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Anti-Logic and the Keynesian “Stimulus” – William L. Anderson – Mises Daily

Anti-Logic and the Keynesian “Stimulus” – William L. Anderson – Mises Daily.

American political culture always seems to be “celebrating” the anniversary of something, be it JFK’s assassination (we just passed the 50th anniversary of that sad event) or the signing of some (mostly bad) legislation. The latest political activity to be enshrined with an anniversary is the so-called stimulus, the $800 billion monstrosity passed five years ago ostensibly to “put America back to work.”

Not surprisingly, the New York Times has editorialized that any criticism of the spending bill — at least any criticism which says “too much” was spent — is a Republican “myth and falsehood.” Not only was the “Stimulus” a legitimate piece of legislation, sniffed the NYT, but it also:

prevented a second recession that could have turned into a depression. It created or saved an average of 1.6 million jobs a year for four years. (Where are the jobs, Mr. Boehner.) It raised the nation’s economic output by 2 to 3 percent from 2009 to 2011. It prevented a significant increase in poverty — without it, 5.3 million additional people would have become poor in 2010.

Like all examples of the Broken Window Fallacy, the spirited defense of this spending bill is based upon “accounting” methods that count the people hired through “stimulus” spending as “new jobs” but fail to note how others might have lost their own means of employment. Now, this was a bill that, among other things, had workers rolling sod into the grass median of I-68 (which is near my home) in an area where runoff collected from tons of salt thrown onto roads by state highway crews (our area receives a lot of snowfall). Not surprisingly, within a year, all of the new grass was dead.

I liken the “stimulus” to throwing a bit of lighter fluid onto a pile of soaking wet wood. The flames pop up for a few seconds, but then disappear as the effects from the fluid go away. (No, repeated douses of “stimulus” fluid do not ultimately gain traction and then lead to a miraculous economic recovery.)

If Beltway political culture permits any criticism of the Holy Stimulus, it is this: “the stimulus wasn’t big enough.” Intones the NYT: “The stimulus could have done more good had it been bigger and more carefully constructed.”

The rest of the editorial is a compilation of near-plagiarism from Paul Krugman’s columns and blog posts, and it reflects how Keynesian anti-wogic works. The “logical” narrative goes as follows:

  • “Enough” government spending during a recession will bring the economy to “full employment.”
  • The economy is not at full employment.
  • Therefore, there wasn’t enough government spending.

Should one question the Keynesian premises of this awful syllogism, the standard answer is: America had “full employment” during World War II. (Robert Higgs has thoroughly debunked this enduring myth.) But, then, so did Germany and the U.S.S.R., according to Keynesian standards, but no one envies what people there experienced!

The problem that occurs when one wishes to interpret the results of the Stimulus is not due to bad politics. To put it another way, Stimulus spending always will confer political benefits, given that the money is transferred from taxpayers to preferred political constituents. Those footing the bill include both present and future taxpayers, since they will have to pay later for the public debt incurred to pay for present stimulus spending.

I make this point because the stimulus always has been presented as a government action that improved general or overall economic conditions, as opposed to being a political wealth-transfer scheme. The NYT editorial drips with what only can be a religious faith in the whole system, as though politicians seeking votes are going to “carefully” construct a process that is aimed at making certain political constituencies better off — but at the expense of other constituencies.

In reality, the government-based stimulus is based upon bad economics or, to be more specific, one of bad economic logic. To a Keynesian, an economy is a homogeneous mass into which the government stirs new batches of currency. The more currency thrown into the mix, the better the economy operates. One only needs to read Krugman’s writings to see that belief in full bloom.

Austrian economists, on the other hand, recognize the relationships within the economy, including relationships of factors of production to one another, and how those factors can be directed to their highest-valued uses, according to consumer choices. The U.S. economy remains mired in the mix of low output and high unemployment not because governments are failing to spend enough money but rather because governments are blocking the free flow of both consumers’ andproducers’ goods and preventing the real economic relationships to take place and trying to force artificial relationships, instead. (Green energy and ethanol, anyone?)

Simply put, the stimulus could work only if it were directing factors of production from lower-valued uses to higher-valued uses as determined ultimately by consumer choice. If that actually were the case, then the government would not have to force consumers to use stimulus-funded ethanol and electricity created by wind power.

Austrians arrive at their position through logic, but logic that is based in what we already know about human action. Unlike Keynesian “logic,” the premises of Austrian economics are sound, so the conclusions derived from them also are sound. No wonder the Austrian position is banned from the NYT editorial page!

Note: The views expressed in Daily Articles on Mises.org are not necessarily those of the Mises Institute.

Comment on this article. When commenting, please post a concise, civil, and informative comment.
William Anderson, an adjunct scholar of the Mises Institute, teaches economics at Frostburg State University. Send him mail. See William L. Anderson’s article archives.

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The High Price of Delaying the Default – Thorsten Polleit – Mises Daily

The High Price of Delaying the Default – Thorsten Polleit – Mises Daily.

Mises Daily: Wednesday, February 26, 2014 by 

Credit is a wonderful tool that can help advance the division of labor, thereby increasing productivity and prosperity. The granting of credit enables savers to spread their income over time, as they prefer. By taking out loans, investors can implement productive spending plans that they would be unable to afford using their own resources.

The economically beneficial effects of credit can only come about, however, if the underlying credit and monetary system is solidly based on free-market principles. And here is a major problem for today’s economies: the prevailing credit and monetary regime is irreconcilable with the free market system.

At present, all major currencies in the world — be it the US dollar, the euro, the Japanese yen, or the Chinese renminbi — represent government sponsored unbacked paper, or, “fiat” monies. These monies have three characteristic features. First, central banks have a monopoly on money production. Second, money is created by bank lending — or “out of thin air” — without loans being backed by real savings. And third, money that is dematerialized, can be expanded in any quantity politically desired.

A fiat money regime suffers from a number of far-reaching economic and ethical flaws. It is inflationary, it inevitably causes waves of speculation, provokes bad investments and “boom-and-bust” cycles, and generally encourages an excessive built up of debt. And fiat money unjustifiably favors the few at the expense of the many: the early receivers of the new money benefit at the expense of those receiving the new money at a later point in time (“Cantillon Effect”).

One issue deserves particular attention: the burden of debt that accumulates over time in a fiat money regime will become unsustainable. The primary reason for this is that the act of creating credit and money out of thin air, accompanied by artificially suppressed interest rates, encourages poor investments: malinvestments that do not have the earning power to service the resulting rise in debt in full.

Governments are especially guilty of accumulating an excessive debt burden, greatly helped by central banks providing an inexhaustible supply of credit at artificially low costs. Politicians finance election promises with credit, and voters acquiesce because they expect to benefit from government’s “horn of plenty.” The ruling class and the class of the ruled are quite hopeful that they can defer repayment to future generations to sort out.

However, there comes a point in time when private investors are no longer willing to refinance maturing debt, let alone finance a further rise in indebtedness of banks, corporations, and governments. In such a situation, the paper money boom is doomed to collapse: rising concern about credit defaults is a deadly enemy to the fiat money regime. And once the flow of credit dries up, the boom turns into bust. This is exactly what was about to happen in many fiat currency areas around the world in 2008.

A fiat money bust can easily develop into a full-scale depression, meaning failing banks, corporations filing for bankruptcy, and even some governments going belly up. The economy contracts sharply, causing mass unemployment. Such a development will predictably be interpreted as an ordeal — rather than an economic adjustment made inevitable by the ravages of the preceding fiat money boom.

Everyone — those of the ruling class and those of the class of the ruled — will predictably want to escape disaster. Threatened with extreme economic hardship and political desperation, their eyes will turn to the central bank which, alas, can print all the money that is politically desired to keep overstretched borrowers liquid, first and foremost banks and governments.

Running the electronic printing press will be perceived as the policy of the least evil — a reaction that could be observed many times throughout the troubled history of unbacked paper money. Since the end of 2008, many central banks have successfully kept their commercial banks afloat by providing them with new credit at virtually zero interest rates.

This policy is actually meant to make banks churn out even more credit and fiat money. More credit and money, provided at record low interest rates, is seen as a remedy of the problems caused by an expansion of credit and money, provided at low interest rates, in the first place. This is hardly a confidence-inspiring route to take.

 

 

It was Ludwig von Mises who understood that a fiat money boom will, and actually must, ultimately end in a collapse of the economic system. The only open question would be whether such an outcome will be preceded by a debasement of the currency or not:

The boom cannot continue indefinitely. There are two alternatives. Either the banks continue the credit expansion without restriction and thus cause constantly mounting price increases and an ever-growing orgy of speculation, which, as in all other cases of unlimited inflation, ends in a “crack-up boom” and in a collapse of the money and credit system. Or the banks stop before this point is reached, voluntarily renounce further credit expansion and thus bring about the crisis. The depression follows in both instances.[1]

A monetary policy dedicated to averting credit defaults by all means would speak for a fairly tough scenario going forward: depression preceded by inflation. This is a scenario quite similar to what happened, for instance, in the fiat money inflation in eighteenth-century France.

According to Andrew Dickson White, France issued paper money

seeking a remedy for a comparatively small evil in an evil infinitely more dangerous. To cure a disease temporary in its character, a corrosive poison was administered, which ate out the vitals of French prosperity.

It progressed according to a law in social physics which we may call the “law of accelerating issue and depreciation.” It was comparatively easy to refrain from the first issue; it was exceedingly difficult to refrain from the second; to refrain from the third and with those following was practically impossible.

It brought … commerce and manufactures, the mercantile interest, the agricultural interest, to ruin. It brought on these the same destruction which would come to a Hollander opening the dykes of the sea to irrigate his garden in a dry summer.

It ended in the complete financial, moral and political prostration of France — a prostration from which only a Napoleon could raise it. [2]

Note: The views expressed in Daily Articles on Mises.org are not necessarily those of the Mises Institute.

Thorsten Polleit is chief economist of the precious-metals firm Degussa and co-founder of the investment boutiquePolleit & Riechert Investment Management LLP. He is honorary professor at the Frankfurt School of Finance & Management and associated scholar of the Mises Institute. He was awarded the 2012 O.P. Alford III Prize in Libertarian Scholarship. His website is www.Thorsten-Polleit.com. Send him a mail. See Thorsten Polleit’s article archives.

Notes

[1] Ludwig von Mises. Interventionism: An Economic Analysis. Irvington-on-Hudson, N.Y.: Foundation for Economic Education, 1998. P. 40.

[2] Andrew Dickson White. Fiat Money Inflation in France, How It Came, What It Brought, and How It Ended. D. Appleton-Century Company Inc., New York and London: D. Appleton-Century, 1933. S. 66.b

Bitcoin and Gold: Currency versus Money

Bitcoin and Gold: Currency versus Money.

Bitcoin holders — especially those who bought in during the crypto-currency’s recent surge past $1,000 — are a bit shell-shocked this week:

 

Bitcoin prices plunge as problems persist

Bitcoin prices plunged again Monday morning after Mt.Gox, the major exchange for the virtual currency, said technical problems require it to continue its ban on customer withdrawals. 

Mt.Gox said it has discovered a bug that causes problems when customers try to use their account to make a transfer or payment of bitcoins to a third party. It said the problem is not with Mt.Gox software but affects all transfers of bitcoins to third parties.

The exchange said it was suspending withdrawals and third-party payments until the problem is fixed, although trading in bitcoins continues.

A bug is allowing a third party receiving a bitcoin transfer to make it look as if the transfer did not go through, which can lead to improper multiple transfers, Mt.Gox said.

Bitcoin prices on Mt.Gox plunged from about $693 just early Monday to $510 at 6 a.m. ET, soon after the statement was posted. Prices had been as high as $831 just after 7 p.m. Thursday before Mt.Gox’s halt of withdrawals was first disclosed early Friday morning.

Mt.Gox tried to put the best face on the technical problems in its latest statement, noting that the technology is “very much in its early stages.”

“What Mt.Gox and the Bitcoin community have experienced in the past year has been an incredible and exciting challenge, and there is still much to do to further improve,” it said.

This is one of those “teaching moments” that the President likes to point out. But the lesson isn’t that bitcoin in particular or crypto-currencies in general are fatally flawed. It is that they are currencies, not money or investments, and the differences between these three concepts is crucial to doing asset management right.

An investment is something that, if successful, generates cash flow and potentially capital gains, but if less successful can produce a capital loss. Money, in contrast, is capital. It is what you receive when you sell an investment and/or where you store the resulting wealth until you decide to buy something with it. Money does not generate cash flow and does not “work” for you the way an investment does. Instead, it preserves your capital in a stable form for later use.

“Sound” money exists in limited quantity and doesn’t have counterparty risk – that is, its value doesn’t depend on someone else keeping a promise – so it tends to hold its value over long periods of time. Gold and silver, for instance, have functioned as sound money for thousands of years. As you’ve no doubt heard many times, the same ounce of gold that bought a toga in ancient Rome will buy a nice suit today. Ditto for oil, wheat and most of life’s other necessities.

Currency, meanwhile, is the thing we use for buying and selling. It can also be money, as in past societies where gold and silver coins circulated. But it doesn’t have to be. Paper dollars, euro, and yen are representations of wealth rather than wealth itself and are only valuable because we trust the governments managing them to control their supply and banks to give us back our deposits on demand. Such currencies are not very safe but are extremely convenient, so even people who understand the inherent flaws of today’s currencies keep some around for transacting.

As for bitcoin, for a while the more excitable in the techie community seemed to think that crypto-currencies could function not just as currency but as money, i.e., as a form of savings, because the supply of bitcoin was limited by the algorithm that creates it. But they were overlooking counterparty risk. Since the vast majority of bitcoins in circulation are stored electronically and transmitted over the Internet, they’re only valuable if those media function correctly. Let a system fail, as Mt. Gox apparently has, and the bitcoins in that system are either unavailable (in which case their immediate value is zero) or suddenly very risky, in which case they’re obviously not a good savings vehicle.

Is this a deal-breaker for crypto-currencies? No. In many ways bitcoin is a better currency than the dollar because it can’t be inflated away by a desperate government or confiscated in the coming wave of bank bail-ins.

People who understand crypto-currencies and own a small amount of bitcoin for transactional purposes are probably unfazed by the latest speed bump. And people who had their life savings in it have received a valuable lesson in the nature of money.

Paper Gold Ain’t as Good as the Real Thing | Casey Research

Paper Gold Ain’t as Good as the Real Thing | Casey Research.

Doug French, Contributing Editor
February 12, 2014 10:37am
For the first time ever, the majority of Americans are scared of their own federal government. A Pew Research poll found that 53% of Americans think the government threatens their personal rights and freedoms.

Americans aren’t wild about the government’s currency either. Instead of holding dollars and other financial assets, investors are storing wealth in art, wine, and antique cars. The Economist reported in November, “This buying binge… is growing distrust of financial assets.”

But while the big money is setting art market records and pumping up high-end real estate prices, the distrust-in-government script has not pushed the suspicious into the barbarous relic. The lowly dollar has soared versus gold since September 2011.

Every central banker on earth has sworn an oath to Keynesian money creation, yet the yellow metal has retraced nearly $700 from its $1,895 high. The only limits to fiat money creation are the imagination of central bankers and the willingness of commercial bankers to lend. That being the case, the main culprit for gold’s lackluster performance over the past two years is something else, Tocqueville Asset Management Portfolio Manager and Senior Managing Director John Hathaway explained in his brilliant report “Let’s Get Physical.

Hathaway points out that the wind is clearly in the face of gold production. It currently costs as much or more to produce an ounce than you can sell it for. Mining gold is expensive; gone are the days of fishing large nuggets from California or Alaska streams. Millions of tonnes of ore must be moved and processed for just tiny bits of metal, and few large deposits have been found in recent years.

“Production post-2015 seems set to decline and perhaps sharply,” says Hathaway.

Satoshi Nakamoto created a kind of digital gold in 2009 that, too, is limited in supply. No more than 21 million bitcoins will be “mined,” and there are currently fewer than 12 million in existence. Satoshi made the cyber version of gold easy to mine in the early going. But like the gold mining business, mining bitcoins becomes ever more difficult. Today, you need a souped-up supercomputer to solve the equations that verify bitcoin transactions—which is the process that creates the cyber currency.

The value of this cyber-dollar alternative has exploded versus the government’s currency, rising from less than $25 per bitcoin in May 2011 to nearly $1,000 recently. One reason is surely its portability. Business is conducted globally today, in contrast to the ancient world where most everyone lived their lives inside a 25-mile radius. Thus, carrying bitcoins weightlessly in your phone is preferable to hauling around Krugerrands.

No Paper Bitcoins

But while being the portable new kid on the currency block may account for some of Bitcoin’s popularity, it doesn’t explain why Bitcoin has soared while gold has declined at the same time.

Hathaway puts his finger on the difference between the price action of the ancient versus the modern. “The Bitcoin-gold incongruity is explained by the fact that financial engineers have not yet discovered a way to collateralize bitcoins for leveraged trades,” he writes. “There is (as yet) no Bitcoin futures exchange, no Bitcoin derivatives, no Bitcoin hypothecation or rehypothecation.”

So, anyone wanting to speculate in Bitcoin has to actually buy some of the very limited supply of the cyber currency, which pushes up its price.

In contrast, the shinier but less-than-cyber currency, gold, has a mature and extensive financial infrastructure that inflates its supply—on paper—exponentially. The man from Tocqueville quotes gold expert Jeff Christian of the CPM Group who wrote in 2000 that “an ounce of gold is now involved in half a dozen transactions.” And while “the physical volume has not changed, the turnover has multiplied.”

The general process begins when a gold producer mines and processes the gold. Then the refiners sell it to bullion banks, primarily in London. Some is sold to jewelers and mints.

“The physical gold that remains in London as unallocated bars is the foundation for leveraged paper-gold trades. This chain of events is perfectly ordinary and in keeping with time-honored custom,” explains Hathaway.

He estimates the equivalent of 9,000 metric tons of gold is traded daily, while only 2,800 metric tons is mined annually.

Gold is loaned, leased, hypothecated, and rehypothecated, over and over. That’s the reason, for instance, why it will take so much time for the Germans to repatriate their 700 tonnes of gold currently stored in New York and Paris. While a couple of planes could haul the entire stash to Germany in no time, only 37 tonnes have been delivered a year after the request. The 700 tonnes are scheduled to be delivered by 2020. However, it appears there is not enough free and unencumbered physical gold to meet even that generous schedule. The Germans have been told they can come look at their gold, they just can’t have it yet.

Leveraging Up in London

The City of London provides a loose regulatory environment for the mega-banks to leverage up. Jon Corzine used London rules to rehypothecate customer deposits for MF Global to make a $6.2 billion Eurozone repo bet. MF’s customer agreements allowed for such a thing.

After MF’s collapse, Christopher Elias wrote in Thomson Reuters, “Like Wall Street cocaine, leveraging amplifies the ups and downs of an investment; increasing the returns but also amplifying the costs. With MF Global’s leverage reaching 40 to 1 by the time of its collapse, it didn’t need a Eurozone default to trigger its downfall—all it needed was for these amplified costs to outstrip its asset base.”

Hathaway’s work makes a solid case that the gold market is every bit as leveraged as MF Global, that it’s a mountain of paper transactions teetering on a comparatively tiny bit of physical gold.

“Unlike the physical gold market,” writes Hathaway, “which is not amenable to absorbing large capital flows, the paper market, through nearly infinite rehypothecation, is ideal for hyperactive trading activity, especially in conjunction with related bets on FX, equity indices, and interest rates.”

This hyper-leveraging is reminiscent of America’s housing debt boom of the last decade. Wall Street securitization cleared the way for mortgages to be bought, sold, and transferred electronically. As long as home prices were rising and homeowners were making payments, everything was copasetic. However, once buyers quit paying, the scramble to determine which lenders encumbered which homes led to market chaos. In many states, the backlog of foreclosures still has not cleared.

The failure of a handful of counterparties in the paper-gold market would be many times worse. In many cases, five to ten or more lenders claim ownership of the same physical gold. Gold markets would seize up for months, if not years, during bankruptcy proceedings, effectively removing millions of ounces from the market. It would take the mining industry decades to replace that supply.

Further, Hathaway believes that increased regulation “could lead, among other things, to tighter standards for collateral, rules on rehypothecation, etc. This could well lead to a scramble for physical.” And if regulators don’t tighten up these arrangements, the ETFs, LBMA, and Comex may do it themselves for the sake of customer trust.

What Hathaway calls the “murky pool” of unallocated London gold has supported paper-gold trading way beyond the amount of physical gold available. This pool is drying up and is setting up the mother of all short squeezes.

In that scenario, people with gold ETFs and other paper claims to gold will be devastated, warns Hathaway. They’ll receive “polite and apologetic letters from intermediaries offering to settle in cash at prices well below the physical market.”

It won’t be inflation that drives up the gold price but the unwinding of massive amounts of leverage.

Americans are right to fear their government, but they should fear their financial system as well. Governments have always rendered their paper currencies worthless. Paper entitling you to gold may give you more comfort than fiat dollars.

However, in a panic, paper gold won’t cut it. You’ll want to hold the real thing.

There’s one form of paper gold, though, you should take a closer look at right now: junior mining stocks. These are the small-cap companies exploring for new gold deposits, and the ones that make great discoveries are historically being richly rewarded… as are their shareholders.

However, even the best junior mining companies—those with top managements, proven world-class gold deposits, and cash in the bank—have been dragged down with the overall gold market and are now on sale at cheaper-than-dirt prices. Watch eight investment gurus and resource pros tell you how to become an “Upturn Millionaire” taking advantage of this anomaly in the market—click here.

Long-Term Charts 1: American Markets Since Independence | Zero Hedge

Long-Term Charts 1: American Markets Since Independence | Zero Hedge.

Sometimes, perhaps all too often; investors, traders, economists, and mainstream media anchors miss the forest and see only the trees (growing to the sky or crashing to the floor). To provide some context on the markets, we present the first of three posts of long-term chart series (and by long-term we mean more than a few decades of well-chosen trends) – stock, bond, gold, commodity, and US Dollar prices for the last 240 years

American Markets Since Independence

 

Stock Prices

 

Interest Rates

 

Commodity Prices

 

The Gold Price

 

The Crude Oil Price

 

The US Dollar

 

 

H/t @Macro_Tourist for these increble charts

 

Of course, as we have noted in the past, Nothing lasts forever… (especially in light of China’s earlier comments )

Death of the Dollar | Zero Hedge

Death of the Dollar | Zero Hedge.

Click here to follow ZeroHedge in Real-time on FinancialJuice

We’ve all done it, haven’t we? Chucked something in the wash and turned it on too high, only to see it pop out at the end of the cycle and it ends up the size of your hamster. Well, Obama has been doing the same. Except this time it’s not your winter woollies that he’s shrinking, it’s the greenback.

The US currency is shrinking as a percentage of world currency today according to the International Monetary Fund. It’s still in pole position for the moment, but business transactions are showing that companies around the world are today ready and willing to make the move to do business in other currencies.

The US Dollar has long been the world’s number one denomination in world currency supply. It represents 62% of total holdings in foreign exchange in central banks around the world. But, it is in for a tough race from up-and-coming strong currencies. The Japanese Yen and the Chinese Yuan are both giving the Americans a good run for their money. The Swiss franc is too (surprisingly). There is $6 trillion in foreign exchange holdings around the world at any given time, on average and the US Dollar represents almost two-thirds of that.

The fact that Brazil and China have also just signed a currency-swap deal worth something to the tune of $30 billion stands as living proof that the dollar may be further on the wane. China will exceed all expectations in the future as the world’s largest economy. The US will be overtaken. The Chinese currency will one day overtake the Dollar too. Has to be!

Although, it’s not quite there for the moment. China is not near being the world’s reserve currency yet. In order to be the world’s reserve currency there would be the need to produce enormous quantities of what the world wants. China has got that one off pat already. Then, countries holding the reserve currency would need to be able to spend that currency elsewhere in other countries or find a place to put it while waiting to do so. World capital markets are currently in dollars (40%), which means that there would be no possibility of using the Chinese currency. But, that’s only a matter of time. Some are predicting this will happen pretty soon.

The Federal Reserve has come in for some strong criticism over the unconventional Quantitative Easing methods that have resulted in 3 trillion spanking new dollars rolling off the printing presses. This has certainly brought about some degree of worry around the world that the dollar is not quite as safe as it might have been thought to be in the past. Is the world worrying that the dollar is not as safe a bet as it used to be in world domination. Are central banks worried that it will shrink in the wash and the colors will run?

Some are predicting that the dollar will shrink rapidly over the next two years and it will lose its top place as the world’s reserve currency by 2015. In the 1950s the dollar was 90% of total foreign currency holdings around the world. The dollar has definitely lost out to other currencies that are stronger. If there is a continued move and the dollar shrinks, then the resulting catastrophe that will ensue will have a spiral effect on the already enormous US budget deficit (over $1 trillion a year on average).

The only reason the Federal Reserve has been in a position to print more money recently is simply because they are in the strong position to be able to do so as the world’s leading reserve currency. If that changes, then the Americans won’t have the possibility of just hitting the button and setting the printing presses rolling. That means the US will be in no other position than to end up having to pay their debt back.

The US economy and the market are starting to show signs of recovery. Signs. It’s not sustained, hope as they might. If the dollar loses its attraction, then it won’t be used as the international reserve currency. Businesses will start using another currency and the dollar will lose out further still.

Some experts are saying that the problems of the dollar are like a time-bomb ready to explode. Ultimately, it will bring about the death of the dollar. As we stand on and watch, huddled around the coffin as it is lowered into the ground, we know it’s all too late. The flowers have been sent and the Stars and Stripes has been played in recognition of loyal service for the nation.

The QE methods are nothing more than aiding and abetting the already problematic situation of the greenback. We might look back in years to come and reminisce over whether it was the right (long-term) solution to use QE, whether printing bucks sent the greenback to an early grave, or whether it just reached the end of its life and croaked peacefully without making too much noise.

But, criticism of and worry over the dollar and its longevity have been hot topics for years now. The US dollar is a fiat currency that can easily lose status, deriving its value from government regulation and law. But, then again, so is the Euro. So, people living in Europe shouldn’t start throwing stones…they live in glass houses too…and that’s before they start.

Originally posted: Death of the Dollar

You might also enjoy: You’re Miserable USA! | Emerging Markets: Lock, Stock and Barrel | End of the Financial World 2014 |  Kristallnacht on Wall Street? Bull! | China’s Credit Crunch | Working for the Few | USA:The Land of the Not-So-Free  

How Central Banks Cause Income Inequality – Frank Hollenbeck – Mises Daily

How Central Banks Cause Income Inequality – Frank Hollenbeck – Mises Daily.

The gap between the rich and poor continues to grow. The wealthiest 1 percent held 8 percent of the economic pie in 1975 but now hold over 20 percent. This is a striking change from the 1950s and 1960s when their share of all incomes was slightly over 10 percent. A study by Emmanuel Saez found that between 2009 and 2012 the real incomes of the top 1 percent jumped 31.4 percent. The richest 10 percent now receive 50.5 percent of all incomes, the largest share since data was first recorded in 1917. The wealthiest are becoming disproportionally wealthier at an ever increasing rate.

Most of the literature on income inequalities is written by professors from the sociology departments of universities. They have identified factors such as technology, the reduced role of labor unions, the decline in the real value of the minimum wage, and, everyone’s favorite scapegoat, the growing importance of China.

Those factors may have played a role, but there are really two overriding factors that are the real cause of income differentials. One is desirable and justified while the other is the exact opposite.

In a capitalist economy, prices and profit play a critical role in ensuring resources are allocated where they are most needed and used to produce goods and services that best meets society’s needs. When Apple took the risk of producing the iPad, many commentators expected it to flop. Its success brought profits while at the same time sent a signal to all other producers that society wanted more of this product. The profits were a reward for the risks taken. It is the profit motive that has given us a multitude of new products and an ever-increasing standard of living. Yet, profits and income inequalities go hand in hand. We cannot have one without the other, and if we try to eliminate one, we will eliminate, or significantly reduce, the other. Income inequalities are an integral outcome of the profit-and-loss characteristic of capitalism; they cannot be divorced.

Prime Minister Margaret Thatcher understood this inseparability well. She once said it is better to have large income inequalities and have everyone near the top of the ladder, than have little income differences and have everyone closer to the bottom of the ladder.

Yet, the middle class has been sinking toward poverty: that is not climbing the ladder. Over the period between 1979 and 2007, incomes for the middle 60 percent increased less than 40 percent while inflation was 186 percent. According to the Saez study, the remaining 99 percent saw their real incomes increase a mere .4 percent between 2009 and 2012. However, this does not come close to recovering the loss of 11.6 percent suffered between 2007 and 2009, the largest two-year decline since the Great Depression. When adjusted for inflation, low-wage workers are actually making less now than they did 50 years ago.

This brings us to the second undesirable and unjustified source of income inequalities, i.e., the creation of money out of thin air, or legal counterfeiting, by central banks. It should be no surprise the growing gap in income inequalities has coincided with the adoption of fiat currencies worldwide. Every dollar the central bank creates benefits the early recipients of the money—the government and the banking sector — at the expense of the late recipients of the money, the wage earners, and the poor. Since the creation of a fiat currency system in 1971, the dollar has lost 82 percent of its value while the banking sector has gone from 4 percent of GDP to well over 10 percent today.

The central bank does not create anything real; neither resources nor goods and services. When it creates money it causes the price of transactions to increase. The original quantity theory of money clearly related money to the price of anything money can buy, including assets. When the central bank creates money, traders, hedge funds and banks — being first in line — benefit from the increased variability and upward trend in asset prices. Also, future contracts and other derivative products on exchange rates or interest rates were unnecessary prior to 1971, since hedging activity was mostly unnecessary. The central bank is responsible for this added risk, variability, and surge in asset prices unjustified by fundamentals.

The banking sector has been able to significantly increase its profits or claims on goods and services. However, more claims held by one sector, which essentially does not create anything of real value, means less claims on real goods and services for everyone else. This is why counterfeiting is illegal. Hence, the central bank has been playing a central role as a “reverse Robin Hood” by increasing the economic pie going to the rich and by slowly sinking the middle class toward poverty.

Janet Yellen recently said “I am hopeful that … inflation will move back toward our longer-run goal of 2 percent,” demonstrating her commitment to an institutionalized policy of theft and wealth redistribution. The European central bank is no better. Its LTRO strategy was to give longer term loans to banks on dodgy collateral to buy government bonds which they promptly turned around and deposited with the central bank for more cheap loans for more government bonds. This has nothing to do with liquidity and everything to do with boosting bank profits. Yet, every euro the central bank creates is a tax on everyone that uses the euro. It is a tax on cash balances. It is taking from the working man to give to the rich European bankers. This is clearly a back door monetization of the debt with the banking sector acting as a middle man and taking a nice juicy cut. The same logic applies to the redistribution created by paying interest on reserves to U.S. banks.

Concerned with income inequalities, President Obama and democrats have suggested even higher taxes on the rich and boosting the minimum wage. They are wrongly focusing on the results instead of the causes of income inequalities. If they succeed, they will be throwing the baby out with the bathwater. If they are serious about reducing income inequalities, they should focus on its main cause, the central bank.

In 1923, Germany returned to its pre-war currency and the gold standard with essentially no gold. It did it by pledging never to print again. We should do the same.

Note: The views expressed in Daily Articles on Mises.org are not necessarily those of the Mises Institute.

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Frank Hollenbeck teaches finance and economics at the International University of Geneva. He has previously held positions as a Senior Economist at the State Department, Chief Economist at Caterpillar Overseas, and as an Associate Director of a Swiss private bank. See Frank Hollenbeck’s article archives.

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Worthwhile Canadian Initiative: “Is the falling exchange rate good news or bad news?”

Worthwhile Canadian Initiative: “Is the falling exchange rate good news or bad news?”.

“Is the falling exchange rate good news or bad news?”

I was on CBC radio yesterday morning for about 5 minutes, talking about the exchange rate.

From this experience, and from previous similar experiences, this is what reporters want to ask:

“Who gains, and who loses, from the fall in the exchange rate? For Canada as a whole, is the fall in the exchange rate good news or bad news?”

And the answer they expect to hear is:

“Exporters gain; importers lose. On the one hand it reduces unemployment; on the other hand it increases inflation.”

I don’t think reporters are alone in looking at it from that perspective. Most non-economists are probably the same. But economists are uncomfortable answering that question. Let me try to explain why:

The exchange rate didn’t just fall. Something, call it X, caused it to fall. So when we ask “Is the fall in the exchange rate good news or bad news?”, what are we really asking? You can’t give a good answer if you are unclear on the question.

We might be asking:

1. “Is X good news or bad news?”

Or, we might be asking:

2. “Given that X happened, should the Bank of Canada take action to prevent the fall in the exchange rate?”

To my mind, that second question is the useful one to ask. Because, even if we think we know what X is, and whether X is good news or bad news, if we can’t do anything about X, that isn’t very useful.

2a. An economist can say something useful about the benefits of two different monetary policies: would it be better for the Bank of Canada to fix the exchange rate, or should it target inflation and let the exchange rate adjust to wherever it needs to keep inflation on target?

2b. Or, an economist can say something useful about whether the Bank of Canada, in this particular case, needs to prevent the exchange rate falling in order to prevent inflation rising above the 2% target.

I decided to answer that second question, in the form 2a. I said it would be better for the Bank of Canada to target 2% inflation than to fix the exchange rate to the US Dollar.

I didn’t really answer 2b. But I think that, in this particular case, the Bank of Canada is right to let the Loonie depreciate, to help bring inflation back up to the 2% target.

My guess is that X is mostly news about Canadian inflation coming in lower than had previously been expected, and the realisation that the Bank of Canada would therefore not be raising interest rates as quickly as had previously been expected. (Note that when Statistics Canada released the December CPI data, on Friday morning, and inflation was just slightly higher than I had expected, the Loonie gained nearly half a cent in the next hour.) And maybe weaker commodity prices are part of X too. And maybe the US recovery, and the prospect of rising US interest rates, is part of X too.

Sometimes, when a reporter asks you a question, it’s best not to answer it, and to answer a different question. Not because you are weaseling out of answering the reporter’s question, but because you think about it differently, and you think the reporter’s question isn’t the right one to ask. (I now have more sympathy for politicians being interviewed, when they appear to duck an apparently straight question!)

Update: by the way, when reporters want to interview an economist, they (or one of the people they work with) will normally want to have a pre-interview discussion first. This is your chance to suggest they re-frame the question in the way you think it should be framed. You can tell them you wouldn’t be able to give a good answer to that question, but you could give a good answer to a different but related question. Because very few reporters have any economics background, they don’t really know what questions to ask. And, from my experience, they seem to be willing to listen to your suggestions, because they are trying to prepare for the interview, as well as help you prepare.

It would be interesting to hear any reporter’s thoughts on interviewing economists. (It must be tough!)

Posted by  on January 28, 2014

India’s Central Bank Governor: “International Monetary Cooperation Has Broken Down” | Zero Hedge

India’s Central Bank Governor: “International Monetary Cooperation Has Broken Down” | Zero Hedge.

India’s recently crowned central bank head (and predecessor of the IMF’s Nostradamal Olivier Blanchard), Raghuram Rajan, has not had it easy since taking over India’s printer: with inflation through the roof, and only so much scapegoating of gold as the root of all of India’s evils, Rajan announced an unexpected 50 bps interest rate hike two days ago in an attempt to preempt the massive EM capital flight that has roundhoused Turkey, South Africa, Hungary, Argentina and most other current account deficit emerging markets. Whether he succeeds in keeping India away from the EM maelstrom will be unveiled in the coming days, although if last summer is any indication, the INR has a long way to fall.

Hinting that the worst is yet to come, was none other than Rajan himself, who yesterday in an interview in Mumbai with Bloomberg TV India, said that “international monetary cooperation has broken down.” Of course, when the Fed was monetizing $85 billion each and every month and stocks could only go up, nobody had a complaint about any cooperation, be it monetary or international. However, a 4% drop in the S&P from its all time high… and everyone begins to panic.

The reason for Rajan’s displeasure is because he believes that the DMs owe the EMs a favor: “Industrial countries have to play a part in restoring that, and they can’t at this point wash their hands off and say we’ll do what we need to and you do the adjustment.”Sorry Raghu – Bernanke hightailed it out of here and as Citi’s Steven Englander pointed out yesterday, left you “to twist in the wind.” Feel free to submit your thoughts on the matter in the overflowing complaint box in the Marriner Eccles lobby.

Instead of doing this, however, Rajan continued complaining to Bloomberg:

“Fortunately the IMF has stopped giving this as its mantra, but you hear from the industrial countries: We’ll do what we have to do, the markets will adjust and you can decide what you want to do,” Rajan said. “We need better cooperation and unfortunately that’s not been forthcoming so far.”

Rajan said yesterday developed countries might not like adjustments emerging markets take to cope with the outflows, without elaborating on specific measures. His surprise Jan. 28 move to raise the benchmark repurchase rate by a quarter point – – adding to increases of 50 basis points since he took over the Reserve Bank of India in September — was to stem consumer-price inflation running at close to 10 percent, he said.

 

“In an environment when there is external turmoil, we have to get our house in order and we can’t postpone that,” Rajan said. “So a collateral benefit of getting inflation down is that you also strengthen the belief in the value of the rupee.”

“When there is huge outside turmoil, even today post the Federal Reserve withdrawing stimulus further, it is extremely important that we both be seen on the same page.”

You know – this is truly wonderful: for once a central banker admits that his peers are on the verge of losing control of the globe – of course not in those words as the result would be sheer panic upon the realization that central bankers are just as clueless as everyone else – because while conducting central planning in one country is somewhat feasible for a period of time, doing so across every country across currencies, and capital markets, is impossible. And the Indian knows this.

He also knows that in a worst case scenario, the Indian Rupee will crash and burn and make last year’s record devaluation of the INR seem like breakfast at Gideon Gono’s. Which means that doing the right thing would mean allowing the people – his people – to preserve their wealth in the only real currency that will withstand whatever Emerging Market collapse may be headed this way. Gold.

Instead, what did the Indian Central Bank do? This.

  • Jan 21 – The government raises the gold import duty by 2% to 6%.
  • Jan 22 – The government more than doubles the duty on raw gold to 5%.
  • Jan 30 – Finance Minister P. Chidambaram says there are no plans for additional taxes or curbs on gold imports.
  • Feb 1 – The Reserve Bank of India (RBI) plans to introduce three or four gold-linked products in the next few months.
  • Feb 6 – The RBI says it would consider imposing value and quantity restrictions on gold imports by banks.
  • Feb 14 – The central bank relaxes rules on gold deposit schemes offered by banks by allowing lenders to offer the products with shorter maturities.
  • Feb 20 – The Trade Ministry recommends suspending cheaper gold jewellery imports from Thailand.
  • Feb 28 – India keeps its gold import duty unchanged in its annual national budget, defying industry expectations.
  • Feb 28 – India proposes a transaction tax of 0.01% on nonagricultural futures contracts, including for precious metals.
  • March 1 – The Finance Minister appeals to people not to buy so much gold.
  • March 18 – The Reserve Bank of India says it is examining banks that sell gold coins and wealth management products to identify “systemic issues”, with a view to closing any legal loopholes.
  • April 2 – The Finance Ministry suggests it is unlikely to raise the import tax on gold further to avoid smuggling and would instead introduce inflation-indexed instruments.
  • May 3 – The RBI restricts the import of gold on a consignment basis by banks.
  • June 3 – The Finance Minister says India cannot afford high levels of gold imports and may review its import policy.
  • June 5 – India hikes the gold import duty by a third, to 8%.
  • June 21 – Reliance Capital halts gold sales and investments in its gold-backed funds.
  • June 24 – India’s biggest jewellers’ association asks members to stop selling gold bars and coins, about 35% of their business.
  • July 10 – India’s jewellers announce they might continue a voluntary ban on sales of gold coins and bars for six months.
  • July 22 – The RBI moves to tighten gold imports again, making them dependent on export volumes, but offers relief to domestic sellers by lifting restrictions on credit deals.
  • July 31 – India hopes to contain gold imports well below the 845 tonnes that were shipped last year, the Finance Minister says.
  • Aug 13 – India hikes the import duty on gold for a third time in 2013, to 10%. Duties for silver and platinum are also increased to 10%. The customs duty on gold ore bars, ore, and concentrate are increased to 8% from 6%.
  • Aug 14 – India turns the screws on gold buying again, banning imports of coins and medallions and making domestic buyers pay cash.
  • Aug 29 –  India considers plan to allow commercial banks to buy gold direct from ordinary citizens
  • Sept 19 – India hikes import duty on gold jewerly to 15%

And so on.

So thank you for your fake concern Raghuram, but if you really wanted to help your people when the hammer hits, you would lift all capital controls on gold now, and allow your population to preserve their wealth in the only way they have known for the past two thousand years – by converting it into the barabrous relic. And since you won’t, enjoy reaping what you and your demented central-planning peers have sown.

Calm Broken in Markets Amid Concern of Emerging Contagion – Bloomberg

Calm Broken in Markets Amid Concern of Emerging Contagion – Bloomberg.

Declines that erased $1.7 trillion from global stocks as currencies from Turkey to Argentina slid are proving a Wall Street maxim, according to Brian Barish of Cambiar Investors LLC: selling can start anywhere.

“You’re never fully prepared for something like this,” Barish, president of Denver-based Cambiar, which manages $9 billion, said in a phone interview. “You say to yourself, ‘I know the froth is picking up, I know this is starting to get a little out of hand, this is going to get ugly when the hammer comes down.’ You know all of that, but you just don’t know what is going to get sold and why and by who.”

From Thailand and Russia in the late 1990s to Portugal and Greece three years ago and Turkey and Argentina today, crises inemerging markets are as hard to predict as they are to contain. Now they’re threatening a run of gains that has gone virtually uninterrupted in the developed countries for more than a year as investors adjust to a world where neither China nor the U.S. are likely to ride to the rescue.

The MSCI All-Country World Index, which came within 5 percent of an all-time high on New Year’s Eve, has dropped 4 percent since Jan. 22, the worst losses for worldwide equity markets in six months. Turkey’s attempt to stem declines in the lira backfired as a doubling of official interest rates led to even more selling. Stocks tumbled anew yesterday as the Federal Reserve said it would curtail its bond-buying program in the second month of reduced stimulus.

Obscure Causes

“The reasons are always a little bit unexpected,” said Khiem Do, head of Asian multi-asset strategy with Baring Asset Management in Hong Kong. Though the causes are obscure, the outcome was predictable, he said. “The correction is long overdue.”

The Standard & Poor’s 500 Index (SPX) tracking the biggest American companies fell 1 percent yesterday, bringing its decline since the Jan. 15 record to 4 percent. The Turkish currency depreciated as much as 2.4 percent after strengthening about 4 percent during the day. South Africa’s rand sank more than 2 percent even as the central bank unexpectedly raised rates. Gold increased 0.8 percent and copper fell.

Stocks Retreat

S&P 500 futures rose 0.2 percent at 6:03 a.m. in New York today, after the gauge dropped to the lowest level since Nov. 12. The MSCI Asia Pacific Index lost 1.5 percent and the Stoxx Europe 600 Index dropped 0.5 percent. India’s rupee weakened 0.5 percent versus the dollar and Indonesia’s rupiah slid 0.4 percent.

Emerging-market stocks have had the worst start to a year since 2008 as currencies from Turkey to South Korea tumbled. Sentiment toward the markets had started to sour last year after the Fed signaled it would scale back stimulus and as China’s economic growth showed signs of slowing. The MSCI Emerging Markets Index has slipped 11 percent from an October peak. A Bloomberg gauge tracking 20 emerging-market currencies has fallen to the lowest level since April 2009.

“It definitely caught people off guard,” Kevin Chessen, head of international trading and managing director at BTIG-Baypoint Trading LLC, said by telephone. “People came into January quite bullish. Then all of a sudden you started to see a few chinks in the armor, and it caused people to scramble. People also don’t have enough protection on like they’ve had in the past. It may be why the selloff got exacerbated.”

Constant Watch

Turkish central bank Governor Erdem Basci is fighting to arrest a currency run after a corruption scandal that broke last month ensnared several cabinet members. The political fallout coincided with an outflow of money from emerging economies including Brazil.

Argentina allowed the peso to plunge 15 percent after the central bank began scaling back interventions in the foreign-exchange market last week. Global stocks declined 3.3 percent since Jan. 23, when a factory index in China fell short of economist projections.

“The environment is changing so quickly and just to make sense of so many moving parts is extremely challenging,” Benoit Anne, London-based head of emerging-markets strategy at Societe Generale SA, said in a phone interview from New York. Anne said he woke up at 2 a.m. on Jan. 29 for Turkey’s central bank decision and was awake again at 4 a.m. to monitor the market before arriving for work at 7 a.m. for a morning meeting.

“It’s almost around the clock,” he said. “It’s extremely stressful.”

Currencies Fall

All but seven of 24 developing-nation currencies fell yesterday, with Russia’s ruble and Mexico’s peso losing more than 1 percent against the dollar. The South Africa Reserve Bank unexpectedly raised the repurchase rate to 5.5 percent from 5 percent, following Turkey’s decision to boost borrowing costs after a late-night emergency meeting.

“If you look at the things that have kicked off over the last two weeks in terms of currency, they are kind of long overdue,” said Gary Dugan, who helps oversee about $53 billion as the Singapore-based chief investment officer for Asia and the Middle East at Royal Bank of Scotland Group Plc’s wealth management unit. “All of these things are well known, but it reached a crescendo that broke the back of the market.”

Speculation that developed market stocks were due for a retreat has built for months, including forecasts this month from Blackstone Group LP’s Byron Wien and Nuveen Investment Inc.’s Bob Doll Jr., who both called for a 10 percent drop. The S&P 500 hasn’t lost 5 percent since June 2013. For the MSCI All-Country index, the broadest gauge of global equities, the last retreat of 10 percent was in June 2012.

Finding Opportunities

Global stocks had surged since mid-2012, with U.S. equities capping a fifth year in a bull market, as the Fed implemented three rounds of quantitative easing and earnings nearly doubled. Ignoring turmoil in emerging markets, the Fed said yesterday it will trim its monthly bond buying by an additional $10 billion, sticking to its plan for a gradual withdrawal from departing Chairman Ben S. Bernanke’s unprecedented easing policy.

The emerging-markets selloff has done little to dent the $10 trillion of stock value that was created worldwide in 2013, when the S&P 500 advanced 30 percent and Japan’s Topix Index (TPX)climbed 51 percent.

“I like days like this,” Carsten Hilck, who oversees about 5 billion euros ($6.8 billion) as senior fund manager at Union Investment Privatfonds GmbH in Frankfurt, said in an interview. “Risk and reward goes together in markets like this. Turbulence makes prices move so I can react.”

1998 Similarities

This year’s drop in global equities is half as large as the worst retreat of 2013, when the MSCI gauge fell 8.8 percent from May 21 through June 24 after Bernanke raised the possibility in Congress of reducing stimulus. It slid 14 percent between March and June 2012 as Europe struggled to extinguish its sovereign debt crisis in Greece and Portugal.

Declines will prove temporary, much as they did in 1998, according to Mark Matthews, the Singapore-based head of Asia research for Bank Julius Baer & Co. Like then, the latest selloff comes after a five-year advance lifted valuations above historical averages. The S&P 500 traded as high as 17.4 times annual profit in December, the most expensive level in almost four years, data compiled by Bloomberg show. In 1998, stocks rebounded from a 19 percent drop that came as currency turmoil in Asia and Russia spread to developed markets.

The most vulnerable emerging markets “have already reached a bottom in terms of their ‘badness,’” Matthews said. “Even if they do continue to see economic slowdown, I cannot believe it would be enough to derail the strong U.S. recovery.”

Market Breadth

The global economy will grow 3.7 percent this year, up from an October estimate of 3.6 percent, the International Monetary Fund said in revisions to its World Economic Outlook released Jan. 21, citing accelerating expansions in the U.S. and U.K. Economies of Japan, Europe and the U.S. are forecast to expand together for the first time since 2010, according to data compiled by Bloomberg.

A total of 460 stocks in the S&P 500 ended higher in 2013, the most since at least 1990, according to data compiled by Bloomberg. While breadth of that nature has been a bullish stock-market indicator in the past, the turmoil in emerging markets this year is leading investors away from equities, according to Jawaid Afsar, a trader at Securequity Ltd. in Sheffield, England.

“Last year, you could’ve picked any stock at any time and you didn’t need protection because the markets kept going higher and higher,” Afsar said by telephone. “Suddenly, emerging markets have tumbled across the board, currencies are getting hit hard, so people are running for cover. It’s come out of the blue.”

Treasury Haven

Stress in emerging markets has made a winner out of two of last year’s least-loved assets. Treasuries rose yesterday, pushing 10-year note yields down to the lowest level in two months. Gold, which posted its worst annual return since 1981 last year, has climbed more than 5 percent in January.

Shifts among asset classes and the global declines in 2014 have led to a surge in volatility. TheChicago Board Options Exchange’s Volatility Index, known as the VIX, reached 18.14 this month, the highest level since October, and average daily moves in the S&P 500 rose to 0.55 percent, compared with 0.44 percent in December, data compiled by Bloomberg show.

“My phone hasn’t stopped ringing in the past few days, and I met with about half of my clients, as some of them have direct exposure to emerging-market currencies,” Lorne Baring, who manages about $500 million as managing director of B Capital in Geneva, said in a telephone interview, adding the firm reduced emerging-market exposure prior to the selloff. “They want to know my views on whether the situation is going to get worse, and I tell them yes, it will.”

To contact the reporters on this story: Whitney Kisling in New York at wkisling@bloomberg.net; Eleni Himaras in Hong Kong at ehimaras@bloomberg.net; Weiyi Lim in Singapore atwlim26@bloomberg.net

To contact the editor responsible for this story: Lynn Thomasson at lthomasson@bloomberg.net

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