Market Talk
Today we are seeing some large price/percentage moves in many markets, which is something we should all start to accept as the new norm for the second half of this year moving forward.
Rumours started Sunday of Tspiras’s new proposal and the markets took it all at face value! DAX at best was up 3.5%; ASX closed up 9.7%; Asian stocks up over 2% (China closed but HK +1.2%); euro little changed whilst the U.S. dollar lost ground against EM (especially Turkey 1.1%). The 2yr GGB’s as a yard stick and was today trading at 23.5%.
Ty/RX 10yr spread tightened by 6bp with the last trade at time of this writing was 146bp. Bunds traded around 1.5pts lower whilst peripheral debt performed (especially BTP’s higher by over 1.5pts).
Gold lost its recent safe-haven bid losing $16 at 1184 (-1.2%)
U.S. stocks all following the feel good factor +0.8% (so far)
Both dealers and fund managers continue to have the number one concern that remains the vanishing liquidity – which is even in the Treasury market! As liquidity evaporates, the more volatility we will see because the lower the volume, the greater the price swing, which then comes back reducing the risk appetite.
If we are seeing swings like this in government bonds, then the entire spectrum of markets will be entering a different pattern altogether post-2015.75.
The Solution – the ONLY Solution
QUESTION:
Can you please explain how your Solution is different than what Central Banks around the world are currently doing and appear to be poised to expand on? And how it changes anything?
As I understand it your plan is to exchange all national/soverign government debt for private equity credits, which smells alot like a second currency, and abandon federal taxation to save pensions and the economy. Your plan is to simply print enough dollars to fund the federal government.
ANSWER: Central banks are monetizing debt, this much is true. However, that accomplishes nothing for they cannot return the system back to a pre-2007 state. They leave the debt intact and a rise in interest rates will blow up the budgets, to which governments will then target more aggressively in tax collection.
By doing a debt-to-private equity swap, that is substantially different from constructing more roads, buildings, or Dunkin Donuts. Investment in infrastructure is a short-term impact and does not create long-term jobs. You have to keep building to maintain employment and those things do not contribute to the creation of national wealth as they too consume it. True, building a plant will enable a business to create wealth. By itself, a building is a depreciating asset that ultimately needs to be replaced.
A debt-to-private equity swap would be the creation of small business, which employs 70% of the civil work force. The major companies have reached saturation levels and are buying their own shares back. So, we are not talking about swapping $17 trillion of debt for more Apple, Amazon, PayPal, or IBM shares. We are talking about creating an opportunity to fund small business, which the banks gave up on for if they do not have 120% collateral, they cannot borrow from banks. Venture capital creates wealth and this is substantially different.
Additionally, we can see that up to 70% of the national debt is accumulative interest expenditures. The central banks are not eliminating the debt; they are buying it and leaving interest still payable, which will maintain the tax collection. The debt will continue to rise and so will taxes, sucking in everything like a black hole, and diverting capital from creating employment consumed purely by bondholders. Detroit went bust when pensions consumed more than 50% of total revenue. Government could not raise taxes and the pensions kept sucking in everything to the point where public services collapse. You pay taxes for nothing.
If we eliminate taxes, we will restore our liberty and eliminate FATCA, restoring the world economy. The private equity swap would convert Social Security into a national wealth fund that really invested, creating jobs for the youth and the displaced government workers. Eliminate tax collection and it would shrink government by 33%, not to mention save the world economy and our liberty.
This is just the start. Central banks quantitative easing does none of this. On top of that, they will come after your assets to pay the bondholders who convinced them they fail unless they are paid. Additionally, the cost of labor would decline by 50% by eliminating taxes and people would then fund corporations. Corporate taxes are very destructive for the very same capital is taxes three times. You buy shares with after tax dollars. The corporation pays taxes. It pays a dividend tax, and then the shareholder pays income tax on the dividend. Eliminate that and people will secure their own future pensions with equities. This would create a huge domestic job market and it will cause companies to bring jobs home where it will be more efficient.
Printing money to fund government capped at say 5% of GDP will be a huge reduction in government. Eliminate taxation and we will reduce government. There were SEVEN agencies that all approved the CDOs the banks sold which blew up the world in 2007. Not a single one of them understood what they were approving. There should be ONE agency, not SEVEN, and it would be cheaper to pay for expertise in a single agency rather than lawyers who know nothing, yet think they do. The savings in reducing the size and servicing the debt will more than offset the cost. Plus, you are trapped in the old idea that increasing money supply automatically creates inflation. Sorry, even QE1-3 proved that theory is dead wrong. As long as people save or hoard, increasing the money will by no means cause prices to rise. The money supply MUST increase with the population or you get DEFLATION.
That is just skimming the surface. Those who are living in the 16th century and say, “oh just printing 5% to pay for government is horrible and inflationary”, I say you will pray on hands and knees for inflation by the time they are done confiscating everything you have to pay the bondholders. Wake up. This is the 21st century.
Greece: The Way Out
QUESTION:
Marty,
I lived in Greece for 3 years while in the US Air Force. I fell in LOVE with the country, the people and the food! I want nothing but the best for this country. If you were given the floor in front of PM Alexis Tsipras, what steps would you suggest that he take to get out of the mess that Greece is in right now?
Sincerely,
MM
ANSWER: I would immediately suspend all debt payments. I would do a debt-to-private equity swap but the ratio should be about a 50% haircut on the debt. The exact number should be no greater than where the debt to drachma stood in 1998, and all interest should be applied to principle.
The debt-to-private equity swap would cause capital to be repatriated to Greece and you will see small businesses develop. The smartest have been leaving Greece to find jobs. They need to be attracted back. Eliminate all taxation and cut government expenditure by reducing regulation and size. The swap to private equity will create new businesses and that will create jobs for the displaced government workers.
Do this to start and you will see Greece boom and its stock market will rise, just as the USA did out of 1932. It is time to start focusing on the people rather than only the bondholders.
IMF Has Been Training Journalists to Support IMF and Trioka in Greece
Greece’s former representative to the IMF, Panagiotis Roumeliotis, testified in front of the special parliamentary committee concerning the outstanding Greek debt. He revealed that the IMF has been training journalists to support the Trioka.
Roumeliotis testified:
“The IMF trained [journalists so that] Greek journalists can promote the positions of the IMF and the European Commission in Greek media.”
No comments:
Post a Comment