Fear Doesn’t Glitter

“All money is a matter of belief.”
– Adam Smith

Gold is taking a solid beating these days. It’s been slipping for a while, but when China revealed that it’s reserves were less than believed it really fell – quickly slipping below $1,100 per ounce when one mysterious trader dumped everything. It’s now more than a third off its 2010 peak and nearly everyone believes that it’s doomed to slip below $1,000 per ounce by the end of the year.

What happened? Isn’t gold the ultimate money in an unstable world? The short answer is no, and this has as much to do with the rise of the US Dollar as anything. But in the end gold is not as much a form of money as it is a barometer of fear – a commodity that appears to be in much shorter supply today than it was just a few years ago.

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Fight it with Funny

Is it just me, or are there a lot of protest rallies these days? Certainly the South has lit up with marches and displays of the Rebel Flag now that the Palmetto State has taken it down from the Statehouse. There seems to always be something going on somewhere and some of them are from groups or people pushing something that others may find offensive.

What to do about it? The one thing you can’t do is let ‘em get to you – the moment you are offended and act out in a way you might not otherwise is the moment they gain power over you. The key is to laugh, to deflate the moment and dissolve the tension in a roaring guffaw.

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Crisis and Calm

If you’re having trouble figuring out what’s going on in the world you’re in good company. The global economy has been undergoing rapid change for a number of years but global politics has been a bit slow to catch up to it.

A few items that Barataria has covered recently have entered new phases recently – unpredictable, rapidly changing phases that show that things are indeed coming to a head. We’ve consistently called 2017 as “The Year Everything Changes” for a number of reasons, but the lead-up to that year is proving to be especially chaotic. Here are updates to three stories we’ve been all over that should take surprising turns in the next year and a half. You read it here first!

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Chinese Meltdown, Latin America Next?

The long anticipated meltdown in Chinese stocks has accelerated this week, although it took a break today. Whether or not it has implications for the broader economy in China and around the world is unclear, given how little China relies on its stock market for financing and growth.

It’s all about the “carry trade”, or ability to borrow money in a foreign currency (usually US Dollars) at low interest rates and invest it at home in the hope that the local currency (Renminbi, or “people’s currency”) will become more valuable relative to the foreign currency later. It’s a two-fer if you can invest it in something that appears to be gaining in value, such as local stocks, and Chinese investors went for it bigtime.

Yes, it was all another bubble waiting to pop, which it appears to be doing now. But can this hurt us? Speculation has centered on trade with Latin America, which has its own uneven growth and a growing reliance on China. But this is silly for a lot of reasons. It’s worth looking at Latin America as a unit and seeing what effects we can really expect.

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Banks Amok? Perhaps Not

The Greek Crisis has everyone nervous, and for good reasons. If this is what happens when a nation hits a financial crisis people around the world have to reasonably ask, “Are we next?” Every nation on this planet is deep into debt, although few are as bad off as Greece.

A lot of national debt is a threat to the world we live in for two related but distinct reasons. The first is that a nation loses the ability to make its own decisions and operate as a legitimate sovereign nation – which, in the case of democracies, means a de facto taking of power by creditors at the expense of the people. The second is that a large debt load has to be serviced by the government somehow which ultimately is a drain on the economy, reducing the standard of living and generally hurting personal opportunities.

With all this debt floating around causing so much pain it’s best to look at who holds it and how the world can get a handle on it.

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“Oxi” Means …

Greece has voted “no”. The word is “oxi”, pronounced something like “ohee” in phonetic English, but with a little bit stuck in your throat on the “h” as if you are spitting on the European Central Bank (ECB).

It may well be that this deal had to be rejected and Greece has to essentially go over the cliff to be able to really stand on its feet one day. It may be that the ECB deserves to be spat on, and for that matter perhaps all banks have it coming to them.

But banks today are what we have to watch – in Greece and all around the world. The proud Hellenic people may be about to find out what a world without banks is like as theirs are at the very least going to remain closed for a while longer.  Life is going to become increasingly more difficult for everyone.

But this is hardly the first time Greece stood up and said “no” to the great powers of the world.
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Q&A on Greece

On Sunday, 5 July, voters in Greece will head to the polls on an utterly unique referendum on a proposed bailout. The process is non binding, the question itself is strange, and the consequences of it are completely unknown.

What does any of it mean? The short answer is that Greece, and all of Europe, are in completely uncharted territory at this point. The five year crisis has gone from slow simmer to a full boil in the hot summer sun. Greece is calling Europe’s bluff, and Europe is not backing down.  The only thing we can be sure of is that there will be a resolution shortly, one way or the other. What exactly that means is itself completely up in the air as well.

Here are a few questions and answers on the Greek Crisis based on a variety of news sources.  Follow the links for more information in each question.

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