The day of the last Nobel Memorial Prize laureate in Economics

 A small part of the population knows that the "Nobel Prize in Economics" is in fact the "Swedish Central Bank Prize in Economic Sciences in Memory of Alfred Nobel". There are many similarities between the selection for the regular Nobel Prizes and for the Swedish Central Bank Prize in Economic Sciences, and there is indeed a deliberate will to be consistently identified with them. 

But only a few persons remember that this Prize in Economics was first awarded in 1969, i.e. 68 years after the regular ones. 

Some brief statistics have been published about the laureates, by country in which are located the universities where they worked (cf references). I have updated these results to take into account the years 2011, 2012, 2013 : 

Okay, nice shoot from anglo-saxon scholars. Now with such an overwhelming share of first-class thinkers awarded for their achievements during their life-long careers (specially in macroeconomics domain), the U.S. and UK economies should be huge successes, shouldn't they ?

1- Mainstream economists (both Friedman's side and Keynes' side) are always very reluctant to confront their models and their past predictions with long term and updated data series.
Let's just have a look if they really won the match since 1960's :

• How close to an exponential trend is the growth of U.S. Total Public Debt :

Source: Conscience-Sociale.org, using Fed data up to 2013Q1

• How close to an exponential trend is the growth of Federal Total Public Debt (In 2013 Q1, it reached US$ 16.8 Trillion) :

Source: Conscience-Sociale.org, using Fed data up to 2013Q1

• Interest rates in US and UK :

 

• U.S. Net Export of Goods and Services :

• Real Trade Weighted U.S. Dollar Index :

• Consumer Price Index :

(note the log scale)

• "Civilian Unemployed and Not Looking Ratio" is the proportion of the civilian non institutionalized population aged 16+ that is unemployed and not looking for work :

• US Population receiving food stamps :

• Ratio of Corporate dividends over wages & salary :

• There are now more people under “correctional supervision” in America (more than six million) than were in the Gulag Archipelago under Stalin at its height :

• US total monetary base priced in tonnes of Gold :

• 1 U.S. $ priced in mg of Gold :

• Annual U.S. and UK output produced (GDP per capita) priced in troy ounces of gold :

Source: Conscience-Sociale.org; data series 1791-2012 from MeasuringWorth 

2- Observations:

* these results are the worse seen in recorded history. 

* The only "positive" result is the historical high and ever rising level of incomes only for the top 1% and above :

* the creation of Nobel memorial Prize in Economics was first announced in 1968, at the same time where neoconservatism in US appeared and neoliberal ideas started to develop.

* all mainstream commentators have analyzed the economical policy of the U.S. and UK to use neoliberals ("Chicago school") principles, and more Keynesian policies since 2008.

3- Then we can affirm :

- either the US/UK Nobel Memorial laureates in economics were listened by the US/UK governments, but others economists would have given better advices : the observed results prove their Prize was not deserved ;

- or the US/UK Nobel Memorial laureates in economics were listened by the US/UK governments, but others economists would not have been able to give better advices : then the observed results prove economics is still not a science, but only a art. The laureates then deserve an Oscar-like prize, but not a Nobel-like prize ;

- or the US/UK Nobel Memorial laureates in economics were not listened by the US/UK governments, despite the highest level of promotion and audience given, and the observed results prove their Prize was useless and all mainstream commentators were clueless ;

4- In any case, the Nobel Memorial Prize in Economics has proven that deep reforms are required in the way laureates are chosen, at least. Given  the historic and catastrophic failure of neoliberalism and therefore the huge loss of credibility of the whole mainstream economics, this will be surely been done.
But given the very low speed of reforms by EU academies, the lock by Swedish Central Bank from one side, and the current global shift of power from the other side, we can anticipate that BRICS will announce the creation of a new "Prize in Economics funded by a BRICS organisation" and elected by the BRICS academies, before any process reform for Nobel Memorial Prize in Economics takes place. This is an anticipated consequence of both the global geopolitical dislocation and the scientific crisis in economics.

We anticipate this announcement within 4 years at the latest, depending on the number of future laureates working in universities located in BRICS countries, or eventually from non mainstream school of economics (for instance A. Fekete from NewASoE but this award alone would finalize a paradigmatic change).

The day of this announcement will be the day of the last Nobel Memorial Prize laureate in Economics.

Updated 10/14/2013:
- including results of 2013 awards ;
- My congratulations to Shiller who is pursuing a good work using data and facts about the housing market., although I did not agree with his sale of the rights to build the Case-Shiller index to a private company.

---

References: 

• List of laureates in Economics
• Brief Statistics of the Nobel Prize Winners for Economics, IONECI M., ENE S., 2011; The period observed was 1969-2010.
• The U.S. Debt Dashboard
• Dashboard of US Economy
• The UK Debt Dashboard
• The Gold Basis

Did JPM ask knowledgeable investors or baboons ?

 The question was clear : "How much do you think 10-year UST yields will change in the event in the event of a technical default (i.e. a coupon or principal payment on US debt is delayed by a short amount of time) ?", but the range of answers is truely amazing (chart below), and reveals how much the understanding of financial markets is upside down.  

Keep in mind we are talking here about the most important rate in the current international monetary (fiat) system. When every market are rigged and "virtually artificial", a measurement does not mean anything because the standard used is stretched. And you can't control what you can't measure with reliability.

In this case, we should compare UST rate with a "gold bond" rate. Ooh, there is none ? Yes... and what about to launch again a new "gold bond" (i.e. a bond that is denominated in gold, pays its interest in gold, and pays the principle back in physical gold, and not a gold backed bond denominated in fiat currency) ? A single one would be sufficient to compare with UST, and it can be done by any country in the world, at any time. It would create an enormous attraction and interest by investors.
Why should we force ourselves to navigate blind and tied by the hands in the storms of financial markets ? I guess some BRICS countries at least have perfectly understood the message.  

(Source)

Update 10/09:
Clarified definitions for gold bond and gold backed bond, as kindly pointed by K.Weiner.
Gold bond idea was first introduced by A. Fekete.
The 'baboons' word refers to this study (or here in french).

The monetary war in seventy-one seconds

James Rickards has given few days ago a very interesting interview to Mineweb Radio in South Africa.

I consider this as the best summarized description of monetary war (so called 'currency war'), albeit a very short one.

I only disagree with a point : Rickards described 3 phases in the monetary war : 1921-1936 ; 1967-1987 ; 2010-now.

In fact, the current crisis is rampant since 1967. One major event has temporarily covered up the monetary crisis: the strategic partnership between US and China, which has sustained the international role of the US dollar, but without reforming any fundamental weaknesses. The CBGA first gold agreement in 1999 was a significant sign that the monetary crisis, like a dormant virus, was still there.

The US/China monetary partnership has been broken since 2009/10, and this has unveiled a new wave of the monetary crisis.
Here are a few pictures from my Research Pages to illustrate the major trends:

Chinese exports of goods to US as a % of total Chinese exports ;

Data serie since 1985

U.S. : Velocity of M2 money stock (lhs; using GDP/M2); 

Velocity using M2 / StLouis Fed non-adjusted monetary base (rhs); 

Data series since 1959

source

Artwork: Statement on the New Economic Policy and the Return of Hoarded Gold to the Federal Reserve Banks

The full content is available in a PDF file.

Artwork licensed under Creative Commons BY-SA 3.0 

Artwork: Gold Confiscation Executive Order 2013

Also available in a pdf file.

Artwork licensed under Creative Commons BY-SA 3.0

Gold, the renminbi and the multiple-currency reserve system

 The Official Monetary and Financial Institutions Forum and the World Gold Council have just released a new report called "Gold, the renminbi and the multiple-currency reserve system".

The foreword is by itself a very good synthesis of the current situation :

" The world is preparing for possible twin shocks from the parlous position of the two main reserve currencies, the dollar and the euro. As China weighs up its options for joining in the reserve asset game, gold – the official asset that plays no formal part in the monetary system, yet has never really gone away – is poised, once again, to play a pivotal role. [...] No other reserve asset seems safe from the coming dollar shock. "

If this new international monetary system preparation and the dollar replacement as the major reserve and international currency still looks incredible for you, here are others synthetic views of the current situation :

ECRI U.S. Weekly Leading Index ;

data serie from 1967 to 1/4/2013; click to zoom

Share of AAA-rates assets as part of the total fixed income markets

...this is the rush towards new safe assets (for instance below Australian AAA sovereign bonds) :

...and out from the U.S. Treasury and Agency securities :

...and add to this the reports about gold massively bought and recycled out from LBMA system or newly claimed by Asian countries.

Now back to the OMFIF report : Chapter 4 summarizes different prospective scenarii for the 2013-2018 timeframe. As usual with prospective-only scenario, they simply ignore the politics, and let the readers do their own choice. More, they do not argument at all why they have chosen these scenario and not others ones, and do not even mention Japan.

I have then to give my own view, based on previous political anticipation about the strenghtening of the eurozone, more political integration into Euroland+ (i.e. EU less UK plus Scotland), more weakness of the Fed blunt monetary policy, increasing defiance towards Fed monetary policy from others interests, and a new monetary policy from Japan following the recent election (cf Yahoo News). 

Currency zone	Macroeconomic developments	Currency effect	Impact on gold
U.S.	US economy in recession due to fiscal tightening and ineffective policies. Public finances remain weak, as does domestic demand.	Dollar drops as fast as the new reverse system is taking momentum.	Gold market manipulation and Euro strength are initially gold negative, but US weakness then cannot avoid to boost gold.
Eurozone / Euroland+	Euro area works through its problems and survives intact, thanks to the new integrated policies and macroeconomics tools.	Euro strengthens as Europe appears to have overcome the crisis.	Euro strength is gold negative, but US weakness then cannot avoid to boost gold.
China and South Asia	China tries to stimulate domestic demand.	Renminbi decouples from dollar as further de-pegging is seen as attractive.	Chinese buying continues. Emerging market central banks continue opportunistically to build up gold stocks.
Japan	Japan tries to stimulate domestic economy using a new monetary policy.	BoJ decouples from Fed policy as further pegging of Yen with Renminbi is seen as attractive.	BoJ have to buy some gold stocks to back their own currency, and/or sell their U.S. Treasury for others bonds.

I will discuss UK geoeconomics in a future article, if this priority increases.

Gold and Central Banks, Q3 2012

 The new issue of Gold Demand Trend is released.

Here is a short summary about the gold demand by Official Sector :

• Central banks continued to purchase gold in Q3 2012, albeit at a slower pace. Demand of 98 tonnes, worth US $ 5.2 bn, accounted for 9% of overall demand during the period.
• Brazilian central bank purchased 1.7 tonnes, for the first time since june 2005.
• Paraguay central bank purchased 7.5 tonnes, representing a more than 10-fold increase from its previous reserves of 0.7 tonnes
• South Korea central bank increased its holdings of gold by 29% in July (adding 16 tonnes).
• Sales between central banks (under CBGA agreement) in the last 12 months was the lowest since the beginning of this Agreement in 1999, with an amount of 5.9 tonnes.

Below are shown the biggest official gold reserves, where I've chosen to calculate aggregates relevant to the current multipolar world :

Country or economic pole	Gold Reserves (tonnes), Nov. 2012 WGC report
Euro Area (incl. ECB)	10 787
EU 27 sum	11 538
USA	8 135
Switzerland	1 040
China + Taiwan + Hong-Kong	1 480
Japan	765
Russia	935
Brazil	35
India	558
South Africa	125
BRICS sum	3 133
Iran	500 (source, Feb. 2012)
Gulf Countries sum (Saudi Arabia, Kuwait, Bahrain, Qatar)	419
Venezuela	362
U.K.	310
Turkey	302
Lebanon	287
Algeria	174
Libya	117
Syria	26

Monetary war : from sovereign debt to sovereign gold

 As I wrote in "Le nerf de la guerre monétaire", behind sovereign debt, there's gold. Because the supposed-to-be-deadly Euro sovereign debt crisis is over, and the Euroland is successfully running towards much stronger integration, a new battlefield is being investigated : "Audit the gold Reserves". 

This is a very tactical game, and here are some recent developments:

• Bundesbank joins Fed in demanding secrecy for gold swaps, gata.org, Dec. 01, 2010
• Give Treasury Its Proper Role on the National Security Council, NY Times, July 23, 2012
• Where’s the gold? NY Fed undergoes first-ever audit, RT.com, August 04, 2012
• The U.S. government has been quietly carrying out an audit of all the American-owned gold at the New York Fed. The process involves drilling small holes in about ten per cent, or roughly 350, of the bars to make sure they're pure. The results will be announced towards the end of the year.
• Why America is going to win the global currency battle, FT.com, Oct. 12, 2012
• Unease about Germany's unchecked gold reserves, AP, October 22 2012
• Rechnungshof fordert Inventur der Goldreserven, Der Spiegel, October 22 2012 [english translation : German Court Demands Bundesbank Audit Sovereign Gold Holdings, ZeroHedge.com]
• The Bundesbank has supposedly decided to transfer 50 tonnes of gold held with the New York Fed to Germany over the next three years for thorough examination.
• Statement by the Deutsche Bundesbank on the accounting treatment of the gold reserves, Bundesbank, Oct 22, 2012
• Bundesbank Disagrees With Audit Court’s View on Gold Reserves, Bloomberg, Oct 23, 2012
• Gold reserves stored securely, Bundesbank, Oct 25, 2012
• The Deutsche Bundesbank’s gold holdings (as per 31 December 2011), Bundesbank, Oct 25, 2012
• Remarks on current developments in Europe, Bundesbank, Nov 1, 2012

 We, Europeans, must not be worried. We believe NY Fed when they say the german gold is there. And even if it weren't NY Fed is good for its replacement.

[This article was first updated 10/28 : add links about statements published 10/25 ; it will be further updated depending on future new important publications or press releases]

The growing role of gold in the evolving international financial architecture

Let's start with a relevant extract from the last WGC report :

"The second quarter was another period of significant purchasing by official sector institutions, with demand amounting to 157.5 tonnes.This was a record quarter for central bank buying since the sector began recording net purchases in Q2 2009 and was more than double the 66.2 tonnes of purchases made in the same period of 2011. 

Purchases in the first half of the year totalled 254.2 tonnes, 25% up on 203.2 tonnes from the same period last year. The official sector accounted for 16% of overall Q2 gold demand.

Some central banks have clearly indicated their intention to bolster gold reserves. One such institution is the National Bank of Kazakhstan, which stated in July that it had increased its 2012 target for gold purchases from 24.5 tonnes to 26 tonnes. 

The bank has previously stated that it plans to buy the country’s entire domestic production over the next two to three years in order to reduce its reliance on the US dollar as a reserve asset, confirming that it is targeting an allocation to gold of 15% of its foreign exchange reserves.

Following the confirmation in June that it had purchased over 32 tonnes of gold in March, the central bank of the Philippines made no net changes to its reserves throughout the second quarter. The bank’s stated policy of buying local mine production remains in place and reserves as at the end of June stood at a provisional 194.2 tonnes, equal to around 13% of total reserves. 

Russia’s programme of buying saw the central bank add a further 22.3 tonnes to its reserves during the April to June period. Total gold reserves at the end of the period stood at around 920 tonnes, roughly equal to 9% of total reserves. 

The National Bank of Ukraine appears to have accelerated a programme of very small sporadic purchases, which it has made over recent years, with four consecutive monthly additions to its gold reserves since March of this year. These transactions have been small in size, with purchases in the second quarter totalling 3.6 tonnes, but relative to total holdings of 32.8 tonnes this represents a significant percentage increase in the bank’s gold reserves.

Small purchases were also made by a range of central banks across Europe and South America, including Serbia (+0.2 tonnes), Guatemala (+0.2 tonnes) and the Kyrgyz Republic (+0.2 tonnes).

Turkey continued to record increases in its gold reserves; however, these additions are excluded from our data. As reported in the previous issue of Gold Demand Trends, recent legislation allows commercial banks to pledge gold as part of their reserve requirements to the central bank. The reported changes in Turkey’s gold reserves reflect changes in gold pledged by commercial banks, rather than acquisitions by the central bank in the open market. While not representing a traditional addition to official sector reserves, the increase in reserves reflects the growing role of gold in the evolving international financial architecture.

Following a similar pattern to its actions last year, South Korea’s central bank announced in August that it had purchased 16 tonnes of gold in July, having “judged ...market conditions were good” to make a purchase as part of its stated ongoing diversification of reserves. Coming as it did after the end of the quarter, the purchase is not captured within the second quarter data but is confirmation of a continued trend of purchasing by the sector. The bank has increased its gold holdings by 56 tonnes since June last year, with the aim of diversifying its portfolio. The latest purchase takes South Korea’s gold reserves to 70.4 tonnes, accounting for around 1% of total reserves. 

Sales among central banks remained muted in the second quarter. Under the terms of the third Central Bank Gold Agreement, sales [...] amount to just 13.9 tonnes."

The gold buying policy of Russia Central Bank is not new. But in just 4 years of global systemic crisis, ALL central banks have switched the diversification policy of their reserves, as depicted below :

Except Switzerland, the bar and coins demand market has increased in Europe since last quarter. It is now the biggest market in the world, above China or India. 

Source : WGC Gold Demand Trend Q2 2012 report

Central Banks are adding tonnes of new gold to their reserves : statistics

 According to the World Gold Council, during the last quarter centrals banks and others official sector institutions from Russia, Mexico, Kazakhstan, Philippines, Belarus, Ukraine, Tajikistan, Turkey, Argentina added tonnes of new gold to their reserves, mainly to reduce their exposure to US dollar. Moreover,

"Central banks sales were virtually non-existent during the quarter. Signatories to the CBGA-3 have almost ceased sales of their gold, with occasional small sales announced as related to the sale of gold coins."

The 80.8 tonnes added during Q1 2012 are exclusive of the 14.3 tonnes net addition to Turkey gold reserves.

Read the source for more details : Gold Demand Trends Q1 2012

Euroland : consumers are rushing into gold investment

The World Gold Council has just released their updated Gold Trends for Q3 2011.

Europe is the best-in-class region about gold investment, back to a 1990 world share (click to enlarge) :

And France is the best-in-class country about the y/y Q3 growth in gold investment with 1533% growth !

This result is confirmed by the 12 months ended Q3 2010 total vs 12 months ended Q3 2011 total. But the french market can become much larger if we compare it with neighboring countries :

Euroland countries are leading a huge trend into physical gold investment since 2008. See the aggregated 10 years historical data :

And 2011 will certainly be higher than 2010 : the total for the first nine months are just below the full 2010 year. Note also the much lower ratio of ETF in 2010. 

US citizens are reported to be more interested into silver this year compared to 2008. This is also a sign that consumers investment capacity has sharply decreased in this country.