Daily Digest 2/9 - World Currency System Moving Towards Catastrophe, East Coast Digs Out
Canada’s triple whammy of data is reality check for economy (westcoastjan)
As well, the number of new residential buildings under construction tumbled during the same month, with weaker activity in both single and multiple-unit homes, particularly in Ontario.
In truth, asset allocation is more than just sum zero, given that corporations have the ability to create and destroy units of debt and equity via issuances and buybacks. Regardless of that, what matters most is the price action. And if prices are going up, at the margin, there were more bids than offers at the last point of sale. More buyers than sellers. It’s that simple. And it works in both directions.
Our Investment Sinkhole Problem (Arthur Robey)
While we don’t stop to think about what is happening, the reality is that increasingly less oil (or other product such as natural gas, coal, gold, or copper) is being produced, for the same investment dollar. As long as the price of the product keeps rising sufficiently to cover the higher cost of extraction, the investor is happy, even if the cost of the resource is becoming unbearably high for consumers.
In Venezuela, where President Hugo Chavez has attempted to control all aspects of his country’s economy, price freezes instituted on essential goods like diapers and cleaning products over a year ago failed to curb soaring inflation which registered at over 22% last year. In response, with their quiver out of arrows, the Venezuelan government announced today that they are devaluing their national currency, the Bolivar, by over a third. The announcement had the immediate impact of increasing the price for a US dollar in Bolivar by nearly 50%.
The quantity theory of money looks as follows: M x V = p x Y. It is an equation in which the monetary base times the velocity of money equals price inflation times real GDP. Central banks use this equation for their monetary policies. It is the reason why one of their focus points is to influence the psychology (mood) of people: if people “feel” that everything is going well, they will spend more, raising the velocity of money and resulting in a higher gross GDP. Given the fact that the economies are not really producing more, for sure not in the in US and Japan, it implies that the central bank efforts to create inflation could very well result in a much higher inflation rate than targeted. While aiming for 2%, the result could very fast be 6%.
Those low rates helped create a housing boom that Ottawa has taken great pains to slow down by restricting lending in an effort to create a so-called soft landing instead of a U.S. style crash. The impact of longer loans on cars is much the same as it is on houses, a lower monthly payment that ultimately allows you to buy more.
Kobad Bhavnagri of BNEF added that new coal-fired power plants are too expensive in Australia now and therefore no new ones are likely to be built, especially as the carbon price is expected to rise substantially, possibly tripling by 2030 from its current level of 23 AUD per tonne. By the time Australia needs to consider building new power plants (2020-30), renewables will be even more attractive, and new technologies may have been developed to deal with the intermittency problems of these renewable source of power.
Turbo Trouble (westcoastjan)
“Turbochargers pump more air into the engine during strategic times so it can burn more fuel and make more power during peak demand periods such as passing,” said Drew Winter, editor in chief of WardsAuto World, a trade magazine that issues an annual list of its 10 best engines, in an email to BBC Autos. “When the engine does not need power, the [engine downsizing strategy] does work and the engine behaves like a smaller engine and burns less fuel.”
Northeast Buried; City Spared the Worst (jdargis)
With the storm still raging on Saturday morning, officials in Massachusetts ordered the evacuation of some communities along the coast as waves lashed the shoreline and high tide brought a surge of water inland.
Gold & Silver
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