Yesterday evening, the FT reported that Rinat Akhmetov, Ukraine’s richest man, has bought a penthouse at One Hyde Park for £136.6 million ($222 million). Having contrasted this wonderful extravagance to the hardship of the masses, it is no wonder that the consensual mind deems this to be ‘disgusting’ and/or ‘immoral’.

 

Cartoon of One Hyde Park & a Normal Person

Click to enlarge.

 

As contrarians, we should be keen to critically examine this unchallenged prejudice – is universal equality really an ideal?

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The Federal Reserve has two main objectives:

 

  1. to “Maintain Price Stability” (which explains Janet Yellen’s recent denial of the link between ‘money printing’ and commodity price rises).
  2. to “Foster Maximum Employment”.

Here, I get to grips with the second objective of “fostering maximum employment”. Jargon aside, I try to answer the pertinent question; what does this task really involve?

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It would seem that the premise that holds government as a “good” is firmly lodged in the consensual mind. So much so, that when reading news sites, blogs, magazines and newspapers, one cannot escape a rather absurd prejudice: that government should solve the very problems that it created. Personally, I put this proposition at par with the notion that flame throwers should be used to put out fires.

 

Here, I consider the validity of the premise that says; ‘government is good’. In particular, I express my misgivings with the notion that government intervention can solve governmental failures. Finally, I explore the tendencies for a growing government and the implications for the contrarian investor.

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Jim Rogers is buying Japanese equities (CNBC March 30th 2011). He said that he was looking to buy before the nuclear situation and that the selling panic may have provided a good entry point. See the videos below:
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For most speculators, the notion that ‘short squeezes’ should be banned is utterly preposterous. Why then, do we embrace this absurd postulate in the sphere of money?

 

I always reiterate the simple (but perhaps backward) idea that debt is a short on money. It helps us see the folly of certain public policies by exploding the flaws of unintegrated and compartmentalized thought.  Let me make this concept clear:

 

What does shorting a stock entail? One borrows a stock, sells it on the market for money, and buys it back at a later date. If one sells the stock higher than one buys it, one can keep the difference. Otherwise, one pays the difference. What is debt then? Well, one borrows money, ‘sells’ it for something (e.g. a house) and ‘buys’ that money back at a later date. If one ‘sells money’ higher than one ‘buys money’, one can keep the difference. Otherwise, one pays the difference. The symmetry should be clear. In normal, everyday language; ‘selling money’ consists of buying things and ‘buying money’ consists of selling things. In everyday life, we happen to think of prices in terms of money; this doesn’t change the principle that debt is a short on money.

 

‘Hey, we don’t like this short squeeze, we’re going to ban it!’

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Ayn Rand’s novel ‘Atlas Shrugged‘ posited a world of socialistic irrationalism where the most astute entrepreneurs disappeared mysteriously. In the novel, the microcosm of the entrepreneur-less world was a place called ‘Starnesville’. It was in Starnesville that the ‘Robin Hood’ principles were taken to their logical conclusions. Is the UK headed toward the decay and depravity of Starnesville?

 

The recent news that HSBC might move from London to Hong Kong got me thinking about Ayn Rand’s Atlas Shrugged and – in particular – Starnesville. There is a peculiar thing that goes on in this country; not only do the majority of people support socialistic fantasies, but they do not regard these fantasies as socialistic. Such are the consequences of the crowd’s tendency to pervert the meanings of words. Today (in the UK), one can argue vehemently for progressive taxation and still be regarded a capitalist!

 

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Recent events in the Middle-East remind me of some insights from Carroll Quigley’s ‘Tragedy & Hope: A History of the World in our Time’. Here, I explore current events in the context of very long-term changes in civilizations.

 

As was described by Carrol Quigley, civilizations typically follow a certain path from their inceptions to their deaths. I quote his lucid description:

 

… each civilization is born in some inexplicable fashion and, after a slow start, enters a period of vigorous expansion, increasing its size and power, both internally and at the expense of its neighbors, until gradually a crisis of organization appears. When the crisis has passed and the civilization has been reorganized, it seems somewhat different. Its vigor and morale have weakened. It becomes stabilized and eventually stagnant. After a golden age of peace and prosperity, internal crises again arise. At this period there appears, for the first time, a moral and physical weakness which raises, also for the first time, questions about the civilization’s ability to defend itself against external enemies. Racked by internal struggles of a social and constitutional character, weakened by loss of faith in its older ideologies and by the challenge of newer ideas incompatible with its past nature, the civilization grows steadily weaker until it is submerged by outside enemies and eventually disappears.

 

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