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Gold Down for the Long Run?

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“The long run is a misleading guide to current affairs.  In the long run we are all dead.”
– John Maynard Keynes

A step back can be very illuminating, especially in economics.  History teaches us an awful lot when we are willing to pay attention to what it says to us (which is almost never).  The long run is also a good way to get away from current fashions, trends, and all the ways that everyone can fool themselves.  Of course, as Keynes tells us, you run the risk of making a completely different mistake in the process.  At least no two economists ever agree on anything, so there’s plenty of wiggle room.

It’s the bigger version of your typical financial reporting – “Stocks fell today on news that blah blah blah …”  when in fact it was just a drippy grey April day in New York and everyone felt lousy.

A decade-plus trend, the increasing price of gold, is coming to a spectacular end.  This may mean something very important – if it’s not the last gasp of the last bubble to work its way through our system.

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Just Too Big

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“Too Big to Fail” has been a standard for a number of international investment banks, including JP Morgan (JPM) for many years now.  We’ve seen that turn into “Too Big to Jail” where major violations of law result in nothing more than fines which have clearly been absorbed into the cost of doing business as they please.  But the real problem is one of consistent hubris from a company too big for anyone to understand or even manage effectively.  That’s the conclusion of the report issued by Sen Carl Levin into the “London Whale” losses at JPM’s London Office last April.

What happens when a company this large becomes so reckless that a major problem is inevitable?  We might soon find out – at terrible expense.  No matter what, their behavior is becoming a major problem that could give life to a movement that puts an end to the cozy relationship once and for all.  Assuming, of course, we aren’t already too late.

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Happiness is Coming!

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For the first time in years the people have a chance to vote.  It’s a straight up or down vote – do you want to continue the brutal regime or do something different that isn’t all that well defined?  If that sounds like an impossible situation, it’s what was facing Chile in the referendum on Augusto Pinochet on 5 October 1988.  Many wanted to boycott the whole deal as a sham, a fake that was sure to be rigged.  Some wanted to use it as an opportunity to document the murders of 3,197 political opponents or the torture of more than 29,000.

But some wanted to win.  And how they did it was with a positive message and an upbeat anthem that convinced the nation that “Happiness is coming!” (Chile, la alegría ya viene!) If it seems unlikely, it’s brilliantly retold in the movie “No,” nominated for an Oscar.  You must see this movie – but more to the point, we all need to understand the message.  Democracy and an open society flourishes when people can see their future together – hope, pride, and happiness.

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Jubilee – Cancel Debt!

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There has been a lot of good economic news lately, at least compared to the very bad news of a few years ago.  But that doesn’t mean that there aren’t bad things worth keeping a close eye on – especially those that predict future action by the Federal Reserve.

The velocity of the US Dollar – the number of times per year that money turns over through the economy – continues to drop without an end in sight.  This is a worrying sign because it suggests that most of the economic growth we are seeing comes from money that is being more or less printed by the Fed.  It also suggests that there will be another round of quantitative easing, or even more money printed.  There has to be a better way – and this wouldn’t be Barataria if we didn’t take a stab at how.

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Inequality Becomes Intolerable

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How bad has wealth inequality become in the US?  Thanks to a video that is becoming viral, a new discussion about inequality has fired up – sadly, just after our election cycle.  It takes off from work done 6 months ago by Dan Ariely and Mike Norton, first reported humbly in a simple blog.  But thanks to new graphics and explanation it’s lighting up the ‘net in a way not seen before.

As discussed previously, income and wealth inequality is the best indicator of a future slowdown in economic growth around the world.  More attention to this problem is certainly a good thing.  But the context of how this comes to be and what can be done about it remains elusive.  Let’s take a long view and see where the problem came from – and what can be done about it as we work to set up the next period of expansion that comes after the Managed Depression we are in now.

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