Economics

Liam Halligan: Bankers regain power as Davos summit ends with a big fudge

There is another excellent piece in today’s Sunday Telegraph, from Mr Liam Halligan, summarising the end game situation at the recent Davos power elite comedy hour. I shall limit myself to cherry-picking just three quotes, one for each Marx brother.

Here is Groucho, always running away from his obligations:

“Yet while the grand-standing and finger-pointing should stop, it is absolutely not time to “move on”. The structural banking reforms we so desperately require are still a very long way from being agreed. The chances now are, given the Davos mood music, that they never will be.”

Here is Chico, preferring a good tune to actually ever achieving anything:

“Yet the actual document [Basel III accord] is so full of fudges and escape hatches that it amounts to very little. The only concrete policy – requiring banks to hold more capital against potential losses – doesn’t kick-in until 2018. Other measures designed to prevent future crises – such as liquidity standards and a global resolution mechanism for failing firms – have been postponed, allowing banks to carry on pretty much as before.”

And here is Harpo, silent but deadly:

“The question of “too-big-to-fail” remains entirely unresolved. And it looks as if we’ve now passed the high watermark in terms of Western leaders’ appetite for genuine banking reform. The country that should worry most about this grim reality, it pains me to write, is Great Britain.”

Economics

Marc Faber: We have a crack-up boom

Ludwig von Mises was always very keen on the term ‘crack-up boom’. I was therefore jolted from my mid-morning coffee today when I heard the same phrase being used by Dr Marc Faber, the infamous author of the Gloom, Boom, and Doom report.

If you have a spare few minutes to fill in today, while you’re between tasks, I thought you might also want to catch up on the good Doctor’s latest thoughts, as revealed via Bloomberg:

Here are the highlights:

On President Obama:

“If you want me to be honest I think he’s done a horrible job and I think that will continue. I think he’s basically a dishonest person; intellectually dishonest. And change? Nothing has changed.”

On Washington’s political control of the US economy:

“I think what should happen in the US is for the President to tell the US that you have to tighten our belts.  We have to go through hard times for five years to repair the damage that was committed over 20-25 years by the Federal Reserve, the Treasury, and the politicians.  Somebody has to tell the truth.  But the politicians keep fuelling an illusion that you can spend yourself out of the misery and that by printing money you will improve the economy, which is not the case.”

On Chairman Ben Bernanke:

“Maybe after he will see the disaster he has created he may resign or he may be disposed.”

On why, despite being Swiss, Dr Faber will never be invited to or ever appear at Davos, except perhaps for a little light ski-ing and après-ski after the bigwigs have left town:

“Well I’m not sure the thinkers are in Davos. I think it’s a group of liars and people that go along with the system and perpetuate fraud and abuse and dubious practices in the financial system.”

On the ‘global recovery’, as reported by mainstream news reporters everywhere, over the last two years:

“If you print money and you have huge fiscal deficits, it would be horrible if the data isn’t any better than it is now. So, we have a crack-up boom. And I wrote about this. The question is; how sustainable is it and how healthy is it? It’s not a boom that is driven by capital spending, and savings and, say, factors that lead to sustainable growth. It’s all money printing and fiscal deficits. And one day, the burden of these deficits will have to be paid by someone. Either through inflation or through essentially much higher interest payments on the government debt. And this will be borne by your children.”

On fiscal stimulation:

“The economy has become a drug addict and by injecting more drugs you are not going to solve the problem. You have to put it into rehab.”

And finally, although I hate to upset any gold bugs out there, or indeed even myself, here are the good doctor’s thoughts on gold. Gold bugs may wish to look away, now:

“I like gold but I think it will go down for the time being. There’s a correction — an ongoing correction — and from the top to the bottom the correction could be 20%.”

Just in case I’ve just upset anyone, who was unable to take their eyes away; as the Mogambo Guru might put it, “Excellent, for I’ll be able to buy even more gold at rock-bottom basement prices.”

To read more on the Crack-Up Boom, direct from the pen of Ludwig von Mises, you can read these extracts from Human Action, below:

Economics

One for the weekend: Jim Rickards discusses $100 trillion dollars worth of new debt designed to solve fiat currency problem

The upcoming world power elite meeting at Davos will decide that the debt slaves of the world who fund their riches need to be nailed down further with another $100 trillion dollars worth of debt. Or so says Jim Rickards, in an intriguing new interview with King World News, which amongst other things also discusses Alan Greenspan’s post-Fed views on fiat currencies:

Rickards believes that the mechanism for generating another $100 trillion of debt will be based upon the SDR (Special Drawing Rights) paper ‘currency’ of the IMF, the primary financial excrescence of this unaccountable Davos power elite.

You can read the summary World Economic Forum (WEF) report below:

You can read the full WEF report below, in PDF format:

Or via Scribd:

More Credit with Fewer Crises 2011