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The Golden Revolution (John Butler, Wiley 2012)

Global Economy, On the cover, Sin categoría

Every time I speak with someone about monetary policy and the possible return to the gold standard I hear two sentences: “We can’t do anything” and “it’s impossible”.

This book by John Butler (@butlergoldrevo) is a must read because it debunks many myths about the current “new normal” of eternal monetary expansion, as well as explaining how a transition to a new form of gold standard is inevitable, as the mirage of money printing fails to deliver the social promise repeated over and over to justify financial repression and quantitative easing.

Throughout its pages, John Butler explains how expansionary policies create enormous distorsions and how the questionable benefits rarely offset the risks. The abrupt “boom-and-bust” cycles become more aggressive and shorter, demanding more and more expansion to cover the mistakes of the previous set of measures. The book is entertaining, full of detail and, more importantly, plenty of common sense.

Buy here

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Baltic Dry Index Shows The Global Economy Is Not Moving

Energy, Global Economy, On the cover, Sin categoría
Baltic Dry Index Shows The Global Economy Is Not Moving
 
 
The big moves seen in the Baltic Dry Index falling aggressively (down 52% YTD and back to September levels) have come from a combination of:
–          . Capesize rates have fallen 48% in a week to $17k per day. This has been driven by spot chartering falling to 72 vessels relative to the highs of 161 vessels chartered seen at the peaks in December.
–        .  Iron Ore imports are on hold after stockpiles in major Chinese ports have gone to 82mt versus 71mt average in 2013. Chinese crude steel output has fallen driven by pollution control measures as well.
. Panamax rates have fallen 7% in a week due to the suspension of Colombian coal shipments until March by Drummond, the world’s 4th largest coal exporter.
–         . Crude tanker rates (VLCCs) have fallen 28% in a week to $30k per day, as vessels to the US are reducing given lower imports.
 
These moves justify the decline back to September levels, as the previous increases arrived from short term big rate improvements driven by re-stocking in India and China and an increase in refinery utilization –and oil imports- from the US.
In essence, rates are returning to a normalized level of small improvement from the lows but a shipping environment that is still oversupplied and global commerce is not improving drastically, and definitely not even close to 2007 levels. 
 
The moves up in rates in October-December were driven by one-off events that drove to a short-term tightness in very particular segments (Capesize and Panamax).

 

Commodities Update: Plenty of Supply

Energy, Global Economy, On the cover, Sin categoría
Brent down 3.2% MTD at c$107/bbl. WTI at $94/bbl (-4%). Differential has settled around $13/bbl. 
 
US production at a 25-year high.
Global oil supply at 92.23m b/d, up 1.16m b/d or 1.3% y/y. Within this OPEC supplies increased 310k b/d m/m to 29.82m b/d on higher output from Saudi Arabia & the UAE. Iraq was the only member to post a monthly decline in December.  Continue reading Commodities Update: Plenty of Supply →

Spain: Recovery, yes. But high taxes and bureaucracy limit potential

Global Economy, On the cover, Sin categoría, Spain
“The real goal should be reduced government spending, rather than balanced budgets achieved by ever rising tax rates to cover ever rising spending”. Thomas Sowell
high taxes and bureaucracy limit potential


Spanish bond yields have fallen to pre-crisis levels despite debt to GDP reaching c100%, a deficit that will be above the target 6.5% and refinancing needs of c€224bn in 2014. The “Draghi put”, added to much better comps on unemployment (fallen by 147k in 2013), consumer spending (+2% in December) and added to expectations of an 0.5%-1% growth in GDP have helped. Continue reading Spain: Recovery, yes. But high taxes and bureaucracy limit potential →