Jack Worthington's Social & Investment Commentaries

Time for Germany to Pay the Piper

Posted in Uncategorized by Jack Worthington on July 9, 2015

Time for Germany to Pay the Piper

As I’ve been unsuccessfully arguing since 1992, as a grad student at Columbia University when professor Robert Mundell, the “father of the Euro”, was conducting his work on “optimal currency areas”…the Eurozone is NOT an optimal currency area and never has been!  I remember being blasted for my position on an Econ final by an Irish professor blinded by Europhoria.

Finally, after 23 years of ignoring reality, the Greek crisis has brought the issue front and center, like a festering, now life-threatening wound.

This is not about Greece…it’s about the fundamentally flawed Eurozone experiment.  Greece is not the only “lesser-developed” Eurozone country hamstrung by the currency union.

I won’t go through the economics again…if you want to see that, refer to earlier commentaries.

The Eurozone was created primarily to benefit German exporters, and Germany has benefitted greatly from the system.  It’s now time for Germany to pay the piper.  Either bailout Greece and keep your captive PIIGS export market intact, or allow a North/South Euro split…the more natural state of affairs.

SUSTAINABLE GREECE / EUROZONE SOLUTION:

Option A)

PIIGS, not just Greece, should exit the Euro asap and create a Southern Euro currency union, w/ France as anchor member of the Southern Eurozone and Germany anchoring the Northern Euro.

Expect a quick economic explosion in Southern Europe, as a devalued currency attracts global investment and tourism.  France especially, would reap an economic windfall previously dominated by the Germans.

Option B)

PIIGS sovereignty, self-determination, and higher economic growth potential.  Back to the drachma, peseta, lira, franc, etc…

Let’s see if the French wake up…

JW

NY, NY

9 Jul 2015

RE: Greece & China

Posted in Investment & Social Commentaries by Jack Worthington on July 8, 2015

Publishing client note…

RE: Greece & China

XXXX – IMO, these two current crises are important, uncommon catalyst events that are likely to have a significant impact on the near to 10+ year global economic outlook…and obviously commodity prices including oil.

Greece:

  • If populist anti-austerity forces prevail in some significant way…if successful in bending the global financial community to their demands…contagion into other emerging markets is likely…a mindset is changed as the stigmas related to default and capital controls are weakened…an irrational, populist “revolutionary” mindset takes over; i.e. the torch and pitchfork crowd gains their voice…”hell no, we won’t pay”. In fact, the Latin Americans have been one of the loudest cheering squads for the Greek “No” vote.
  • Free global mobility of investment capital is not an immutable law of economics…the general absence of capital controls is a relatively recent development in economic history which gained significant momentum in Reagan years. Positive:  Foreign direct investment in the forms of capital and portfolio flows from developed to developing world over the past 30 years, allocated somewhat efficiently, has driven a remarkable improvement in developing world living standards (people moved from the rice paddy to a desk job and car ownership) and general economic prosperity globally.  Negative: A lack of capital controls in a developing economy has significant risks…asset bubbles are created on the way in as large amounts of capital are invested in small markets…and those asset bubbles can be popped spectacularly and sometimes overnight, when spooked foreign securities investors bolt for the door…leaving carnage in their wake.  With the past few econ crises since the 1990’s, capital controls, especially in developing world, are gaining acceptance again and will find their way back into the global economy in some form…guaranteed…it’s coming…just a matter of when, not if.  This is a meaningful and high impact sentiment tide change in recent economic history.  A trivial example of how things used to be…long forgotten: apparently, in the 1960’s Brits were not allowed to take more than £50 out of the country for their vacations.
  • Practical implications: 1) When implemented, capital controls (in various forms) and, or a perceived increase in developing economy investment risk, will reduce the amount of FDI going into developing economies…whose economic growth (and demand for commodities) will slow…yes, they are shooting themselves in the foot…oil, iron ore, copper, etc… down.  2) World equity markets headed into a down cycle.  Equities are technically valued as the net present value of future growth opportunities “NPVGO”; i.e. when future growth opportunities are reduced, the stock price is automatically reduced.  Many of the world’s largest companies have transitioned into truly global organisations, selling products to customers, and investing in production capacity, globally.  When their NPVGO is reduced, their stock price is automatically going down.
  • This scenario is likely to gain steam in the near term. I’ve lived through so many crises over my career (as an expat local in the foreign meltdown economy) that the definition of “near term” could mean anything from beginning today, up to roughly 3 years at outside.  I’ve seen these things explode quickly (Asia) and fester as money slowly drains out (France).  Social unrest in these “back to the rice paddy” scenarios can be explosive and violent…been there, seen that.  At some point, it’s possible that general emerging market disease contagion returns again; i.e. how the localised Mexican Peso crisis of 1994 quickly spread to global EM’s including China.  This Greek crisis has that potential.

China:

  • The stock market collapse in China is a unique situation. We can’t look at it in the same way as we do a US or European stock market collapse.  In China, 85% of market participants are unsophisticated, individual, ordinary folk gamblers who move in herd lockstep.  Panic sets in…unsophisticated gamblers sell everything…greed returns…unsophisticated gamblers buy everything.  Boom-bust built into the system.  In contrast, the US market is driven by a very large number of highly sophisticated and informed professional investors, managing a very broad range of investment strategies.  Less boom-bust built into the system…outside of program trading / fat fingers, etc…!  Let’s keep it there for a minute and not complicate the discussion!
  • One of China’s top strategic national priorities is to make the RMB a global reserve currency. To do this, the capital account must be opened to at least the level of the US, where FDI flows rather freely in and out…and a very wide range of investment products and opportunities are available to park your RMB…both within and outside China.  This, in combination with fundamental demand for RMB for global trading purposes, is what will underpin the RMB as an important world reserve currency.  China does not have these fundamentals in place, but is somewhat aggressively trying to move into that direction…but fearful of the negative effects brought by a lack of capital controls.
  • When/if the RMB becomes a competitive world reserve currency, demand for RMB will be at the primary expense of US$. The US$ is now sitting on top of the hill (maximum, and hugely significant benefits currently accruing to US citizens)…when/if RMB ascends, US$ will move to some place further down the hill (significant standard of living benefits transferred from individual American citizens to Chinese citizens).
  • IMO, the Chinese will not allow the Greek contagion mentioned above to impede progress on one of its key national priority interests…to improve the standard of living for ordinary Chinese citizens by gaining reserve currency benefits. IMO, I believe the Chinese will buck the trend on capital controls, and continue if not accelerate financial market liberalisation.  The Chinese need to continue their efforts to attract sophisticated, professional, foreign market participants to help exert guiding influence in their equity markets…reducing the local “gambler” effect.
  • IMO, to have a grasp on the world’s economic and geopolitical future, it’s important to know what the ruling powers of China plan for their own future and place in the world. Fortunately, Xi Jinping gives us that outline in his book “The Governance of China”, available in English, and written for our benefit.  Repetitive and not well-translated…it’s still very helpful.  A good roadmap, written by the leader of the long-term power structure guiding the world’s #1/#2 economy…and rising.
  • IMO, the Chinese gov’t needs to allow the market bloodbath to take place, and animal spirits to re-enter at their natural pace, with minimal gov’t intervention. Their gamblers will be back in full force soon enough if the gov’t doesn’t spook them w/ overly interventionist policies.

Summary:

De-risk short term, with a long-term China bet.

JW

NY, NY

8 Jul 2015

Iran Deal Warning

Posted in Uncategorized by Jack Worthington on April 7, 2015

Iran Deal Warning

An Iranian Shiite theocracy is, and will always be, a significant national security threat to the US, the West, and every non-Shiite society in the Middle East / North Africa.  One of their key, long term stated objectives is to wipe the US (the debauched, sinful, “Great Satan”) from the face of the earth by any and all means possible.  Obama’s naïve deal attempts to insert Iran into the role of a rational, regional peacekeeper counterweight vs. ISIS and militant Sunni’s in the Middle East.  Theocracies, and nations driven by Islam, unhinged from the rational thought process / M.A.D. which underpinned peaceful coexistence in the Cold War, will start a nuclear arms race and nuclear war will soon follow.  This deal is naïve ivory tower arrogance at its finest, completely disconnected from the reality of “Twelfth Imam / apocalyptic thinking” that drives these Iranian leaders at their core.  Iran’s leaders have publicly stated their intention to facilitate the final battle of Armageddon.  Quoting Iran’s supreme leader Ayatollah Ali Khamenei in 2012: “We must study and remind ourselves of the end of times and Imam Mahdi’s era…We must prepare the environment for the coming so that the great leader will come.”.  Bueller??  Bueller??  Hello??  Obama, following the Neocons, has dismantled the ugly but somewhat effective realpolitik solution that has kept militant Islam at bay for centuries.  A dangerous genie is about to be let out of the bottle, and the world is about to pay an extraordinary price for this ivory tower insanity.

As I’ve said it would over the years on this blog, the Middle East / North Africa is exploding into chaos as a direct result of naïve US decisions to pursue dismantling of the old system, albeit ugly, broken, and hypocritical as it was.  George W. Bush tipped the first domino, and Barack H. Obama wiped the table clean.  I predict every generation of Americans in the future will deeply regret that we did this…that our arrogance brought us to this depth of foolish thinking.  We cannot forcefully shape the world into our own image, and it is foolish to bankrupt the country, destabilize the world, and alienate ourselves from most countries of the earth in pursuit of this psychopathic folly.  Would God want the US to shape the world into its image?  If we’re on the wrong side of that answer, watch out.

Winston Churchill to Neville Chamberlain: “You were given the choice between war and dishonor.  You chose dishonor and you will have war.”  Substitute “we” for “you”.

JW

7 Apr 2015

NY, NY

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Je Suis Charlie

Posted in Uncategorized by Jack Worthington on January 7, 2015

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RT News “OPEC is a struggling dinosaur in the age of shale”

Posted in Investment & Social Commentaries by Jack Worthington on December 9, 2014

RT News “OPEC is a struggling dinosaur in the age of shale” – My recent interview with RT News regarding geopolitics in the world oil industry.

Unlike classic microecon in the relatively free market West, the true “microeconomic” cost of production for a sovereign oil producer, is the cost of retaining political power for the current regime.  I.e. what amount of government spending on social safety net programs must that government provide to retain power / prevent overthrow.

To reasonably forecast the world oil price in the current environment, one should estimate budgetary costs in US$ per barrel terms for the major OPEC and non-OPEC producers, and compare with the classic microeconomic costs for “free market” shale producers in the US.  How long can the sovereign producers of OPEC, et al, keep overproducing to keep prices far below their true cost of production (social stability)…in an effort to drive marginal US shale producers out of the market?  It’s a time forecast.

When the price of oil eventually rises as a result of this short-sighted, short term strategy, free market producers re-enter and drive prices lower again…a vicious cycle for high cost producers…they must overproduce again to drive “marginal” US shale producers back out of the market…temporarily.  The piper will eventually need to be paid; i.e. “high cost” sovereign producers will need to re-adjust their societies expectations in the new age of shale.

Some argue that new shale production is a temporal blip on the screen.  The new shale tech we see in the venture capital pipeline is truly extraordinary.  Expect continued and significantly increased dislocation in this industry, and social instability in sovereign producers, as the world energy map continues to change.

In 2011, prior to the US Presidential elections, I made this exact prediction, produced a video presentation, and suggested a path forward which might help to smooth the transition for all countries involved.  Few people will listen to anyone who suggests US energy independence is a significant threat to world peace if not handled with the utmost wisdom.  It’s like I attacked motherhood or apple pie.

Well…here we are folks.  Enjoy that apple pie…but the ala mode topping might not be to your liking.

JW

NY, NY

9 Dec 2014

 

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Consequences of an Imperial Presidency

Posted in Investment & Social Commentaries by Jack Worthington on November 21, 2014

“Consequences of an Imperial Presidency”

Precedent set. At some future point a Republican president will be elected…now a fight for all the marbles.  Will be interesting to see which laws they enforce and which they don’t.  Watching history unfold in an amazing way…all I know is the US will change in more ways than we can currently imagine under an imperial presidency with unchecked power.  This is a revolutionary game-changer in all senses of the term.  If you think political division in the US is hostile today, that hostility will be magnified X times over in the future.  “Third world” extreme political tactics are on their way…that is all we can really count on.  For everyone who didn’t fight against an imperial presidency, you get what you deserve…in heaps and spades.  For spineless congressmen and senators who refused to fight for a separation of powers, a special place of infamy and derision in American history is reserved for you…guaranteed.  Unfortunately, conservative politicians usually have conservative personalities.  Expecting bold action from these people is like asking a chicken to bark.  Somehow, some way, Americans must attract higher quality individuals into political leadership, who possess the appropriate demeanor for this monumental challenge.  At this dangerous moment of history, within and without, we cannot afford to keep electing wooden figurines with craven personalities to lead government.  I think we can all agree on perhaps only one thing, Democrat-Republican-Independent-Other, that we aren’t attracting our best and brightest into this game, at grave risk for the country.  The old business maxim “it’s all about people” applies equally to government.

JW

NY, NY

21 Nov 2014

Speak now, or…

Posted in Investment & Social Commentaries by Jack Worthington on November 11, 2014

Speak now, or…

 

The wisdom and experience of elder statesmen Henry Kissinger and Mikhail Gorbachev are speaking truth to power, against the tide of mainstream media-supported US propaganda.

 

We’re on the brink of an unnecessary Cold War that’s particularly dangerous for Americans, above all others. It’s time to get informed, support these elder statesmen, and speak truth to power.

 

I voiced my opinion in this May interview with Sophie Shevardnadze of RT: http://rt.com/shows/sophieco/159844-us-mercenaries-operations-ukraine/

 

Sophie’s grandfather was Eduard Shevardnadze, the Soviet Foreign Minister under Mikhail Gorbachev, who was an instrumental force behind the end of the Cold War.  Unfortunately, he died this past summer.  His voice, alongside Mikhail Gorbachev, is missed at this critical juncture of world history, as we move back to the Cold War he and other world leaders worked so hard to end.

 

It’s time to get informed, support these elder statesmen, and speak truth to power.  The US GOP is on the wrong path, as are the Democrats.

 

JW

11 Nov 2014

NY, NY

Confused by US foreign policy? A “must-read” clarifier…please tweet / re-tweet

Posted in Investment & Social Commentaries by Jack Worthington on November 11, 2014

Confused by US foreign policy?  A “must-read” clarifier…please tweet / re-tweet

 

No, this won’t be my clarification of US foreign policy.  Although I’ve pounded the table for the past few years trying to explain it, one of the most succinct and credible analyses I’ve come across so far is from an article I read this morning by Annie Machon, a former intelligence officer for the UK’s MI5.  Sadly, we’re likely to never encounter an analysis like this in the US mainstream media:

 

“Anyone Threatening US Petrodollar is Public Enemy No.1” by Annie Machon

http://rt.com/op-edge/204063-gorbachev-cold-war-berlin-wall/#.VGIJrHnPNDI.twitter

 

  • Read the article:
  • Follow the money
  • Demand change via the ballot box

 

The US mainstream media is strongly influenced by the US CIA via its domestically-focused propaganda division called “Operation Mockingbird” http://en.wikipedia.org/wiki/Operation_Mockingbird …a secret program (like the NSA’s domestic spying program) which was uncovered during the Church Committee US senate hearings in the mid-1970’s http://en.wikipedia.org/wiki/Church_Committee .  The New York Times, Washington Post, CBS, Time magazine, and roughly 20 other media organizations admitted their involvement with Operation Mockingbird in those hearings.

 

The US mainstream media is the linchpin of the most powerful and dangerous government propaganda machine in human history.  Don’t let anyone tell you that the Russians (with so few English language foreign media outlets) are propaganda masters, but the US doesn’t participate.  Keep the eyes wide open Pollyanna.

 

Is anyone else wondering what happened to Ebola news in the mainstream media?  Was this disease eradicated?  If so, isn’t that important world news?  Where is the MSM?

 

Did anyone read in the US MSM yesterday that internationally respected American elder statesman Henry Kissinger “warns of West’s fatal mistake that may lead to new Cold War” http://rt.com/news/203795-kissinger-warns-cold-war/ .  Of course this wasn’t reported in the US MSM.  It exposes how wrong and dangerous the Obama administration’s position with Russia is…not only in the Obama administration, but many old Cold Warriors in the GOP.

 

Did anyone read in the US MSM recently that Mikhail Gorbachev, internationally respected elder statesman, last leader of the Soviet Union, and architect of the “openness” and “restructuring” which led to the end of the Cold War, came out and said this http://rt.com/news/203475-gorbachev-speech-berlin-wall/ :

 

Western policies toward Russia championed by Washington have led to the current crisis, and if the confrontation continues, Europe will be weakened and become irrelevant.

 

Taking advantage of Russia’s weakening and a lack of a counterweight, they claimed monopoly leadership and domination in the world. And they refused to heed the word of caution from many of those present here,” he said. “The events of the past months are consequences of short-sighted policies of seeking to impose one’s will and fait accompli while ignoring the interests of one’s partners.

 

Instead of becoming a leader of change in a global world Europe has turned into an arena of political upheaval, of competition for the spheres of influence, and finally of military conflict. The consequence inevitably is Europe’s weakening at a time when other centers of power and influence are gaining momentum. If this continues, Europe will lose a strong voice in world affairs and gradually become irrelevant.

 

What needs to be done is for the west to tone down its anti-Russian rhetoric and seek points of convergence”…”he assured the forum that the Russian leadership was willing to do its part”.

 

Let the serious diplomacy, by serious diplomats and elder statesmen, begin asap.  Germany, take the lead.  We’re hamstrung by leadership and credibility glitches…hopefully temporary, but I’m not optimistic given the old Cold Warriors entrenched in the GOP, the Cold War mentalities deeply imbedded in Washington bureaucracy, a Zero-Sum American culture, and a gov’t controlled MSM.  America is in desperate need of change, asap.

 

JW

11 Nov 2014

NY, NY

Investment Alert – Kiev’s announcement and the immediate threat it poses to the global economy

Posted in Investment & Social Commentaries by Jack Worthington on August 8, 2014

Investment Alert – Kiev’s announcement and the immediate threat it poses to the global economy.

 

First, if it’s not quickly self evident that the government running Ukraine does not have Western interests first and foremost in its decision-making process, I have some great property deals for you in South-Central Florida…please contact me immediately.

 

The Kiev government in Ukraine is clearly trying to do everything it can to bring the EU into a military confrontation with Russia…having our children fight their hateful war for them…shedding our blood and spending our money ad infinitum…for the benefit of a regime that by all fair international comparisons, we should deem war criminals.  Fairly, in the past, the leader of any government that has taken power illegally via coup and resorts to attacking an unfavoured group of its citizens militarily with heavy weapons, we have labelled as an international pariah / war criminal that must be removed.  Bashar Al Assad, Saddam Hussein, et al.  We seem to ignore Ukraine’s Petro Poroshenko…because he’s on the side of the coup we instigated.  He came to power through a voting process and set of circumstances that we ourselves continue to condemn as undemocratic frauds in Crimea and parts of SE Ukraine…yet we support him…because he’s our guy.

 

Enough on that…let’s get to the purpose of this note, and a key unforeseen butterfly effect of our Ukraine debacle that is about to send our world and the global economy into a tailspin.

 

It’s hard to believe the EU approved today’s announcement by Kiev that their sanctions against Russia (to be voted on this coming Tue 12 Aug) could include stopping the transit of Russian gas to Europe via Ukraine.  Obviously, such a policy has the potential to send the European economy into a tailspin and threatens the viability of the European project.  This suggestion certainly didn’t come out of Brussels.

 

I believe this is another instance of an unhinged regime in Kiev, with its supporters, trying to pull Europe into military / economic warfare with Russia at all costs.

 

The Kiev junta we installed and support is now holding the world economy and the future of a united Europe hostage via blackmail.  Our asinine foreign policy is backfiring into the real world, hurting real people…you and me.

 

Summary for investors:  Depending on the outcome of the Ukrainian sanctions vote, near term trouble ahead for global equity and European debt markets.  US$ strength and falling US treasury yields as safe haven investors return.  Artificially low yields fueling unintended credit expansion and US inflation…gold price up.  We’re being held at gunpoint folks.  We need to cut this Kiev regime off, and support Russia’s South Stream gas pipeline to Europe, bypassing Ukraine…rather than working to tank it.  There are global economic risks for the transit of Russian gas to South Korea via North Korea…the same with gas to Europe via Ukraine.  Somehow we need to extricate ourselves from this Ukraine debacle asap to mitigate unforeseen consequences which I fear could be far more damaging than we can imagine at the present time.

 

JW

NY, NY

8 Aug 2014

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I #standwithsnowden @couragefound.org

Posted in Uncategorized by Jack Worthington on June 12, 2014

No matter who you are, or where you live, evil will oppose the light of truth and your world will be a darker place with no Snowdens; therefore I #standwithsnowden @couragefound.org

JW

NY, NY

12 June 2014

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