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George Dorgan  

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  • Horror Graph Of The Week - Greek PMI Collapses [View article]
    It makes absolutely no sense to compare a world-wide depression like 1931 to a small problem country like Greece. Such a cash-crunch happens regularly in African countries, when their currencies collapse, and nobody writes such lines.

    Given that the Greek GDP more than doubled between 1999 and 2007, it must contract again. It was inflated with debt and deflated again later.
    The closing of the banks and the following PMI contraction was a necessary warning to comply with the requirements of the creditors: A simulation of a currency collapse.

    The previous government complied and the country recovered, this government wants to live on others money.
    Certainly Europeans can live together with the euro. There was just an initial mistake to raise Greek GDP and labor costs too much, as compared to Germany. Same with Spain or Portugal...
    Now, economists should be calm and wait until German labor costs have risen again and bridged the gap. It will take some years, the economy does this job alone. No need for economists any more (as opposed to 2007 when they should have warned).
    Aug 3, 2015. 02:00 PM | 1 Like Like |Link to Comment
  • The Issue SNB Defenders Don't Address [View article]
    Sumner criticizes the central bank because Switzerland is in "mild deflation". He ignores that deflationary pressures come from outside. Internal inflation is +0.5% while imported inflation is around minus 1%.
    Due to regulation on rent hikes, massive asset price inflation has not translated too much into higher rents. This will certainly come in the future and will be accentuated when the SNB will need to hike rates, because by regulation existing rents are coupled to SNB interest and mortgage rates.
    Feb 9, 2015. 12:22 PM | Likes Like |Link to Comment
  • The Issue SNB Defenders Don't Address [View article]
    This, however, is a very good statement and I believe that the SNB might finally file for bankruptcy or recapitalisation.

    "In the long run, there is a very strong negative correlation between the rate of NGDP growth and the size of balance sheets as a share of GDP. The faster the rate of NGDP growth, the higher the level of nominal interest rates, and the lower the demand for zero interest base money. Tighter money means bigger balance sheets"

    However, it is based on my view that the difference between higher Nominal GDP growth as opposed to real GDP reflects an inflation run-up that investors do not like. The SNB finally opted for higher real GDP growth and lower NGDP, which helps the central bank to keep rates low and companies competitive.
    See also our core thesis.
    Feb 9, 2015. 11:43 AM | Likes Like |Link to Comment
  • The Issue SNB Defenders Don't Address [View article]
    Scott says: "Update: Some commenters have questioned my claim that SNB purchases slowed after the peg was enacted in late 2011. Evan Soltas has a post explaining why this occurred."

    This is complete rubbish, sorry. I regularly provide the statistics:
    Interventions in July- Sept 2011: 190 bln.
    Interventions from April 2012- Sept 2012: 256 bln.
    Feb 9, 2015. 11:41 AM | Likes Like |Link to Comment
  • Swiss National Bank Policy And Its Implications For Currencies, Assets And Central Banking [View article]
    Thank you very much, Colin, for referencing our site

    If you could use links to the relevant article on our site instead of using the link-less text "source"

    Your contribution is to connect the different pieces I have provided, into one view.
    If we could cross-post it on
    Feb 7, 2015. 10:30 AM | 1 Like Like |Link to Comment
  • How German Disinflation Is Bringing Down The Euro [View article]
    Incredible "plague" caused by low food and gas prices.
    Wages are rising by 3.5%

    They are really desperate these Germans!
    Jan 7, 2015. 01:16 AM | Likes Like |Link to Comment
  • The Best Contrarian Macro Investment: Russia? [View article]
    I cannot believe the claim that Russian firms have a lot of USD debt. If they had it, they got rid of it already already when the ruble started its descent.
    The reasons for the weak ruble are FX speculation, capital flight of oligarchs and default fears after the 1998 experience.
    As I explain above, default fears are irrational and oligarch money will come back.

    Russians and Putin are and were not risk-averse enough. As opposed to the risk-averse China, there are no capital controls.
    Dec 17, 2014. 12:47 AM | Likes Like |Link to Comment
  • The Best Contrarian Macro Investment: Russia? [View article]
    Putin and the central bank finally decided to drive Russia into a recession and I am very happy that they do it. I was desperately waiting for higher unemployment to fight against rising wage expectations.

    Many market participants are looking at Russia’s hike from 10.5% to 17.0% and saying “wow”.

    Sergej Glazyev already before:
    "With the average profitability of manufacturing in 7.5-8% loan issued at rates of 10% and above [Now we are at 17%], cannot be used by most companies either for investment or for working capital. With the exception of a number of oil and gas, and chemical and metallurgical sector, the real economy that decision cut from credit emitted by the state."

    JPM (via Zerohedge

    "The rate hike occurred after today's 10% depreciation of the RUB despite attempts by the CBR to intervene earlier in the day. The decision was aimed at "limiting substantially increased ruble depreciation risks and inflation risks" according to the CBR. This emergency move suggests to us that household deposit dollarisation had increased significantly (official October data had already suggested dollarisation re-accelerated again). Tonight's large rate hike should in the short term help to slow retail dollarisation demand. However rate hikes do little to help the underlying demand for USD from corporates and banks who continue to front load their demand in order to apy their FX debt payments further down the line. With limited access to USD funding markets and oil having yet to find its bottom, the perceptions of local banks and corps on RUB continues to be negative, fuelling this hoarding behavior.

    Bottom line: expect the market to react positively to the rate hike in the short run, but further measures are needed from the CBR for us to turn more bullish on RUB in the medium run, particularly in the absence of improved geopolitical risks and higher oil prices."

    But Goldman is less negative on the move: "The decision clearly removes the uncertainty over the CBR's strategy that in our view was a major driver of the recent Ruble volatility and hence is positive. "
    Dec 17, 2014. 12:35 AM | Likes Like |Link to Comment
  • The Best Contrarian Macro Investment: Russia? [View article]
    As I anticipated the Dubai stock market is finally crashing.
    Dec 17, 2014. 12:12 AM | Likes Like |Link to Comment
  • The Best Contrarian Macro Investment: Russia? [View article]
    So for you it was obvious already in March that the Brent oil price would fall from 105$ to 60$?
    Dec 13, 2014. 02:35 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    Sorry for that, false friend for a native German like me.
    I meant "lending to Americans".
    Currently it is driven by the combination of 2.5% yield on Treasuries combined with the expectation of a stronger dollar.
    Dec 13, 2014. 02:30 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    I call it: "A new financial cycle has started. Germany grows thanks to local demand and the above mentioned rising wages.

    My judgement is that thanks to German internal demand, the euro will perform better than gold in the next year.
    Dec 13, 2014. 02:25 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    Thanks for the challenging feedback.
    1) I incorporated a reference to Luzi Stamm's petition in my rather neutral article on Swiss gold sales:

    2) On Italian or German stocks:
    Please read the article on "Irrational exerburance" that explains that higher wages point to lower profits of German companies. The latest GDP release speaks of 3.6% higher income of wage earners.
    Be aware that I still buy Swiss stocks thanks to currency manipulation.

    Moreover, I have a 30-40% monthly savings rate with salaries paid in CHF. Purchases of Italian stocks hedges against a potential purchasing power destruction of my francs orchestrated by the SNB.

    3) Deflation isn't deterimental to gold.
    Correct, I mentioned this in a recent tweet.
    "Rising gold to oil ratio points to low Fed rates for longer."
    Gold maintains value thanks to limited supply, while for example ipads and any other technological gadget loses value.
    We live in period of positive deflation thanks to free trade, global distribution of labor and technological improvements. Therefore I do not expect a deflationary shock on wages and do not hold gold at current prices. I am ready to buy around 1000$ and will do so.

    4) As for the difference between 1200$ (gold purchasing level, suggested in the article) and my personal level: I already possess an inflation hedge, namely CHF income, I do not need to hold so much gold. The situation is completely different for Americans.
    Dec 13, 2014. 02:21 AM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    In the part on today's situation, it was already in. I clearly state that the money side of trade flows move into Europe, while financial flows (from Europe) bet on Fed rate hikes.
    Dec 6, 2014. 12:38 PM | Likes Like |Link to Comment
  • Why Was The Gold Price So Low In 1999/2000? [View article]
    I am sorry, my fault not to mention it.
    In the underlying history article,
    I clearly state that yield-seeking Europeans were borrowing to Americans, while US capital went back from Asia to the US.
    Possibly it was too evident for me that higher GDP growth in the US attracted foreign capital, so I missed the sentence here.

    I submitted a change to the article
    Dec 6, 2014. 12:23 PM | Likes Like |Link to Comment