Phisix: Expect A Breakout from the 5,000 level Soon

The neurotic cannot endure life in its real form. It is too raw for him, too coarse, too common. To render it bearable he does not, like the healthy man, have the heart to "carry on in spite of everything." That would not be in keeping with his weakness. Instead, he takes refuge in a delusion. A delusion is, according to Freud, "itself something desired, a kind of consolation"; it is characterized by its "resistance to attack by logic and reality." It by no means suffices, therefore, to seek to talk the patient out of his delusion by conclusive demonstrations of its absurdity. In order to recuperate, the patient himself must overcome it. He must learn to understand why he does not want to face the truth and why he takes refuge in delusions. Ludwig von Mises

Analyzing financial markets has principally been about focus—particularly what we think or believe comprises and signifies as causal factors that lead to specific outcomes.

Focusing on Real Action

Since our focus has mostly been influenced by conventional theories, definitional context of issues involved and heuristics (or mental shortcuts), we are likely to be drawn to distractions from the allure of false relationships. Noise will be read as signals. Effects will be read as causes.

As Austrian economist and author Gary North wrote[1],

People can be misled by deliberately distracting them. This fact is basic to all forms of "magic," meaning prestidigitation. The performer seeks to persuade members of the audience to focus their attention on something peripheral, when the real action lies elsewhere. A skilled performer can do this "as if by magic."

In the marketplace, deliberate distraction has been part of the social convention. We docilely embrace mainstream ideas because this is mostly seen as a socially appropriate or the popular or the normative thing to do. We are hardly concerned about what works or not (but which we presume that they do work), or of the validity or soundness of theories, but rather have mostly been concerned with how we blend with crowds.

Thinking out of the box is seen as a form of heresy which risks ostracism and ex-communication and so must be sternly avoided. Thus, when the orthodoxy has become fixated with peripheral events or activities, we are predisposed to join them, even when the real action, as Professor North says, lies elsewhere.

Boom bust cycles are evidences of such dynamics. Lured by false signals from distortive policymaking, the public imputes many peripheral issues to explain and act on market activities.

The public’s understanding has mostly been influenced by mainstream’s popular obsession with peripheral based doctrines disseminated through media and or by institutional based literatures or through “expert” opinions.

Yet the effects of policies in shaping people’s incentives are hardly reckoned with, even if political actions influence almost everything we do—from savings, investment, consumption to everyone’s distinctive value scales. Conventional thinking reduces the import of political policies as “given” or as having neutral effects to people’s thought processes and the attendant incentives to action. Many for instance are engrossed with “aggregate demand”

The public, including the army of so-called establishment experts, who incidentally hardly saw the 2008 crisis coming[2], forgets that tampering with money essentially contorts half of every transaction that we engage in, whether in the real economy or the financial markets.

Also the boom phase of the bubble cycle influences greatly the market’s psychological framework.

Booms have the tendency to cover or forgive on many of our mistakes. Booms also have the proclivity to embed on the tenuous or flimsy methods we employ in the evaluation or appraisal of the markets. Lastly, because booming markets tend to confirm on most of our biases, there comes a point where the markets will be overwhelmed by an egotistical overreach, highlighted by systemic euphoria or to engage in colossal risk taking activities on the account of overconfidence.

By overlooking on the genuine relationships between perceived causal factors and the expected outcomes, we hardly realize that we may be imbuing on more risks than warranted.

The point is focusing on the peripherals without comprehending on the genuine actions driving the marketplace serves as recipe to a calamitous portfolio

And real action shows that this week’s marginal gains by the Philippine bellwether, the Phisix, have again been a global one and not a standalone or local event.

Outside the Philippine Phisix, the list of my top ten global market performers among 71 nations which I monitor seems like a horse race, where the dominant character has been sharp gyrations, although generally biased to the upside.

This week Greece, India and Brazil dropped out of the list and have been replaced by Denmark, United Arab Emirates and Columbia. Despite the latest bailout agreement[3], Greece benchmark fell by a nasty 9%, nearly halving the yearly gains in just a week. On the other hand, the declines of Brazil and India have mostly been due to recent marginal retracements amidst the fiery rally by other bourses.

Note that the gains have ranged from 17-34% while the median gains are at 20%.

With 90% of global bourses up on my radar screen, where almost half have posted gains of over 10%, it safe to generalize that bulls, running on central bank steroids, have been on a rampage since the start of the year.

The ASEAN-4 bellwethers have seen divergent performance. Thailand (red orange) and the Philippines (orange) are head-to-head in front of Malaysia (red) which seems to have stagnated and Indonesia (green) which appears to have stumbled. My guess is that eventually the laggards will pick up the pace.

Sectoral Indices: Mixed Actions and Changes in Composition

This week’s actions at the PSE suggest of two events: one that the interim consolidation partly represents selective retracements, and second, that the slight gains posted by the Phisix over the week, understate what has been going on in the broader market.

Selective retracements are visible from the divergence in sectoral performance.

Profit taking mode enveloped most industries except the financial and holding sectors, where the latter’s gains have mainly emanated from the astounding run by Aboitiz Equity Ventures [PSE: AEV] up 21.78% over the week.

And much like the sharply volatile global markets, year to date, the financial sector has captured the top spot from the property sector while the Holding sector has equally surpassed the service sector for third spot.

The banking and finance sector has essentially been lifted by the stupendous advances of Union Bank of the Philippines [PSE:UBP], which has been up by about a whopping 104%, followed by the Rizal Commercial Bank [PSE:RCB] and Security Bank [PSE:SECB]. Other giants as Bank of the Philippine Islands [PSE: BPI] and Metrobank [PSE:MBT] has basically reflected on the advances of the Financial index while Banco De Oro [PSE: BDO] and China Bank has lagged [PSE: CHIB]

The massive jump in share prices of the financial system has been reflecting on the recent spike in the credit growth of the domestic financial system[4]

Last year’s most outstanding performer, the mining sector, has lagged the advances of the Phisix due to the consolidation phase by the mining heavyweights. The transition in the mining sector has been exhibiting a shift in the market’s attention from the heavyweights to the periphery (second and third tier firms) and now to the oil issues.

Philodrill [PSE: OV, black candle], Oriental Petroleum [PSE: OPM] and Petroenergy Resources [PSE: PERC] posted extraordinary gains over the past two weeks. [disclosure I am a shareholder of PERC and OV]

Once again these are manifestations of the rotational process at work. And the transitions in the upside price actions have been in the context of companies within specific sectors and the relative performances among the sectoral benchmarks

All these actions have been confirming signs of an inflationary boom.

Yet index watching can’t be entirely relied on as they are subject to changes by the authorities based on several self-designed standards.

The Philippine Stock Exchange [PSE: PSE] has recently announced there will be some alterations in the composition of subindices, while leaving the main index or the Phisix unchanged.

From a news report at the Businessworld[5],

"A total of 11 companies will be added to the current composition of various sector indices while 13 companies will be removed," the PSE said.

For financials, National Reinsurance Corp. of the Philippines and Vantage Equities, Inc. will be taken out while CitisecOnline.com, Inc. will be added, the bourse said in a memorandum circular.

Industrials will see the departure of Integrated Micro-Electronics, Inc., Republic Cement Corp., San Miguel Brewery, Inc., and Ginebra San Miguel, Inc., and the entry of Greenergy Holdings, Inc. and Megawide Construction Corp.

For holding firms, South China Resources, Inc. will be replaced by Solid Group, Inc., Pacifica, Inc., and Alcorn Gold Resources Corp.

Leaving the services sub-index are Pacific Online Systems Corp., Liberty Telecoms Holdings, Inc., and TransPacific Broadband Group International, Inc. The inclusions are Premiere Horizon Alliance Corp. and IP E-Game Ventures, Inc.

Dropped from the property list were Philippine Realty & Holdings Corp. and A. Brown Co., Inc.

Mining and oil, lastly, will have Omico Corp. replaced by Benguet Corp. "A" and "B," United Paragon Mining Corp. and Abra Mining & Industrial Corp.

Any impact from the tweaking or changes in the composition of the sub-indices will be short-term.

Market Internals Turns Notably Bullish

While the market internals of the PSE has partly been exhibiting partial signs of profit taking, some vital indicators has been neutralizing or offsetting these.

Net foreign trades (averaged weekly) appear as showing signs of recovery from an interim slump. Any reacceleration of foreign buying will likely focus on Phisix component issues. And foreign buying into Phisix issues means a potential test or even a successful breakout of the Phisix 5,000 level.

The chart also shows that this cycle has broadly been about local investors driving the Phsix to record highs.

The daily average Peso volume (averaged on a weekly basis) has likewise been on an uptrend. This means that further expansion of trading volume will likely translate not only to a higher Phisix but also on a broad market based buoyancy.

Finally this has been the most surprising of them all, total number of trades (averaged weekly basis) has exploded.

This possibly extrapolates to a jump in the number of ‘new’ participants (most likely retail investors) and or more active or aggressive churning activities by traders and punters.

In short, the local markets have been exhibiting generalized bullishness.

Improving net foreign trade, rapidly ballooning trade volumes and spiking total daily number of trades seem like a pressure packed seething volcano awaiting the right opportunity to explode.

More Steroids from Global Central Bankers and their Real Side Effects

Well central bankers are there to ensure the continuity of the cyclical boom.

Despite talks of ‘stigmatization’ or the reluctance to avail of European Central Bank facilities by several banks[6], I expect the reopening of the second three year Long-term Refinancing Operations (LTRO) facility will be utilized to the hilt.

In addition, the expected implementation of the recently announced credit expansion programs via asset purchases or QEs by the Bank of England[7] and Bank of Japan[8], and China’s recent easing of reserve requirements[9] have all been pointing to another gush of liquidity headed for the global financial marketplace. And much of these should be expected to get funnelled into the asset markets.

Moreover, as of this writing the G-20 have reportedly been trying to forge for a $2 trillion global rescue fund[10] to erect a firewall from the European sovereign and banking debt crisis.

As stated earlier, real actions means that swamping the world with digital and or freshly minted money will have real side-effects, not only the financial markets, but also in the economy.

Prices of natural gas, which should remain under pressure from the supply side growth from the shale gas revolution (see chart above[11]), seem on the verge of a price recovery (see chart below).

One would note that the recent recovery in oil prices have coincided with the jump in the US S&P 500 benchmark. Also the price surge in gasoline in the US has been accelerating.

I have not persuaded[12] that the spike in oil prices have been because of geopolitical turbulence particularly a prospective war on Iran or the ongoing civil war in Syria.

A continued uptick of the prices of vital commodities would eventually push up interest rates through the inflation premium. And higher inflation could possibly either force a policy tightening which translates to an eventual bust, or shortage of money which will be met by even more money printing that leads to an acceleration of inflation or the crack-up boom.

Thus it pays to observe how pervasive the side-effects will be and how politicians will react to side-effects. Again a stimulus response feedback loop mechanism based on market’s response to political actions and vice versa

Global Credit Easing Policies Points to A Firming of the Philippine Peso

Going back the immediate transmission effects of global policies to the local markets, perhaps recent signs of the recovery seen in the NET foreign flows in the PSE can be traced to cross-currency yield seeking arbitrages or carry trades.

To add, should portfolio flows into the Philippines intensify, through the PSE and local bond markets, then the lagging Philippine Peso will likely see more room for appreciation.

The Philippine Peso’s historic 40 decade long of decline (see the upper window of the above[13]) had been reversed as portfolio flows to the local debt and equity markets surged from 2004-2007 (see the lower window of the above[14]).

In addition, when the Phisix peaked at the 3,800 level in 2007, the Peso eventually firmed up until the 40.25 level. Today with the Phisix knocking at 5,000 levels the Peso still remains at the 42.84 levels. Much of this can be explained by the current locally driven bullmarket and the relatively lack of participation by foreigners.

I would suspect that part of the Peso’s lagging performance could also be due to interventions by the BSP. But I would need evidence to confirm this.

The ramping up of QEs may change the complexion of the game where local bulls will likely be complimented by foreign yield spread arbitrageurs.

And the bottom line is: Expect a break of the Phisix 5,000 level soon.

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[1] North Gary Inside Job: How Nixon Was Taken Down, June 8, 2005 Lewrockwell.com

[2] Telegraph.co.uk The Queen asks why no one saw the credit crunch coming November 5, 2008

[3] Bloomberg.com Euro Finance Ministers Said to Reach Agreement on Greek Bailout February 21, 2012

[4] See Global Equity Market’s Inflationary Boom: Divergent Returns On Convergent Actions February 13, 2012

[5] Businessworldonline.com PSE limits tweaks to sub-indices, February 22, 2012

[6] Weekly Focus, Two steps forward – one step back Danske Research February 24, 2012

[7] See Bank of England Adds 50 billion Pounds to Asset Buying Program (QE), February 9, 2012

[8] See Bank of Japan Yields to Political Pressure, Adds $128 billion to QE, February 14, 2012

[9] Bloomberg.com China Cuts Reserve-Ratio for Growth as Inflation Deters Interest-Rate Move, February 20, 2012

[10] Reuters.com G20 inches toward $2 trillion in rescue funds February 26, 2012

[11] Gruenspecht Howard Annual Energy Outlook 2012 Early Release Reference Case, US Energy Information and Administration, January 23, 2012

[12] See Are Surging Oil Prices Symptoms of a Crack-up Boom? February 24, 2012

[13] Wikinvest.com Philippine Peso (PHP)

[14] Tradingeconomics.com Portfolio investment; excluding LCFAR (BoP; US dollar) in Philippines

Portfolio investment excluding liabilities constituting foreign authorities' reserves covers transactions in equity securities and debt securities. Data are in current U.S. dollars.This page includes a historical data chart, news and forecats for Portfolio investment; excluding LCFAR (BoP; US dollar) in Philippines.

Quote of the Day: The Key Thing Poor Countries Should Do

In a eulogy to Sir John James Cowperthwaite, a British civil servant and the Financial Secretary of Hong Kong from 1961 to 1971, the quebecoislibre.org wrote (hat tip Bob Wenzel)

Asked what is the key thing poor countries should do, Cowperthwaite once remarked: "They should abolish the Office of National Statistics." In Hong Kong, he refused to collect all but the most superficial statistics, believing that statistics were dangerous: they would led the state to to fiddle about remedying perceived ills, simultaneously hindering the ability of the market economy to work. This caused consternation in Whitehall: a delegation of civil servants were sent to Hong Kong to find out why employment statistics were not being collected; Cowperthwaite literally sent them home on the next plane back.

Cowperthwaite's frugality with taxpayers' money extended to himself. He was offered funds from the Hong Kong Executive to do a much needed upgrade to his official residence, but refused pointing out that since others in Hong Kong did not receive that sort of benefit, he did not see why he should.

Cowperthwaite's hands off approach, and rejection of the in vogue economic theory, meant he was in daily battle against Whitehall and Westminster. The British government insisted on higher income tax in Singapore; when they told Hong Kong to do the same, Cowperthwaite refused. He was an opponent of giving special benefits to business: when a group of businessmen asked him to provide funds for tunnel across Hong Kong harbour, he argued that if it made economic sense, the private sector would come in and pay for it. It was built privately. His economic instincts were revealed in his first speech as Financial Secretary: "In the long run, the aggregate of decisions of individual businessmen, exercising individual judgment in a free economy, even if often mistaken, is less likely to do harm than the centralised decisions of a government, and certainly the harm is likely to be counteracted faster."

Mr. Cowperthwaite’s contribution deserves even more credit. According to the Guardian

His example inspired the governments of Margaret Thatcher and Ronald Reagan, and was a key influence in China's economic liberalisation after the demise of Mao Zedong.

I add to my list of underrated and unsung heroes of capitalism Sir John James Cowperthwaite.

Poor and Middle Income Countries are ‘Happier’?

Based on self-reported happiness, poor to middle income countries have reportedly been happier than their rich counterparts

So says the Economist,

DESPITE the economic gloom, the world is happier than it was before the financial crisis set in (according to a recent poll from Ipsos which surveyed 19,000 adults in 24 countries). 77% of respondents describe themselves as "happy", three percentage points higher than in 2007. Those countries who report themselves as being the happiest tend to be in poor and middle-income countries, while the gloomiest are in rich countries (the figures for Italy and Spain were 13% and 11%).

Reasons? Again from the Economist,

Two conclusions emerge. Large, fast-growing emerging markets do not share rich industrialised countries’ pessimism. The already large “very happy” cohort rose 16 points in Turkey, ten points in Mexico and five points in India. Even rich-country pessimism is uneven. The share of “very happy” people rose six points in—of all places—Japan, defying tsunami and nuclear accidents. But growth amid global misery does not explain everything: the biggest falls in happiness also occurred in large emerging markets, in Indonesia, Brazil and—a perennial misery guts—Russia.

The second conclusion challenges the received notions of mankind’s moods. A tenet of political science is that happiness levels rise with wealth and then plateau, usually when a country’s national income per head reaches around $25,000 a year. “The richer a country gets,” argued Richard Wilkinson and Kate Pickett in “The Spirit Level”, an influential book of 2009, “the less getting still richer adds to the population’s happiness.” Many on the left have concluded that pursuing further economic growth is pointless. Even right-wing politicians such as Britain’s prime minister, David Cameron, and the French president, Nicolas Sarkozy, have set up projects to study “gross national happiness”.

I am tempted to say that polls like this seem to justify the political economy of fascism—since people are happier by being poor, then maintain their happiness by continued immersion to poverty. This by handing over economic opportunities to politicians and their cronies through “special interest group captured” political institutions.

Happiness is subjective or signifies an individual's state of mind or represent personal value scales expressed through expectations.

If the above account has some grain of truth in it, then I’d say that reference point matters: Poorer nations may have relatively lower expectations than those of rich economies. And trajectories of economic growth have been changing the underlying dynamics of expectations

With globalization (measured by trade volume and Industrial Production) at record highs (chart from Professor Mark Perry) economic opportunities have been brightening up for emerging markets compared to debt plagued developed economies.

In other words, optimism, for people who have been jaded or inured to poverty, have likely been derivative from increasing trade opportunities (through liberalization or more economic freedom) that has rewarded their drudgery.

Economic growth favors emerging markets; chart from another 2009 Economist article

Whereas people used or conditioned to living lavish lifestyles funded by intractable debt will have to face the realities of rebalancing their finances. So again, changes in expectations from base points seem to be shaped by the economic developments

There is another aspect: the welfare state. People in rich countries, many of whom are dependent on the welfare state may have seen a reduction in the essence of personal values; particularly family, responsibility, and value of work.

As economist Vedran Vuk writes at the Mises.org,

The agenda of the state is to break up the family. The more you depend on the state, the more you justify its existence, and the larger it grows. The idea that people can provide things for themselves either individually or through the family frightens the state. It delegitimizes its role. The role of the family is dangerous to its survival.

In contrast, the rewards in economic growth have not only been benefiting one’s material welfare, but importantly are magnified through personal values (again family, responsibility and work ethics) in lesser welfare dependent economies.

US to Deal with North Korea’s Dollar $100 bill Counterfeiting

A counterfeiter meets another counterfeiter: North Koreans printing unauthorized US $100 dollar bills

From Business.time.com (hat tip lew rockwell blog)

U.S. negotiators are heading into a second day of what have been dubbed “serious and substantial” talks with North Korean officials. Yet amidst all the discussion of how the U.S. will attempt to work with Kim Jong Un, there has been little (open) speculation as to whether Dear Leader Junior might crank up production of $100 and $50 bills. No, not North Korean 100- or 50-won banknotes, worth about as much as old tissues. I’m talking about fake greenbacks — or, as the U.S. Secret Service has dubbed them, “superdollars.”

These ultra-counterfeits are light years beyond the weak facsimiles produced by most forgers, who use desktop printers. As an anti-counterfeiting investigator with Europol once put it: “Superdollars are just U.S. dollars not made by the U.S. government.” With few exceptions, only Federal Reserve banks equipped with the fanciest detection gear can identify these fakes…

Forging $100 bills obviously gels with the regime’s febrile anti-Americanism and its aim to undercut U.S. global power, in this case by sowing doubts about our currency. State level counterfeiting is a kind of slow-motion violence committed against an enemy, and it has been tried many times before. During the Revolutionary War, the British printed fake “Continentals” to undermine the fragile colonial currency. Napoleon counterfeited Russian notes during the Napoleonic Wars, and during World War II the Germans forced a handful of artists and printing experts in Block 19 of the Sachsenhausen concentration camp to produce fake U.S. dollars and British pounds sterling. (Their story is the basis for the 2007 film “The Counterfeiters,” winner of the 2007 Oscar for Best Foreign Language Film.)

Superdollars can be viewed as an act of economic warfare, but Pyongyang’s motive is probably more mundane: The regime is broke. The 2009 attempt to raise funds by devaluing its already pathetic currency revealed not only the country’s fiscal desperation, but also the abuse Dear Leader was willing to inflict on his people. The won was devalued 100-fold, which meant 1,000 won suddenly had the purchasing power of 10 won. (Imagine waking up to a learn that a slice of pizza costs $250.) Officials set a tight limit on how much old money could be exchanged for new, so whatever value existed within people’s paltry savings evaporated overnight. Compared to devaluation, generating quick cash by counterfeiting some other country’s more stable currency looks downright humanitarian.

So part of the reason why the North Korean government counterfeits the US 100 Benjamin Franklin bills has been to put up a façade or a veneer on its rampant inflationism.

But counterfeiting is a twofold process. According to the great Murray N. Rothbard such process involves first, an increase of the total supply of money, thereby driving up the prices of goods and services and driving down the purchasing power of the money-unit; and second, the changing of the distribution of income and wealth, by putting disproportionately more money into the hands of the counterfeiters.

In short, counterfeiting is the finagling of the public’s wealth into the pockets of politicians or the counterfeiters who run the printing press. This essentially makes the US government, via the fiat money standard running on central banking operations, no different than typical counterfeiters except that US central bank operations are reckoned as legitimated.

And besides, North Koreans need not “undercut U.S. global power” because the US has already been working on path towards self inflicted perdition, through US dollar debasement policies.

Yet the US government disdains competition and will likely act to curtail them.

Again Professor Rothbard,

Whereas the government may take a benign view of all other torts and crimes, including mugging, robbery, and murder, and it may worry about the "deprived youth" of the criminal and treat him tenderly, there is one group of criminals whom no government ever coddles: the counterfeiters. The counterfeiter is hunted down seriously and efficiently, and he is salted away for a very long time; for he is committing a crime that the government takes very seriously: he is interfering with the government's revenue: specifically, the monopoly power to print money enjoyed by the Federal Reserve.

So will the counter-counterfeiting of the North Korean government serve as justification for war hungry US politicians to open a new front in the imperial theater of war?

Mobile Internet is the Future

Internet and mobile phones are in the process of (media) convergence

From comscore.com

“2011 proved to be a groundbreaking year for the mobile industry, with smartphones hitting the mainstream, tablets emerging as a formidable fourth screen, and consumers increasingly integrating mobile behaviors into their lifestyles. As the industry continues to innovate and more consumers look to multiple devices and platforms to consume digital media, we expect the mobile and connected device landscape to be shaken up even further in 2012,” said Mark Donovan, comScore Senior Vice President of Mobile. “As mobile channels present a more personal, social, and ubiquitous experience to consumers, advertisers and publishers have an opportunity to better engage target audiences, given an understanding of how to connect and leverage the unique characteristics of these emerging platforms.”

Key findings highlighted in 2012 Mobile Future in Focus include:

• Smartphones Gain Adoption Among ‘Early Majority’, Driving Mobile Media Consumption
  Nearly 42 percent of all U.S. mobile subscribers now use smartphones, along with 44.0 percent of mobile users across the EU5 (comprised of France, Germany, Italy, Spain, and the UK). Mobile media use – defined as browsing the mobile web, accessing applications, or downloading content – saw increased growth as a result, surpassing the 50-percent threshold in many markets, supported by the proliferation of high-speed networks and increased public WiFi availability.

• Smartphone Platform Wars Intensify As Android and Apple Take the Lead in Most Markets
  The Google Android and Apple iOS smartphone platforms emerged as the leaders of the U.S. smartphone market in 2011, with Android just a few points shy of capturing half of the smartphone market and iOS accounting for nearly 30 percent of the market. In the EU5, Android saw similarly significant gains, unseating market leader Symbian in 3 out of the 5 European markets measured.

• Surge in Mobile App Usage Shapes a Dual Mobile Browsing Experience, Fueling Category Growth
  In 2011, both the U.S. and EU5 saw the growth in mobile app use exceed the growth in mobile browser use, leading to both markets seeing the same percentage of their mobile audience use both apps and browsers to access mobile media. Health ranked as the fastest-growing mobile media category in the U.S. in 2011, followed by Retail and other commerce-related categories such as Electronic Payments and Auction Sites.

• Mobile Retail Information Leads to Emergence of Smartphone Shopping Behaviors
  More than half of the U.S. smartphone population used their phone to perform retail research while inside a store in 2011, illustrating the emergence of savvy smartphone shoppers who bring online shopping behaviors in-store – a trend seen in other markets as well. At the end of 2011, nearly 1 in 5 smartphone users scanned product barcodes and nearly 1 in 8 compared prices on their phone while in a store.

• Mobile Devices Fuel Social Networking On-The-Go, Driving Real-Time Online Interaction
  64.2 million U.S. smartphone users and 48.4 million EU5 smartphone users accessed social networking sites or blogs on their mobile devices at least once in December 2011, with more than half of these mobile social networking users accessing social media almost every day. While mobile social networking users showed the highest propensity to read posts from people they knew personally, more than half of those in the U.S. and nearly half in the EU5 also reported reading posts from brands, organizations, and events.

• Mobile Connectivity and Connected Devices Encourage Cross-Platform Digital Media Consumption among ‘Digital Omnivores’
  Tablets quickly rose in popularity in 2011, taking less than two years to account for nearly 40 million tablets in use among U.S. mobile users and outpacing smartphones which took 7 years to reach the same. By the end of 2011, nearly 15 percent of U.S. mobile users also had tablets – a trend seen across other markets as well.

Download the complimentary copy of 2012 Mobile Future in Focus here

Are Surging Oil Prices Symptoms of a Crack-up Boom?

Dr. Ed Yardeni thinks that there has been a mismatch between oil prices and oil demand

Dr. Yardeni writes

The price of Brent crude oil is up again this morning over $124 a barrel. It’s up from $107.65 at the end of last year as a result of increasing tensions with Iran following the imposition by the US and Europe of tough new sanctions on Iran. They are already reducing the ability of Iran to export crude oil. Last year, Iran exported about 2mbd. That is likely to get cut by half or more. That’s not enough to explain why oil prices are soaring given that global oil supply is around 88mbd. Of course, concerns are mounting that the diplomatic and economic confrontation with Iran could turn into a military conflict that would disrupt oil traffic coming out of the Persian Gulf. This certainly explains why oil prices are rising.

Global oil demand, on the other hand, is weakening and suggests that oil prices could fall sharply if the Iranian issue can be resolved without push coming to shove. As I’ve explained previously, I believe that the sanctions are rapidly crushing Iran’s economy and may force the Mullahs to give up their ambitions to build nuclear weapons. This may take some time, of course. Meanwhile, if oil and gasoline prices continue to rise, I expect that the Obama administration will coordinate a global release of supplies from the Strategic Petroleum Reserves, as occurred last summer in response to the drop in Libya’s exports.

While tensions over Iran partly contributes to the elevated state of oil prices, there are deeper factors involved as previously explained

Importantly when mainstream economists talk about demand they usually refer to consumption demand and ignore the second type of demand—reservation demand.

The distinguished dean of the Austrian school of Economics Murray N. Rothbard explained,

The amount that sellers will withhold on the market is termed their reservation demand. This is not, like the demand studied above, a demand for a good in exchange; this is a de­mand to hold stock. Thus, the concept of a “demand to hold a stock of goods” will always include both demand-factors; it will include the demand for the good in exchange by nonpossessors, plus the demand to hold the stock by the possessors. The demand for the good in exchange is also a demand to hold, since, regard­less of what the buyer intends to do with the good in the future, he must hold the good from the time it comes into his ownership and possession by means of exchange. We therefore arrive at the concept of a “total demand to hold” for a good, differing from the previous concept of exchange-demand, although including the latter in addition to the reservation demand by the sellers.

Yet what prompts for an increase in reservation demand?

Again Professor Rothbard

an in­crease in reservation demand for the stock may be due to either (a) an increase in the direct use-value of the good for the sellers; (b) greater opportunities for making exchanges for other purchase­-goods; or (c) a greater speculative anticipation of a higher price in the future

Speculative activities also drive the increased demand to hold a stock of goods. Or in the case of oil prices, increased speculation has also been responsible for the recent spike.

This means that monetary policies designed to ease credit via zero interest rates and quantitative easing have been responsible for encouraging, not only consumption but speculative activities too, by increasing people’s time preferences.

One would note that oil prices and stock market prices (S&P 500) have been ramping up. These are symptoms of an inflationary boom.

Of course, inflationary boom extrapolates to a boom bust cycle or to a crack-up boom.

As Professor Ludwig von Mises wrote

The boom could continue only as long as the banks were ready to grant freely all those credits which business needed for the execution of its excessive projects, utterly disagreeing with the real state of the supply of factors of production and the valuations of the consumers. These illusory plans, suggested by the falsification of business calculation as brought about by the cheap money policy, can be pushed forward only if new credits can be obtained at gross market rates which are artificially lowered below the height they would reach at an unhampered loan market. It is this margin that gives them the deceptive appearance of profitability. The change in the banks' conduct does not create the crisis. It merely makes visible the havoc spread by the faults which business has committed in the boom period.

Neither could the boom last endlessly if the banks were to cling stubbornly to their expansionist policies. Any attempt to substitute additional fiduciary media for nonexisting capital goods (namely, the quantities p3 and p4) is doomed to failure. If the credit expansion is not stopped in time, the boom turns into the crack-up boom; the flight into real values begins, and the whole monetary system founders. However, as a rule, the banks in the past have not pushed things to extremes. They have become alarmed at a date when the final catastrophe was still far away.

While a crack-up boom is not imminent, current monetary policies have brought us into this direction. The more governments engage in reckless policymaking in our monetary affairs, the greater risks of spiraling commodity prices.

Rising oil price, thus can be seen as symptoms of a chronic disorder in the current state of money.

Transparency Issues on the US Federal Reserve

Former IMF chief Economist Simon Johnson takes the US Federal Reserve to task for their lack of transparency,

The Wall Street Journal reported on Tuesday that during the 1980s the Fed’s board held 20 to 30 public meetings a year, but these dwindled during the Greenspan years to fewer than five a year in the 2000s and “only two public meetings since July 2010.” At the same time, “the Fed has taken on a much larger regulatory role than at any time in history” — including “47 separate votes on financial regulations” since July 2010, The Journal said.

This high level of secrecy is a concern. It is particularly alarming when combined with the disproportionate access afforded to industry participants in the arguments about what constitutes sensible financial reform.

Just on the Volcker Rule — the provision in Dodd-Frank to limit proprietary trading and other high-risk activities by megabanks — Fed board members and staff members apparently met with JPMorgan Chase 16 times, Bank of America 10 times, Goldman Sachs nine times, Barclays seven times and Morgan Stanley seven times (as depicted in a chart that accompanies the Wall Street Journal article).

How many meetings does a single company need on one specific issue? How many would you get?

For example, Americans for Financial Reform, an organization that describes itself as “fighting for a banking and financial system based on accountability, fairness and security,” met with senior Federal Reserve officials only three times on the Volcker Rule. (Disclosure: I have appeared at public events organized by Americans for Financial Reform, but they have never paid me any money. I agree with many of its policy positions, but I have not been involved in any of their meetings with regulators.)

Americans for Financial Reform works hard for its cause, and it produced a strong letter on the Volcker Rule — as did others, including Better Markets and Anat Admati’s group based at Stanford University.

Based on what is in the public domain on the Fed’s Web site, my assessment is that people opposed to sensible financial reform — including but not limited to the Volcker Rule — have had much more access to top Federal Reserve officials than people who support such reforms. More generally, it looks to me as though, even by the most generous (to the Fed) account, meetings with opponents of reform outnumber meetings with supporters of reform about 10 to 1.

According to those records, for example, the Admati group has not yet managed to obtain a single meeting with top Fed officials on any issue, despite the fact that the group’s members are top experts whose input is welcomed at other leading central banks. To my definite knowledge, they have tried hard to engage with people throughout the Federal Reserve System; some regional Feds are receptive, but the board has not been – either at the governor or staff level…

I do not understand the Fed’s attitude and policies — if it is serious about pushing for financial reform. No doubt they are all busy people, but how is it possible they have time to meet with JPMorgan Chase 16 times (just on the Volcker Rule) and no time to meet Anat Admati – not even for a single substantive exchange of views?

People’s actions are driven by incentives or purpose behavior. So are the actions of those running government bureaucracies. The fundamental difference is that the incentives of bureaucrats are prompted for by political exigencies against market participants who are guided by profits and losses.

Researcher Jane Shaw expounds on the public choice theory

Their incentives explain why many regulatory agencies appear to be "captured" by special interests. (The "capture" theory was introduced by the late George Stigler, a Nobel Laureate who did not work mainly in the public choice field.) Capture occurs because bureaucrats do not have a profit goal to guide their behavior. Instead, they usually are in government because they have a goal or mission. They rely on Congress for their budgets, and often the people who will benefit from their mission can influence Congress to provide more funds. Thus interest groups—who may be as diverse as lobbyists for regulated industries or leaders of environmental groups—become important to them. Such interrelationships can lead to bureaucrats being captured by interest groups.

The political relationship between the regulator and the regulated always impels for a feedback mechanism, such as lobbying, as the regulated will always find ways to circumvent or to relax on the rules which restricts or inhibits their actions. And the typical outgrowth to such relationship has always been the lack of transparency, revolving door relationships (Wikipedia: movement of personnel between roles as legislators and regulators and the industries affected by the legislation and regulation and on within lobbying companies), logrolling and corruption. Such "conflict of interests" relationships frequently make regulatory agencies “captured” by special interest groups.

And what is the ultimate cause for this?

To quote Milton Friedman in Capitalism and Freedom

Any system which gives so much power and so much discretion to a few men that mistakes – excusable or not – can have such far-reaching effects is a bad system. It is a bad system to believers in freedom just because it gives a few men such power without any effective check by the body politic – this is the key political argument against an "independent" central bank. But it is a bad system even to those who set security higher than freedom. Mistakes, excusable or not, cannot be avoided in a system which disperses responsibility yet gives a few men great power, and which thereby makes important policy actions highly dependent on accidents of personality. This is the key technical argument against an "independent" bank. To paraphrase Clemenceau, money is much too serious a matter to be left to the Central Bankers.

In short, the kernel of the transparency issues surrounding the US Federal Reserve has been about the negative ramifications from the centralization of power. Conflicts of interests and regulatory capture signifies as issues which won’t go away for as long political power (in relation to money, but applies elsewhere) remain concentrated to a few men. The more the power assumed by central bankers, the greater the risks of political indiscretions and secrecy.

Thus, the transparency issue can be resolved by the abolishment of central banks.

This means, yes, End the Fed.

Andrew Napolitano: What If Democracy Is Bunk?

Provocative stuff from Judge Andrew P. Napolitano

What if you are only allowed to vote because it doesn't make a difference? What if no matter how you vote, the elites get to have it their way? What if "one person, one vote" is just a fiction created by the government to induce your compliance? What if democracy is dangerous to personal freedom? What if democracy erodes the people's understanding of natural rights and the foundations of government, and instead turns elections into beauty contests?

What if democracy allows the government to do anything it wants, as long as more people bother to show up at the voting booth to support it than to oppose it? What if the purpose of democracy is to convince people that they could prosper not through the creation of wealth but through theft from others? What if the only moral way to acquire wealth – aside from inheritance – is through voluntary economic activity? What if the government persuaded you that you could acquire wealth through political activity? What if economic activity included all the productive and peaceful things we do? What if political activity included all the parasitical and destructive things the government does?

What if governments were originally established to protect people's freedom, but always turn into political and imperialist enterprises that seek to expand their power, increase their territory and heighten their control of the population? What if the idea that we need a government to take care of us is actually a fiction? What if our strength as individuals and durability as a culture are contingent not on the strength of the government but on the amount of freedom we have from the government?

Read the rest here

Video: Smoking Ban is a Ban on Freedom

Politicians make the gullible public believe that policies of prohibition, usually targeted at vices (like smoking alcohol, prostitution or drugs), have been designed for our betterment (health, environment and yada yada yada--as if we are all too obtuse to know what's best for ourselves).

In reality, these actions signify as their latent desire to expand political control over society by reducing our freedom.

The video below from LearnLiberty.org explains how smoking ban regulations assails people's property rights.


Here is a passage from LearnLiberty.org

According to Prof. Aeon Skoble, smoking bans are on the rise in America. At first glance, this trend seems to stage a battle of rights. The smoker claims to have the right to smoke, while the nonsmoker claims the right to clean air in "public" places such as restaurants and bars.

In an important way, however, restaurants and bars are private places. They have owners, just like homes. Skoble argues that restaurant and bar owners should be able to set smoking rules for their establishments, much like you can set smoking rules in your own household.

Nobody forces a customer into a particular restaurant or bar; drinkers and diners are free to choose among the alternatives available, each of which has a unique environment, including its set of smoking rules. Discussions about "smoker's rights vs. nonsmoker's rights" miss the fundamental issue: restaurant and bar owners' property rights.

Cartoon (s) of the Day: What Tattoos Say About You

Tattoos represent a form of social signaling.

The graphics below from cracked.com attempt to explain them (hat tip Prof Bryan Caplan)

Singapore: The Best Place to Own and Store Gold

The Sovereign Man’s Simon Black says that Singapore is the best place to secure ownership of physical gold

Mr. Black writes,

It’s official. Starting October 1, 2012, Singapore will be the best place in the world to store gold.

As a major international financial center, Singapore is rapidly becoming THE place to invest and do business in Asia. Why? Because it’s just so easy. Regulation is minimal, corruption is among the lowest in the world, and the tax structure is very friendly to businesses and investors. With one exception.

Traditionally, physical gold and silver purchases in Singapore have been taxed at a 7% GST rate (like VAT, or a national sales tax). The only legitimate exception was purchasing (and subsequently storing) at the Freeport facility, adjacent to the main airport.

In just-released budget documents, however, the government of Singapore announced that it will begin waiving GST on purchases of investment grade gold, silver, and other precious metals effective October 1st.

This is huge… and it should really make Singapore the best place in the world to buy and store gold. Prices are already incredibly competitive, with ultra-low premiums and very reasonable storage costs.

Thanks for the tip.

Has China’s Role as the ‘World’s Factory’ Coming to an End?

Has Europe taken over China’s role as the “new sweat shop”?

Writes Spiegel Online, (bold original)

It used to be that European carmakers opened plants to assemble their cars in China. Now the Chinese have turned the tables with the opening of their first factory in Bulgaria, an EU country with low labor costs and taxes. Increasingly, Chinese carmakers are setting their sights on the European and American automobile markets.

Great Wall this week became the first Chinese automobile manufacturer to open an automobile assembly plant inside the European Union in the latest move suggesting the country's carmakers are seeking to establish a beachhead into the European market.

Bulgarian Prime Minister Boyko Borisov on Tuesday attended the opening of Great Wall's new factory in the northern Bulgarian village of Bahovitsa. The plant is to be operated jointly by Great Wall and the Bulgarian firm Litex Motors.

For years, European carmakers like Volkswagen have established large joint ventures in order to gain footholds in the Chinese market, but now the tables appear to be turning.

"Stepping on the European market is our strategy," Great Wall CEO Wang Fengying said at the opening festivities.

Within three to five years, the company plans to produce an entire line of models in Bahovitsa to be sold in Europe, she said. Test assembly of the Voleex C10 and the Steed 5 pick-up truck, which sell for 16,000 to 25,000 leva (€8,200 to €12,800), began already in November.

In the midterm, Great Wall plans to assemble around 50,000 automobiles per year at the 500,000 square meter plant. The number of workers is expected to grow from the current total of 120 to 2,000. Initially, the company plans to sell its vehicles primarily in Bulgaria and neighboring Eastern European countries like Serbia and Macedonia, but it later plans to expand into other EU countries.

Attractive Labor Market

Bulgaria, the EU's poorest country, is attractive as a labor market because it is an oasis of cheap wages and low taxes. Workers are considered well educated and the country is ideal as the site for a company like Great Wall to launch. Given that wages for factory workers have risen considerably in China in recent years, assembly sites abroad have become increasingly attractive for some manufacturers.

While it may be true that China’s wages have risen over the past years, it is important to put into perspective that there has been an enormous chasm between European wages (yes despite Bulgaria's position as having one of the lowest wage in Europe) and China’s wages.

From Urbanomics

Europe hourly compensation in manufacturing is more than 30 times China!

From Ebandit

Chinese workers would take more than 8 years and 10 months to catch up with the annual European minimum wage earnings.

Even if the wage convergence trend does deepen overtime, where China’s wages continues to increase as Europe’s wages decline, it would take substantial changes, and possibly many many many years, if not decades, for this wage based differential to close.

And while the mainstream loves to tunnel on “wages” or “compensation” as the key reason for any shifts in investments [mainly to justify government’s actions for currency interventions or the imposition of mercantilist-protectionist policies], the reality is that wages are just part of the many factors driving the entrepreneur’s economic and financial calculations or business decision processes, such as access to markets, finance, infrastructure et al…, regulatory costs, tax regime, legal environment, political institutions and etc…

Perhaps too, some Chinese investors may just be courageous and far-sighted enough to use the recent crisis as an opportunity to position or that the same investors appreciates Europe's competitive and comparative advantages and acted to capitalize on these

Besides, one investment shift does not a trend make.

The last point is that this serves an example of how conditions are not fixed (past performance does not guarantee future outcomes) and that the world is highly complex.

Asia’s Fast Developing Bond Markets

The Economist writes,

Cross-border bank lending to Asia’s developing economies has been shrinking recently. European banks in particular have been retrenching as they seek to meet new capital targets. That may prompt many borrowers to turn instead to the capital markets--as they did during the last financial crisis. European bank lending to emerging Asia fell by over a fifth in the year to March 2009. In response, firms in these countries issued a flurry of bonds: over $240 billion in 2009, compared with $122 billion the year before. Asia's growing bond-markets may provide a useful "spare tire" in a region that still mostly bounces along on bank lending.

One would note from the above that declining cross border bank lending (mainly from Europe and the US) seem to impact AAA securities the most.

On the right window, since 2009 we can see a surge in BBB and BB and below rated securities. In my view, such lending dynamics seem consistent with the negative real rates environment. And my impression is that the recent decline in corporate bond activities may reverse soon, as negative real rates will likely reinvigorate lending activities. But the complexion of Asia's credit market will change.

I would further add that attributing Asia’s growing bond markets to a “spare tire” underappreciates the real dynamic.

The following charts from Asian Development Bank

In reality, since 1997 Asia’s bond markets have been exploding. Although government securities remain dominant, corporate and financial institutions have been grabbing a bigger piece of the outstanding regional bond market pie.

To further add, the gist of the growth in the region’s bond issuance has been in the domestic markets (local currency). This means that (domestic) savings have increasingly been funneled into the local economy through corporate and financial bonds.

Despite the risk of a ballooning bubble, the good news is that Asia’s capital markets seem to be rapidly developing. The bond and equity markets will provide meaningful competition to the banking system in terms of intermediating savings into investments.

Yet if such an explosive growth trend will continue, Asia will eventually give Europe and the US the proverbial run for one’s money.

Quote of the Day: Industrial Policies

From Bloomberg columnist Caroline Baum

Yes, other countries, such as China, have "industrial policies," with government subsidizing favored industries. History isn't on their side. In the 1980s, Japan was a manufacturing and exporting powerhouse, the envy of the world. Three decades later, where's the evidence of success?

How Mobile Texting Can Make People Stupid

From Kurzweilai.net

University of Calgary linguistics researcher Joan Lee, who interviewed texters in research for her master’s thesis. Texting is associated with rigid linguistic constraints that caused students to reject many of the words that non-texters knew, she found.

“Textisms represent real words which are commonly known among people who text,” she says. “Many of the words presented in the study are not commonly known and were not acceptable to the participants who texted more, or read less traditional print media.”

Lee suggests that reading traditional print media exposes people to variety and creativity in language that’s not found in the colloquial peer-to-peer text messaging used among youth or “generation text.”

She says reading encourages flexibility in language use and tolerance of different words. It helps readers to develop skills that allow them to generate interpretable readings of new or unusual words.

I warn my children that immersion to txt language may addle their language construction. Answering papers, quizzes or submitting reports partly blemished with txt formats can be embarrassing.

War on Gold: India’s Government Mulls Restraint on Gold Imports

The proverbial shot across the bow against gold holdings by India’s citizenry, has been fired by the Indian government.

Reports the Mineweb.com,

India's top policy advisory body, the Prime Minister's Economic Advisory Council headed by C Rangarajan, has urged government to discourage gold imports into the country and rather channel savings into formal financial instruments.

The Council made the recommendation in its review of the economy that the government discourage gold purchases and instead provide incentives for investment in financial assets because gold accentuates the current account deficit and hence, import of the yellow metal is unsustainable…

Massive gold imports have rung alarm bells with Indian economists, investment bankers and analysts stating that India's fascination with gold could be a reason why growth appears to be flagging. The gold import bill is expected to touch $100 billion by 2015-16, industry body Assocham (Associated Chambers of Commerce and Industry) has said. "Calculated on the basis of CAGR of period 2010-11 over 1999-2000, the gold import bill could total $100 billion soon. At these levels, gold imports are a huge burden on the balance of payments and accentuates the current account deficit," said Assocham secretary general D S Rawat.

What in reality has been unsustainable isn’t the average Indian’s fixation with gold, but rather the government’s insatiable spending habits.

chart from tradingeconomics.com

India’s fiscal balance has deteriorated sharply since 2008.

chart from tradingeconomics.com

And growing consumption activities, substantially out of government spending, has been reflected on the India’s trade and current account balance through ballooning deficits.

Besides, expansion in government activities essentially crowds out the private sector. This essentially reduces productive opportunities.

The great Murray N. Rothbard explains that fiscal deficits,

whichever way you look at them, cause grave economic problems. If they are financed by the banking system, they are inflationary. But even if they are financed by the public, they will still cause severe crowding-out effects, diverting much-needed savings from productive private investment to wasteful government projects. And, furthermore, the greater the deficits the greater the permanent income tax burden…to pay for the mounting interest payments, a problem aggravated by the high interest rates brought about by inflationary deficits

Yet the political agents abetted by mainstream experts wants the average Indians to shift their savings to financial assets which in reality are meant to finance more of government’s profligacy.

from tradingeconomics.com

The Indian government has last year embarked on monetary tightening policies where interest rates had been raised 13 times…

from tradingeconomics.com

…this has has led to a temporary drop in consumer price inflation, but whose long term trend remains up…

…and the tightening has likewise prompted for a decline in her stock market.

However, whatever discipline India’s government wanted to demonstrate appears to have been fleeting. India’s government recently announced the reversal of tightening policies, which has been instrumental to the vigorous rally of India’s stock market.

At the end of the day, a stirring revelation can be gleaned from gold prices based on India’s rupee over the long term

chart from goldprice.org

Aside from the cultural and traditional affinity with gold, the average Indians appears to have been hedging against government’s inflationism.

The rupee’s purchasing power against gold has fallen off the cliff, or seen conversely, gold prices in rupee terms have skyrocketed!

As the distinguished Henry Hazlitt wrote,

The next inflation hedge we have to consider is the purchase of gold. This seems to many the best hedge of all. They remember that in the great German inflation those Germans who consistently bought gold whenever and to the extent they could, and held it until the inflation ended, came out with at least their principal intact. From a strictly economic point of view, buying gold in a major inflation and holding it probably presents the least risk of capital loss of any investment or speculation.

The Implications of Cuts in Saudi Arabia’s Oil Production and Exports

In the light of $100 oil, Saudi Arabia, the world’s largest oil producer and exporter has reportedly cut production.

The CNBC reports,

The world’s top oil exporter, Saudi Arabia, appears to have cut both its oil production and export in December, according to the latest update by the Joint Organizations Data Initiative (JODI), an official source of oil production, consumption and export data.

The OPEC heavyweight saw production decline by 237,000 barrels per day (bpd) from three-decade highs of 10.047 million bpd in November, the JODI data showed on Sunday.

The draw-down was sharper for the actual amount exported, declining by 440,000 bpd, or 5.6 percent, to come in at 7.364 million bpd, the data also showed. The level would still be similar to exports after a steep ramp-up last June.

In its monthly report on February 10, the IEA put Saudi Arabia’s production number for December slightly lower at 9.55 million bpd, a disparity of 260,000 bpd versus the JODI data.

The actions of the Saudi Arabian government have profound implications.

Could it be that Saudi Arabia has been responding to the threat of Shale oil revolution? Recently Saudi halted a planned $100 billion expansion of productive capacity.

And considering that Saudi’s fiscal budget breakeven level stands at an equivalent of $90 oil, with current prices only marginally above the critical threshold, Saudi’s political stewards seem to anxiously sense of the growing risks to political stability or a threat to their grip on power. Hence the move to reduce oil production aimed at the preservation of the status quo or the incumbent welfare state.

Chart from Energy Insights

It could also be that Saudi’s reserve and production may also have reached a “peak”.

Last year, Wikileaks reported that cable correspondence by key officials from Saudi Arabia suggested that the kingdom may have bloated their estimated reserves by nearly 40%. Thus cuts in exports and production have merely been exposing the chicanery of oil politics.

The bottom line is that Saudi Arabia seems desperate to see higher oil prices.

So aside from production cuts, the bias for inflationary policies, the other alternative would be to promote a war on Iran using the obsession “with the need to prevent Iran getting nuclear weapons” as cover. The same applies to other autocratic Middle East oil producing welfare states.

Thus political languages conveyed by political authorities can be deceiving as they may not reflect on the realities intended.

As George Orwell warned,

Political language is designed to make lies sound truthful and murder respectable, and to give an appearance of solidity to pure wind