The Unraveling of Europe’s Wonderland

Dr. Ed Yardeni at his blog, has a superb and eloquent piece on the problems besetting the Eurozone which he calls as Europe’s wonderland (bold emphasis mine)

The Europeans have had the best governments money can buy. Their elected leaders have provided them with all sorts of wonderful social welfare benefits. Many Europeans are employed by their governments to provide those benefits to their needy fellow citizens. Those who cannot find a job, or are too depressed to look for one, are provided with extremely generous unemployment benefits. Retirement benefits are great, and early retirement is the norm. Life has been very good in Europe.

Of course, that all costs lots of money. That’s why income tax rates are so high in Europe. On top of those rates, Europeans pay significant value-added taxes on the goods and services they buy. Yet there has been an ever-widening gap between government spending and revenues. That’s partly because Europeans have responded to their exorbitant tax rates with widespread tax avoidance.

The spending of European governments has ranged between 40% and 60% of GDP for many years. The revenues collected by these governments have ranged between 30% and 50% of GDP. The resulting deficits have led to rapidly rising ratios of government debt to GDP.

Attempts to bring back some fiscal sanity, led by Germany’s Chancellor Angela Merkel, are now widely caricatured as fiscal “austerity.” In my opinion, the only way to fix Europe is to slash government spending, reduce tax rates, enforce tax collection, and deregulate labor markets. Instead, enraged European voters are rising up against austerity and voting for the status quo. They haven’t indicated who they expect will pay the bills. However, they must be counting on either the Germans to pick up the tab or the ECB to implement more rounds of the LTRO.

European politicians who signed on to the “fiscal pact” promoted by Germany late last year are losing their jobs. Those favoring a “growth pact” are winning support, though they have no specific plan yet and certainly no way to finance it once it is specified. Also gaining support are various left- and right-wing fringe groups that tend to promote anarchy as the most effective way of overthrowing the established order and replacing it with their disorder.

Europe is at risk of devolving from an economic and monetary union into a disunion of failed states. The Greeks are unable to form a coalition government after the two major parties lost significant support to fringe parties over the weekend. They may need to have another round of elections. The remote chance of Radical Left leader Alexis Tsipras forming a coalition faded on Tuesday when New Democracy leader Antonis Samaras promptly rejected his demand to scrap Greece’s bailout plan, warning such a move would drive Greece out of the euro: "Mr. Tsipras asked me to put my signature to the destruction of Greece. I will not do this. The country cannot afford to play with fire."

(According to Greek mythology, Prometheus stole fire from Zeus and gave it to mortals. Zeus then punished him for his crime by having him bound to a rock while a great big eagle ate his liver every day only to have it grow back to be eaten again the next day. During the Greek War of Independence, Prometheus became a figure of hope and inspiration for Greek revolutionaries.)

The above is simply commonsense economics which shows that we can NOT spend ourselves to prosperity or that there is NO such thing as a free lunch.

This implies that reversion to the mean would be the natural order from previous overspending that produced high levels of debt. And the logical and commonsensical solution to such predicament would either be to raise revenues by making the economy more competitive or to reduce government spending, or more optimally, having to apply both approaches. The ECB can only kick the can and even worsen the scale of the imbalances.

Unfortunately many people live in dreams. Politicians and their academic and institutional backers pander to such utopianism by imposing the same policies that got them there. They do this by whipping up public’s sentiment by peddling half truths to the gullible and uninformed. A good example is media’s baloney over so-called “austerity” which in reality has been a gross perversion of semantics. Mr. Yardeni’s chart above reinforces my earlier assertions.

Yet Sweden’s anti-Keynesianism policies should serve as a wonderful counterexample where commonsense economics--economic freedom, genuine austerity and tax cuts--have been driving real growth.

Politicians and (parasitical) voters would like to make permanent a life of abundance, by living off someone else’s labors. Unfortunately the reality says that we are bounded by the laws of scarcity, and people’s efforts are constrained by such limits.

Thus when the proverbial rubber meets the road, delusions over Europe’s desired perpetual state of wonderland has been in the process of being unmasked.

Reality, says Libertarian author Robert Ringer, isn't the way you wish things to be, nor the way they appear to be, but the way they actually are.

Sweden Secret Recipe: Austerity, Tax Cuts and Economic Freedom

From Spectator.co.uk [bold emphasis mine] (hat tip Professor Mark Perry)

When Europe’s finance ministers meet for a group photo, it’s easy to spot the rebel — Anders Borg has a ponytail and earring. What actually marks him out, though, is how he responded to the crash. While most countries in Europe borrowed massively, Borg did not. Since becoming Sweden’s finance minister, his mission has been to pare back government. His ‘stimulus’ was a permanent tax cut. To critics, this was fiscal lunacy — the so-called ‘punk tax cutting’ agenda. Borg, on the other hand, thought lunacy meant repeating the economics of the 1970s and expecting a different result.

Three years on, it’s pretty clear who was right. ‘Look at Spain, Portugal or the UK, whose governments were arguing for large temporary stimulus,’ he says. ‘Well, we can see that very little of the stimulus went to the economy. But they are stuck with the debt.’ Tax-cutting Sweden, by contrast, had the fastest growth in Europe last year, when it also celebrated the abolition of its deficit. The recovery started just in time for the 2010 Swedish election, in which the Conservatives were re-elected for the first time in history.

All this has taken Borg from curiosity to celebrity. The Financial Times recently declared him the most effective finance minister in Europe. When we meet in his Stockholm office on a Friday afternoon (he and his aide seem to be the only two left in the building) he says he is just carrying on 20 years of reform. ‘Sweden was a textbook case of European economic sclerosis. Very high taxes and huge regulatory burden.’ An economic crisis in the early 1990s forced Sweden on the road to balanced budgets, and Borg was determined the 2007 crash would not stop him cutting the size of government.

‘Everybody was told “stimulus, stimulus, stimulus”,’ he says — referring to the EU, IMF and the alphabet soup of agencies urging a global, debt-fuelled spending splurge. Borg, an economist, couldn’t work out how this would help. ‘It was surprising that Europe, given what we experienced in the 1970s and 80s with structural unemployment, believed that short-term Keynesianism could solve the problem.’ Non-economists, he says, ‘might have a tendency to fall for those kinds of messages’.

He continued to cut taxes and cut welfare-spending to pay for it; he even cut property taxes for the rich to lure entrepreneurs back to Sweden. The last bit was the most unpopular, but for Borg, economic recovery starts with entrepreneurs. If cutting taxes for the rich encouraged risk-taking, then it had to be done. ‘In most cases, the company would not have been created without the owner,’ he says. ‘There would be no Ikea without [Ingvar] Kamprad. We would not have Tetra-Pak without [Ruben] Rausing. They are probably the foremost entrepreneurs we have had in the last few decades, and both moved out of Sweden.’

But they were not rich, I say, when they were starting out. ‘No, but they were becoming rich. If you have a high wealth tax and an inheritance tax, people emigrate because it becomes too costly to own a company. Ownership is a production factor. Entrepreneurs are a production factor. Yes, these people are rich and you can obviously argue that we want to encourage social cohesion. But it is also problematic if you drive out entrepreneurs from your country, because they are the source of job creation.’

In contrast to the phony austerity, as presented by media and the left, supposedly plaguing the crisis affected EU nations, Sweden’s fiscal conditions seems to validate the above report. (following 2 charts from Tradingeconomics.com)

Government debt to GDP has been in a material decline

While Sweden’s government budget has even posted surpluses.

And because of these truly pro-growth (economic freedom) measures, the chart above (from Professor Mark Perry) shows how Sweden has outperformed the US.

In Pictures: The Eurozone’s “Austerity” Programs

I’ve been saying that whatever politicians, media and their zealot followers label or lay claim as “austerity” programs has been a blatant canard.

The precious deck of graphs below from tradingEconomics.com give us the perspective

First the Eurozone’s Government Debt to GDP

Ok, one might argue that the steady ascent of government debt relative to GDP has been happening because of recessions or economic growth slowdown.

So the second set of graphs which exhibits their respective fiscal conditions is meant to give us a better understanding.

Note, reference points of comparisons are very important and sensitive to making claims.

It is TRUE that government spending in the aforementioned countries above has somewhat been reduced compared to, or when based from 2010.

But except for Portugal, whose authorities have admitted that government spending does NOT work, spending levels have substantially been elevated compared to, or based from 2000-2007 for most of the Eurozone, especially the crisis afflicted nations. Add to this the ballooning balance sheets of the ECB.

From the above, we can see that whatever claims of “austerity” have been representative of half-truths, and which in reality, signifies as terminological prestidigitation.

So the return of pro-welfare governments will only exacerbate their current woes based on unsustainable political economic conditions and amplifies the transmission of the many risks (credit, currency, inflation, interest rate and etc...) to the world.

Results of European Elections Points to More Inflationism

From Bloomberg,

Francois Hollande, who defeated French President Nicolas Sarkozy to become the first Socialist in 17 years to control Europe’s second-biggest economy, pledged to push for less austerity and more growth in the region.

“Europe is watching us,” he told supporters in Tulle, France, last night after he won about 52 percent of the vote. “Austerity isn’t inevitable. My mission now is to give European construction a growth dimension.”

Hollande inherits an economy that is barely growing, with jobless claims at their highest in 12 years and a rising debt load that makes France vulnerable to the financial crisis that has rocked the euro region the past two years. Sarkozy became the ninth euro leader to fall in that time and the first French president in more than 30 years to fail to win re-election.

Hollande’s comments were echoed in Greece, where voters flocked to anti-bailout groups, leaving the two main parties, New Democracy and Pasok, a seat short of a majority if they govern together, an Interior Ministry projection showed. His victory may sharpen tensions with key allies with Hollande advocating a more aggressive European Central Bank role in spurring growth -- a measure opposed by Germany.

As I earlier said politics has always been about gross distortions of reality and the manipulation of the public.

There really has been no “austerity” going on in the crisis affected Eurozone economies. Just look at how ECB’s balance sheets have been exploding…

chart from mybudget360.com

As I wrote earlier,

What has been really happening has been a transfer or a redistribution of resources from both the private and the public sectors into the politically privileged banking system. Taxes have been increased or are in the process of being raised to pay for the bailouts of the banks.

In genuine austerity programs, resources would be made available for the productive use of the private sector. This means growth in the private sector relative to a reduction of government expenditures.

So with the so-called “pro-growth anti-austerity” governments in power, the policy options likely to be taken by them will be 1) to stop the bailouts of the banking system and to resume welfare spending or 2) have the ECB finance both the banking system and the welfare state. [As an aside, the pro-growth and or anti-austerity is actually a mislabel, which in reality, should be called “pro-welfare” governments]

Cato’s Dan Mitchell has a fitting description,

the new political parties are pro-bailout. They are quite happy to mooch off German taxpayers, American taxpayers, and anyone else who is stupid enough to send money (after all, somebody has to finance critical functions of government, such as collecting stool samples from people who want to set up online companies and subsidizing pedophiles).

What gets them upset is the notion that they should do anything in exchange for these handouts. Perish the thought!…

And given the current budgetary mess they are into and given the market’s reluctance to finance them, both options imply more reliance on the ECB to backstop their proposed spending.

Said differently, if the pro-welfare governments act to fulfill on their campaign platform promises of more welfare spending, then I expect increased pressure on the ECB to finance their spending splurges. And if the ECB complies, then we are likely to see even more bailouts mostly through inflationism.

Of course I expect the US Federal Reserve to work behind the scenes to assist the ECB as they have done so, like in the recent past.

Also if these governments will insist on imposing policies based on the Santa Claus (Free Lunch) principle, and refuse to see the reality through lens of the law of scarcity, then we may see defaults to occur soon, or if not, the EU may die a natural death either from internal political dissension or hyperinflation.

Worst is that instead of achieving the objectives of an EU integration which in part has been meant to avert perennial wars of the past, more political redistribution will mean more discord that raises the risks of war.

Writes Professor Philipp Bagus

The EMU provokes conflicts between otherwise peacefully cooperating nations. Redistribution is always a potential cause of social stress. The monetary redistribution in the EMU was not understood by the bulk of the population and, thus, did not cause conflicts. The bailouts, the rescue fund, and the interventions of the ECB that were ultimately caused by the setup of the EMU have made the redistribution between countries more obvious.

Eurozone’s Farce Fiscal Austerity Programs

I have been saying that the so-called fiscal austerity in the Eurozone has been a farce.

The European Central Bank has continually been bailing out the region’s banking system through inflationism or via the massive expansion of the ECB’s balance sheet.

Meanwhile European governments have been raising taxes matched by partial budget cuts and politically label this as “austerity” programs. [The left, using deliberate semantical distortions, misleadingly blames such failures on the markets].

What has been really happening has been a transfer or a redistribution of resources from both the private and the public sectors into the politically privileged banking system. Taxes have been increased or are in the process of being raised to pay for the bailouts of the banks.

In genuine austerity programs, resources would be made available for the productive use of the private sector. This means growth in the private sector relative to a reduction of government expenditures.

In the current Eurozone programs, this has not been happening.

Professor Steve Hanke in an interview with Streit Talk explains further, (bold emphasis mine)

Member states haven’t delivered on much in terms of fiscal austerity and certainly not structural reform. Fiscal austerity should be about reducing the size of government…governments are bloated and spending way too much in Europe. Austerity should be almost entirely focused on reducing government expenditures and obviously not on increasing taxes. But there’s a lot of tax increase noise within the so-called austerity programs in Europe, so they just have it all wrong. And, in any case, they haven’t delivered much.

As far as structural reforms go, there have been almost none that have actually been implemented, even in Greece. They’ve talked a lot, and spent most of their time blaming markets or the outside world – the Germans, the Dutch, the Finns, and so on – for the problems that they’ve gotten into. So there’s a lot of finger pointing going on and talk about structural reforms, but they’re half-baked.

And when I say structural reforms, what do I mean? What they have to do is put in place growth-friendly policies and get government out of the way. And that means they have to have something like Presidents Reagan and Clinton did in the United States; they have to reduce government expenditures and reduce regulation and red tape. But they’re not in that business in Europe. Their assessment is: we have a crisis because markets failed and we have to regulate markets more now so that they don’t fail in the future. This is just upside down because the crisis was caused by government failure – mainly the European Central Bank and the Federal Reserve Bank of the United States. These were the great enablers and engines that allowed for the blow-up of the bubble that ultimately burst in the fall of 2008, although there were problems in Europe even in the summer of 2007.

So essentially in both the fiscal austerity and structural reform realms, the packages that they’ve been talking about are really almost fatally flawed. And they haven’t even delivered on what they said they would deliver on in the first place. They’ve been wasting their time moving from one meeting to the next and jumping from one fire to the next. They lack the “vision thing.” The long and the short of it is: will these steps toward fiscal austerity and structural reform stabilize the periphery’s sovereign debt markets? The answer is: of course not.

Politicians of developed nations will increasingly resort to more interventionism channeled through central banks, whom the public understands little about, as a way to shield their skullduggery.

And this is why markets will be sensitive to sharp volatilities, and or susceptible to “pump and dumps”, as market actions will be shaped by the feedback loop mechanism between market actions and political responses and vice versa.

Keynesian Policy Failure: Portugal Edition

For the mainstream, “austerity” has been a harmful, immoral or inhuman policy. And the popular prescription has been for "virtuous" government to keep spending money to pump up the “aggregate demand”.

However for the incumbent government of Portugal, tried Keynesian interventionist policies has signified an utter failure.

From the New York Times,

Defending austerity is not getting any easier for Europe’s politicians. And Vitor Gaspar, Portugal’s finance minister, has it harder than others. The country’s unemployment rate is 14 percent, and its economy, which has been stagnant for years, is expected to shrink another 3.3 percent in 2012.

Opponents of austerity may cite Portugal as a country that could benefit from economic stimulus and kinder budget cuts. But Mr. Gaspar, speaking to The New York Times last week, has a message for observers who say Europe needs to substantially relax its austerity approach: We tried stimulus and it backfired.

Like some other European countries, Portugal tried what Mr. Gaspar called “a Keynesian style expansion” in 2008, referring to a theory by economist John Maynard Keynes . But it didn’t turn things around, and may have made things worse.

“My country definitely provides a cautionary tale that shows that, in some instances, short-run expansionary policies can be counterproductive,” Mr. Gaspar said. “There are some limitations to the intuitions from Keynes,” arguing that the economist himself saw instances when demand-stoking policies might not lead to growth.

The tough line has yet to win markets over. The yield on Portuguese government bonds – more than 11 percent on longer-term bonds — is substantially higher than the yields on debt issued by Ireland, Spain or Italy. Mr. Gaspar says the yields are “not a reflection of the fundamentals.”

If interventionism caused the crisis, then it should be expected that further interventionism will worsen the crisis. So Portugal’s botched Keynesian experiment which “may have made things worse”, did what simple logic dictated.

However in the world of politics, the stereotyped approach for crisis management can be characterized as “doing the same thing over and over again and expecting different results”. In the world of politics, insanity has been the conventional policy.

It’s refreshing to know that Portugal’s government seem to have been awakened from a mental stupor.

Buy Low, Sell High the Euro Crisis

Daily Reckoning’s Chris Mayer opines that the Eurozone crisis is a golden opportunity for investors because it represents “the biggest firesale in history”

Mr. Mayer writes,

Europe’s banking sector holds 2½ times as many assets as the U.S. banking sector. It’s huge. And it’s in big trouble. Europe’s banking sector needs cash — mountains of cash.

As a result, it will have to sell more than $1.8 trillion of assets, which will likely take a decade to work through. For perspective, it sold only $97 billion from 2003–10. “The list of asset sales is the longest I’ve seen in 10 years,” says Richard Thompson, a partner at PricewaterhouseCoopers in London. Knowing how these things work, the final tally could well be double that. The world has never seen anything this big before.

Where will the cash come from?

This is our opportunity. There is no better, more-reliable way to make money than to buy something from someone who has to sell. Bankers are the best people in the world to buy from. Believe me, I know.

I was a vice president of corporate banking for 10 years before I started writing newsletters in 2004. I would get at least three or four requests every year from some investor group asking if we had any assets we were looking to unload. Why? Because they know banks are stupid sellers…

But institutionally, banks can’t really hold bad debts for long. As soon as they report a big bad debt on a quarterly financial statement, some annoying things happen. It means they have to put aside more capital for this particular loan, which they hate to do, as it lowers profitability and requires a lot of paperwork. It can raise the attention of regulators, which banks hate. It can raise shareholder suspicions about lending practices, which banks hate. So the usual way to deal with bad debts is to clear ’em out as fast as possible. (Unless you’re swamped with bad debts in a full-blown crisis, in which case you try to bleed them out and buy time to earn your way out, and/or patch them up as best you can to keep up appearances while you pray for a miracle — or a bailout.)

With the EU banking sector loaded with trillions of stuff it must sell, the mouths of knowing investors drool with money lust.

The fundamental universal concept discussed above is “buy low, sell high”.

And bursting bubbles or bubble busts have presented as great windows of opportunities to acquire assets at bargain basement prices or at fire priced sale that should signify best value for one’s money (whether for investment or for consumption).

But it takes tremendous self-discipline to go against the crowd, to shun short term temptations, and to patiently wait for opportunities like these. And it also takes prudence and emotional intelligence to adhere to Warren Buffett’s popular aphorism of “be fearful when others are greedy and greedy when others are fearful”.

There is another major or important implication from the article above. The Euro crisis is far far far from over. And so with the US banking system (although to a much lesser degree relative to the Eurozone)

Euro banks have only sold a speck or a fraction of what has been required ($97 billion of $1.8 trillion) to cleanse their balance sheets to restore a sense of normalcy in their banking system.

This only means that the political path will come from one of the two options:

One, central banks, particularly the ECB, possibly in conjunction with the US Federal Reserve, will have to persist in massively inflating the system in order to prevent the markets from clearing. The policy of deferment (as seen today) allows for the banking system to gradually dispose of their assets at artificially inflated prices…

Otherwise, the second option means facing the consequence of a banking system meltdown, which should ripple to the welfare state—an option, which so far, has been sternly avoided by incumbent political authorities.

Of course, politicians and the vested interest groups have been hoping that economic growth will eventually prevail that would help resolve the crisis.

But this is wishful thinking as the direction of political actions, purportedly reform the political economies of crisis stricken nations, has little to do with promoting growth but to transfer resources from the public to the politically protected banking system.

Austerity has been a fiction peddled by the left.

chart from Bloomberg

Central bank assets have soared to uncharted territories, as taxes and numerous restrictive trade regulations have been imposed, while price inflation has been percolating through the system.

chart from tradingeconomics.com

In short, the fire sale of assets from Eurozone’s crisis afflicted banking system has yet to come.

And we should first expect more central banking interventions that would amplify such an outcome.

And I’d further state that the boom bust cycle fostered by global negative real rates environment will lead, not only to fire sales of financial assets to the Eurozone, but across the world—in the fullness of time.

Chart of the Day: Greece Austerity?

chart from tradingeconomics.com

Some experts question the “benefits of austerity” on the Greece economy.

The graph above prompts for the question, where the heck is “austerity”?

Should a one year slump in Greece’s government budget (referenced only to 2010) be discerned as austerity? But how about comparing the Greece’s budget since 1995…does this look anywhere like austerity?

Reference points can be manipulated or framed to fit biases. But that would translate to intellectual dishonesty.

Serial Bailouts For Greece (and for PIIGS)

From the Bloomberg

European Union officials will focus on preparing a new aid package for Greece that includes a “voluntary” role for investors after the EU and International Monetary Fund approved the fifth installment of Greece’s 110 billion-euro ($161 billion) bailout.

“I expect the euro group to agree to additional financing to be provided to Greece under strict conditionality,” Luxembourg Prime Minister Jean-Claude Juncker said after meeting with Greek Prime Minister George Papandreou in Luxembourg yesterday. “This conditionality will include private-sector involvement on a voluntary basis.”

Papandreou agreed to 78 billion euros in additional austerity measures and asset sales through 2015 to secure the 12 billion euro bailout payment and meet conditions for receiving an additional rescue package. He agreed to make “significant” cuts in public-sector employment and establish an agency to manage accelerated asset sales, according to a statement released in Athens yesterday. The plan is fueling popular opposition and protests across Greece...

Under the original rescue, Greece was due to sell 27 billion euros of bonds next year. EU leaders and Papandreou have acknowledged that a return to markets won’t be possible with Greece’s 10-year debt yielding 16 percent, more than twice the level at the time of the bailout. The EU is looking to close that funding gap through new loans and bondholders’ willingness to roll over Greek debt, EU officials have said.

Europe’s financial leaders needed to hammer out a revised Greek package to persuade the IMF to pay its share of the 12 billion-euro tranche originally due in June. The IMF had indicated that it would withhold its 3.3 billion-euro piece unless the EU comes up with a plan to close Greece’s funding gap for 2012. The EU-IMF statement said the full payment would be made in early July. [all bold highlights mine]

These developments seem on the way to validate my views.

Mainstream has been ignoring the political role of the EU’s existence, the role of central bankers, the intertwined complex political relationships between the banking sector, the central banks and the national governments and the inherent ability of central banks to conduct bailouts by inflating the system.

If the US had QE [Quantitative Easing] 1.0, 2.0 and most likely a 3.0...until the QE nth, despite poker bluffing statements like this [Morningstar.com]

"The trade-offs are getting--are getting less attractive at this point. Inflation has gotten higher," Bernanke said. He cited the rising inflation expectations seen then and offered "it's not clear that we can get substantial improvements in payrolls without some additional inflation risk." He went on, "If we're going to have success in creating a long-run sustainable recovery with lots of job growth, we've got to keep inflation under control."

...or that the earlier consensus view that QE 3.0 is unlikely,

central bank watchers believe there is simply no appetite within the central bank to undertake such an effort, which some in markets are already referring to as QE3.

...QE 3.0 will be coming for the above reasons as earlier discussed.

The path dependence from previous actions of regulators and political leaders and the dominant ideological underpinnings which influence their actions combined with the framework of current network of political institutions are highly suggestive of the direction of such course of actions.

Importantly, the implicit priority to support the politically privileged industries as the banking system—which functions as the main intermediary that channels private sector funds to governments. Alternatively, this means policies has been designed to sustain the status quo for politicians and their allies.

Further, it would be misplaced to put alot of emphasis on political protestations by the public as measure to predict future policies.

Political leaders have learned the lessons of Egypt and Tunisia and have been applying organized violence as seen in Libya, in Yemen or in Syria.

It won’t be different for the political leaders of the developed world. As indications of their prospective actions against popular political pressure, even several protestors on US Memorial Day have suffered from police brutality from just “dancing”

In addition, sentiment can shift swiftly.

Recent soft patches in economic data, which I think has been part of the signaling channel maneuver, which has likewise began to affect markets, appear to be reversing previous sentiments which says that the Fed has “no appetite” for QE 3.0.

Again from Morningstar

Having received the strongest indication yet of a slowing economic recovery, traders of U.S. interest rate futures on Friday backed off on the notion that the Federal Reserve will start raising its short-term federal-funds rate during the first half of next year.

Finally, for those who say they are ‘massively’ short the Euro...

...it’s gonna be alot of pain for them.

So like the US, the above only reveals that the Eurozone crisis will mean that Greece and the PIIGS will experience bailouts after bailouts after bailouts. Thus, an implied currency war in the process until the unsustainable system of fiat money collapses or people awaken to the risk thereof and apply political discipline.

For now, the policy of bailouts and inflationism will continue to be the central feature of today’s global policy making process where currency values will be determined by the degree of relative inflationism applied.

Enervate Crony Capitalism: Cut Their Financing

Speaking of crony capitalism, Professor and author Thomas Sowell suggests how to enervate them—cut their financing!

Here is Professor Sowell, (townhall.com) [bold emphasis mine]

Trying to reduce the deficit by cutting spending runs into an old familiar counter-attack. There will be all kinds of claims by politicians and sad stories in the media about how these cuts will cause the poor to go hungry, the sick to be left to die, etc.

My plan would start by cutting off all government transfer payments to billionaires. Many, if not most, people are probably unaware that the government is handing out the taxpayers' money to billionaires. But agricultural subsidies go to a number of billionaires. Very little goes to the ordinary farmer.

Big corporations also get big bucks from the government, not only in agricultural subsidies but also in the name of "green" policies, in the name of "alternative energy" policies, and in the name of whatever else will rationalize shoveling the taxpayers' money out the door to whomever the administration designates, for its own political reasons.

The usual political counter-attacks against spending cuts will not work against this new kind of spending cut approach. How many heart-rending stories can the media run about billionaires who have lost their handouts from the taxpayers? How many tears will be shed if General Motors gets dumped off the gravy train?

It would also be eye-opening to many people to discover how much government money is going into subsidizing all sorts of things that have nothing to do with helping "the poor" or protecting the public. This would include government-subsidized insurance for posh and pricey coastal resorts, located too dangerously close to the ocean for a private insurance company to risk insuring them.

Below is a timely example (hat tip Filipino libertarian colleague Jep Chu) of what Mr. Sowell calls as ‘sad stories in the media’ which projects the image of government as ‘helping the poor and protecting the public’.

The fact is that “subsidizing all sorts of things” signify no less than political propaganda for the benefit of the politically privileged vested interest groups that feeds on government revenues forcibly extracted from the public.

Unfortunately, sad stories sell to irrational voters.

Has Brazil Successfully Inflated Their Debt Away?

So claims popular analyst John Mauldin in his latest newsletter.

You don’t even have to go that far back to see hyperinflation and how brilliantly it works at eliminating debt. Let’s look at the example of Brazil, which is one of the world’s most recent examples of hyperinflation. This happened within our lifetimes. In the late 1980s and 1990s, it very successfully got rid of most of its debt.

Today, Brazil has very little debt, as it has all been inflated away. Its economy is booming, people trust the central bank, and the country is a success story. Much like the United States had high inflation in the 1970s and then got a diligent central banker like Paul Volcker, in Brazil a new government came in, beat inflation, produced strong real GDP growth, and set the stage for one of the greatest economic success stories of the past two decades. Indeed, the same could be said of other countries like Turkey that had hyperinflation, devaluation, and then found monetary and fiscal rectitude.

In 1993, Brazilian inflation was roughly 2,000 percent. Only four years later, in 1997 it was 7 percent. Almost as if by magic, the debt disappeared. Imagine if the United States increased its money supply, which is currently $900 billion, by a factor of 10,000 times, as Brazil did between 1991 and 1996. We would have 9 quadrillion U.S. dollars on the Fed’s balance sheet. That is a lot of zeros. It would also mean that our current debt of 13 trillion would be chump change. A critic of this strategy for getting rid of our debt could point out that no one would lend to us again if we did that. Hardly. Investors, sadly, have very short memories. Markets always forgive default and inflation. Just look at Brazil, Bolivia, and Russia today. Foreigners are delighted to invest in these countries.

Sometimes I feel like dispensing the role of snopes.com a popular website which serves as “the definitive Internet reference source for urban legends, folklore, myths, rumors, and misinformation.”

Well, here is the account of Brazil’s inflation-debt dynamics according to the Wikipedia.org, (bold highlights mine)

The stabilization program, called Plano Real had three stages: the introduction of an equilibrium budget mandated by the National Congress a process of general indexation (prices, wages, taxes, contracts, and financial assets); and the introduction of a new currency, the Brazilian real, pegged to the dollar. The legally enforced balanced budget would remove expectations regarding inflationary behavior by the public sector. By allowing a realignment of relative prices, general indexation would pave the way for monetary reform. Once this realignment was achieved, the new currency would be introduced, accompanied by appropriate policies (especially the control of expenditures through high interest rates and the liberalization of trade to increase competition and thus prevent speculative behavior).

By the end of the first quarter of 1994, the second stage of the stabilization plan was being implemented. Economists of different schools of thought considered the plan sound and technically consistent.

1994-present (Post "Real Plan" economy)

The Plano Real ("Real Plan"), instituted in the spring 1994, sought to break inflationary expectations by pegging the real to the U.S. dollar. Inflation was brought down to single digit annual figures, but not fast enough to avoid substantial real exchange rate appreciation during the transition phase of the Plano Real. This appreciation meant that Brazilian goods were now more expensive relative to goods from other countries, which contributed to large current account deficits. However, no shortage of foreign currency ensued because of the financial community's renewed interest in Brazilian markets as inflation rates stabilized and memories of the debt crisis of the 1980s faded.

The Real Plan successfully eliminated inflation, after many failed attempts to control it. Almost 25 million people turned into consumers.

The maintenance of large current account deficits via capital account surpluses became problematic as investors became more risk averse to emerging market exposure as a consequence of the Asian financial crisis in 1997 and the Russian bond default in August 1998. After crafting a fiscal adjustment program and pledging progress on structural reform, Brazil received a $41.5 billion IMF-led international support program in November 1998. In January 1999, the Brazilian Central Bank announced that the real would no longer be pegged to the U.S. dollar. This devaluation helped moderate the downturn in economic growth in 1999 that investors had expressed concerns about over the summer of 1998. Brazil's debt to GDP ratio of 48% for 1999 beat the IMF target and helped reassure investors that Brazil will maintain tight fiscal and monetary policy even with a floating currency.

In short, monetary reform via the dollar peg (first), fiscal austerity and the move towards greater economic freedom resulted to the reduction of Brazil’s debt.

Here is the account of the World Bank... (bold emphasis mine)

Brazil’s debt decomposition indicates that primary fiscal balances and real GDP growth have been the most significant debt-reducing factors between 1993 and 2003. Brazil’s primary fiscal balance, which has improved significantly in the recent past, has provided the largest debt-reducing contribution, in particular since 1999. Real GDP growth was responsible for a debt decline of 9.0 percent of GDP over the decade.

Apparently the World Bank says the same-fiscal side reforms functioned as the critical factor in Brazil’s debt reduction.

And here is a paper from the Inter-American Development Bank entitled The Structure of Public Sector Debt in Brazil

Afonso Sant’anna Bevilaqua, Dionísio Dias Carneiro, Márcio Gomes Pinto Garcia, Rogério Furquim Ladeira Werneck, Fernando Blanco, Patricia Pierotti, Marcelo Rezende, Tatiana Didier writes, (bold highlights mine, italics theirs)

Given Brazilian inflationary history, the domestic bonded debt market was recreated in the mid-1960s with the introduction of indexed bonds (ORTNs), which were then conceived as an antiinflationary tool. The idea was that only the money financing of the fiscal deficits was inflationary. In the period of more than thirty years since its creation, the Brazilian open market has evolved into a very sophisticated one. The gross bond debt held by the private sector is currently around one fourth of a trillion US dollars; the megainflation of the 1980s and early 1990s did not inflate away the Brazilian debt.

During the megainflation, most of the debt was placed with banks (and later, with mutual funds managed by the banks) which used the bonds as the asset counterpart of inflation protected deposits (the indexed money, or domestic currency substitute). With the Real Plan this situation is gradually changing. The debt maturity has been lengthened (with a few setbacks, as the recent Asian and Russian crises), and more agents interested in becoming final holders of long debt—as insurance companies and pension funds—are becoming more important in the financial arena.

A radical change in Brazil debt maturity profile and similarly a change in the classification of debt holders had also been a part of Brazil’s debt reduction dynamics. This paper even highlights: “the megainflation…did not inflate away the Brazilian debt”.

Bottom line: Beware of oversimplified misleading analysis.

Ireland’s Woes Won’t Stop The Global Inflation Shindig

``When governments try to confer an advantage to their exporters through currency depreciation, they risk a war of debasement. In such a race to the bottom, none of the participants can gain a lasting competitive edge. The lasting result is simply weaker and weaker currencies against all goods and services — meaning higher and higher prices. Inflationary policies do not confer lasting advantages but instead make it more difficult to plan for the future. Stop-and-go inflationary policies actually reduce the benefits of using money in the first place.” Robert P. Murphy Currency Wars

For the mainstream, effects are usually confused with the cause to an event. And the misdiagnosis of the symptoms as the source of the disease frequently leads to the misreading of economic or financial picture which subsequently entails wrong policy prescriptions or erroneous predictions.

Yet many mainstream pundits, whom has had a poor batting average in predicting of the markets, have the impudence, premised on either their perceived moral high grounds or their technical knowledge, to prescribe reckless political policies that would have short term beneficial effects at the costs of long term pain with a much larger impact.

Take for instance currency values. Many pundits tend to draw upon “low” currency values as the principal means of attaining prosperity via the “export trade” route. As if low prices mechanically equates to strength in exports. And it is mainly this reason why these so called experts support government interventionism via currency devaluation.

Yet what is largely ignored is that in the real world most of the world’s largest exporters have currencies that are relatively “pricier”, and that most of the “cheap” currency economies tend to be laggards in trade—the latter mostly being closed economies.

In contrast to mainstream thinking, prosperity isn’t about the unwarranted fixation of currency values, but about societies that promotes competitiveness and capital accumulation.

As Ludwig von Mises once wrote[1], (bold emphasis mine)

The start that the peoples of the West have gained over the other peoples consists in the fact that they have long since created the political and institutional conditions required for a smooth and by and large uninterrupted progress of the process of larger-scale saving, capital accumulation, and investment.”

In other words, prosperity emanates from a society which respects the sanctity of property rights premised on the rule of law, which subsequently acts as the cornerstone or foundations of free trade and economic freedom that shapes the state of competitiveness of the economy.

The allure of the polemics of “cheap” currency is no less than “smoke and mirror” chicanery aimed at promoting the interests of a politically privileged class that does little or nothing to advance general welfare.

In short, what is being passed off or masqueraded as an expert economic opinion, is no less than a political propaganda.

Discipline As Basis For Bearishness?

And this applies as well to debt.

Many see the humongous debt load by developed nations as the kernel of the most recent economic crisis. They also use the debt argument as the main basis in projecting the path of economic and financial progress.

Yet debt serves NOT as the principal cause, but as a SYMPTOM of an underlying cause.

It is the collective monetary and administrative policies that have promoted debt financed consumption predicated on the presumed universal validity of AGGREGATE DEMAND that has been responsible for most of the present woes. This has largely been operating for the benefit the government-banking industry-central banking cartel worldwide[2]. Yet such irresponsible policies have spawned endless boom bust cycles and outsized government debts from repeated bailouts and various redistribution schemes which ultimately end in tears. Yet no lesson is enough to restrain these pundits from making nonsensical rationalizations of encouraging a repeat of the same mistakes.

The point is, redistribution has its limits, and we may be reaching the tipping point where the natural laws of economics will undo such false economic premises. And this would represent the grand failure of Keynesian economics from which today’s paper money standard has largely been anchored upon.

For instance the current woes in Ireland, which has not been about the imploding unwieldy social welfare programs yet, but has been about the BLANKET GUARANTEES issued by the Irish government to some of their major ‘too big to fail’ banks, have been used by perma bears to argue for the revival of the ‘deflation’ bogeyman.

While the Ireland debt crisis seem to share a similar characteristic to that of the experience of Iceland[3] in 2008, where the presumed ascendancy or infallibility of government “guarantees” crumbled in the face of economic laws, Ireland’s case is different in the sense that there appears to be political manoeuvring behind the pressure for the latter to comply with the proposed bailout.

Rumors have been rife that the proposed bailout of Ireland have been meant to raise Ireland’s exceptionally low 12.5% corporate tax rates, which has been an object of contention by European policymakers, most especially by the European Central Bank (ECB)

According to the Wall Street Journal[4],

``Brussels has always resented that Ireland transformed its economic fortunes by cutting corporate income taxes and marginal tax rates. At various times, the EU has sued Ireland to raise its rates, accused it of "social dumping" for having a 12.5% corporate income tax, and threatened to cut off European subsidies unless it hiked taxes. None of it worked, but now, with Ireland's banks teetering and its economy in its worse shape in a generation, Europe is moving in for the kill.”

And what better way to compel Ireland to accede to the whims of the bureaucrats in Brussels than to force a crisis from which Ireland would need to accept political conditionalities in exchange for a rescue!

Of course, politicians such as French President Nicolas Sarkozy had been quick to deny the political blackmail[5], saying that “But that’s not a demand or a condition, just an opinion.”

However the important point is that what is being misread by the mainstream as an economic predicament is actually a self inflicted mayhem arising from the political ruse meant at achieving certain political goals.

And unelected politicians have used the markets, largely conditioned to the moral hazard of bailouts and inflationism, to advance their negotiating leverage.

Another point I wish to make is that Euro bears have emphasized that the decision by some Eurozone members to assimilate fiscal austerity has been interpreted as a reason to be bearish on the Euro.

For this camp, the alleged political angst from imposing fiscal discipline would allegedly force the disintegration of the currency union. This is plain AGGREGATE DEMAND based hogwash.

How can it be bearish for individuals or nations (which comprises a community of individuals within defined territorial or geographical boundaries) to act on cleaning up their balance sheets? The excuse is that the lack of AGGREGATE DEMAND will pose as a drag to the economy undergoing the process of “develeraging” from which the government should takeover. What works for the individuals does NOT work for the nation.

Of course the distinction of the paradox can viewed based on time preferences: short term negative and long term positive. People who emphasize on the long term see the positive effects of the structural adjustments even amidst the necessary process of accepting short term pain. Like any therapeutic process, it takes time, regimented diet and regular exercise to recover. There is no short cut, but to observe and diligently work by the process.

On the other hand, there are those who cannot accept any form suffering, or the entitlement mentality. And this mindset characterises the advocates of short term policy fixes.

For politicians who depend on the electoral process to remain in office, any form of suffering represents a taboo as this would signify as loss of votes and consequently the loss of office. Thus, politicians have used short term premised Keynesian economics to justify their actions mostly via the magic of turning bread into stones—printing money.

For unelected bureaucrats the incentives are almost similar, the consequences of any imbalances must be kicked down the road and burden the next officeholder.

For academic or professional supporters, whom are employed in the industries that have privileged ties with the government or whose institutions are funded directly or indirectly by the government, they serve as mouthpieces for these interest groups by embellishing propaganda with expert opinion covered by mathematical models.

The point is this that the AGGREGATE DEMAND paradigm from debt based consumption is not only unsustainable but unrealistic. Yet mainstream experts purposely confuse interpreting the effects as the cause to advance vested interest or for blind belief from dogmatism.

Remaining Bullish On The Euro

And having to confuse effects with the cause is one way to take the wrong side of the markets.

Figure 1: Ireland Government’s Spending Binge

As we pointed out above it is not debt but the incentive by politicians to spend taxpayer money to the point of accruing heavy debt loads that has aggravated the present woes.

As Cato’s Dan Mitchell[6] points out in the case of Ireland,

``When the financial crisis hit a couple of years ago, tax revenues suddenly plummeted. Unfortunately, politicians continued to spend like drunken sailors. It’s only in the last year that they finally stepped on the brakes and began to rein in the burden of government spending. But that may be a case of too little, too late.”

And contrary to the outlook of the Euro bears, the incumbent low corporate taxes seem likely to attract many investors into Ireland.

According to the Economist[7],

IDA Ireland, the agency that targets such investors, says FDI in 2010 will be the best for seven years. A new generation of firms, including computer-gaming outfits like Activision Blizzard and Zynga, are joining the established operations of Intel and Google. Ireland’s workforce is young, skilled and adaptable. Rents are coming down even faster than wages.

So not limited to low taxes, Ireland’s less activist government has resulted to more market based responses in the economy that seems to have also been generating incentives for investors to react positively in spite of the ongoing crisis.

Euro bears are wrong for interpreting discipline and responsible housekeeping as a bearish sign, and equally mistaken for prescribing unsustainable policies that play by the book of mercantilists.

We must be reminded of Professor von Mises’ advise on assessing currency values where ``valuation of a monetary unit depends not on the wealth of a country, but rather on the relationship between the quantity of, and demand for, money”[8]

This means that in terms of relative policies between the US and the Eurozone, the policy of inflationism as administered by the US monetary authorities, seem to tilt the relationship between the quantity (via Euro austerity) and demand, in favour the Euro, whose rally we have rightly predicted[9] in mid of this year.

Alternatively this means that any dip should be considered as a short term countercyclical trend or must be considered a buying window.

Misunderstanding Deflation

Finally, those who continually obsess over the prospects of a deflation environment similar to that of the Great Depression are bound to be incorrigibly wrong.

The Great Depression wasn’t not only a result of contraction of money supply via collapsing banks, but likewise the curtailment of trade from rampant protectionism (Smoot Hawley) and obstructionist policies (regime uncertainty) that inhibited the incentive of the public to invest.

Left to its own devise and unobstructed by government, the marketplace would result to an optimal supply of money. This means for as long as globalization remains operational there won’t be “deflation”.

As another great Austrian Economist, Murray N. Rothbard explained[10],

But money is uniquely different. For money is never used up, in consumption or production, despite the fact that it is indispensable to the production and exchange of goods. Money is simply transferred from one person’s assets to another. Unlike consumer or capital goods, we cannot say that the more money in circulation the better. In fact, since money only performs an exchange function, we can assert with the Ricardians and with Ludwig von Mises that any supply of money will be equally optimal with any other. In short, it doesn’t matter what the money supply may be; every M will be just as good as any other for performing its cash balance exchange function.

If there is any deflation it won’t be from what the mainstream expects, because price deflation would emanate from productivity growth instead of debt deflation, Think mobile phones or computers.

And that’s the reason why perma bears have gotten it miserably wrong, even all the credit indicators previously paraded to argue their case based on the flawed AGGREGATE DEMAND have NOT materialized[11] and worked to their directions.

Now that these indicators either have bottomed out or have manifested signs of improvements, they have NOT been brandished as examples.

So perma bears have been desperately looking for scant real world evidence to support their views.

Bond Markets Reveal Upsurge In Inflation Expectations

IF there would be any ONE thing that would crush the ongoing liquidity party it would be a chain of interest rates increases that eventually would reach levels that would trigger many projects or speculative positions financed by leverage or debt as unprofitable. This would be the credit cycle as narrated by Hyman Minsky.

This means that a bubble fuelled by systemic leverage would be pricked by the proverbial interest rate pin that would unleash a cascade of asset unwinding. This has been a common feature of our paper money system which only shifts from certain asset markets to another.

The motion of rising interest rates would surface from a pick-up in credit demand, which may reflect on policy induced illusory economic growth, broad based consumer inflation as a consequence to sustained monetary inflation or a dearth of capital, which may be prompted for by a surge of protectionism, a collapse in the banking system or snowballing questions over the credit quality on major institutions, if not on claims on sovereign liabilities.

Figure 2: Municipal Bonds by Rising Yields Over The Long End

Despite the recent statistical reports of muted consumer price inflation which marked “the smallest increase since records started in 1957”[12], one must be reminded that consumer price indices represent a basket of goods, services and assets based on the construct of the US government. And these hardly reflect on the accuracy of the real rate of consumer price inflation because they are determined based on the interpretation of government technocrats on what they perceive constitutes as a meaningful measure of “inflation” based on the aggregate assumptions.

So even if food and oil prices have been rising (CCI index in figure 2) it appears that these increases have hardly filtered into the government’s statistical data.

Yet the contradiction appears to have been vented on the bond markets as US treasury yields surge across the long end of the curve as seen in the US 1 year yield (UST1Y) and the 10 year yields (TNX).

As we have been echoing the view of Austrian economists, the inflation which signifies as a political process, would have uneven effects on the economy.

As Professor von Mises wrote, (bold highlights mine)

``Changes in money prices never reach all commodities at the same time, and they do not affect the prices of the various goods to the same extent. Shifts in relationships between the demand for, and the quantity of, money for cash holdings generated by changes in the value of money from the money side do not appear simultaneously and uniformly throughout the entire economy. They must necessarily appear on the market at some definite point, affecting only one group in the economy at first, influencing only their judgments of value in the beginning and, as a result, only the prices of commodities these particular persons are demanding. Only gradually does the change in the purchasing power of the monetary unit make its way throughout the entire economy.

So yes the ‘definite point’ where the symptoms of inflation appear to emerge can be seen in emerging markets, commodities and commodity related industries, with the succession of growing inflation expectations permeating presently into the bond markets.

Remember, recently investors bought into US Treasury Inflation Protected Securities (TIPs) at negative interest rates[13] indicative of mounting expectations of the resurgence of inflation.

So pundits sarcastically questioning “inflation where” are misreading the gradualist dynamics of deepening and spreading inflation. They will instead show you employment data and output gap to argue for “no” inflation regardless of what the bond, stockmarket and commodity markets have been saying.

The other sins of omission by the mainstream has been to read present trends as tomorrow’s dynamics.

Now the tax free US municipal bond markets had likewise been slammed by the surging treasury yields (despite the Fed’s QE 2.0 aimed at keeping interest rates at artificially low levels). As long term US treasury yields have soared, so has these tax free yields.

Other reasons attributed[14] to the recent collapse in muni bond markets have been the expectations of more issuance from many revenue strained states and the potential abbreviation of issuance of Build American Bonds (BABs) given a gridlocked in the US House of Congress, which may have prompted for a deluge of offering in order beat the deadline.

In my view, all these other excuses appear to be secondary to the deepening trend of inflation expectations.

Of course rising interest rates would also put more pressure on the already strained recovery in the US housing markets which I believe has been the object of QE 2.0.

Yet earlier this year we have debunked claims by the government officials and the mainstream pundits supporting the notion of “exit strategies” which I labelled as Poker bluff[15]. (Yes we are once again validated)

And this means that further stress into the housing markets which would translate into balance sheet problems for the US banking system will be perceived by officialdom as requiring more QE’s. So you can expect the Federal Reserve to feed on more QEs as strains on the housing sector remain unresolved.

Another beneficiary of the QE has been the US Federal government. While government spending may be curtailed under the new US Congress, concerns by emerging markets over “currency wars” may lead to less appetite in financing of US debts. This implies that the US will likely resort to the age old ways of financing deficits-debase of the currency. In short, more QEs to come.

So what all these imply for the markets?

It’s still an inflation shindig ahead.

Of course considering the inflation process distorts the market mechanism, we should expect sharp swings in the upside as well as the downside, but with the upside trend becoming more dominant as US monetary authorities resort to more QEs which will be transmitted globally.

Nevertheless, the so-called “crack up boom” or the flight from paper money appears to be taking place worldwide as gold has been fervently rising against all currencies.

With markets expectations over inflation getting more widespread, stay long commodity or commodity related investments.

Lastly, avoid the confusion trap of misreading effects as causes.

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[1] Mises, Ludwig von, Period of Production, Waiting Time, and Period of Provision, Chapter 18 Section 4, Human Action

[2] See QE 2.0: It’s All About The US Banking System, November 8, 2010

[3] See Iceland, the Next Zimbabwe? A “Riches To Rags” Tale?, October 14, 2008

[4] Wall Street Journal Editorial Target: Ireland, October 5, 2010

[5] Bloomberg.com Ireland Aid From EU Won’t Require Tax Increase, Sarkozy Says, November 21, 2010

[6] Mitchell, Daniel J. Don’t Blame Ireland’s Mess on Low Corporate Tax Rates, November 18, 2010

[7] The Economist, Saving the euro, November 18, 2010

[8] Mises, Ludwig von Monetary Stabilization And Cyclical Policy (1928) The Causes Of The Economic Crisis, p.18

[9] See Buy The Peso And The Phisix On Prospects Of A Euro Rally June 14, 2010

[10] Rothbard, Murray N. Mystery of Banking, p. 34

[11] See Trick Or Treat: The Federal Reserve’s Expected QE Announcement, October 31, 2010

[12] Reuters.com Dollar hampered by tame U.S. inflation data November 17, 2010

[13] See Trick Or Treat: The Federal Reserve’s Expected QE Announcement, October 31, 2010

[14] Mousseau, John The Spike in Muni Yields - an Opportunity, cumber.com November 16, 2010

[15] See Poker Bluff: The Exit Strategy Theme For 2010, January 11, 2011