Wednesday, August 31, 2011

Fed Divided on How to Respond to Crisis

Minutes: Fed Weighed Asset Purchases

Euro-Zone Confidence Slumps

Euro-Zone Confidence Slumps

South Africa Misses Opportunity

By Grant de Graf

At a time that gold is spiking to all time highs, it is rather unfortunate that South Africa is left sucking the left over lollipop, when the country should be enjoying the fruits of mining exports, reminiscent of the 70s. Poor economic policy, questionable governance, high unemployment and an off the chart crime rate, have dogged Africa's largest economy.

Although the unemployment rate is officially 25%, high crime rates, the lack of housing suggest that  it is much higher. Little wonder that controversial youth leader of the ANC, Julius Malema, whose overtures to the electorate to nationalize major industry, kill all whites ("Kill the Boer") and rearrange government leadership, is gaining popularity. Any democratic country, which fails to solidify economic prosperity for the majority of its citizens, will always face electoral discontent.

As with the United States, South Africa needs a strategic free market solution to facilitate solid growth rates. Unless this can be achieved, the government will face strong political challenge. Seemingly, the ANC continues to embrace antiquated Marxist policies that talk the walk, but that do not walk the talk. On this score it is tragic that the majority of South Africans will miss out on the "gold rush". Even more tragic is the fact that they will become victims to politicians and their empty promises.  

South African Growth Falters

South African Growth Falters

ECB Rescue Fund Hits Snags

Rescue Fund Hits Snags

Monday, August 15, 2011

ECB Settled €22 Billion in Bond Buys

ECB Settled €22 Billion in Bond Buys

Skeleton in Closet Linked to Riots and Hooliganism in Britain

by Grant de Graf

In the aftermath of the riots, hooliganism and looting that rocked England last week, officials are left wondering how this all happened. Thugs raided departmental stores and embarked on a new surge of violence that all began after Mark Duggan from Tottenham, North London, was fatally shot by the London Metropolitan Police. Soon the protests against the police shooting turned violent and spread to other parts of England, ultimately becoming a free-for-all opportunity for thugs and gangs to capitalize on the lawlessness.

Prime Minister David Cameron has understandably expressed shock and bewilderment at the low level of morality that has permeated through some elements of British society. Most community leaders have expressed a multitude of factors as the reasons that may have contributed to the violence, from bad parenting to ineffective police liaison management by Scotland Yard. The causes are complex.

However, one factor that clearly does have a strong correlation to crime is the economy. Take New York City for example and the high rate of violence that existed in the 90s - as the economy improved together with the implementation of more effective policing methods, crime plummeted. It is true that the cause of the British hooliganism are complex and multifaceted, but few can deny that the weak economy, the severe austerity measures and anemic levels of growth, were the catalyst that set the pigeons loose.

The truth is that unfortunately, as the impact of austerity gains traction in Britain, there will be other skeletons in the closet that start to shake. 

Tuesday, August 9, 2011

ECB Opts for Fool's Paradise

by Grant de Graf

The ECB has recently embarked on its own spending spree, a new strategy by the European Central Bank directed at buying up Italian and Spanish bonds, in an apparent attempt to comfort markets.

"The concept is to try and restore the normal functioning of markets through a better transmission of monetary policy, in order to ensure price stability," said ECB President Mr. Jean-Clause Trichet

The result is that bond yields in those countries have fallen, ostensibly an indication that objectives of the ECB have been achieved.

Somehow I am left with a familiar déjà vu, reminiscent of the 70s that saw a series of gold sale auctions by the Federal Reserve, in an attempt to contain the run away spot price. The result was that it had very little impact on the price of gold and in fact even accentuated its rise.

I am positive that the ECB will be successful in restraining bond yields in the short term, but in the long term the market is always much bigger than a government, a fact which the ECB has partially acknowledged. For example, Mr. Trichet has already stressed that confidence wouldn't return for good, unless governments demonstrate their commitment to stricter fiscal discipline.

However, what the ECB fails to appreciate is that failure to commit to fiscal disciple is a good way to destroy a country, but that implementing austerity, is not necessarily a good way to remedy the problems that have resulted from mismanagement, or even simply a consequence of the economy. Countries that face difficulty need well-defined programs that will encourage investment and job growth, a lesson that the United Kingdom and even the U.S. are learning. Simply applying a monetary policy initiative is not enough.



WSJ Assistant Managing Editor John Bussey explains the global impact of the European Central Bank purchasing Italian and Spanish bonds on a large scale. Photo: DANIEL ROLAND/AFP/Getty Images

Trichet Defends ECB Strategy

Trichet Defends ECB Strategy

‪Fed May Strengthen Stimulus Pledge

‪Fed May Strengthen Stimulus Pledge - YouTube

Why This Crisis Is Different From the 2008 Financial Crisis

Why This Crisis Is Different From the 2008 Financial Crisis

Markets Are Getting it Wrong

Markets Are Getting it Wrong - A Perspective

Monday, August 8, 2011

Greece Bans Short Selling

Greece Bans Short Selling

ECB Moves to Prop Up Italy, Spain

ECB Moves to Prop Up Italy, Spain

Belgium's Gridlock Spooks Investors

Mixed Picture for Belgium as Borrowing Costs Rise

Africa’s Famine Has Broad-Reaching Consequences

Behind Africa’s famine, more than just drought Famine isn’t inevitable - The Washington Post

Government Debt Dynamics

World debt guide: Countries Ranked According to Debt

Australia Can Build Its Way Out of Trouble

Australia Can Build Its Way Out of Trouble

‪Roubini Says Most Advanced Economies Are `in Trouble'‬‏ - YouTube

‪Roubini Says Most Advanced Economies Are `in Trouble'‬‏

The No-Win Greek Debt Buyback Trap – Lessons from Ecuador

The No-Win Greek Debt Buyback Trap – Lessons from Ecuador: