeed, it might be stronger.

These people and funds display what I would term “financial ADHD” – a form of capitalism that is constantly distracted and looking for attention. What we need is patient capital, and patient investing. The only way we will get it is to ignore the children when they throw their toys out of the pram!


  1. McCawber

    Your best article ever, TONY.
    subscribe

  2. McCawber

    No mention of the impact on Pension Funds.

    • Indeed, unless one regards their pension as a future punt, that if it works out, great, but have other plans just in case….I have 3 retirement strategies, not counting not fully retiring…..

    • salmonofdoubt

      Spot on. Not sure on which planet the author lives, but citizens do rely on hyper inflated stock markets for their pension, or rather they have to, because state pension is inadequate. And not because they are greedy. Very low quality, populist article.

      • McGoo

        Unfortunately, mickfarrell is correct. The stock market these days is a casino (that may not always have been the case), and relying solely on casino winnings to fund your retirement is a very bad idea. It *might* work out well, but it’s so risky that you really must have plans B and C too. And the state pension does not count as a plan – the aging population means that the state pension will eventually collapse, probably in our lifetimes.

        I do put money into my employers stock-market-based pension, but only because of the tax-relief and the fact that my employer matches my contribution. I view it as playing the casino with (mostly) other peoples money.

      • joe sod

        Have to agree good article. Essentially the point is that the markets are having an hysterical fit based on very little. I think an awful lot of the volatility is being caused by computer algorithms programmed to follow trading patterns from historical data. If this falls by this and something else is at this then sell. Then the selling continues and suddenly technically we are in a bear market then because we are in a bear market the selling accelerates because everyone thinks its 2008 again. Once the selling pattern starts then there are loads of reasons to justify the sell off but nobody was talking about it 2 months ago. I dont know why everyone thinks stocks are overvalued when the US indexes are barely higher than the year 2000, Japan is still way lower than its 1989 level and much of Europe is below the year 2000 levels, countries like portugal and spain have been falling since 2008.

  3. mediator

    Hi David

    My reaction to your article is that I’m like Fox Mulder in the X-Files “I want to believe.” In a perfect market or close to perfect market where politics and markets weren’t so intertwined I would agree with your analysis however we live in
    a crony capitalist world which is in reality run by and for financiers and the very wealthy – if banks fail let them might have worked in the 1800′s but we know from experience that our capitalist system doesn’t run on a creative destruction paradigm – it runs on bailouts from the many to the few.

    Case – what is Deutsche Bank Fails or looks likely to fail – are you saying that it shouldn’t affect us that that we shouldn’t worry?

    I wish it were so but I fear that mainline bank failures this time will lead to calls for bail ins and worse – the eradication of cash so that persistent negative interest rates can be deployed to further tighten the grip of the worlds central bankers on the real economy and lives of every citizen.

    • Daithi7

      Great article and great response by mediator,

      I’m no expert but I believe carnage doesn’t matter to the real person, v or the `real economy `, if it’s contained within limits. The real type of issue that makes it dangerous is the amount of leverage being used throughout the system. This is the real danger imho.

      For instance, it was leverage and leveraged instruments that enabled the sub prime Us property market implode the world economy in 2008. I mean the over spending of American red necks should not be able to bring down even one bank, never mind the world economy. How did that happen? regulatory approved, &/or ignored, credit instruments leveraged t this bet over and over again until the real risk was unrecognisable. So Florida red necks were able to theaten the whole world economy and sovereign people’s of Ireland, Greece, Portugal and Spain. That’s alot of collateral damage hey!?

      This brings me back to the x current market turmoil. Sure it won’t matter if it’s just kept to paper money, but as mediator says, this is all well and good until large institutions (too big to fail,etc) or worse sovereigns are theatened. When that occurs, we know (from our experience in this country) how this story goes, the state gets involved as the guarantor& lender of last resort. Then the unpayable debts of the speculators become the debts o of the people, and most annoyingly, another group of leveraged speculators and investors code along to buy the diamonds from the debris for 10cents in the dollar.

      Quite how all this type of nonsense should be reformed for the greater good, will I don’t have an iota tbh. All I really care about is that this time Ireland is a little better insulated from the effects of such a credit bubble implosion.

      Because one sure thing with this amount of leverage and this amount of over valuation of assets is that there will be a few more crashes ahead. So strap in as securely as possible people and prepare for a bumpy ride. Cos that’s what leverage does, it accentuates the positive and the negative!!

  4. Mike Lucey

    Possible bail-ins should be a worry now that they have been given the green light.

  5. Pat Flannery

    The reason the present system is unstable is because national governments have lost economic control. Even central banks are no longer effective. The belief in “laissez-faire” has taken too deep a hold.
    David recommends a similar “laissez-faire” attitude by the public. Maybe that’s why we have the system we have – nobody cares. That attitude is particularly prevalent in Ireland. It is un-cool to care.

    • mediator

      Hi Pat

      I would respectfully disagree. We have the opposite of laissez faire, we have too much government control of our markets and they themselves are given their marching orders from on high. This idea that central banks have lost control is erroneous. While individual central banks have no control and also do what they are told, the mainline central banks ie Fed, ECB, BOE etc have their agenda and are progressing with it under the illusion of having no control

      • Pat Flannery

        Hi mediator,

        Elizabeth Warren said it best recently when she reminded us that there is a mechanism for the American people to choose Scalia’s successor on the US Supreme Court, the US President we elected. She is right.

        We need to stand by our elected representatives more and exert our authority over them. Right now we allow them to get “their marching orders from on high”. That is because at present the favorite pastime of Irish people is slagging off the very people they elected.

        • mediator

          Fair point Pat – the failure of the democratic system is our failure to hold them to account however there are myriad reasons for this which are built systematically into the system. A good analogy is shareholders on an individual level exerting pressure on the board of directors – its not practicable and therefore in practice firms run themselves. With politics set up the way it is we can only de -elect politicians we are unhappy with however they are replaced by carbon copies given the barriers to entry in the system/ media / money etc and politicians who wield power know that the interests they kowtow to can provide them with parachutes in the event of their being de-elected.

          best

          M

          • Pat Flannery

            mediator: there is an American saying “the world is run by those who turn up”.

            Irish people do not turn up at County Council meetings around the country, where there is always an open public gallery, something noticeably lacking in the Dail.

            For democracy to work there must be public participation at every level, something that seems to be actively discouraged (at every level) in Ireland.

            Consequently Ireland is run by a few privileged insiders who always “turn up” and keep everybody else at bay.

          • Mike Lucey

            Company Shareholders have the ability at any time to call an EGM and vote to replace board members. So it’s not exactly the case that board members have a totally free hand to run a company as they wish.

            It the case of our so called democracy we had something similar to this ability in the (was it) 1932 Constitution but it was kicked under the carpet. Maybe it’s high time it was pulled out again?

        • Mike Lucey

          Elizabeth Warren is right about a lot of things. It’s a great pity she did not put her name into the hat for the US of A presidency. Maybe next time?

  6. michaelcoughlan

    David McWilliams.

    Like McCawber said above;

    It is indeed your best article ever.

    “Ultimately, hedge funds have absolutely no economic value to society, and if they all went bust, the global economy would be none the weaker. Indeed, it might be stronger”

    Replace might with “most certainly would” and add “because capital will return to its rightful owners i.e. the wealth creators”

    You also it seems have inadvertently addressed the lobbying on the board re the various bubbles in the markets by making the following statement from above;

    “In truth, the main reason the markets are falling is that – at the margin – financial markets have become a series of highly leveraged bets by very wealthy hedge funds.”

    This is more or less what you said about Anglo in the early oughties when the legal reps of the presstitutes stopped you from publishing the name of Anglo.

    I can imagine Peter Sutherland posting you a voodoo doll any day now.

    Problem identified David so practicable guidelines for ordinary citizens are most paramount now I respectfully suggest.

    Anglo Davis was an over leveraged bet on Irish property.

    What this article identifies is over leveraged bets on the worlds financial markets.

    One thing to consider though as the markets implode Saudi will invade Syria because they have no option and this is a direct confrontation to Russia so your article on Spanish credit implosion from gold etc is most apt. I also still feel that your bull trap graph of a year or two ago would be worth purring up again as I really feel it was the best roadmap and most prescient of any commentary anywhere.

    Michael.

  7. george

    What about calling it, “Financial Aids”.
    .
    And do anyone have hopes, that the politicians will deal with the financial elites?
    .
    Politicians that when people tell them, that obvious things should be done, like personal debt forgivness for some people who deserve it, they turn around and tell you that their hands are tied up, because EU policies, or secret treaties like the TTIP. And they can do nothing of real relevance for society, other than talk nonsense all day.
    .
    To tell you the truth, I’ve more hope in Pope Francis and Mr. Putin doing a deal for humanity!

    • george

      I forgot to add: The politicians, who as well allow multinationals to walk away with billion of euro in taxes, that should stay in the Country? And are crucifying the SMEs with unrealistic indirect taxes, rates, and regulations? Are they really going to be able to control the mess we have in the world? I’ll be really surprise!

  8. StephenKenny

    For me, the comment:

    “But if the problem on the banks’ balance sheets is that there is too much debt and they can’t make enough profit now to generate the capital to set aside against these debts, then they surely they should sort out the debts?”

    is the most telling. It applies not only to the banks, but also to governments, companies, and the public. And it isn’t just the debts on their books that are the problem, given interest rates are in ‘batshit crazy panic’ territory. It’s the current reliance of almost everyone and everything on constant increasing their debt levels.

    For example, the UK: The government recently released their ‘forecast & budget’ for the next 5 years, glowing of course: the UK government deficit is forecast to be gone by 2021. A team of top experts back this forecast, every economics and business correspondent no doubt rejoices over the sunny uplands that are approaching. The 800b gorilla hidden behind the curtain in this little charade, is that the financial model that backs this up relies upon UK consumer debt rising from about £1.5trn today to about £2.5trn in 2021. An extra £1trn in outstanding debt in 6 years. An average of about £165bn per year, about £3bn per week, or about £31,000 per member of the workforce per year – average UK pay is about £31,000 per year . All borrowed against, and secured on, property (the only way a consumer can really borrow money).

    This is a house price bubble of Biblical proportions, supported by direct government intervention. Someone recently explained this to me too. There is a scheme, it seems, called ‘Help To Buy’. A nice name. Help. It resolves to this: The government will give you an interest and repayment free loan for 5 years, to the value of 40% of the property price. It is currently limited to properties less than £600,000. A little arithmetic indicates that once in place, this cannot be withdrawn without shattering property prices (80% fall in prices?), and also that it cannot stay at a maximum of £600,000 (e.g. prices under about £800k will fall so as to qualify). There will very quickly simply be no market.

    Run the numbers, and this is just ‘helicopter money’. This sort of central planning is also why the Soviet Union fell.

    ‘sort out their debts’? This isn’t a bank thing, this is an ‘everyone, everywhere, all the time, forever’ thing.

  9. Colm MacDonncha

    I just wonder how many lads in suits have invested heavily in oil futures?
    And where are they going to make up the loses for the Hedge Fuc…sorry – Funds whose investors’ money is gone up in smoke?
    Saudi Arabia going to war in Syria is a huge threat, and the only way that the Russian – backed Assad’s army can stop a 300,000+ Saudi armoured infantry assault is by use of tactical battlefield nuclear weapons.Going to get a whole lot warmer out there methinks. I have no idea what effect such a scenario would have on Europe? Thoughts, anyone?

    • george

      That’s right and I think it was the reason why Pope Francis and Patriarch Kirill met. Because the Vatican knows, the effect the intervention of Saudi Arabia and Turkey would’ve in the war in Syria, and in Europe. So contrary to DMW I’d say, we’ve every reason to be worry about!

      • george

        sorry: “worried about it”

      • Grzegorz Kolodziej

        Considering Patriarch’s Kirill is a known KGB/FSB agent code named “Mikhailov” (Patriarch’s Alexy code named was “Drozdov”), this meeting rather reminds diplomatic contacts between Pope John XXIII, JFK and Comrade Khruschev regarding Cuban missile crisis.

        3 events provide me with concern as a potential WWIII starter (should there be a terrorist attack): Euro 2016, NATO summit in Warsaw this summer and, most of all, the World Youth Day 2016 in Kraków, where 2,000,000 people are expected to arrive and where Islamic terrorist organisations (whoever they are backed by – I do not think that there is one single centre of decisions now as things are getting out of control even of the US, which intially had controlled a lion’s share of them) have already announced an assassination attempt, at least on their websites, after the Defence Minister Macierewicz announced that Poland will send troops to fight ISIS (there seems to be a rift between hawkish Mr. Macierewicz and President Andrzej Duda – theoretically the Supreme Millitary Commander

        - “Perhaps some comments are over interpreted. Today there are absolutely no such decisions. These are open issues which we will discuss at the NATO forum,” PAP quoted Duda as saying at a security conference in Munich, when asked about the defence minister’s comments.

        Regarding the said Youth Day, this had been planned before the whole mess with Islam terrorism threat in Europe was created by German “800,000 and more next year” invitation, and like with Germany’s invitation, it would look a bit stupid if Poland withdrew from the Krakow event (already all police and intelligence services hava a ban on taking holidays for those events).

        What really worries me is a massive flight of Jews from Western Europe this year. Many readers may be surprise why this is concern of mine, but considering Mossad is one of the best intelligence services in the world, maybe they know that something is in the air.

        So far they had been mainly escaping from Israel and France to Poland (record number of applications for Polish citizenship – already parts of Kazimierz in Krakow look like parts of Israel, where unbothered Orthodox Jews parade in their costumes – furthermore, on 24 Feb 2014 then President Komorowski signed decree 1066 which allows foreign armed forces to operate in Poland – as a result there was an Italian immigrant to Poland who got so heavily beaten by Mossad when he asked the bus driver to turn off the engine that he had to spend a few months in a hospital – in fairness, the Israeli embassy issued an apology)

    • Deco

      The Saudis are already is a quagmire in Yemen. The population in their eastern provinces is restive. And the loyal part of the population contains elements that thinks ISIS represents progress.

      Saudi Arabia intervening in Syria could cause a civil war in Saudi Arabia itself.

      Likewise Turkey intervening in Syria is the type of event that would cause the more grown up elements in the Turkish military to opt out.

      Remember, it was when Morsi wanted to drag the Egyptian military into the internal affairs of other countries (Syria and Israel were both on the list of targets) that the Egyptian military realised that the fantasy had to end.

      Saudi Arabia as a financial equations is strong. As a societal concept, or even as an organizational concept, this might not be the case.

      Likewise the grownups in Turkey will not be eager to die for Erdogan’s illusions. Those who received a fuctional education in Turkey, who are capable of independent reasoning, or who have their critical faculties alert will not see the point in participating in an adventure to turn back the clock in Syria. And that is what Erdogan is proposing.

      Syria is a mess. But it can be fixed.

      Erdogan is determined that this will not be allowed to happen, without him turning Syria into a subservient protectorate.

      Russia does not have to fear Turkey, because China will prop up Russia as a way to weaken Ankara. Beijing has cool relations with Ankara, due to Ankara’s interference in Central Asia.

  10. Colm MacDonncha

    George I am worried about it, but as one that is prone to imagining the worst case scenarios I would be very interested to see what people think of the doomsday scenario of NATO becoming involved in a ground war in Syria against Putin’s Russia where nuclear weapons get used. How would the Israelis react to clouds of radioactive fallout dust in Tel Aviv? Is it Bunker time?

  11. McCawber

    Question.
    Would one be better to emigrate to the USA rather than staying in the republic.
    Assume one is prepared to liquidate ones assets, convert them to dollars and take ones chances that ones pension might continue to pay out “something “

    • michaelcoughlan

      Its a very good question. I am 44 this month and its my last chance to go. The housing building industry is moribund which means those of us who took mcwilliams advice and stayed out still cant get back in.

      Not the US as the chances are the dollar will inflate with cash being banned. If the govt can balance the books this place as fucked up it is might be one of the safer places if the saudis go all out and try and take syria.

      • joe sod

        But you had 5 years of property slump in Ireland to buy a house if you were lucky not to buy before the crash. In most of the country house prices are still low it’s only in Dublin that there is a problem. In many us cities especially new York property prices are astronomical now and you are also buying with dollars at multi year highs. Even in UK property much higher prices than Ireland. I think you would be mistaken at this stage to try and start over in the US.

      • No worries Michael.. At forty I was broke for the second time, negative net worth, but since raised a family and enough to retire and fund the kids start in life. Have you not heard, life begins at 40.

  12. Deco

    Excellent article.

    The hype concerning the financial markets is over-rated. It affects a tiny sliver of humanity. Much less than the proportion of humanity affected by declining real estate markets in China, Canada and Scandinavia.

  13. Deco

    [
    Ultimately, hedge funds have absolutely no economic value to society, and if they all went bust, the global economy would be none the weaker. Indeed, it might be stronger.
    ]

    That badly, desperately needs to be said.

    Unfortunately it is too obvious for joker outfits like The Economist magazine, and the Wall Street Journal.

    • Daithi7

      Deco,
      Of course the theory goes (and I am not for 1 second trying to defend the theory) is that the function hedge funds and other such creations offer is they make markets more efficient by more accurately pricing assets, etc. Of course this is all b*****cks when they leverage them up to the nth degree. Ask they really do is add to at bubbles and volatility. There shoud definitely be serious limits on the amount of leverage these greymarket type of funds raise to speculate, oh sorry, ???? ,I mean, invest in markets.

      The realistic cynic in me tells me too many financial centres (e.g. London,Dublin, frankfurt, Zurich, NY,etc) and their politicians are too busy chasing these funds to domicile with them than to even bother to try and regulate them better. It will probably take another credit crisis before hedgev funds attract more scrutiny again. In the meantime ‘ fasten your safety belts ‘ there’s turbulence ahead!!

  14. This is an article written by someone with his head in the sand. He refuses to state the reality he knows. Economic training and working in a central bank have clouded the mind.

    Where is the discussion on what causes the excess debt, the misallocation of resources, the hyper inflation of currency production, the stock market and bond bubbles, the real estate booms etc.

    He refuses to acknowledge the Mises observation that every credit based expansionary boom is followed inevitably by a correspondingly big bust.

    How can a sane individual say that none of this has any affect on any individual. That we should all just ignore it and get on with out business.

    There is no mention of the real causes of the booms and busts even though he knows full well the reasons. No mention of the current money system permeating the world since the creation of the Federal reserve in 1913. No mention of the debt base monetary system. No mention of the fact that every currency is now issued as a loan. Every currency is in fact an IOU. Every currency is a debt burden to the people. Every currency charges interest on that debt.

    No mention that the money system is the route to economic serfdom. Obviously we will just get used to it. Stop worrying.

    No mention of the fact that on aggregate every person is overloaded with debt, that the corporate world lives on debt and that every country is insolvent because of too much debt. Stick my head in the sand as it is of no issue to me. So what everyone is in debt it does not involve me! Stop worrying.

    When everything collapses it will not matter as I have no bank account, no savings and no pension. It will not affect me as I am already broke HA HA. Stop worrying!!

    But what if I have savings, I have a job, I have a pension?

    Well my savings are depreciated by inflation and the buying power reduced year by year, my savings are now subject to being bailed in and becoming worthless inaccessible bank shares. Ditto my pension fund. As David says, who cares? Stop worrying.

    http://ellenbrown.com/2014/12/01/new-rules-cyprus-style-bail-ins-to-hit-deposits-and-pensions/

    So you take my money home and put it in a box. At least it will not be subjected to negative interest rates. Inflation will not be avoided and savings buying power will be reduced by inflation week after week. (I have noticed the price of meat and groceries lately, my insurance premiums and utility bills not to mention property rates and taxes.)

    Not so fast say some countries as they banish cash.

    http://moneywise411.com/government-attempts-to-ban-cash-whats-most-disturbing-is-why-theyre-doing-it/

    http://www.zerohedge.com/news/2015-10-07/ban-physical-cash-coming-soon

    Why would they banish cash? I thought it the only legal tender there is. They will banish cash because they hate cash. They the central banks and government wish to control my every move. They wish to force my life to be totally digital. All will be recorded. Already my health card and benefits is combined , if I wish, with my drivers license. Now they will combine my credit and debit card to one and together with the total information on the others. One electronic card will be my life. Not to worry , it will not affect my life. I do not expect that they will disable my card and I will have no access to benefits, pension cash credit of debit. This will be at the whim of an official or bureaucrat or banker?

    Not to worry. It will not affect me. I will live on barter and veggies from the back yard. Life will continue. I will do as David suggests and not worry about the world collapsing around me; not worry that an authoritarian world wants to control my every movement; my pension fund being bailed in; my personal cash being illegal; my buying power eroded and my life being reduced to peasantry.

    This attitude is a load of codswallop.

    • McCawber

      My suspicion is that DMcW was just putting a positive spin on your own views.
      He’s repeated a lot of your own views but dressed them up in CB clothes. (A frightening thought actually).
      A sort of devil’s advocate approach possibly.
      Aside – What version of “Spindoctor 21st Century” are we up to now.?
      Scrapping €500 notes because people are hoarding them or criminals use them.

    • george

      Tony I agree with most of what you say. The main currencies in the world (dollars or euro) are fake money, and the debt is increasing. And the suckers who’ve control of the money and the debt, control politics, information, and the war machinery as well. So having a party in the backyard, will be of little use!
      .
      You might think I’m crazy, but I think the Pope, the Jesuits, and the Vatican know it, and they are trying to convince Washington DC, and the City of London, that the game is over, that the rules ought to be changed, otherwise they know the world will implode (not that the Vatican isn’t a guilty party as well, but the onlyone of the three that accepts responsability among them). And it’s the reason the Jesuit Pope Francis, with the backing of the Jesuits, and the most progressive section of the Vatican, is getting close to Putin, and Iran.

  15. Saudi Arabia will not invade Syria – the Yanks will not allow them to.

    • The Yanks may want them to.

      • Mike Lucey

        Yes Tony I’m seeing that way also especially after the US delivered 12000 bombs with a combat weight of 500 to 2000 pounds, 15000 bunker-busting bombs and 6000 laser-guided precision bombs.

        The Military Industrial Complex are rolling in the cash hand over fist these days.

        It looks like Dwight D’s quote, “Leadership is the art of getting someone else to do something you want done because he wants to do it” is the modus operandi being used to get control of the Middle East but the protagonists have not considered Ike’s warning about the Military-Industrial Complex!

  16. Grzegorz Kolodziej

    All the same I admire David’s optimism and his ability to see a bright site of what is coming. I am not sure how much of it David and how much the innate optimism of the Irish (Polish culture is probably one of the most pessimistic ones, beaten only by Hungarian, Baltic, and maybe Russian), but it is an interesting take.

    Furthermore, I am glad that David is now inclining to think that FED (and ECB and Bank of England too – are they better than FED? No, they simply do not have petrocurrencies) is part of the problem.

    Overall, and I hope you do not mind me saying that, it’s been a good fortnight for David’s writing. You must come back to that example of Urugway’s defaulting in terms of Brexit and Britain’s – and, a fortiori, Ireland’s – isolation.

    I know it sounds far-fetched – but Britain has an enormous debt and what if their politicians decided, after Brexit (which I do not think will happen): f..k it, now when we are out, let’s wipe out our debt by defaulting, pricking the property bubble by the way and making houses affordable for young people again. So Urugway in the past would be a good country to look at.

    Of course, I am not naive enough to believe in the “positive thinking” spiel, which is basically a way of making money on yuppies with no philosophical background – but David gave me food for thought when he wrote:

    “Ultimately, hedge funds have absolutely no economic value to society, and if they all went bust, the global economy would be none the weaker. Indeed, it might be stronger.
    These people and funds display what I would term “financial ADHD” – a form of capitalism that is constantly distracted and looking for attention.”

    A somewhat chaotic, but quaint American philosopher Ralph Waldo Emerson wrote:

    “Once you make a decision, the universe conspires to make it happen.”

    And much as effiminate Mr. David Cameron is, he is probably more able to make a decision than any of our Ministers (you promised to end the Dublin Bus monopoly, Minister Varadkar and you have done nothing; their prices were going up when oil and real wages were going down massively – is this the reason you voted against setting up an independent anti-corruption agency? Out, out, out).

  17. By far the title for the most malevolent and anti- democratic institution of them all must be reserved for the ECB. Their policies towards peripheral European countries, in the matter of bond holders and bailouts, has been astonishing. (Review our guide on bail-ins today). They are a transnational organisation with little regard to the social principles that the European Union was established on. They are utterly captive by the economic and industrial interest of central Europe and have been the most divisive entity contributing to the erosion of European integration.

    Stephen Flood (Covering for Mark O’Byrne)

    http://www.goldcore.com/us/gold-blog/gold- price- pulls-back-as-b
    ad-actor-fed-signals-slower-rate-hike- cycle/

  18. Daithi7

    Look, I’m all for scenario planning but Brexit will not occur in all likelihood and the (high) probability is that the Brexit referendum, the unlikely possibility that it might be passed by the British people and all the associated posturing that goes with it, will just lead to Cameron negotiating a better deal for Britain in Europe.

    Ireland should be cognisant of this and should try to get the same or similar y terms on any British EU deal (particularly when a small part of the UK is in the north of this island) e.g. in areas such as agriculture, fisheries, oil, financial services, etc, etc, etc

    Also Imho Ireland should threaten to have its own Irexit referedum from the Euro unless the 8bn on Anglo bonds is taken care of by the EU banking fund or done other EU wide fund. That would be good EU diplomacy and I would vote for any credible party who would say they would be working along these lines.

    But, after all the pain inflicted on and endured by the Irish people. It’s beyond curious that no party seems to espouse this totally r reasonable position!?

    P.s. Apologies for straying off topic

  19. Nothing to worry about here folks , move along, be happy. (Stamford wives)

    https://www.youtube.com/watch?v=dwwcNSR6nQE

    GLOBAL COLLAPSE BRINGS THE MARK OF THE BEAST INTO VIEW — BILL HOLTER

  20. McCawber

    http://m.rte.ie/news/business/2016/0216/768333-500-euro-note/
    Paranoid?
    Never forget that just because you are paranoid doesn’t mean they’re not out to get.
    The ECB are planning to “retire” the €500 not.
    See link.
    For the paranoid this is further conditioning on the path to a cashless society.
    Sure we don’t need the €500 notes.
    David is an optimist and we need that optimism.
    Others are pesdimists and we need them too for balance.
    Then we have the realists who question everything.
    What note will be next to go.
    Criminals use €500 and that’s the why. FFS.
    They’renot even bothering to come up with a decent excuse even.
    BTW – To paraphrase – Pensions aren’t everything but they’ll do until everything comes along.
    The same applies to cash.
    Everything is not electronic money btw.

  21. McCawber

    UK inflation repirted as 0.3%.
    Question.
    Is inflation really as low as that.
    If it is WHY is it so low.
    If it isn’t WHY are we being “fed” false figures.

  22. michaelcoughlan

    Dragging his hole Draghi isn’t dragging his hole any longer it seems;

    http://money.cnn.com/2016/02/15/news/500-euro-bill-banknote/

    Banning the 500 euro note mcwillliams will reduce in one go 1/3 of the physical cash supply in the euro zone represented by this one note alone. Madder than a bonbon!

  23. Grzegorz Kolodziej

    So what do you think of the leaders debate, folks?

    I think that Mrs. Lucinda Creighton talked most sense of them all. I am surprised that Fianna Fáil and Mr. Stephen Donnelly are now moving more left.

    Sinn Féin must replace Mr. Gerry Adams with Mr. Pearse Doherty or they would continue sound like Solidarnosc in 1980, and it is 2016 now and even some former Solidarnosc people have read Hayek. Mr. Adams does not seem to be able to anser simple questions as to what his economic plan is, and he pretends that he is not responsible for the mess the UK-subsidies dependent parties created in the North (in Celtic Tiger the North was the most socialist part of Europe in terms of public spending as a percentage of GDP, I do not know the current figures). He is a powerful provider of emotional communicates (more impressive when you sit 5 meters in the front of him, or maybe it is just me). Imagine the good he could do for this country if he actually had any clue about economics (and was honest on Mrs. Mairia Cahill)!

    I think that Mrs. Claire Byrne was a very good moderator. Of course Ireland’s geopolitical situation and QE were not mentioned, but it’s getting boring for me to write about it all the time on this blog.

    Regarding rural crime, one would think that Sinn Féin would be in favour of gun ownership…

    • Mike Lucey

      Grzegorz, I was quite pleased with the RTE Leaders Debate. It was far better adjudicated than the TV3 Leaders Debate.

      Lucinda came across very well and held her ground which I think will bring votes to her party.

      The continuous sniping and petty mud slinging by Enda, Joan and Michael for me lessened their arguments and credibility.

      Stephen was strong and went down well with the audience which I imagine was a cross section of the populous.

      Richard made some strong points but was too constituency orientated but again I imagine his primary interest is retaining his seat.

      For SF I also think its time for Gerry to step down in favour of Pearse. I was very impressed with Pearse’s performance on the Finance Minister and Finance Spokespersons Debate. He does his sums before making statements, something that is currently lacking.

      I was disappointed not to see the Green Party represented as they are still a force in the country with a policy and fielding 50 candidates I believe.

  24. McCawber

    Dear Mr Draghi.
    Can you publish the global/worldwide opinion polls that back up your claim regardibg tge publics opinion re criminals abd cash.
    I’m not a criminal and my instrument of choice is cash also.
    The brass neck of the man ie should I say the ECB.

  25. Daithi7

    Ah relax the cacks lads, tis only money :)))

  26. Ya gotta love this forecast slump too.

    jaytaylormedia.com/overwhelming-signs-of-accelerating-economic-collapse

  27. cooldude

    The Asset slump that no one should worry about is only just getting started according to Bo Polny an expert in cycles in currencies and business. Daithi will be worried if Bo is right about what’s coming down the tracks this year. The only reason I post this is because he got the July highs in the Dow to the exact day, the December low in gold to within two days and he is very specific on where both are headed. Very interesting stuff and we shall see if he is right

    https://www.youtube.com/watch?v=sa5MF91gU4g&feature=em-share_video_user

  28. michaelcoughlan

    @Tony brogan.

    Gold is behaving like it is on steroids. Is there any chance the scum plunge protection crowd can smash the price again this time?

    Michael.

    • Gold got kicked down over the weekend and yesterday. Today started up but ended off.

      Remember the volatility that will happen. It is a fact that if a full market study of a complete cycle is done it will show as follows.

      Start low. Go high over several years. Top out and decend over several years. Say a 15-20 year span.
      On the way up 17 out of 20 of the cycle biggest Down Days will happen

      On the way Down will be 17 of the biggest days up will occur.

      So right now the stocks will see generally lower prices but some of the biggest up days ever recorded.
      Conversely the PM market will move up generally yet see some of the biggest bown days ever recorded.

      Just grin and bear it. Now is the time to move from stocks and bonds to PM’s. Then sit and wait. If you are careful PM miners stocks will be even greater gains subject to good management and politics and jurisdictions.

      We may have bottomed in PM’s but only confirmed when the gold/ silver ratio is trending downward as silver always out performs in a bull market.

      • cooldude

        The key thing on the gold chart is continual higher lows since December. There will always be retesting of support levels such as the 1180-1200 to make this a strong support level.

        Likewise in the S&P we have had lower highs since the cycle high in July last year. This rally is weak enough and should turn back down around 1950 on the S&P. The next drop will probably be a very major one as once support at 1800 gives way it will drop real hard and will really enter bear market territory.

        The main difference between this year and 2008 is the US dollar is falling with the stockmarket and this will lead to weakness in the largest bond market in the world. When this is fully understood by the investment community this will lead to massive inflows into the only safe havens left.

        Get ready it’s going to be a bumpy ride.

      • cycle biggest Down Days will happen on the UP side of the graph

  29. McCawber

    My cash pile has been building as I take your advice.
    I’ve invested some of if into gold shares.
    One of you suggested investing in etfs.
    I’m making haste slowly as they say.

    HOWEVER.
    If the ECB can raid my savings account can they my share account.

    • Do not take advice. Review what you hear and take your own advice. Discussions are good.

      Be aware who you use for trading or buying. Many brokers act as custodian for your shares. That is the shares are not in your hands. Thus those same shares can be borrowed by the broker and offered for sale to short the very company you are invested in. Thus the broker works against your best interest just to make a buck.

      Avoid bank owned brokers and deal only with a broker who does not borrow your stock or take delivery of the shares yourself.

      I left TD Waterhouse and use
      Q-trade

      Exchange traded funded in PM’s do not have to buy metal you think you are invested in so as you buy the shares you put no demand on the metal and no effect on the price

      Go to prospectus of GLD and you will see this . the custodian is HSBC the largest gold short. Again your custodian works against you.
      Ditto JP Morgan and SLV the silver fund.

      Basic principal is have your PM in hand if you can.

      It’s a slimey world out there!!!!

  30. McCawber

    Also.
    I have some Post Office 4 year savings and some prize bonds.
    Anyone care to comment – Where would they stand on any proposed hit list.
    I’m sure others might be interested in your comments.
    I know some of my friends are starting to take notice.

    • michaelcoughlan

      Brogan is right re shares try and get them in your own name in a crest account or else at least a rep dealer who will hold them in a segregated account.

      Hold a few bob at home in a selection of currencies not Euro ones which will decline less rapidly than the Euro. If buying a miners etf like gdx only buy in incrementally and ideally in no more than 5% each time after the previous purchase has risen.

      Make sure you tell your broker to have an automatica sell on each purchase at a level in profit so he can sell your position in profit if the market gets smashed without having to get you on the phone. Put some money in gold money/bit gold, vaultoro etc. Open a bank account in Germany or the uk. Have some savings in Euro at home and on deposit in Ireland.

      Most importantly CHILL.

      The banks here closed for several weeks altogether in the 70′s and life went on. People simply wrote IOU’s.

      McWilliamls current advice I feel is the best ever in that he says don’t worry as these fucking scum in the CB’s are getting their comeuppance.

      Michael.

  31. Mary Cryan

    Looking at commodities prices from a national angle – the Election looms and one topic that is not getting sufficient attention is the award of exploration licences (which confer ownership of Oil and Gas discoveries to the finder) to large Oil Multinationals. These actions by the government have no benefit to the population, with profits staying with the Oil companies. Indeed, while Fine Gael did not start this process, they are guilty of letting it continue (and indeed, I fail to see why they couldn’t just say “no more licences”).

    For David: there is a need for someone High-profile to raise this issue nationally, and if possible, pursue the option of challenging this in the High Court or European (yes, I am aware of the issues with Article 10, but even an unsuccessful action might have the potential to generate enough national interest to **get something done**). The longer this issue is ignored, the less Oil/Gas remains to be protected.

    • Daithi7

      Ah look,

      How many of these ‘BIG BAD MULTINATIONALS WHO ARE THIEVING OUR GOD GIVEN EXPLORATION RIGHTS’ have actually found commercially viable fields?

      Do you think they should be someway rewarded for the exploration seed capital that they are providing and most often writing off??
      (or do u believe they should just risk their money &resources for no reward!?/

      Is it the government’s stated intention to tax profits from such fields at fairly high rates to ensure the state and exchequer benefit directly from any potential finding???

      Move on please.

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