THE SATURDAY ESSAY: Why ‘TGIF’ yesterday betrayed the first signs of ‘TGOF’

Friday 4th January 2013 was a turning point

Reading some of the financial technical press and better class of website content yesterday afternoon, there was a very Friday feeling about it all. The first short week after New Year is always a butt-kick after several consecutive days of food, family and fantasy. Everyone sounded pretty bored, and glad of the two-day respite now beginning. In fact, I think this ennuie was a more than slightly depressive response to the arrival back at a desk, and the discovery that Santa Claus hadn’t brought that much desired present marked Salvation For All.

The actual news events (forget the usual dopey analysis of them) spoke for themselves. For once, new developments presented an astonishingly consistent picture of Getting Real. As the day drew to an apathetic close, for me ‘Thank God it’s Friday’ had morphed into ‘Total Gloves-off Fighting’. What Zero Hedge described on Thursday as ‘the continuation of postponement and avoidance and reckless governance of the nation’ (neat precis) was shaping up to become Now it’s going to get Nasty.

Much of it was the same old same old that doubtless contributed to the air of tired resignation: deliberate uncertainty being created in every potential investor-escape sector, stock markets being pumped ever higher on QE-driven fantasies bearing zero correlation to market sales, brief ecstasy at the US Payroll data release and so forth.

Behind these featured, ageing actors lurked the extras providing a by now standard backdrop of gathering storm: moaning winds beneath billowing clouds, and a sign up ahead saying ‘Bates Motel’. Some snippets of truth were coming out about the real situation in Spain; gold traded down to $1629 an oz for a while, when it should really have been settled in the $1660-1690 range. US insurance companies and institutional lenders were rumoured to be getting heavy with Congress about cliffs, ceilings, and general dicking about. Poor figures from UK services sector alongside equivocal stuff from US payrolls – plus the growing reality that ‘job’ has become just another governmental data lie. For the analysis of part time vs full time employment in the West shows without further room for doubt that people are working shorter hours less formally for less cash….and this isn’t a personal lifestyle choice on their part.

However, three very sore, pulsating bright-red thumbs were in amongst the well-manicured hands gently manipulating the news along. The first was a brief wobble in the US Treasuries sector, with some significant rises in bond yields. For a few hours, one or two nervous screen-rats came face to face with the future. It was mercifully brief, but it was there: “cheap debt is not forever” it whispered.

The second was the behaviour of the Japanese Yen, in itself of note given the context of new political developments in the Land of the Rising Sun. A currency trend like this one helps to make Nipponese exports struggle:

yenoctdec12

Much of this has been win-win Chinese buying…an unwelcome bedfellow to recent Sino-Japanese sabre-rattling. This is how yesterday went:

yen4113

Between 7 and 9 am, the top Samurai decided “enough already”. Between 9 and 1, aggressive buying pumped the currency straight back up again.

Now this sort of stuff happens all the time. But on this occasion, set against the three-month trend was a clear attempt being made to fight back against sovereign financial attack.

The third event happened on the other side of the world, but involved precisely the same bare knuckled punch-up in which the Queensberry rules haven clearly been taken up to the attic for storage. The Swiss continued to dump all the francs they could sell, but piled bigtime into Sterling.

This isn’t surprising either: in 2008 the Quid bought 2.35 Sf; as of now it buys 1.49. At one time in 2011 it was at 1.20, but then the consistent Zurich policy of currency value-for-money protection got going properly. Yesterday and Thursday, however, the forced revaluation of the UK Pound was focused and concerted enough to attract the attention of heavyweights like Ambrose Evans-Pritchard.

As early as Thursday evening, AEP was noting that ‘The Bank of England is straining every sinew to drive down sterling with quantitative easing, and what happens? The Swiss National Bank trumps Threadneedle Street with an outright blitz of Gilt purchases.’ He went on to make the Asian currency link too, asking what might happen when ‘Japan kicks in with its own nuclear plans to drive down the yen, and Asia follows suit’. Well, my nose says that it began yesterday, and the score so far is Japan 1 China 1 (1-0 ht).

It is, however, a surreal form of soccer in which the objective is to keep heading the ball past your own keeper.

~~~~~~~~~~~~~~~~~~~

Yesterday was a qualitative turning point in my book. I think we got the first signs that the crew of the globalist SS Titanic had assessed the damage and decided it was lifeboats time. Yesterday was the day the stern started to lift far enough above the water level to reveal some propellers on All Stop.

Summits beginning with G will soon be moving on from vapid promises and mendacious commitments to barely controlled anarchy. The UK is hosting the coming year, and Prime Minister David Cameron is already salivating at the prestige he expects to come his way. I think he is heading for a nightmare as the facade breaks down, and the swing to survivalism takes hold. But thuggish sovereign cheating makes fools of us all: we shall see.

As I’ve opined many times before, currency devaluation wars are really the forerunner to outright protectionism. Unlike many commentators, my view remains a somewhat sanguine “Bring it on”. What bust-banisher Gordon ‘Globalglobalglobblegobble’ Brown sneeringly called ‘siege economics’ could well be an extreme commercial form which, in time, gives way to sovereign self-sufficiency complemented by the export of any surpluses – packaged stylishly and honestly as high-margin added-value products for the emerging Asian rich. Such an idea is found risible by the growth-nutters (and most of Camerlot); but if we do withdraw from the EU it will become an imperative alongside zero immigration. I don’t have any problem with that.

In the meantime, next week will be the first ‘normal’ trading period we’ve had since November. I expect some revelations about Greek banks, bent Italian figures, and Spanish Caja insolvency. I’m also picking up disturbing hints about the potential for telling comments from Berlin as and when those ‘shocks’ are revealed. But then, I’ve heard them before…and Frau Merkel is a dab hand at sqashing any debate that shows signs of taking reality on board.

Stay tuned.

Footnote: I am in receipt of a minor Pedant’s Revolt over the use of the word ‘neocon’ to describe the insane yet dominant Friedmanite capitalist model currently holding sway across the world. I do think this is angels on a pinhead stuff, but for the record, the word is not the ‘misnomer’ some of you would have us believe. The prefix neo means new. It is derived from the Greek word neos, which means young, fresh, new or recent. But in modern times it has come to hint at revival, copy and parallel – as in neo-classical, neo-colonialist, neo-realism and so forth. 

Neo-conservative economics admire (and are derived from) the Adam Smith school of laissez-faire mercantilism as outlined in The Wealth of Nations. As such, ‘neocons’ favour a conservatively light hand being applied to the regulation of international trade: in its contemporary form, it in turn favours a conservative lack of intervention in and regulation of the means of producing goods and financing corporate growth – as well as embracing the ideas of Milton Friedman…often alongside Theodore Levitt.

I do not accept the term neo-liberal as in any way descriptive of this school, as today’s most voluble and powerful business and media leaders are economically illiberal when it comes to genuine competition, and giving an even break to nimble small alongside mighty leviathan. Many of them are monopolist baby-stranglers, price-fixers, law-benders and government-bribers….they are risk averse, and prefer shareholder reward to healthy innovation. As such, they are not in any way economically liberal. Usually, they are politically conservative and repressive.

Anal defining aside, most commentators and readers of the econo-fiscal landscape accept and understand what ‘neocon’ means – viz, ‘self-serving denialist jerk who thinks wealth is more important than civilised fulfilment, and cynically active denier of the utter failure of Friedmanism wherever it has been tried’. As a piece of recognised and deservedly tarnished shorthand, therefore, I will be continuing to use it. And this discussion is now closed.

70 thoughts on “THE SATURDAY ESSAY: Why ‘TGIF’ yesterday betrayed the first signs of ‘TGOF’

    • All right for us at home; but I bought £2k worth of CHF a while ago, just before they pegged it to the EUR. I am hoping that there will be a big bounce if the Euro goes down, but at the moment I will have to settle for “diversification of my fiat currency” as a consolation. I was wondering if changing them for Renminbi would do any better, but I doubt it. The Chinese have to sell their goods abroad too…

      • Norwegian krone – oil based, massive FX reserves, highest per capita income and wealth in the world. Hong Kong dollar – effectively a US dollar but likely to be re-pegged to the Remnimbi within a couple of years or so. Korean won is also undervalued but would not advise holding for political reasons.

  1. Pingback: John Ward – The Saturday Essay : Why ‘TGIF’ Yesterday Betrayed The First Signs Of ‘TGOF’ – 5 January 2013 | Lucas 2012 Infos

  2. I suppose we are seeing currency wars as per Jim Rickards.

    As governments keep printing they will detonate their debt time bombs. When inflation moves upwards (3% target for Japan) so will yields on bonds and this is when the problems start. Japan with government debt of 240% of GDP will be the first shoe to fall. Kyle Bass is short on Japanese debt, just like he was with MBS and Greek CDS.

    UK won’t be far behind with total debt of 500% (including Government, business and private debt) and then the good old US of A.

    • No no, Robin. You don’t understand. Are not all these Governments assuring us that QE WILL restart ‘growth’, that in fact it has already helped restart it? Do you not realise that once ‘growth’ kicks off properly all that debt won’t matter and everything will turn out wonderful? Do you not realise that stopping QE or a stop to piling up more and more debt might, horror, impede ‘growth’? Do you not realise that all the important economists are certain these are the only possible policies, just as all the important scientists are certain we are heading for catastrophic global warming? Surely they cannot be wrong? No, I am afraid you simply do not understand, it is all beyond your intellectual level, you must trust the experts and the politicians, only they understand these things and know what to do.

      On the other hand, you, like myself, John and almost every thinking person, may well have a much clearer idea and vision of just how deep in the shit we are and just how wrong, or deliberately manipulating events in their own interests, these people are.

      • Peter C, do you not realise the Illuminati control this planet? Do you not realise that deliberately engineering the globe’s massive debt, is just one part of their evil quest for a NWO? Do you not realise the Illuminati is not the slightest bit interested in the welfare of Humanity? The Illuminati own virtually every listed company on the planet. It was the Illuminati that shipped millions of American jobs overseas. The Illuminati is witholding free energy. The Illuminati poisons our air with chemtrails. The Illuminati poisons our food with GMO. The Illuminati are witholding medicines that cure all diseases. Urging us to trust politicians and experts is naught but truly malodorous advice. Trust a politician? Most of whom are controlled by the Illuminati! Your intellectual level must be brainwashed. Look to the Illuminati. It is they who are responsibe for all the ills of our wonderful planet. The good news is, they know there will never be a NWO. Thank God!

      • @Bigbwana

        I see you didn’t read the second paragraph. Perhaps I should have concluded the first with the /sarc modifier.

        While I doubt the Illuminati per se exists today in terms of a centuries long conspiracy to fulfil a specific plan, there is no doubt that certain groups do exist, Bilderberg, for example, that consist of the elite, or those who would consider themselves to be so, who have a stated agenda promoting One World Government. They are not alone, of course. The European Union and the UN are filled with like-minded individuals. There are also the ‘charities’ like Common Purpose who have truly engaged the methodology of the Illuminati and also long to see OWG. Freemasonry has long been linked to the Illuminati and still today operate their own brand of ‘you scratch my back, I’ll scratch yours and let’s keep it in the family’ immoral elitism. Even Bader Meinhof and the Red Brigades were a somewhat vicious part of the same. Whether there is a real connection between all these and the rest I leave to the conspiracy theorists. However, I think there is little doubt that the majority of the Western political classes are fully signed up to the idea of One World Government and truly see beneficent serfdom as the proper course for the future.

  3. Whilst I do understand you use the term neo-con to mean neo-liberal (as Chomsky put it – it’s not new and it’s not liberal), you may just want to check out their relevant Wikipaedia entries before closing the discussion as the two mean very different things.

    • John’s use of the word neocon seems very personal and that’s fine, it’s his blog. But the normal usage does not refer to economics at all but to the politics of the formerly socialist but now hard right, pro-war, pro-Israel politics of the Jean Kirkpatrick, Wolfowitz, Perle, Cheney, Kristol, Podherentz etc.,school

      • My dear proud Catholic, those with Jewish-sounding names, which are solidly embeded in American government, and the original neo-cons, are Zionists. You will find the same Zionists in the Bilderbergers. CFR, on every board of every major listed company, and soildy entreched in the Banking industry. Calling them Jews is truly insulting to the Jewish peoples, most of whom live in poverty, in a country controlled by Zionists.
        NewScientist published an article, last year, which detailed business on this planet. Super-computers unravelled the mother of paper-trails. 147
        companies own 87% of the companies listed on global stock markets. These 147 mega-corporations were owned by a tight cabal of Banks!
        The Zionists are bankrolled by the Illuminati. And man, did they come close to literally owning this planet. There but for the Grace of God, go We!

      • Catholic: Bigbwana is correct, there is a huge difference between being Jewish and being Zionist. The neocons are overwhelmingly Zionists with fellow travellers such as Cheney, Murdoch and Gove and Lord Black in this country. Kirkpatrick was Catholic. In the US some of the neocons are Christian fundamentalists and others are Mormons. Their Godfather, so to speak, was Leo Strauss, a professor at the University of Chicago.

        I met Perle when he was working for Sen Henry Jackson in the 1970s. Jackson was an early non-Jewish neocon.

      • For a country with less about 2.1% of the country, four of the six quoted above are Jews.

      • I agree with that — it’s his blog and he can use a word to mean whatever he wants it to mean. However, his confident assertion that everyone understands it is disproved by these comments. I didn’t say it in the original email, but the most widely understood use of the term “neocon” — as evidenced here — is as an anti-Semetic slur. You use the word neocon when you want to blame the Jews. I hope that’s not the way it’s used on this blog, but using it to mean evil is a dangerous way to speak — and I’m Christian.

    • Astounding. Why stop there though, why not a Billion Trillion coin?
      They would have a surplus then! In fact Draghi could mint one too, and Japan, let’s all do it…

      • Why bother minting a coin (which would be a waste of precious metal) why not simply print a large super sized giant banknote (to fit the required number of zero’s it would need to be the size of a large flag). One side could have President Obama’s image and signature and the other a suitable patriotic national image such as an obese overstuffed thanksgiving day turkey.

  4. The principal reason for a fear of what 2013 may well bring is quite simple.
    ‘Check out Previous Recent Form !’

    Overall were the major economies of the world (say G8 if you like) actually better off with better commercial prospects on Jan 5th 2010 than Jan 5th 2009.?….er No !
    Were global economics better on Jan 5th 2011 than Jan 5th 2010.?.Nope !
    Were global economics better on Jan 5th 2012 than Jan 5th 2011.?.Nope !
    Have we seen any serious signs of recovery in the major world economies, green shoots, rising business confidence, growth (? !) etc from Jan 5th 2012 to Jan 5th 2013?… ….None whatsoever that I have noticed !

    The 64 Trillion Dollar question is surely this ….Are we looking at a straight line descending graph that is highly likely to continue merrily on its way towards 5th January 2014, no matter what Sprouts, GOPs, Geli, The Chinese or anyone else tries to do about it, or is this the start of a reverse exponential curve that at some point drops the lot of us, pretty much worldwide, off of a massive economic and social cliff ? I’m in agreement with JW’s recent couple of posts and this one and am moving rapidly from hoping for the former to anticipating for the latter.

    Refilling the logshed, buying charcoal in bulk, oil lamps, tinned food, lentals, rice, calor gas, generator petrol etc and planning to put gates at the end of our road during 2013 down here in Surrey !

  5. All this talk of financial wizardry…
    but all the commentators I talk to can see on the horizon is neo hyperinflation which will balance everyone’s books wonderfully, and we can all live happily debt free ever after, until the next time.

  6. Pedants corner…..

    Between 7 and 9 am, the top Samurai decided “enough already”. Between 9 and 1, aggressive buying pumped the currency straight back up again.

    Actually they sold the currency and bought the Dollar to drive the rate up….

    The best play right now is going long Sterling and short yen…. The Sterling has room on the upside if the SNB is going to keep defending the Franc and the Japs want the yen devalued…

  7. The discussion of the abuse of the term “neocon” is closed. Like that of man-made global warming? How very Stalinist.
    It appears that I am not the only reader who cringes whenever an otherwise insightful piece is ruined by an immature rant against “neocons”. I am reminded of trade union leaders from the Thatcher years, who railed against her social policies as “monetarist”. They had no clue what the term meant, but thought it sounded like something nasty.
    As somebody else said, this is John’s blog and ( like the Queen of Hearts ) he can choose words to mean anything he likes. It’s just a shame that any intelligent passers-by are going to think he’s an idiot.

    • Pedant Alert but wasn’t that Humpty Dumpty?

      ‘I don’t know what you mean by “glory”,’ Alice said.

      Humpty Dumpty smiled contemptuously. ‘Of course you don’t — till I tell you. I meant “there’s a nice knock-down argument for you!”‘

      ‘But “glory” doesn’t mean “a nice knock-down argument”,’ Alice objected.

      ‘When I use a word,’ Humpty Dumpty said, in rather a scornful tone, ‘it means just what I choose it to mean — neither more nor less.’

      ‘The question is,’ said Alice, ‘whether you can make words mean so many different things.’

      ‘The question is,’ said Humpty Dumpty, ‘which is to be master — that’s all.’

    • I think we all know what John means.
      “Freidmanite” might confuse, as will “Hayekian”. Plus, freidman was actually fairly Keynsian in comparison to the present, “Freshwater” lot. “Laissez faire” is to much of a mouthful, and “ultra-conservative” is plain wrong, because they don’t want to preserve a damn thing, except their own plutocratic status.

  8. In days of old when knights were bold
    The currency was coins of gold
    Now fiats deep inside the hold
    Are catching fire as some foretold

    So, what to do and where to look?
    The answer’s not in any book
    The wealth of nations – so old hat
    We’ve found the bag and lost the cat

  9. At least John has his finger on the pulse, because a financial world war was declared by Japan. I’m sure dear Abe will be visiting a shrine soon to p**s off the Chinese. And China will be buying yen to p**s off the Japanese.

    But the war in Asia will be fought in Hong Kong. Some see HK as a handy back door with which to invade China via shadow banking. To say that mainlaind authorites are spewing foam of rage into their rice wine would be an understatement.

    We all take it as a given that the Japanese are nationalistic but there is a very nasty strain of uber Han nationalism in China that is hellbent on a war of revenge on Japan and any sort of war will do.

    The smoke and mirrors has already started with the Telegraph talking of the importance of trading blocks. That’s bo**ocks, the starting gun has been fired, it’s every man for himself.

    PS. An apology to John, his blog, his rules end of.

  10. Pingback: FORT KNOX GOLD: Fed figures show US debt over 40 times bigger than gold reserves, critics want proper audit. | The Slog. 3-D bollocks deconstruction

    • Did they not try that in Cambodia? I seem to remember it didn’t end well. Unless one is proposing to add certain NuLab heads to those piles of skulls, in which case, I withdraw any objections.

      • Was a similar scenario reset also described in Dan Brown’s Digital fortress?
        Since it’s all electronic money anyway then a reset to 2006 should stabalise things and give everybody time to think things through (with the benefit of hindsight)
        There would be a few losers – but only about 1%

    • Presumably all those people calling for a total reset and a return to zero along with all debt forgiven don’t mind all of their pensions and savings being zeroed or for that matter any other tangible assets of value being confiscated as after all zero means zero. All debts and assets wiped from the slate.

      • I can see that happening in Texas, the second ammendment comes to mind along with very liberal interpretation of gun ownership, I’ll grab some popcorn, this will be worth watching……..

  11. There are many different words for shite, what does it matter which one is chosen ? as long as the word itself conjures up the idea of a steaming turd or variations of it.

    • Because I was an early neoconservative, remain one, and am proud of it. The appropriation of the term to describe everything that both John and I are sworn to oppose is offensive.

      • I think the problem here is that the meaning of invented phrases and words like neoconservatism warp over time as different people/groups apply their own prejudices to them, for or against. Originally neoconservatism could be defined as compassionate capitalism, recognising capitalism’s role as a generator of wealth while accepting that there was a need for a social safety net for those without a direct capitalist stake. It was perverted in the USA to mean the use of economic power as a quasi warfare weapon to promote American interests and business. John and others in the media have further perverted the meaning to what can be described as uncompassionate capitalism hell-bent on enriching the elite while crushing the masses.

        In short, such words do not have real-world definitions, like beauty, any such definition is in the eye of the beholder, or user in this case. To those who know the original meaning the use of the term does tend to jar and detracts from the message given the content of John’s opinion. If John had opted for newcons or a similar new construct it would have been much clearer and cleaner, I think so anyway.

  12. .’ As a piece of recognised and deservedly tarnished shorthand, therefore, I will be continuing to use it. And this discussion is now closed.’
    John, when you get a strop and write like this it brings a smile to my face.
    Grumpy old men are great .Long may you continue.

  13. As a Jew and a Zionist, let me put you senile conspiracy theorists on the right track.
    A ‘Zionist’ is somebody who believes in Zionism, which is “is a form of
    nationalism of Jews and Jewish culture that supports a Jewish nation state in territory defined as the Land of Israel.” No more and no less.
    A ‘Jew’ is, well, just http://en.wikipedia.org/wiki/Jews.
    If the world were controlled by ‘Zionists’ and Jews, I would not have to work so hard for a living like my Christian fellow citizens. No doubt you think the Mossad was responsible for 9/11 like other nutters.

      • Mossad may not have actually pressed the button on 9/11, but for CERTAIN they knew it was going to happen. The police officer who arrested certain Zionists videoing the actual attacks – dancing for joy – would be annoyed if you said he was hallucinating.

    • ‘Let me put you senile conspiracy theorists on the right track.’
      So, let’s start with an insult to your intelligence and drive home my superiority…
      Not sure there are many that would agree with your ‘summation’
      Doesn’t work for me, that’s for sure. Not sure about anybody else…

    • Dr Teeth, the Zionists, perverting the original meaning, like the original neo-cons/warmongers has been perverted, so elegantly pointed out by Peter C, above, who are in poistions of power, are merely peons. The Rothschilds purchased vast tracks of land in the ME from the Ottoman Empire. The same Rotschilds today are the richest family in the world. Israel belongs to the Rothschilds. They call all the shots. As they do in ‘the City’, which is also owned by them. The hardcore Zionists in Israel have treated their Arab neighbours with contempt, for 60 years, urging retaliation. So the country would arm itself to the teeth. Purchasing weapons in America, from arms manufacturers whose major-shareholders are ‘numbered’ companies. War, terrorism, financial depravity, poverty, hunger, are all cause and effect, in the evil quest for a NWO. No doubt you believe 19 Arabs with box-cutters did the dirty deed. ‘9/11 Revaled’ is a fact-filled documentary pointing a finger directly at Mossad. And they come from Israel, which is owned by the Rotshilds. I rest my case!. .

    • And you can keep saying that all you want, you won’t convince anyone here by your tedious repetition and lack of any reasoned proof.

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  15. JW,

    Your graph showing the Japanese yen devalueing 10% since november (78¥ to 88¥) then saying this hinders Japanese exports is plainly incorrect a weak yen assists exporters and hinders importers surely?

    What is for sure that much maligned man, Keynes, viewed devaluation as protectionism and an economic evil.

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