Study Says Resveratrol has Anti-Ageing Properties

From Kurzweilai.net

A new study by nine universities and government organizations led by David Sinclair of Harvard Medical School supports the hypothesis that the metabolic benefits of the red wine ingredient known as resveratrol are largely due to its actions on the SIRT1 gene.

“Resveratrol improves the health of mice on a high-fat diet and increases life span,” said David Sinclair of Harvard Medical School. The question was how.

By producing mice in which the SIRT1 gene can be completely turned off in adults, the researchers discovered that those SIRT1-deficient adult mice don’t enjoy the benefits of resveratrol.

Dosage effects resolved

The study also provides insight into another important aspect of the resveratrol controversy. Doubts had arisen in part because the red wine ingredient seems to act in different ways at different doses. The study by Sinclair and colleagues clears those details up, too. They show that resveratrol targets SIRT1 directly at moderate doses and hits other targets at higher ones. Importantly, SIRT1 is required for resveratrol’s benefits irrespective of dose. Based on the findings, Sinclair emphasizes the value of finding the lowest effective dose of resveratrol, and perhaps any drug, to avoid off-target effects.

Medical breakthroughs that may extend people’s lifespans poses as another "800 pound gorilla in the room" for welfare states.

And maybe this also means I should shift from beer to red wine.

Cartoon of the Day: Political Insanity

Hilarious one (but true) from Cato’s Dan Mitchell

The above aptly represents the aphorism “Doing things over and over and expecting different results.”

Quote of the Day: Emotional Inequality

Why should exhibiting those particular feelings be primary in making the case for a free society? Other passions are part of the morally-healthy package: Admiration for those who have achieved a lot. Anger at those who violate rights. Respect for those who exhibit independence and integrity. And of course empathy for those who are struggling with poverty. But empathy for the poor is not more morally special than respect for integrity or anger at bullies and tyrants, and it is a mistake to single it out for special foundational political status. Instead, political theorists concerned with the moral foundations of liberal society should be concerned with general principles of moral character that enable individuals to live freely.

That’s from philosopher Stephen Hicks discussing one the flaws of social justice oriented bleeding heart libertarians (hat tip Professor David Henderson)

Art Markets: Record $120 Million for “The Scream”

Image from Wikipedia.org

From Yahoo

Edvard Munch's painting "The Scream," one of the world's most recognizable works of art, sold for $120 million at Sotheby's on Wednesday, setting a new record as the most expensive piece of art ever sold at auction.

The sale at Sotheby's Impressionist and Modern Art auction featured other works by Pablo Picasso, Salvador Dali and Joan Miro, but Munch's vibrant piece was the centerpiece of the auction in a salesroom packed with collectors, bidders and the media.

The vibrant pastel from 1895 was conservatively estimated to sell for about $80 million at Sotheby's, but two determined bidders drove the final price to $107 million, or $119,922,500 including commission, during a 15-minute bidding war.

One of four versions by the Scandinavian painter, which was being sold by Norwegian businessman Petter Olsen, "The Scream" easily eclipsed the old auction record held by Picasso's "Nude, Green Leaves and Bust," which went for $106.5 million at Christie's two years ago.

I have been pointing out that symptoms of bubbles have not been limited to towering skycrapers, but also to art and wine prices.

The record sale of “The Scream” which coincides with today’s easy money (zero interest rate) environment and central bank QEs, I believe has been highlighting this.

Nevertheless “The Scream” whose artist Edvard Munch described as…

I was walking along a path with two friends – the sun was setting – suddenly the sky turned blood red – I paused, feeling exhausted, and leaned on the fence – there was blood and tongues of fire above the blue-black fjord and the city – my friends walked on, and I stood there trembling with anxiety – and I sensed an infinite scream passing through nature.

…seems to be a propitious theme in today’s sharply volatile politically influenced markets, as driven by serial bubble policies, unwieldy debt, politically desperate actions manifested through rampant inflationism and financial repression.

Anxiety channeled through the "sense of an infinite scream passing through nature" seem to be part of the world we are living in.

Black Holes Show How Limited Man’s Actions Are

From Yahoo.com

Scientists have witnessed the rare spectacle of a supermassive black hole devouring a star that had ventured too close -- an event that occurs about once in 10,000 years, they reported on Wednesday.

Matter-sucking black holes normally lurk dormant and undetected at the centre of galaxies, but can occasionally be tracked by the scraps left over from their stellar fests.

"Black holes, like sharks, suffer from a popular misconception that they are perpetual killing machines," said researcher Ryan Chornock from the Harvard-Smithsonian Center for Astrophysics in Massachusetts.

"Actually, they're quiet for most of their lives. Occasionally a star wanders too close, and that's when a feeding frenzy begins."

If a star passes too close, the black hole's gravitational pull can rip it apart before sucking in its gases, which are heated by the friction and start to glow -- giving away the silent killer's hiding place.

A computer simulated photo from Nasa (Yahoo/AFP)

Scientists can only watch in awe.

While it is true that contemporary scientists have been experimenting with man made black hole machine via the Large Hadron Collider (LHC) to study several theories which I earlier pointed out, such as the Higgs boson “elementary particles cause matter to have mass”, validity of the Grand Unification Theory (are electromagnetism, strong nuclear force and weak nuclear force a single manifestation?), existence of the superstring theory (quantum gravity) and dark matter and dark energy, yet they cannot explain much of why black holes exists, the role it plays, or how a catastrophic disaster (Armageddon) can be avoided.

Yet the solar system where planet earth belongs to faces the same black swan risk from black holes as any planetary or star systems.

As I wrote in 2010 (emphasis original)

Yes, you may forget the farcical anthropogenic climate change, because the forces of nature would be exponentially be way far far far far more powerful and potent than the outcome from any of our collective destructive actions.

Besides, as remarked by the scientists interviewed in the TV documentary program, like any part of nature, our world operates on its own cycle. This means that the “ice age” could be just around the corner in some thousands of years to come, while the sun will expire on its own, by running out of fuel to burn, in about 5 billion years, and that today’s “aging” earth, even without the sun’s demise, will likely meet its end on its own.

And the sad part is that there is nothing mortal man can do to stop it. Every species or anything else that is part of nature will cyclically become extinct.

What’s my point in showing this?

Comedian George Carlin in this video has rightly been saying that too much self importance has been given in what man can do over the environment, such that we make a political spectacle/fuzz out of it.

In reality, humans represent only an iota in the overall spectrum of the universe.

Also our knowledge has been severely constrained to comprehend nature in its entirety, in as much as even understanding human action, the digital age notwithstanding.

In short, parlaying limited and presumptive of knowledge of the environment into public policies are fraught with the risks of unintended consequences. The existence of black holes only underscores this.

Growing Number of Wealthy Americans Renounce Citizenship

While Filipinos have been dreaming of emigrating to the US and acquiring US citizenship, the number of wealthy overseas Americans giving up their citizenship have been ballooning, due to increasingly repressive tax laws.

From Bloomberg,

Rich Americans renouncing U.S. citizenship rose sevenfold since UBS AG (UBSN) whistle-blower Bradley Birkenfeld triggered a crackdown on tax evasion four years ago.

About 1,780 expatriates gave up their nationality at U.S. embassies last year, up from 235 in 2008, according to Andy Sundberg, secretary of Geneva’s Overseas American Academy, citing figures from the government’s Federal Register. The embassy in Bern, the Swiss capital, redeployed staff to clear a backlog as Americans queued to relinquish their passports.

The U.S., the only nation in the Organization for Economic Cooperation and Development that taxes citizens wherever they reside, is searching for tax cheats in offshore centers, including Switzerland, as the government tries to curb the budget deficit. Shunned by Swiss and German banks and facing tougher asset-disclosure rules under the Foreign Account Tax Compliance Act, more of the estimated 6 million Americans living overseas are weighing the cost of holding a U.S. passport.

“It started with the fallout from UBS and non-U.S. banks feeling it’s too risky to deal with Americans abroad,” said Matthew Ledvina, a U.S. tax lawyer at Anaford AG in Zurich. “It will increase because Fatca will require banks to track down people, some of whom will make voluntary disclosures before renouncing their citizenship.”

Renunciations are higher in Switzerland because American expatriates expect extra scrutiny of their affairs after the UBS case and as the U.S. probes 11 other Swiss financial firms for aiding offshore tax evasion, said Martin Naville, head of the Swiss-American Chamber of Commerce in Zurich.

This is another example of the law of unintended consequences at work. Worst, these could be symptoms to the road to serfdom.

Facebook Launches Organ Donation Program

Facebook will use its social networking platform to facilitate a global organ donation program.

From abcnews.go.com

Conversations over the dinner table with his med-student girlfriend helped Mark Zuckerberg formulate his latest big idea — harnessing the power of Facebook to help eliminate the critical shortage of organs for patients desperately in need of life-saving transplants.

And it was his friendship with Apple founder Steve Jobs, whose life was extended by years following a liver transplant, in part, that spurred the 27-year-old Facebook founder and CEO to help put that idea into practice.

“Facebook is really about communicating and telling stories… We think that people can really help spread awareness of organ donation and that they want to participate in this to their friends. And that can be a big part of helping solve the crisis that’s out there,” Zuckerberg told ABC’s Robin Roberts in an exclusive interview at the company’s headquarters.

Starting today, users in the United States and U.K. will be able to add that they’re organ donors to their Timelines, and if they’re not organ donors, they can find links to official organ donation registries and instantly enroll.

This has just been one of the many social benefits that accrue from the information age and from laissez faire capitalism.

Paul Krugman Haunted by Debate with Ron Paul

Well, Paul Krugman seems to be haunted by his recent debate with Ron Paul.

Mr. Krugman writes,

A bit of meta on my “debate” with Ron Paul; I think it’s a perfect illustration of a point I’ve thought about a lot, the uselessness of face-to-face debates.

Think about it: you approach what is, in the end, a somewhat technical subject in a format in which no data can be presented, in which there’s no opportunity to check facts (everything Paul said about growth after World War II was wrong, but who will ever call him on it?). So people react based on their prejudices. If Ron Paul got on TV and said “Gah gah goo goo debasement! theft!” — which is a rough summary of what he actually did say — his supporters would say that he won the debate hands down; I don’t think my supporters are quite the same, but opinions may differ.

This has been Mr. Krugman’s second post on the debate [earlier post here], whereas Mr. Ron Paul has not said a word since.

Ron Paul, as Bob Wenzel rightly observed, has clearly gotten into Krugman's head.

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.

The Kind of Education that will Get a Job in the Information Age

As I have been repeatedly saying, the information change will radically change the way we do things. This will partly include the nature of digital economy businesses which will be reflected on jobs, as well as, many aspects of the employee-employer relationship such as recruitment.

Andrew Coulson of the Cato Institute has this insightful piece of advice for job seekers.

First is to give less importance to college

So many college degrees today are intrinsically worthless that it should really not be possible to find people willing to pay for them

[Edited to add: In the US 1 out of 2 college graduates have been unemployed. In the Philippines 2 out of 5 graduates have been unemployed.]

Next is to build relevant skills through self-learning by using the web. (bold emphasis)

So what’s the alternative if you’re a high school senior seeking higher education? How about this: instead of handing control over that education to someone else, decide what it is you would like to learn over those four years and then… learn it. Thanks to the Web, the material covered in virtually every undergraduate program is readily available at little cost—and the same is true for many advanced programs. And, having learned it, spend a few hundred dollars to create a website or even simply a YouTube channel on which you demonstrate your new skills/understanding. Conduct research. Write it up. Build something. Translate Cyrano into English, maintaining the Alexandrine meter and rhyme. Whatever it is. Then, when you’re ready to apply for work, submit your resume with a link to this portfolio of relevant work.

Employers, ask yourself this question: Would you rather hire someone with a portfolio such as the one described above, visibly demonstrating competency and personal initiative, or someone with a degree that is generally supposed to signal that competency, but that you can’t readily assess for yourself?

My blog is a testament of self-learning acquired through the web. But I am self-employed.

Fighting the Curse of Despotism

Terrific advice from Sovereign Man’s Simon Black

When you step back and look at the big picture, the writing on the wall seems so clear, so obvious. In Western Europe and the United States in particular, bankrupt, insolvent governments will resort to any means necessary in order to maintain the status quo: keeping them in power at our expense.

This means continuing to reduce personal liberty, eliminate economic freedom, vanquish privacy, debase the currency, stifle innovation, eradicate financial opportunity, and destroy the savings and livelihoods of millions of people.

These tactics are not new, this time is not different. Empires on the slide have always resorted to cannibalism– feeding off the productive class in order to keep the party going a little while longer.

In the fourth and fifth centuries (AD), for example, the Western Roman empire resorted to centrally planned labor allocation, price fixing, rapid currency devaluation, capital controls, civil asset forfeiture, and tax rates that were so high that the few citizens who remained welcomed the invading barbarian hordes with open arms.

Most of the smart, productive Romans had already moved on to greener pastures long before. As the situation worsened, more and more people began to leave until there was a mass Exodus of over 90% of western Rome’s population in its final decades.

Similarly, the Ottoman Empire, having reached the zenith of its expansion in the 16th century, established a massive, unsustainable bureaucracy that was far more costly than any other administrative hierarchy in history, including Rome’s.

Soon Ottoman bureacrats began to see the people as existing to provide them with position… rather than their position existing to support the people. Sound familiar?

Huge spending in the Ottoman Empire gave way to a massive public debt (on which they defaulted in 1875), which eventually begat currency debasement, inflation, an absurd tax system, and a substantial reduction in civil liberties.

History shows that freedom is almost always the price that societies pay to maintain the status quo and keep their rulers in power. When the system finally collapses under its own weight, though, things can go from bad to worse as the people cry out for CHANGE.

The French, for example, traded an absolute monarch in Louis XVI for an absolute dictator in Robespierre. Similarly, the Russians traded the empire of ‘Bloody’ Tsar Nicholas II for the Red Terror of Soviet Russia.

As the Russian Marxist revolutionary Leon Trotsky said in 1937, “The old principle of ‘who does not work shall not eat’ has been replaced by a new one– who does not obey shall not eat.”

Two words: Screw that.

Everybody has a choice to make. On one hand, we can either bury our heads in the sand, pretend that everything is OK, and continue being the boiling frog in the pot… just like the poor schmucks who stuck around Rome until the 5th century getting taxed out of their minds and watching their livelihoods inflate away.

On the other, we can recognize that the rise and fall of empires is part of history’s normal cycle… that it’s been happening for millennia, and this time is no different. We can look to the rest of the world and understand that, for all of the turmoil, this is one of the most exciting times to be alive and that the world is full of incredible opportunities.

Just like the Romans who left for Byzantium, the Ottomans who left for Europe, the Europeans who left for North America, there are always regions in the world that are rising while others are falling.

It’s the people who get there first after acknowledging reality and basic historical truth that can reap the greatest reward.

“Freedom is almost always the price that societies pay to maintain the status quo and keep their rulers in power” has been a reality then and today, and not limited to Western Europe and the United States. This has been a cycle.

That’s because people hardly learn from the past. People have been constantly duped, indoctrinated and manipulated by political authorities along with their followers and cronies, whom has succeeded to suppress on or adulterate the meaning of freedom, thus, the repeated condemnation of societies.

Yet enlightenment from education serves as the only preventive antidote from such decadence.

As the great Ludwig von Mises wrote,

Society lives and acts only in individuals; it is nothing more than a certain attitude on their part. Everyone carries a part of society on his shoulders; no one is relieved of his share of responsibility by others. And no one can find a safe way out for himself if society is sweeping towards destruction. Therefore everyone, in his own interests, must thrust himself vigorously into the intellectual battle. None can stand aside with unconcern; the interests of everyone hang on the result. Whether he chooses or not, every man is drawn into the great historical struggle, the decisive battle into which our epoch has plunged us.

The bright side is that the information age has facilitated the intellectual struggle for the cause of liberty to a broader spectrum of audience.

Yet transitions may not be smooth, for the simple reason that there have been many entrenched interests who will resist such changes. Besides, the unviable nature of despotism will lead to its natural collapse.

Nonetheless, as more people get to learn about freedom, the curse of despotism diminishes.

Why Washington has been Brewing a Conflict with China

I’ve said a mouthful about the controversial territorial disputes which I think has been no more than a duplicitous squid tactic meant to promote some hidden political agenda.

Former Assistant Secretary of the US Treasury and former Wall Street editor Paul Craig Roberts thinks all these have been surreptitiously designed for the benefit of the US military industrial complex.

Writes Mr. Craig Roberts at the lewrockwell.com

Washington has pressured the Philippines, whose government it owns, into conducting joint military exercises in the South China Sea. Washington’s excuse is that China has territorial disputes with the Philippines, Indonesia, and other countries concerning island and sea rights in the South China Sea. Washington asserts that China’s territorial disputes with the like of Indonesia and the Philippines are a matter of United States’ national interests.

Washington has not made it clear what Washington’s stake is in the disputes. The reason Washington cannot identify why China’s disputes with the Philippines and Indonesia are threats to the United States is that there is no reason. Nevertheless, the undefined “threat” has become the reason Washington needs more naval bases in the Philippines and South Korea.

What this is all about is provoking a long-term cold war conflict with China that will keep profits and power flowing into Washington’s military-security complex. Large profits flow to armaments companies. A portion of the profits reflow into campaign contributions to “the people’s representatives” in DC and to presidential candidates who openly sell out their country to private interests.

Washington is going to construct new naval bases in the Philippines and on the environmentally protected Jeju Island belonging to South Korea. Washington will waste tax revenues, or print more money, in order to build the unnecessary fleets to occupy these bases. Washington is acquiring bases in Australia for US Marines to protect Australia from China, despite the lack of Chinese threats against Australia. Bush and Obama are the leading models of the “people’s president” who sell out the people, at home and abroad, to private interests.

Why is Washington ramping up a new cold war?

The answer begins with President Eisenhower’s warning to the American people in his last public address about the military/industrial complex in 1961. I won’t quote the warning as it is available online. Eisenhower pointed out to Americans that unlike previous wars after which the US demilitarized, after World War II the cold war with the Soviet Union kept the power and profits flowing into the military/industrial complex, now known as the military/security complex. President Eisenhower said that the flow of power and profit into the military/industrial complex was a threat to the economic wellbeing and liberty of the American people.

Read the rest here

Promoting free trade with everyone will bring this contentious and politically concocted issue to oblivion.

Japan joins India and China on a Gold Buying Spree

From Chron.com

Gold buying has spread to other Asian countries, like Japan. Lombardi points out that, ever since the Japanese government reported a budget deficit, the Japanese consumer increased its buying of gold bullion to be at a 15% greater pace than last year

“The Japanese consumer bought 15% more gold bullion in 2011 than 2010. Thus far in 2012, this trend has shown no signs of slowing down,” says Lombardi.

While deficits have indeed been a factor, it’s obvious that the string of currency debasement policies by the Bank of Japan (BoJ) has been the main driver. As the BoJ works to undermine her currency, the yen, the Japanese citizenry will continue to flock into gold and or may find refuge in ASEAN assets and currencies, whom has been inflating less.

Video: Steve Forbes says Ron Paul should be the Chairman of the US Federal Reserve

Steve Forbes of the Forbes magazine agrees with Ron Paul's view of the monetary system and endorses Mr. Paul as chairman for the US Federal Reserves (hat tip Bob Wenzel).

Wow. Ron Paul has been "rocking the boat" of the establishment.

Quote of the Day: Why Central Planning Fails

Here is an excerpt of Professor Don Boudreaux’s excellent piece on why central planning fails.

Attempts to centrally plan economies are very much like attempts to fly by dressing like and flapping like a bird: utterly futile because the most that can be observed of any successful economy are a handful of large details (“assembly lines,” “retail outlets”…..). The vast majority (99.99999999999…9 percent) of the details that must work reasonably well aren’t observed by the would-be central planner. What Hayek called “knowledge of the particular circumstances of time and place” – knowledge of details spread today across the globe and across billions of different human minds – is not incidental to the successful operation of a modern economy. Utilizing that knowledge – vast, deep, changing, incredibly fine-grained detailed knowledge – is the very key to a successful market economy.

Central planning is as futile as trying to strap on wings and fly like a bird – and potentially as calamitous.

Of course, few people today advocate full-scale central planning of economies. But smaller-scale interventions suffer the same problems as do attempts at central planning: inevitably inadequate knowledge of how to intervene. Asserting, for example, that the key to economic recovery is to “increase aggregate demand” is a fiction borne from observing a true, but only large and inadequate, fact about successful economies: most producers, at any given time, are able to sell most of what they plan to sell. But to leap from this observation to the conclusion that “therefore, government can stimulate economic recovery by increasing aggregate demand” is akin to a human being costumed-up as a bird and leaping off of a mountaintop, flapping away, hoping, hoping, hoping to fly.

The failure of central planning all boils down to one thing: the limits of knowledge.

Video: Ron Paul versus Paul Krugman

A terse modern day version of Hayek versus Keynes debate.

Congressman Ron Paul takes down Paul Krugman. The closing portion of the debate [12:44] on freedom and markets was noteworthy.

(hat tip Professor William Anderson)

China Takes Steps to Push for the Convertibility of the Yuan

China takes a step further to push for the convertibility of her currency, the yuan.

From Marketwatch.com: (bold emphasis mine)

China will widen channels for capital outflows and push for a bigger role for its own currency in cross-border trade, the country's central bank said Saturday.

The People's Bank of China also repeated past pledges to continue efforts to promote convertibility of the yuan under the capital account.

"As foreign capital takes an active role in China's financial markets we will continue to allow domestic capital to participate in global financial markets," the People's Bank of China said in a summary of its China 2011 Global Financial Market Report posted on the website of its Shanghai office.

"China will further expand the use of the yuan in cross-border trade and investment, and create a virtuous circle for cross-border flows of the currency," the bank said.

The summary didn't give any details of the central bank's plans though it said the full report will be issued Saturday.

The People's Bank of China has repeatedly stated it wants to ease restrictions on converting the yuan under the capital account though it has avoided giving any timetable.

China has been encouraging its companies to take a bigger role in the global economy, and one of the key requirements for this has been to let them move foreign exchange offshore.

Beijing has also been trying to promote the use of its own currency in trade settlement, and the central bank's statements on this issue are in line with previously stated policy goals.

So based on the economy, China has been pushing for trade, integration (regionalism) and the yuan as the region's reserve currency.

But based on geopolitics, China does the “gunboat diplomacy”.

These two simply don’t add up.

Go figure.

Quote of the Day: The Bottom One Percent

We hear a lot about the top 1%. We don't hear a lot about the bottom 1%. There are about 313 million people in America today. 1% of 313 million is 3,130,000. In our prisons today are 2,200,000 people. So the people in prison are 2/3 of one percent. And their wages are typically about 23 cents an hour. They are, essentially, the bottom 1%.

Many of them are there for violent crimes, theft, fraud, and other such things. But hundreds of thousands of them are there for buying, selling, or producing illegal drugs. The drug war has put them there. And we taxpayers are paying $30,000 a year and more to keep them there.

So let me get this straight: high-income people are paying lots of taxes so that the government can put poor people in prison and keep them poor or put non-poor people in prison and make them poor.

We hear the occupy people advocate taxing the top 1% more. I've got a better idea: let's tax the top 1% less--they're already paying a disproportionately high share of taxes--and let a few hundred thousand of the bottom one percent out of prison and out of their grinding poverty in prison.

That’s from Professor David Henderson.

The Philippine Financial Markets Shrugs off the Scarborough Shoal Standoff

The financial markets and politicians backed by mainstream media apparently lives in two distinct worlds.

If one goes through the daily barrage of sensationalist headlines, one would have the impression that the Philippines must be in a state of panic. That’s because media has been projecting what seems as intensifying risk of a full blown shooting war over the contested islands, the Scarborough Shoal with China. And all these should have been sending investors scrambling for the exit doors, if not the hills.

But has such alarmism represented reality?

Of course by reality we rely on expressed and demonstrated preferences and not just sentiment. Over the marketplace, people voting with their money have fundamentally treated the recent geopolitical impasse as pragmatically nonevents.

The Phisix has been little change for the week but importantly trades at FRESH record high levels.

Meanwhile the local currency the Philippine Peso posted its SIXTH CONSECUTIVE weekly gains and has been approaching February’s high, whereas local bonds ADVANCED for the week, amidst the geopolitical bedlam[1]

Contrived Risks and Real Risks

There’s a world of difference between real risk and that of a pseudo, or may I suggest concocted, geopolitical risk.

Media has slyly been luring the gullible public into oversimplified “emotionally framed” explanations based on flimsy correlations which blatantly overlooks the behind-the-scenes causal factors[2]. Emotionalism thus opens the door for politicians to prey on the public by manipulating them through the foisting of repressive policies that benefits them at the expense of the taxpayers and importantly of our liberties. The recent call for nationalism via “unanimity” by a national political figure is just an example[3].

Politicians use fear or what the great libertarian H. L. Mencken calls as endless series of imaginary hobgoblins as standard instruments of social controls meant to advance their agenda or self-interests through the political machinery.

Aside from possible factors for the standoff, such as the smoke and mirrors tactic probably employed by China to divert the world from witnessing the brewing internal political schism[4] and or the promotion of sales for the benefit of the military industrial complex, it could also be that the call for “unanimity” may be associated with the domestic impeachment trial of a key figure of the judiciary where “rallying around the president” would extrapolate to the immediate closure of the case in the favor of the administration.

In doing so, the incumbent administration will be able control three branches of government and impose at will any measures that suits their political goals with hardly any opposition, all done under the sloganeering or propaganda of anti-corruption.

Yet the brinkmanship geopolitics in Asia, has not been limited to the controversial territorial claims in Scarborough and Spratlys, as well as Japan claimed Senkaku Islands[5]. Recent events includes the recent widely condemned missile test by North Korea, as well as, missile tests of former archrivals India and Pakistan[6]

Yet market’s responses to these events have disparate.

Pakistan’s Karachi index (KSE:100 orange) trades at the highest levels since 2009 and seems on the way to knock on the doors of the 2007 highs, whereas India’s BSE (SENSEX green) has struggled since peaking late February.

In short, the recent missile tests by both countries hardly influenced financial markets for the two South Asian giants.

The reason for this has been due to substantially improving trade relations[7] that has dramatically eased political tensions between them.

This validates the great free trader Claude Frédéric Bastiat[8] prediction centuries ago.

if goods don t cross borders, armies will

North Korea as the Real Geopolitical Risk

The North Korea-South Korea tiff cannot be seen in the same light.

Since the North Korea’s announcement of a missile test last March 16^th, South Korea’s KOSPI has been struggling. (chart from stockcharts.com)

The South Korean currency, the won, has also wobbled in the face of Nokor’s actions. (chart from yahoo.com)

Nokor’s largely embarrassing failed missile launch[9] last April 13^th has not deterred the new regime under Kim Jong Un from threatening to do another nuclear blasting test[10]

The fundamental difference from the abovementioned instances, including the unfortunate Scarborough-Spratlys affair, has been the near absence or the lack of trade linkages of Nokor which has not fostered social cooperation or goodwill with other nations.

Instead, Nokor’s despotic communist government’s survival has long been dependent on the ‘blackmail diplomacy’ in securing foreign aid. Yet uncertainty shrouds on the direction of Nokor’s foreign policy under the new leadership which appears as being manifested on the markets.

The good news is that so far there has been no sign of panic. This means South Korea’s consolidating markets could be digesting or has been in the process of assessing the political and security risks from Nokor’s new regime.

Otherwise if the worst option does occur, where posturing turns into armed confrontation the ensuing violence will spillover the world markets. But again Nokor has been more of a paper tiger than a real military power considering their dire economic status. A war is likely to cause the Kim regime to disintegrate under its own weight as famished and ill equipped soldiers are likely to defect to the South or a coup will force down the leadership.

The Free Trade Factor and Geopolitical Linkages

The same premise tells us why domestic politicians and media live in a different world from the citizenry. And this is why I hardly touch on mainstream news, except when scouring for the facts. I avoid from reading “opinions”, especially from so-called experts. That’s because mainstream’s opinions blindly represents the interests of the establishment[11].

China ballooning trade with ASEAN, which includes the Philippines[12], represents a very important deterrent from aggression.

As the great Professor Ludwig von Mises wrote in his magnum opus[13],

Man curbs his innate instinct of aggression in order to cooperate with other human beings. The more he wants to improve his material well-being, the more he must expand the system of the division of labor. Concomitantly he must more and more restrict the sphere in which he resorts to military action. The emergence of the international division of labor requires the total abolition of war.

So aside from her thrust to use the yuan as region’s foreign currency reserve as evidenced by the push for wider Free trade zone (including the ASEAN China Free Trade Agreement which began operations in 2010[14]) hardly squares with the bellicosity that has been publicly portrayed.

Free Trade agreements in Asia has exploded since China’s Deng Xiaoping opened China to the world bannered by the famous catchphrase “To get rich is glorious” (which according to some has been misattributed to him)[15]

Claude Barfield of the American Enterprise Institute points out that[16]

In 1975 there was one free trade agreement in the region but in 2011, there are now currently 245 free trade agreements that have been proposed, under negotiation or concluded.

Besides it is naïve to see events in the lens of a single prism.

An outbreak of military conflagration will likely draw in various major players that could lead to a world war, an event which hardly any party would like to indulge in (despite the politicians arrogant rhetoric), considering the today’s age of NUCLEAR and DRONE warfare, standing armies have been rendered obsolete, and mutually assured destruction[17] will likely be the outcome.

So aside from some missile tests by Asian countries, recently Vietnam hosted a joint naval exercise with US[18] while on the other hand China and Russia also recently completed naval war games[19]. While these may look like a show of force for both parties, they could also just be pantomimes.

Yet for me all these seem like watching a movie that gives you the vicarious effect, especially from the 3D vantage point. However when the closing or end credit appears or when the curtains fall, we come to realize that this has been just a movie.

So far the financial markets seem to be exposing on the exaggerations of the so called gunboat diplomacy, or perhaps too much of yield chasing activities may have clouded people’s incentives that has led them to underestimate such a risk.

While I believe the yield chasing factor has functioned as a substantial contributor to the current state of markets domestically and internationally, I also think that the local market has rightly been discounting the territorial claims issue for reasons cited above.

So unless politicians here or abroad totally losses their sanity, the issue over territorial claims will eventually fade from the limelight.

So be leery of politicians calling for patriotism or nationalism, that’s because as English author Samuel Johnson famously warned on the evening of April 7, 1775[20]

Patriotism is the last refuge of a scoundrel.

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[1] Bloomberg.com Philippine Peso Completes Sixth Weekly Gain on Growth Outlook, April 27, 2012

[2] See The Scarborough Shoal Standoff Has Not Been About Oil April 16, 2012

[3] See Scarborough Shoal Dispute: The Politics of Nationalism April 28, 2012

[4] See China’s Political System Reeks of Legal Plunder, April 20 2012

[5] See From Scarborough Shoal to Senkaku Islands April 19, 2012

[6] Globalspin.blogs.time.com Will Pakistan and India’s Back-to-Back Missile Tests Spoil the Mood?, April 25, 2012

[7] Thehindubusinessline.com Pak may be allowed to invest in India February 16, 2012

[8] The Freeman.org Claude Frédéric Bastiat

[9] See See North Korea’s Failed Missile Launch Reflects on Dire Economic Status, April 14, 2012

[10] Bloomberg.com North Korea Poised to Rattle Region With Nuclear Blast April 27, 2012

[11] See The Toxicity of Mainstream News March 13, 2012

[12] networkideas.org China, India and Asia: The Anatomy of an Economic Relationship (Draft Copy) 2009

[13] von Mises Ludwig 4. The Futility of War XXXIV. THE ECONOMICS OF WAR Human Action

[14] Wikipedia.org ASEAN–China Free Trade Area

[15] Wikipedia.org Deng Xiaoping

[16] Barfield Claude TAIWAN AND EAST ASIAN REGIONALISM American Enterprise Institute, November 10, 2011

[17] Wikipedia.org Mutual assured destruction

[18] Telegraph.co.uk Vietnam begins naval exercises with the US, April 23, 2012

[19] Abs-cbennews.com China, Russia end naval exercises, April 27, 2012

[20] Wikipedia.org The Patriot Samuel Johnson's political views

Rotational Dynamics Behind the Phisix Record Highs

The surge to the record levels by the Phisix has been unfolding exactly the way I have been anticipating them—particularly rotational dynamics (or the relative effects of money applied to the stock market) as symptom of an inflationary boom.

I previously wrote[1],

my long held view of a broad based rotational process where there had been a rotation away from big caps to the broader market (second and third tier issues), rotation among sectors (from leaders to laggards) and rotation of issues within specific sectors.

All of which have been manifestations of an inflationary boom.

Rotation among sectors.

The current market leaders, the property sector and the financial sectors, whose gains may have been overextended seems to have taken a recess this week. Thus the shift out of the current leaders into this year’s laggard the mining sector and the service sector.

From the price trend perspective, the green ellipse exhibits the divergences of the banking (black candle), property (violet) holding (green) and commercial (blue) over the short term from the mining (gold) and service (red) sectors. The leaders climbed as the mining sector consolidated while the service sector declined. For last week, that relationship seem to have reversed.

Rotation of issues from within specific sectors.

Since the property heavyweights have taken a rest, the market’s attention promptly shifted to second and third tier issues.

Former laggards have morphed into virtual rock stars.

The heavyweights Ayala Land (ALI-Blue), SM Investments (SM- orange) and Robinsons (RLC-green) whom led the markets higher from the start of the year appear to be undergoing a correction mode.

However over the past week, laggards Filinvest Land (FLI- violet) Megaworld (MEG- red) and Empire East (ELI-black candle) made a belated charge.

While the Phisix did post marginal gains over the week, this was neutralized by the slightly negative market breadth where by sellers edged out advancers.

Given the recent hefty rise to record levels, profit taking should be expected from the Phisix and the overall markets. But any retrenchment will likely to be muted as the easy money environment will continue prompt for more rotational actions that leads to the “rising tide” phenomenon.

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[1] See Phisix: The Journey Of A Thousand Miles Begins With A Single Step, March 12, 2012