Roberto Abraham Scaruffi

Friday 12 December 2014

The European Union Times


Posted: 11 Dec 2014 07:20 AM PST


A recent column in US News & World Report, The Swiss Gold Rush by Pat Garofalo, its assistant managing editor for opinion, is subtitled “A push for the gold standard in Switzerland is symbolic of Europe’s rising right wing.” US News & World Report hereby descends from commentary to propaganda. Who edits its editors?
To begin with, the Swiss referendum, decisively and sensibly rejected by the Swiss electorate, was not about “the gold standard.” It was a vote on a proposition requiring its central bank to increase its gold reserves from around 8% to 20% – implying the acquisition, over five years, of 1,500 tons (“costing at about $56.3 billion at current prices,” reports Bloomberg), never to sell gold, and to hold that federation’s gold within Switzerland. That had nothing to do with the gold standard.
The Swiss voted 77% – 23% to reject this proposition. The Swiss National Council had rejected the initiative by 156 votes to 20 with 22 abstentions, and the Council of States by 43 votes to 2 abstentions. And the referendum may well have been a bad, or at least silly, idea.
With a Swiss GDP of around $650 billion (USD) per year the requirement to acquire $10B/year of this iconic shiny-and-ductile commodity while not insignificant, at less than 2% of annual GDP, hardly would have been crippling. That said, the gold standard was not on the ballot.
As for the gold markets themselves, according to a 2011 report by the FT, reporting on a study by the London Bullion Market Association, there was a $240bn average daily turnover in the London bullion market. The annual mandated Swiss acquisition, then, apparently would have amounted to about … half an hour’s trading volume on one of the world’s major gold marketplaces. Commodity investment, however, has nothing to do with the gold standard.
Demonetized (as at present), gold merely is a commodity. The gold standard is a quality standard, not a quantity standard, and is about maintaining the integrity of the currency, not limiting its supply. This Swiss referendum substantively was irrelevant to monetary policy. As Forbes.com’s own Nathan Lewis perceptively has pointed out the amount of gold held, under the gold standard, as reserves by banks of issue fluctuated dramatically and immaterially.
The Swiss referendum generated a modicum of international attention and considerable criticism. The referendum presented, in fact, as misguided. It did not, however, even imply a restoration of the gold standard much less prove itself, as Garofalo presented it, as a symptom of “Europe’s rising right wing.”
Garofalo stated that “the gold standard is the idea that a nation’s money supply should be tied to gold, rather than being fully controlled by its central bank.” This is not even a crude approximation of the gold standard. The gold standard simply holds that the value of a currency shall be defined by, and legally convertible into, a fixed weight of gold.
Garofalo implies, and cites other writers who claim, that the gold standard constrains the money supply. Not so. As Nathan Lewis has pointed out, for instance, from 1775 to 1900 the amount of gold in the U.S. monetary system increased by 3.4x while the currency increased by 163x without causing a depreciation in value of the currency.
The gold standard is a qualitative, not quantitative, standard. It does not constrain growth of the money supply, merely calibrating it reasonably well (albeit imperfectly, perfection having never been attained by any monetary system) to the real economy’s money demand. Lewis:
between 1880 and 1900, the monetary base in Italy actually shrank by 4.8%. However, the monetary base in the U.S. grew by 81% over those same years. Both used gold standard systems. So, the “money supply” not only has no relation to gold mining production, but two countries can have wildly different outcomes during the same time period.
As for whether the gold standard is superior to fiduciary management there is abundant evidence that the organic nature of the gold standard consistently outperforms the synthetic nature of central bank discretion. Garofalo references a poll of 40 academic economists who dismiss the (admittedly unfashionable) gold standard.
In criticizing the performance of the gold standard Garofalo relies on The Atlantic’s Matt O’Brien.
Indeed, when it was in force, the gold standard brought with it a whole host of negative effects, and as Matt O’Brien wrote in The Atlantic, “was a devilish device for turning recessions into depressions.” It ensures that a central bank can’t respond to a crisis by putting more money into the financial system, greasing the wheels of the economy, since the money supply is restricted by an outside factor.
As for another celebrity on whom Garofalo relies, Nouriel Roubini, his ill-founded hysteria on the gold standard has been critiqued here and here. O’Brien and Roubini are entitled to their own opinions but not to their own facts.
As economic historian Professor Brian Domitrovic, also at Forbes.com, relates, The Gold Standard Had Nothing To Do With Panics and Busts,
Looking at the 19th century, before the gold standard became a ghost, a dead-letter in the early era of the Federal Reserve from 1913-33, there is no evidence that the good old thing was implicated in any panic or bust.
Rather than relying on commentators and academics, pro or anti gold, it might be pertinent to turn to the thoughts of central bankers. Herr Dr. Jens Weidmann, president of the Bundesbank, in a 2012 speech referred to gold as “in a sense, a timeless classic.”
And Garofalo makes no reference to the 2011 Bank of England Financial Stability Paper No. 13, summarized and hyperlinked by Forbes.com contributor Charles Kadlec here. This study by the prudential Bank of England – not for nothing called “the Old Lady of Threadneedle Street” – provides an empirical assessment of the fiduciary management approach ushered in by Presidents Johnson and Nixon and, at the time of the study, in effect for 40 years.
Financial Stability Paper No. 13 contrasts the world economy’s real performance under the Johnson/Nixon protocols relative to the Bretton Woods gold-exchange standard and the classical gold standard. The Bank of England analysis, based on the empirical data, concludes that fiduciary management greatly underperformed (for economic growth, financial stability, inflation, recession, and all other categories assessed) its predecessor systems.
Garofalo legitimately cites the weight of elite academic economic opinion against the out-of-fashion gold standard. That said, this august collection of economists, few if any of whom foresaw the panic of 2007 and ensuing Great Recession, seem to be guided by former U.S. Treasurer Ivy Baker Priest’s motto, “Often wrong, never in doubt.” Readers deserve to be provided with the weight of the evidence to, at least, supplement the weight of elite opinion.
More troubling are Garofalo’s innuendos tying gold standard proponents to sinister “right-wing” politics. There is no meaningful correlation between advocacy for the gold standard and, for example, anti-immigrant sentiment. I, a gold standard proponent, am very much on record for a generous, inclusive, immigration policy (including a path to citizenship for undocumented aliens). So is American Principles In Action, the gold standard’s most prominent advocacy group in Washington, DC (which I professionally advise).
Garofalo implies, and cites other writers who claim, that the gold standard constrains the money supply. Not so. As Nathan Lewis has pointed out, for instance, from 1775 to 1900 the amount of gold in the U.S. monetary system increased by 3.4x while the currency increased by 163x without causing a depreciation in value of the currency.
The gold standard is a qualitative, not quantitative, standard. It does not constrain growth of the money supply, merely calibrating it reasonably well (albeit imperfectly, perfection having never been attained by any monetary system) to the real economy’s money demand. Lewis:
between 1880 and 1900, the monetary base in Italy actually shrank by 4.8%. However, the monetary base in the U.S. grew by 81% over those same years. Both used gold standard systems. So, the “money supply” not only has no relation to gold mining production, but two countries can have wildly different outcomes during the same time period.
As for whether the gold standard is superior to fiduciary management there is abundant evidence that the organic nature of the gold standard consistently outperforms the synthetic nature of central bank discretion. Garofalo references a poll of 40 academic economists who dismiss the (admittedly unfashionable) gold standard.
In criticizing the performance of the gold standard Garofalo relies on The Atlantic’s Matt O’Brien.
Indeed, when it was in force, the gold standard brought with it a whole host of negative effects, and as Matt O’Brien wrote in The Atlantic, “was a devilish device for turning recessions into depressions.” It ensures that a central bank can’t respond to a crisis by putting more money into the financial system, greasing the wheels of the economy, since the money supply is restricted by an outside factor.
As for another celebrity on whom Garofalo relies, Nouriel Roubini, his ill-founded hysteria on the gold standard has been critiqued here and here. O’Brien and Roubini are entitled to their own opinions but not to their own facts.
As economic historian Professor Brian Domitrovic, also at Forbes.com, relates, The Gold Standard Had Nothing To Do With Panics and Busts,
Looking at the 19th century, before the gold standard became a ghost, a dead-letter in the early era of the Federal Reserve from 1913-33, there is no evidence that the good old thing was implicated in any panic or bust.
Rather than relying on commentators and academics, pro or anti gold, it might be pertinent to turn to the thoughts of central bankers. Herr Dr. Jens Weidmann, president of the Bundesbank, in a 2012 speech referred to gold as “in a sense, a timeless classic.”
And Garofalo makes no reference to the 2011 Bank of England Financial Stability Paper No. 13, summarized and hyperlinked by Forbes.com contributor Charles Kadlec here. This study by the prudential Bank of England – not for nothing called “the Old Lady of Threadneedle Street” – provides an empirical assessment of the fiduciary management approach ushered in by Presidents Johnson and Nixon and, at the time of the study, in effect for 40 years.
Financial Stability Paper No. 13 contrasts the world economy’s real performance under the Johnson/Nixon protocols relative to the Bretton Woods gold-exchange standard and the classical gold standard. The Bank of England analysis, based on the empirical data, concludes that fiduciary management greatly underperformed (for economic growth, financial stability, inflation, recession, and all other categories assessed) its predecessor systems.
Garofalo legitimately cites the weight of elite academic economic opinion against the out-of-fashion gold standard. That said, this august collection of economists, few if any of whom foresaw the panic of 2007 and ensuing Great Recession, seem to be guided by former U.S. Treasurer Ivy Baker Priest’s motto, “Often wrong, never in doubt.” Readers deserve to be provided with the weight of the evidence to, at least, supplement the weight of elite opinion.
More troubling are Garofalo’s innuendos tying gold standard proponents to sinister “right-wing” politics. There is no meaningful correlation between advocacy for the gold standard and, for example, anti-immigrant sentiment. I, a gold standard proponent, am very much on record for a generous, inclusive, immigration policy (including a path to citizenship for undocumented aliens). So is American Principles In Action, the gold standard’s most prominent advocacy group in Washington, DC (which I professionally advise).
The figure most synonymous with right-wing totalitarianism, Adolf Hitler, virulently opposed the gold standard. The gold standard then was, as it now is, intrinsic to a liberal republican order. Hitler is recorded as saying:
I had no interest in gold- either natural or synthetic….Our opponents have not yet understood our system. We can be easy in our minds on that subject; they’ll have terrible crises once the war is over. During that time, we’ll be building a solid State, proof against crises, and without an ounce of gold behind it. Anyone who sells above the set prices, let him be marched off into a concentration camp ! That’s the bastion of money. There’s no other way.
Garofalo states that “In 2012, Republicans kowtowed to their more extreme members by including a call to return to the gold standard in their party platform.” This, flatly, is wrong. The 2012 GOP platform did not call to return to the gold standard. It simply called for a “”commission to investigate possible ways to set a fixed value for the dollar.” (Nor did it represent a “kowtow” to “more extreme members.”)
Instead of reciting the platform language Garofalo relied on a distorted description of it by commentator Bruce Bartlett, to which he links. (Bartlett’s reference, in his New York Times Economix blog, to a “metallic basis” was to platform language referencing a commission established by Reagan, not the call to action in the 2012 platform.)
Garofalo states that “Kentucky Sen. Rand Paul – has mentioned the possibility of a return to the gold standard.” The source to which he links states shows the Senator entirely noncommittal: “Paul wouldn’t comment on whether a gold standard is needed or not….” Sen. Paul, pressed by a questioner, simply called for a commission to study the matter, which has a subtle yet materially different connotation from having “mentioned the possibility.”
Garofalo’s misrepresentations are, at best, sloppy, giving readers good cause to wonder about the integrity of this writer’s work. His collected writings are a compilation of progressive nostrums: complaining that gas prices are too low, opposing corporate tax reform, criticizing President Obama for refusing to propose a gas tax, supporting the mandated minimum wage, throwing bouquets to the IRS, and so forth.
Garofalo is a propagandist rather than a commentator. Good on him: the discourse is made spicier by propaganda.
That said, the readers of US News & World Report deserve much better quality propaganda than this. The Swiss referendum may have been silly but it was not about the gold standard. The gold standard neither is “ugly” nor evidence of a “rightward lurch.” And, in the words of its foremost living proponent, Lewis E. Lehrman (whose eponymous Institute I professionally advise), “By the test of centuries, the true gold standard, without reserve currencies, is the least imperfect monetary system of history.”
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Posted: 11 Dec 2014 07:11 AM PST
Scientists identify infrared vision in human eye.
A new study has identified a super power of human eye to see invisible infrared light.
Scientists found that under certain conditions the eye’s retina would be able to react differently and consequently sense infra-red light which is beyond what traditionally considered as visible spectrum.
The super power of the eye appears when pairs of photons combine their energies to make the invisible visible, according to the study published in the Proceedings of National Academy of Sciences (PNAS).
Analyzing cells from the retinas of mice and people uncovered that when powerful lasers emit pulses of infra-red light rapidly, light-sensing cells in the retina sometimes get a double hit of infrared photons.
“We’re using what we learned in these experiments to try to develop a new tool that would allow physicians to not only examine the eye but also to stimulate specific parts of the retina to determine whether it’s functioning properly,” said senior investigator Vladimir J. Kefalov, who is associate professor of ophthalmology and visual sciences at Washington University.
Human vision depends on photons of light triggering cells in the retina, known as photoreceptors.
The light-sensitive pigments in photoreceptors become active only by visible wavelengths of light.
The investigators propose that the pigments may be activated by longer infrared wavelengths of light when they receive two photons at a time.
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Posted: 11 Dec 2014 07:02 AM PST


While the rest of Germany is calling for fewer immigrants, Oliver Junk, the mayor of Goslar, a small town in Lower Saxony has said he wants more to come into the town.
In a speech on Germany’s n-tv news channel, Junk said that “The simplest growth program for Goslar is immigration”
“As a region with a declining population, we rely on immigration,”
“We need citizens to help our communities and our economy to function, so that we can get schools, swimming pools and our municipal infrastructure. Many entrepreneurs say to me: ‘We need more staff and professionals.’ That’s why I say we need more refugees in Goslar.”
“In Germany we don’t distribute refugees intelligently, and we end up preventing sensible integration,”
“Cities such as Dortmund, Berlin and Göttingen build container villages and tent cities, and use empty school buildings. Thus ghettos are formed, because otherwise it wouldn’t be possible to accommodate the people.”
“We will only survive through immigration – migration is good!”
Just another one of those routine German treachery arguments.
Back in the 70’s and 80’s the globalists were telling America and European countries that unless they stopped having children, they would destroy the world; this belief was popularized by the movie “Soylent Green“. Today they are saying that the only way to help Europe’s demographics is to replace its native population with non-European immigrants.
        
Posted: 11 Dec 2014 05:51 AM PST
Cuban President Raul Castro
Cuban President Raul Castro has called on the Caribbean countries to boost their economic and political ties in the face of an “unfair” globalized world.
Castro made the remarks during a regional summit by 15 member states of Caribbean Community (CARICOM) and Cuba in the capital Havana on Monday.
The meeting aims to enhance trade and cooperation among the participating countries.
“I propose that we share viable ideas and proposals to keep working together to develop bilateral cooperation and exchanges, and to diversify our economic and trade relations to face the challenges of the globalized, unfair, and unequal world in which we live,” President Castro said.
The Cuban leader added the Caribbean countries “must survive in a world rattled by a global economic crisis,” and further urged “political, economic and social integration.”
The CARICOM member states, for their part, vowed to agree on more economic cooperation and infrastructure projects.
On Sunday, the Caribbean leaders called on the United States to end “senseless” sanctions imposed against Cuba over five decades ago.
The US imposed a partial trade embargo on the Caribbean island nation in October 1960 and a full trade one in February 1962.
The two countries have lacked full diplomatic relations since 1961.
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Posted: 11 Dec 2014 05:47 AM PST


Thousands of British families will be dependent on handouts and charity this Christmas as rates of poverty in the UK continue to soar.
At a time when real wages remain stagnant for most of the UK’s lowest paid, it is estimated more than 2,000 working families will find themselves in need of assistance from voluntary organizations for food and other necessities.
According to a feature report published in the Guardian on Wednesday, around 4,500 children will also require assistance as a result of severe poverty.
This follows research from the Joseph Rowntree Foundation (JRF) showing around half of all people in poverty come from working families, not the welfare dependent.
“People are not working as many hours as they need to, or are not paid enough per hour, to enable them to lift their families out of poverty,” said New Policy Institute director Tom MacInnes.
MacInnes added that low pay, changing working hours and an increasing number of people working part-time all contributed to overall poverty in the UK.
Meanwhile, the all-party parliamentary group into hunger and food poverty reported earlier this week that sanctions to benefit payments and low real term wages were forcing more British people to rely on food banks.
31-year-old Rebecca Daly, interviewed by the Guardian, said her living costs meant she could not afford to buy her children Christmas presents, and that she would often turn down the heating in her home to save money.
“I’ve just received a gas bill for £148 and I know there will be another one for the electricity arriving any day. Then the kids tell me about the toys and clothes they want for Christmas, it’s so hard when you know you can’t afford it,” she said.
The charity Kind, set up to help the disabled and vulnerable in Merseyside, expects to send out more than 1,600 packages to deprived people this Christmas. London based children’s charity, Kids Company, is expected to hand out over 12,000 food packages in the coming weeks. The organization says this represents a 200 percent increase since 2012.
The Trussell Trust, the UK’s largest provider of foodbanks, also warned that they would face increasing pressure as more Britons become dependent on their support over Christmas.
“Increasingly, people surviving on low incomes are living on a financial knife-edge,” said Trussell Trust chief executive David McAuley.
“For thousands of families, Christmas Day will not be about feasting and presents, it will be a struggle to put food on the table and there will be some children who wake up to no presents at all.”
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Posted by Roberto Abraham Scaruffi at 14:03