Category: Politics

Cheese – The Truth about the Fed

I really can’t do better today than to quote, in full, today’s bulletin from Adrian Ash of the BullionVault:

Crackers
from Adrian Ash
Head of Research, BullionVault

FORGET the glut in crude oil, copper, cargo ships or Chinese steel capacity.

Cheese. There is too much cheese, says Bloomberg.

That is why the price of US cheddar cheese blocks…a tradeable asset, apparently…fell to new 5-year lows yesterday. Cheese futures for December delivery hit their lowest price since April.

“We’re making a lot of cheese and not selling a lot of it,” says one dairy manager.

“So it’s all going into storage for the moment.”

This cheese glut, of course, is the global economic environment into which the US Federal Reserve last night raised its key interest rate.

Hence the humming and hawing in the Fed’s accompanying statement, forecasts and press conference.

Yes, rates have been too low for too long. Yes, financial assets have been bid up to untold records…squashing the yield they offer to nothing…as the glut of money which zero rates have created forced otherwise cautious savers into all manner of half-baked “collectibles” and “luxury goods” at auction…

…not to mention real estate, high-yields “junk” bonds and investment scams.

So the Fed basically promised that “lift off” from zero would start in 2015. That made yesterday’s rate-rise a 100% certainty if markets weren’t to collapse on a loss of confidence in everything Janet Yellen ever says.

But this rating-hiking cycle…the first begun since 2004…is not like any rate-rising cycle the world has ever seen before.

First it starts from near zero. Second, the rest of the world (besides US Dollar-pegged Hong Kong) is going in the other direction…either sitting tight at record lows (like a raft of central bank decisions already today)…or cutting further (like Taiwan did overnight).

Third, but most crucially, it’s a rate rise which the Fed doesn’t want to make and doesn’t believe it should.

Because…thanks to all the gluts in oil, copper and cheese…inflation is missing. And while a strong labour market is one half of the Fed’s mandate, the other half is stability in consumer prices. Which the Fed says means 2.0% inflation. And which…by a remarkable coincidence…the entire Fed policy team unanimously says will be the pace of inflation in the “long run”.

But its other forecasts? These people voted 9-1 against raising rates in October. With nothing changed, they voted 10-0 yesterday to hike after all.

Really, these folks don’t know what they’re doing. They’re making it up as they go along.

Most of the time this doesn’t matter. Because the world gets by regardless and in spite of them.

But every so often…as in the 1970s or say 2008…the world suddenly spots the problem.

This confidence game is a con trick. Fingers crossed the markets don’t notice.

Adrian Ash
Head of Research, BullionVault
There, you’ve been told.  It’s all about cheese.

Voting on the decision to bomb in Syria

A letter to my MP, Sir Paul Beresford:

Dear Sir Paul,

I appreciate that as a very loyal member of your party, this plea is unlikely to be persuasive.  I would not be able to live with myself, however, if I didn’t at least try to influence the way you will vote tomorrow, or whenever, on this critical matter.

Of course I do not support ISIS or any group of murdering nutters, whether influenced by religious dogma, all of which is poisonous, or not.  Rarely do non-believers like me participate in such things.  Funny thing that.  As far as I’m concerned, if I could wake up in the morning to discover that the government had deployed the SAS to take out every known ISIS leader/supporter on the planet, I’d cheer from the rooftops – despite the fact that it would drive a coach and horses through my belief in human rights, justice and civil liberties, I’d get over it.  But aerial bombing?  This is ridiculous.

What’s going on in Syria is little different, except in scale, to what happened in Northern Ireland.  Oddly, no one ever seriously proposed bombing Belfast.  Some of us, especially when we visit the place still, aren’t always sure whether that would have been a good or a bad thing.  I jest, I guess.

You and I both know that civilians will die.  The Royal Air Force are fabulous in their skills and technology but bombs and rockets, ultimately are not entirely predictable, nor is the intelligence on which targets are selected.  One of the reasons why arson is such a heinous crime is because while people may not be the target, all too often circumstances conspire to make them the victims.  Today, mothers watch their beloved children being blown into minute pieces of their young body-parts and being plastered over the walls of their own homes.  This is the fact.  It’s appalling.  While we are not the ones currently pressing the trigger on those weapons, we don’t escape culpability entirely, far from it.  If we are actually pressing that trigger, we the electorate, you our representatives in government, our brave military on your instructions, then it is you and me killing those children – mistakes or not, unintended or not.  They will be maimed and die nonetheless.

We are not “at war”, as so many gung-ho ignoramuses like to trot out.  We are no more “at war” that we were during “The Troubles”.  We understood then what we choose to ignore now, it is the protagonists we need to locate, isolate and deal with and, ultimately, we will have to sit down and talk to their leaders and iron out an accommodation – one that many will find distasteful.  It happens every single time.  Nelson Mandela was a terrorist, I was told, now he’s a saint.  Indeed, since the day I was born, my life has been impacted by terrorism – all of it religiously adorned, most of it under the banner of Islam.  I abhor religion, that one more than most, but I don’t want to kill them all, only those that have a gun, metaphorical or actual, at another’s head and only on a need’s must basis.  If we can talk our way out of it, or throw money at the problem, as distasteful as that may seem, that’s what we should do.

A short time ago, Bashar Assad was the devil incarnate.  Tomorrow he is likely to be our ally.  Russia was our nemesis, today they are our ally and fellow-vigilante.

No-one apart from family members, wept more tears than I over the slaughter in Paris.  When I hear the President of France, the most left wing French leader for decades, react like a primary school bully in the playground, I despair.  Then I’m told we should bomb Syria because he asked us to.  That’s like my next door neighbour demanding that I join his band of vigilantes to track down and beat the man who raped his daughter.  Of course we would all sympathise but that’s why we have the rule of law to keep us from responding to our base instincts and ensure due process.

These reactions to ISIS are the reflexes of very unintelligent people.  I’m being generous.  The only other motivation is that they merely seek the electoral support of our tabloid population and I wouldn’t stoop to such a base accusation.  What we need now are clever people leading out nation’s response.  If compassion isn’t enough then I am hoping that you count yourself in that number.

If you vote in favour of this action, please be in no doubt that you do so against my most earnest desires and certainly not in my name.  Thank you for listening to me.