John Henry Newman and the Significance of the Individual

I posted John Henry Newman’s writing before, and to my surprise, quite a few readers clicked it.  I feel blessed with the support of many intelligent readers of the invisible community.

From Jesse's Cafe:

"God has created me to do Him some definite service; He has committed some work to me which He has not committed to another. I have my mission—I never may know it in this life, but I shall be told it in the next. Somehow I am necessary for His purposes, as necessary in my place as an Archangel in his—if, indeed, I fail, He can raise another, as He could make the stones children of Abraham.

Yet I have a part in this great work; I am a link in a chain, a bond of connexion between persons. He has not created me for naught. I shall do good, I shall do His work; I shall be an angel of peace, a preacher of truth in my own place, while not intending it, if I do but keep His commandments and serve Him in my calling.

Therefore I will trust Him. Whatever, wherever I am, I can never be thrown away. If I am in sickness, my sickness may serve Him; in perplexity, my perplexity may serve Him; if I am in sorrow, my sorrow may serve Him. My sickness, or perplexity, or sorrow may be necessary causes of some great end, which is quite beyond us.

He does nothing in vain; He may prolong my life, He may shorten it; He knows what He is about. He may take away my friends, He may throw me among strangers, He may make me feel desolate, make my spirits sink, hide the future from me—still He knows what He is about."

John Henry Newman, Meditations and Devotions

http://jessescrossroadscafe.blogspot.kr/2012/09/weekend-reading-john-henry-newman-and.html

Robert Johnson: Economists as Scapegoats and His Thought on Teaching of Economics

I encourage you to watch this excellent short video.  Robert Johnson talks about how experts (economists in this case) have become scapegoats, serving power, not the people.  His thought on the teaching of economics can be applied to that of innovation.  Johnson’s points mirror what I’ve been writing about on this blog.

We may need to teach the next generation the historical evolution of innovation undertaking in conjunction with its function in society including flaws as well as strengths.  In this way, they can develop philosophical, political, social meanings of innovation, not just technological aspect of it, thereby serving the public good as experts.  Perhaps, when they see the purpose of innovation and its role in society, they can pursue their career more proactively by seeking the necessary skills and knowledge.

Robert Johnson is former Chief Economist of the U.S. Senate Banking Committee and former Managing Director of the Soros Fund Management.  He received a Ph.D. and M.A. in Economics from Princeton University and B.S. in Electrical Engineering and Economics from M.I.T.

Happy Chuseok!

From Jesse's Cafe:

Economics is a disgraced profession because of the actions of a few that were tolerated by many, too often for the sake of grants, appointments, and academic timidity. Careerism.

I would not give many of the Wall Street friendly economists too much credit for an obsession with abstract thinking and even dogmatic blindness, but much moreso a willingly cynical preoccupation with temporal honors, prestige, power, and money handed out by the financial interests in a bubble economy of their own creation.

And there is a fitting emblem for this hubris, the cult of the self, with the long tenure of Alan Greenspan at the Federal Reserve. 

A bureaucrat who is in a position of power for far too long can become a debilitating influence not only on their particular area or department, but on a profession as a whole.  One might think of it as the J. Edgar Hoover syndrome.

http://jessescrossroadscafe.blogspot.kr/2012/09/robert-johnson-economists-as-marketeers.html

Japanese Ministry of Finance To Japanese Bondholders: You’re Screwed!

The level of state accountability in Japan is staggering.  This phenomenon may not be limited to Japan.  Perhaps, the case of Japan manifests the fallacy of the command economy.  Both Korea and China was modeled after Japan.

When it comes to failed and flawed political and economic systems, there seems to be little difference between the East and the West after all.

Again, it boils down to social responsibility and moral choice.

From Testosterone Pit:

This has got to be the icing on the Japanese cake. The otherwise bland website of the Japanese Ministry of Finance, more specifically the FAQ page on government bonds, has been catapulted to stardom on Facebook and Twitter. Not in a good way. As you flip through the MoF’s website, page after page, you will mostly see zero Facebook likes and zero tweets. Social media and the MoF ignore each other.

But go to the FAQ page, skip down past the categories of Budget, Taxation, and Tariffs to item 4, Government bonds. Under the second group, skip past Tax questions for individuals, Miscellaneous (Is it a crime if I make a copy?), Price and yield questions, and Coupons to the infamous question 5: “In case Japan becomes insolvent, what will happen to government bonds?“

Tweeted 1,645 times, liked on Facebook 3,733 times!

The MoF website isn’t some blog to be ignored (at your own risk) but the official voice of the most important ministry of the most indebted country in the world, whose debt will reach 240% of GDP by the end of this fiscal year. The country borrows over 50% of every yen it spends, and it spends more every year. With no solution in sight. Other than more borrowing. Certainly not cutting the budget, which would be too painful. It wouldn’t be enough anyway. Even cutting the budget in half would leave a deficit. And the recently passed consumption tax increase? It will raise the tax from its current 5% to 8% in 2014 and to 10% in 2015, way too little to deal with the gigantic problem, and years too late. Yet it won’t kick in unless GDP grows at least 2% per year—which has practically no chance of happening.

No, there is no longer a good solution. And everyone knows it.

About 95% of Japan’s debt is held within Japan by government-owned institutions, the Bank of Japan, banks, companies, pension funds, and directly or indirectly by individuals. Hence the question—”In case Japan becomes insolvent, what will happen to government bonds?”—is of primordial importance to just about all Japanese adults.

The question and its answer weren’t decided by some underling. Each word was carefully weighed by experts in the highly hierarchical bureaucracy of the MoF. As these words were polished and examined for every nuance, they were passed up the ladder until they landed on the desk of an official at the very top who approved not only the wording, but also whether or not that question should even be on the website. And the official answer is:

 “Rest assured that the Japanese government will redeem the bonds responsibly.”

“Rest assured!” How bondholders can possibly rest assured under these circumstances remains a mystery, in particular since the MoF then proceeds to tell them exactly how they will get kicked in the groin: bonds will be redeemed “responsibly.”

Not when they mature, but responsibly.

Thus, we have the MoF’s official action plan for the moment when the big S hits the fan, the moment when Japan with its declining wages and shrinking working-age population can no longer save enough to mop up all the government bonds necessary to keep the government afloat [read.... Japan’s Slow-Motion Tsunami].

A selective default. Bonds will retain their “value,” but the government won’t redeem them when they mature. It will redeem them in bits and pieces, stretched into all eternity, as it sees fit. You’ll die before you’ll see your money.

This is THE answer, the official answer we’ve been looking for all along, and now we find it on the MoF website where it would have remained hidden in plain sight had not some enraged Japanese spread the word via Twitter and Facebook.

When the legendary savings of the Japanese are drying up, as they’re in the process of doing, the word responsibly will take on a new meaning within the context of one of the greatest recent acts of governmental irresponsibility: creating that debt monster in the first place.

http://www.testosteronepit.com/home/2012/9/24/japanese-ministry-of-finance-to-japanese-bondholders-youre-s.html

China Officially Warns Japan Not To Infringe Its Territorial Sovereignty; Japan Reciprocates

From Zero Hedge:

If yesterday it was the Middle East's turn to escalate, today it is the Far East, aka Pacific Rim, where China and Japan both remind the world nothing has been fixed in the diplomatic snafu between the two countries over a barren rock in the East China Sea. First, it was China, which on the front page of the biggest daily Xinhua, over the weekend, demanded that Japan immediately stop infringing upon its "territorial sovereignty. To wit: "China asked Japan to immediately stop all acts that harm China's territorial sovereignty, Foreign Ministry spokesman Hong Lei said late Saturday, after some Japanese landed on the Diaoyu Islands. Hong said the Japanese landed on the Diaoyu Islands Friday evening with the excuse of preventing Taiwanese activists from landing on the islets. "It is a severe infringement upon China's territorial sovereignty, and the Chinese government has lodged solemn representations and strong protests to the Japanese side," Hong said in a statement." Other headlines make it quite clear that it is in China's interest to stir populist anger at Japan instead of seeking an amicable resolution. What, however, was the most important article in today's Pacific Rim press is this one which has nothing to do with Japan, and everything to do with China's expanding zone of influence: "China's top security official on Saturday made a surprise visit to Afghanistan, the first time in 46 years that a Chinese leader set his foot on the soil of this landlocked Asian country."

http://www.zerohedge.com/news/2012-09-23/china-officially-warns-japan-not-infringe-its-territorial-sovereignty-japan-reciproc

The Fed Has Another $3.9 Trillion In QE To Go (At Least)

This post sums up where the global economy is heading.

From Zero Hedge:

Some wonder why we have been so convinced that no matter what happens, that the Fed will have no choice but to continue pushing the monetary easing pedal to the metal. It is actually no secret: we explained the logic for the first time back in March of this year with "Here Is Why The Fed Will Have To Do At Least Another $3.6 Trillion In Quantitative Easing." The logic, in a nutshell, is simple: everyone who looks at modern monetary practice (as opposed to theory) through the prism of a 1980s textbook is woefully unprepared for the modern capital markets reality for one simple reason: shadow banking; and when accounting for the ongoing melt of shadow banking credit intermediates, which continues to accelerate, the Fed has a Herculean task ahead of it in restoring consolidated credit growth.

Shadow banking, as we have explained many times most recently here, is merely an unregulated, inflationary-buffer (as it has no matched deposits) which provides the conventional banking credit transformations such as maturity, credit and liquidity, in the process generating term liabilities. In yet other words, shadow banking creates credit money which can then flow into monetary conduits such as economic "growth" or capital markets, however without creating the threat of inflation - if anything shadow banks are the biggest systemic deflationary threat, as due to the relatively short-term nature of their duration exposure, they tend to lock up at the first sing of trouble (see Money Markets breaking the buck within hours of the Lehman failure) and lead to utter economic mayhem unless preempted. Well, preempting the collapse in the shadow banking system is precisely what the Fed's primary role has so far been, even more so than pushing the S&P to new all time highs. The problem, however, as we will show today, is that even with the Fed's balance sheet at $2.8 trillion and set to rise to $5 trillion in 2 years, it will not be enough.

In short: the more the Fed actively relevers using conventional conduits that spur the threat of inflation, and the more that shadow conduits delever, the greater the risk that inflation will finally come to roost. Because that $3.9 trillion in incremental reserves (and recall that already both BofA and Goldman, following our example, determined that the Fed will need to do at least another $2 trillion in QE, which means much more in reality) that will be created to offset the ongoing shadow deleveraging will simply pump up various asset classes, until the hard asset spillover finally hits, and no matter how much SPR jawboning, no matter how many CME margin hikes, no matter how many Saudi rumors of increase crude production, prices of hard assets will finally explode.

We can at this point say that an inflationary surge is an absolute certainty if not for one thing: if somehow the deleveraging in the shadow banking system is finally offset (and with the GSEs now in runoff mode this is a virtual impossibility), and Bernanke can take his foot off the gas, then there may still be a chance. However, as noted, 4 years in, this has not happened, and it will not happen for one simple reason: at its core, the market, which despite all of Bernanke's attempt to the contrary, realizes that a centrally planned system is ultimately unsustainable, and quietly, behind the scenes, those who have shadow credit relationships are promptly unwinding them while they still can, and using the proceeds to invest into hard asset for the inevitable T+1 moment.

The bottom line paradox here is that the more forcefully the Fed intervenes, the greater the implicit loss of confidence in the system, the greater the shadow deleveraging, and the more definitive is the ultimate destruction of the capital markets as we know them. Of course, there is still a chance that Bernanke will step back and realize what he is doing. However, since all Bernanke is, is a pawn of those whose wealth is conserved in the US equity tranche, it means that it is now, and has been for the past 4 years, impossible for him to stop.

http://www.zerohedge.com/news/2012-09-23/fed-has-another-39-trillion-qe-go-least

"And I heard a great voice out of heaven saying, 'Behold, the tabernacle of God is with men, and He will dwell with them, and they shall be his people, and God himself shall be with them, and be their God. And God shall wipe away the tears from their eyes; and there shall be no more death, neither sorrow, nor crying, nor any more pain: for the former things are passed away. Behold, I make all things new."
Revelations 21:3-4

Apple's OEM FoxConn Launching Its Own Retail Stores

This was bound to happen.  It’s China’s turn.  In a sense, this is how Japan has become a high-tech powerhouse.  So has Korea.

I pointed out in prior post that the case of Apple has been more than its competitiveness in product design and features or software.  It is not just Apple.  One has to see why MNCs (Some Korean chaebols have become MNCs) have outsourced and offshored their manufacturing operations overseas to begin with.

It boils down to social responsibility and moral choice, as discussed.  I have stressed that productive capacity is the wealth of a nation.  Policy makers and big business have to give social considerations when making outsourcing and offshoring decisions.  The global production cycle comes full circle.  Protection of manufacturing jobs and wellbeing of a nation go hand in hand.

From Zero Hedge:

Two weeks ago, when summarizing the state of the US vs China escalating patent war (for now manifesting itself in the courtroom brawl between Apple and Samsung, but soon to drag many more comparable companies down in drawn out litigation), we observed that while AAPL may have the upper hand, iPhone 5 map fiasco notwithstanding, that "the Chinese politburo can one day decide to pull FoxConn's operational license, in the process bankrupting AAPL overnight" if China really wanted to turn the tables. Obviously, this was the "thought experimental" MAD outcome which leads to loses for everyone involved: both Apple and China (where Apple's contract manufacturer FoxConn employs over 1 million workers). There is one other alternative: that FoxConn, by now having reverse engineered the peak of Apple's brilliance (whose latest evolutionary step was "lighter" and "longer", which anyone could have come up with), decides to brave it alone, and instead of being a contract manufacturer, to simply slap on a FoxConn sticker, a la Acer and ASUS, and sell all Apple-equivalent products at 50% off while collecting all the revenue. Impossible, you say, Apple would never allow it? It is already happening, first in high-growth Brazil, where FoxConn is now launching its own stores.

http://www.zerohedge.com/news/2012-09-22/apples-oem-foxconn-launching-its-own-retail-stores

Simon Johnson and Peter Boone: The Doomsday Cycle Turns: Who’s Next?

Simon Johnson is professor of entrepreneurship, Sloan School of Management, MIT and Boone is research associate, Centre for Economic Performance, LSE.

From VoxEU:

There is a common problem underlying the economic troubles of Europe, Japan, and the US: the symbiotic relationship between politicians who heed narrow interests and the growth of a financial sector that has become increasingly opaque (Igan and Mishra 2011). Bailouts have encouraged reckless behaviour in the financial sector, which builds up further risks – and will lead to another round of shocks, collapses, and bailouts.

This is what we have called the ‘doomsday cycle’ (Boone and Johnson 2010). The cycle turned in 2007-8 and was most dramatically manifest in the weeks and months that followed the fall of Lehman Brothers, the collapse of Iceland’s banks and the botched ‘rescue’ of the big three Irish financial institutions.

The doomsday cycle is indeed turning – and problems are undoubtedly heading towards Japan and the US: the current level of complacency among policymakers in those countries is alarming. But the next turn of the global cycle looks likely to hit Europe again and probably harder than before.

The continental European financial system is in big trouble: budgets are unsustainable and growth is nowhere on the horizon. The costs of bailouts are rising – and the coming scale of the problem is likely to undermine political support for the Eurozone itself.

The continuing crisis in the Eurozone merely buys time for Japan and the US. Investors are seeking refuge in these two countries only because the dangers are most imminent in the Eurozone. Will these countries take this time to fix their underlying fiscal and financial problems? That seems unlikely.

The lesson from all these troubles is clear: the relatively recent rise of the institutions of complex financial markets, around the world, has permitted the growth of large, unsustainable finance. We rely on our political systems to check these dangers, but instead the politicians naturally develop symbiotic relationships that encourage irresponsible growth.

The nature of ‘irresponsible growth’ is different in each country and region – but it is similarly unsustainable and it is still growing. There are more crises to come and they are likely to be worse than the last one.

http://www.voxeu.org/article/doomsday-cycle-turns-who-s-next

$62.7 Trillion In Net Worth: Here Is The Latest US Household Balance Sheet

From Zero Hedge:

Moments ago, the Fed released its latest Z.1, aka the Flow of Funds, which is the primary source of information of that one component of modern finance which all modern economists continue resolutely to ignore because it blows all their anachronistic theories on monetary theory out of the water: shadow banking data. But more on that later. for now, here is the graphic summary of that most important of conventional data points updated every quarter: the US household balance sheet, and specifically the net worth of the US consumer, which in Q2 declined from a 4 year high of $63 trillion to $62.7 trillion, on a $900 billion drop in financial assets, offset by a $400 billion hike in real estate assets. Most importantly, and the reason why to the CTRL-P operator the only thing that matters is the stock market, of a total of $76.1 trillion in assets, only $24.2 trillion are tangible: i.e., real estate and durable goods. The remainder, $51.9 trillion or 68.2% of total, is Financial assets. It is this number that is the sole target of Bernanke's "monetary policy" and which must be inflated at any and all cost.

http://www.zerohedge.com/news/627-trillion-net-worth-here-latest-us-household-balance-sheet

What Mitt Romney Also Said: A Glimpse Of The Endgame?

The world economic situation is dire.

From Zero Hedge:

By now everyone has heard the infamous Mitt Romney speech discussing the "47%" if primarily in the context of how this impacts his political chances, and how it is possible that a president "of the people" can really be a president "of the 53%." Alas, there has been very little discussion of the actual underlying facts behind this statement, which ironically underestimates the sad reality of America's transition to a welfare state. Recall Art Cashin's math from a month ago that when one adds the 107 million Americans already receiving some form of means-tested government welfare, to the 46 million seniors collecting Medicare and 22 million government employees at the federal, state and local level, and "suddenly, over 165 million people, a clear majority of the 308 million Americans counted by the U.S. Census Bureau in 2010, are at least partially dependents of the state." Yes, Romney demonstrated potentially terminal lack of tact and contextual comprehension with his statement, and most certainly did alienate a substantial chunk of voters (most of whom would not have voted for him in the first place) but the math is there. The same math that inevitably fails when one attempts to reconcile how the $100+ trillion in underfunded US welfare liabilities will someday be funded. Yet the above is for political pundits to debate, if not resolve. Because there is no resolution. What we did want to bring attention to, is something else that Mitt Romney said, which has received no prominence in the mainstream media from either side. The import of the Romney statement is critical as it reveals just what the endgame may well looks like.

Here is the reality: under ZIRP, all bonds with a maturity inside the guaranteed 0% envelope are essentially cash equivalents. This means all bonds 3 years and less, which as is to be expected for riskless paper, have a coupon of roughly 0% (except Fed counterparty risk of course, because the only reason they should trade above 0% is if the Fed loses control of inflation and ends ZIRP prematurely before its announced end date now sometime in 2015). When the Treasury issues them the buyers takes on ZERO risk, thanks to ZIRP. This is also the reason why the Fed sells $45 billion in short-end paper each month, as part of Twist sterilization. In essence the only debt issuance that matters for the US Treasury is that of longer-dated issuance. This amounts to roughly $45 billion per month in the 10-30 year window, and is virtually all the debt that the Fed monetizes on the long-end as part of Twist. This is also knows as Flow as we have explained repeatedly, but we don't except someone still stuck teaching 1980s economics to understand this (Goldman explained this here)

But this is not news: back in February we noted that Under Twist the fed has monetized 91% of all LT gross issuance.

Between Twist 1 and 2, the Treasury has not auctioned off one dollar of gross LT debt to the private market, as evidenced by the total inventory of 10-30 year paper which has remained fixed at $650 billion. It is this liquidity limitation that forced Bernanke to monetize not more TSYs, but to commence buying Mortgage Backed debt.

The fact that Krugman does not get this simplest fact about the nuances in the Fed's monetization activities demonstrates just how dangerous it is to assume that just because someone has been awarded a Nobel, they automatically are an expert in something, anything, especially involving numbers.

And because we enjoy spreading knowledge, and for the benefit of even the most math-challenged Economics professors, here again is a simple clip showing how Romney is actually lowballing the real number of relevant gross issuance, which is nearly all in the critical 10-30 year ballpark, and where the Fed will soon be virtually the sole marginal market player.

http://www.zerohedge.com/news/what-mitt-romney-also-said-glimpse-endgame

John Goltermann: The Experimental Economy

From Zero Hedge:

On the heels of last Thursday’s Fed announcement, there has been much commentary on the whys and wherefores of a new quantitative easing (the so-called QE3). Rather than re-hashing well-covered ground, I want to instead discuss the potential effects and unintended consequences of this policy and how it may impact the investment landscape going forward.

Suffice it to say that the Fed had its reasons. QE3 evidences a belief in the so-called “wealth-effect” – the idea that one will spend more if he/she feels wealthier – and the Fed also believes it can contain any negative consequences. However, others would argue that it’s another shot across the bow of our foreign lenders that we are willing to engage full-out in a currency war as this policy clearly weakens the U.S. dollar. Because the Fed has embarked on a path with little historical precedent – where a central bank has signaled the intent to expand its balance sheet as much as it needs to – we are all now part of an experimental economy.

The point of all this is that while financial markets celebrate the effects of QE3 and bid up all sorts of asset prices, the wealth effect won’t necessarily benefit everyone equally and may further contribute to an income disparity that acts as a drag on the real economy. This has a self-reinforcing political effect as more and more people are forced to sign up for government benefits as their opportunity set diminishes, as interest rates are kept at zero and as economic growth remains low.

Ultimately, it is not our job to criticize Fed policy but rather to manage assets as best as we can, given how the Fed views the world and what it is likely to do. Our investment process on the equity side is to establish positions in well-managed businesses with good assets that have pricing power, but that can also survive and thrive in a slow-growth environment. It is also important to know that the current Fed policy has special consequences and risks.

http://www.zerohedge.com/news/experimental-economy

As The China-Japan Conflict Escalates, Whom Will The US Support?

As mentioned, Japan and China could rise so fast due in large part to their U.S. Treasury holdings in the first place.

From Zero Hedge:

The spread between Chinese and Japanese US Treasury holdings has declined to a tiny $33 billion, from $430 billion one short year ago (we know that China is now actively buying gold with its current account cash instead of US paper but that is irrelevant for the time being). What is more importantly is which of its top US Treasury holders (the Fed being naturally the largest) will the US end up disappointing: China or Japan, because as much as it wants, it won't be able to support both. What happens if and when the snubbed party decides to dispose of its $1.1 trillion in US securities?

http://www.zerohedge.com/news/china-japan-conflict-escalates-whom-will-us-support

Chart Of The Day: Monetary Supply - It's Not A Marathon, It's A Steroid-Fueled Frenzy

From Zero Hedge:

Curious why the mere prospect of a gold, or gold-linked "standard" (or any other hard-asset backing for that matter) - a monetary system in which the creation of money units, i.e., literally the creation of money out of thin air, is constrained by some real-world limitation is the scariest thing to the status quo, the following chart courtesy of Grant Williams should explain it all. It shows the expansion of the world's monetary bases coupled with the expansion in the world's gold supply over a comparable period. Needless to say, expanding the money supply at 8% in several years will hardly lead to the massive inflation needed to "inflate away" the roughly $35 trillion in debt overhang by now (vs $21 billion through 2009) that is crushing the entire developed world.

http://www.zerohedge.com/news/chart-day-monetary-supply-its-not-marathon-its-steroid-fueled-frenzy

Global Retaliation To QEternity Begin: BOJ Considers Additional Easing; Bank Of Japan Increases Asset Purchases By Y10 Trillion

Again, policies do matter.  The rise and fall of a nation is the result largely of policy undertaking.

From Zero Hedge:

Last week it was the Fed crossing the Rubicon with infinite easing. We explained very clearly that the next steps would be everyone else joining the infinite easing party. Sure enough, here comes the first one:

• BOJ TO CONSIDER ADDITIONAL EASING: NIKKEI

Keep in mind that the BOJ already monetizes ETFs and REITs, the very instruments which the Fed will soon be forced to buy. And so it begins - because when it comes to pushing CTRL and P, over and over, it really doesn't take much skill.

It also means that the next round of purchases of precious metals will come from everywhere else, in addition to just the US.

http://www.zerohedge.com/news/global-retaliation-qeternity-begin-boj-considers-additional-easing

From Zero Hedge:

It seems like only yesterday that we were lamenting "Einstein rolling over in his grave" as a result of the BOJ's latest increase in its asset purchase program from Y65 to Y70 trillion, although technically it was 5 months ago on April 27. We would excuse Einstein if he were doing cartwheels in his grave right about now, following the BOJ's latest attempt to keep doing what has definitvely failed for 30 years, hoping this time it will be different, as a result of the just announced latest expansion in the asset purchase program's size by yet another Y10 trillion, this time to a total of Y80 trillion. The expansion impacts only JGBs and T-Bills, both of which will be monetized by a further Y5 trillion. Putting this in perspective, Japan's total public debt is Y1 quadrillion, and counting very fast. All other components of the Japanese LSAP program, including CP, Corporate Bonds, ETFs and REITs (yes, unlike the Fed, the BOJ is quite open about its equity and corporate bond purchases) remain the same. Bottom line, just as we predicted back in July 2009, the global race to debase continues unabated, and as a result of QEternity will merely accelerate until the only true currency is gold tungsten.

http://www.zerohedge.com/news/bank-japan-increases-asset-purchases-y10-trillion-total-program-now-y80-trillion

Japan’s Slow-Motion Tsunami

Korea was modeled after Japan.  The similarities with Japan are so there, while there are some significant differences in terms of debt structure, etc.

From Testosterone Pit:

Borrowing at near zero cost has been its hallmark for years. Due to Japan’s institutional setup and cohesive insular psychology, the government has been able to sell 95% of its debt within Japan. Individuals directly or indirectly hold over 50%. Government-owned or controlled institutions hold over 40%. Among them: the Government Pension Investment Fund, one of the largest pension funds in the world; the government-owned Post Bank, the largest deposit holder in the world; and financial institutions the government can lean on. Then there is the busy Bank of Japan. Foreigners hold only 5%, for decorative purposes. This system hermetically protects the government from any discipline that credit markets could otherwise impose.

But in Japan, you see groomed streets and gleaming public transportation infrastructure. You see innovation, energy, packed trains, and crowds milling around. You see urban renewal where whole city blocks of dilapidated buildings were replaced with new structures. Debt funding is a great thing. For a while. As long as the Japanese believe that the government can meet its obligations, and for as long as the country doesn’t run low on investors.

Which is about to happen. The younger generations are less numerous and earn less, and thus pay less in taxes, than their predecessor generations. They buy fewer houses, and when they buy, it’s later in life. They have to work harder for less. They have no money to save, and they no longer have any illusions that the pension system will be there for them.

Unlike booms and busts, demographic changes advance at a glacial pace. But the first waves of that slow-motion tsunami have already reached the land. This time, it’s the younger generations who are paying the price. But it remains uncertain for how long and to what extent they’re willing and able to pay it—to prop up the system and allow their elders to enjoy their long retirement years.

http://www.testosteronepit.com/home/2012/9/17/japans-slow-motion-tsunami.html

How China's Rehypothecated "Ghost" Steel Just Vaporized, And What This Means For The World Economy

From Zero Hedge:

One of the key stories of 2011 was the revelation, courtesy of MF Global, that no asset in the financial system is "as is", and instead is merely a copy of a copy of a copy- rehypothecated up to an infinite number of times (if domiciled in the UK) for one simple reason: there are not enough money-good, credible assets in existence, even if there are more than enough 'secured' liabilities that claim said assets as collateral. And while the status quo is marching on, the Ponzi is rising, and new liabilities are created, all is well; however, the second the system experiences a violent deleveraging and the liabilities have to be matched to their respective assets as they are unwound, all hell breaks loose once the reality sets in that each asset has been diluted exponentially. Naturally, among such assets are not only paper representations of securities, mostly stock and bond certificates held by the DTC's Cede & Co., but physical assets, such as bars of gold held by paper ETFs such as GLD and SLV. In fact, the speculation that the physical precious metals in circulation have been massively diluted has been a major topic of debate among the precious metal communities, and is the reason for the success of such physical-based gold and silver investment vehicles as those of Eric Sprott. Of course, the "other side" has been quite adamant that this is in no way realistic and every ounce of precious metals is accounted for. While that remains to be disproven in the next, and final, central-planner driven market crash, we now know that it is not only precious metals that are on the vaporization chopping block: when it comes to China, such simple assets as simple steel held in inventories, apparently do not exist.

http://www.zerohedge.com/news/how-chinas-rehypothecated-ghost-steel-just-vaporized-and-what-means-world-economy

Jim Quinn: Are You Seeing What I'm Seeing?

From Zero Hedge:

Connecting the dots between my anecdotal observations of suburbia and a critical review of the true non-manipulated data bestows me with a not optimistic outlook for the coming decade. Is what I’m seeing just the view of a pessimist, or are you seeing the same thing? A few powerful men have hijacked our economic, financial and political structure. They aren’t socialists or capitalists. They’re criminals. They created the culture of materialism, greed and debt, sustained by prodigious levels of media propaganda. Our culture has been led to believe that debt financed consumption over morality and justice is the path to success. In reality, we’ve condemned ourselves to a slow painful death spiral of debasement and despair.

“A culture that does not grasp the vital interplay between morality and power, which mistakes management techniques for wisdom, and fails to understand that the measure of a civilization is its compassion, not its speed or ability to consume, condemns itself to death.” – Chris Hedges

http://www.zerohedge.com/news/guest-post-are-you-seeing-what-im-seeing

Meanwhile In Beijing: "For The Respect Of The Motherland, We Must Go To War With Japan"

From Zero Hedge:

Anti-US protests sweeping across the entire Muslim world (which are continuing today), besieging, attacking and burning down US embassies, are not the only thing that the central banker policy vehicle known as "the markets" have to ignore in the coming days and weeks. Cause here comes China: "Thousands besiege Japan's embassy in Beijing over Tokyo's assertion of control over disputed islands in East China Sea." And China is not happy: "For The Respect Of The Motherland, We Must Go To War With Japan." Sure enough, where would the US be if the focal point of this escalation in militant anger - the Senkaku Islands - was not merely the latest expression of Pax Americana, and America's national interests abroad.

http://www.zerohedge.com/news/meanwhile-beijing-respect-motherland-we-must-go-war-japan

Visualizing Japan's Debt Crisis

The direction in which Japan is heading is concerning in that Korea has been following Japan’s path in many ways.

From Zero Hedge:

From the largest Japanese pension fund unwinding its JGB holdings to Kyle Bass' infamous 'debt-saturation Japan Trade' and Dylan Grice's original Japan funding crisis discussion, the nation - now facing Chinese dis-satisfaction over the recent island-purchase - continues to stagger with its Keynesian-endgame heading to a Koo-nesian disaster. The following info-graphic, via Informed Trades, provides everything the savvy investor needs to know about Debt/GDP, balance of payments, energy imports, demographics, and currency debasement.

http://www.zerohedge.com/news/visualizing-japans-debt-crisis

"If I speak in the tongues of men or of angels, but do not have love, I am only a resounding gong or a clanging cymbal. If I have the gift of prophecy and can fathom all mysteries and all knowledge, and if I have a faith that can move mountains, but do not have love, I am nothing. If I give all I possess to the poor and give over my body to hardship that I may boast, but do not have love, I gain nothing.

Love is patient, love is kind. It does not envy, it does not boast, it is not proud. It does not dishonour others, it is not self-seeking, it is not easily angered, it keeps no record of wrongs. Love does not delight in evil but rejoices with the truth. It always protects, always trusts, always hopes, always perseveres.

Love never fails. But where there are prophecies, they will cease; where there are tongues, they will be stilled; where there is knowledge, it will pass away. For we know in part and we prophesy in part, but when completeness comes, what is in part disappears. When I was a child, I talked like a child, I thought like a child, I reasoned like a child. When I became a man, I put the ways of childhood behind me. For now we see only a reflection as in a mirror; then we shall see face to face. Now I know in part; then I shall know fully, even as I am fully known.

And now these three remain: faith, hope and love. But the greatest of these is love."

1 Corinthians 13

Psy Does 'Gangnam Style' on NBC's Today Show -- First Artist Ever to Perform Same Song Twice

From Billboard.biz:

Korean pop/dance sensation Psy -- who recently signed to Scooter Braun's Schoolboy Records, a part of Universal Republic -- hit NBC's Today show this morning, and was such a sensation that the show's producers had him perform his viral smash "Gangnam Style" twice on the morning show. It is the first time an artist has ever played the same song twice in the same show in "Today" history.

"After he performed, the entire crowd was chanting 'Encore! Encore! Encore!' so much that we just decided to it again," Melissa Lonner, the show's booker, told Billboard.biz. "We've had people play another song because the crowd was so into a concert - Coldplay did that -- but this is the first time where an artist performed the exact same song within the same half hour."

Perhaps the most unforgettable part of the segment was seeing the show's anchors join Psy onstage for the now-famous dance seen in the video, which has garned more than 168 million views on iTunes at press time.

http://www.billboard.biz/bbbiz/industry/tv-film/video-psy-does-gangnam-style-on-nbc-s-today-1007949532.story

Marc Faber: "Fed Will Destroy The World"

From Zero Hedge:

"Everything will collapse" is the consequence Gloom, Boom, & Doom's Marc Faber sees from the Fed's latest 'stimulus' (and the fallacy and misconception of how money-printing can help employment). In a wondrously clarifying interview on Bloomberg TV this morning, Faber explained why he was 'happy', since "the asset values of his holdings will go up" but as a responsible citizen he is worried because "the monetary policies of the US will destroy the world." It truly is class warfare under a veil of 'its good for you' as he notes: "the fallacy of monetary policy in the U.S. is to believe this money will go to the man on the street. It won't. It goes to the Mayfair economy of the well-to-do people and boosts asset prices of Warhols." Congratulations, Mr. Bernanke.

http://www.zerohedge.com/news/marc-faber-fed-will-destroy-world

Ex-President Carter: US Political System Is Corrupted By Big Money

From Jesse's Cafe:

Financial reform and political reform go hand in hand. 

The current system is an artifice of soft bribery and political corruption that isolates the representatives from the people in meaningful ways, encourages "mass persuasion," which is a euphemism for propaganda, and substitutes spectacle and demagoguery for compromise and effective governance.

The problem is that the big media loves the ad dollars and access, the politicians love huge slush funds that allow them to become overnight multimillionaires and power brokers, academics love important appointments and funding, and the corporations love the ability to buy influence that circumvents the political process for their own ends.   Freedom and truth have few powerful friends in a society consumed by the unashamed worship of greed, where honor and integrity are looked upon as quaint relics from the past. 

This is going to end. Badly.

CBC
Jimmy Carter slams ‘financial corruption’ in U.S. elections
Sep 12, 2012 3:57 AM ET


(AP) Former U.S. president Jimmy Carter issued a blistering indictment of the American electoral process Tuesday, saying it is shot through with "financial corruption" that threatens democracy.

Speaking at the international human rights centre that bears his name, Carter said "we have one of the worst election processes in the world right in the United States of America, and it's almost entirely because of the excessive influx of money."

The dynamic is fed, Carter said, by an income tax code that exacerbates the gap between the wealthiest Americans and the rest of the electorate, allowing the rich even greater influence over public discourse and electioneering.

The 39th president lamented a recent U.S. Supreme Court decision that allows unlimited contributions to third-party groups that don't have to disclose their donors.

He added that he hopes the "Supreme Court will reverse that stupid ruling," referring to the case known as Citizens United.

Carter praised Mexico and several countries where staff at his centre have monitored publicly financed elections, and he said the United States should return to publicly financed elections for president. The system technically is still in place, but it is voluntary and both President Barack Obama and Republican challenger Mitt Romney have chosen to bypass the taxpayer money because they can amass far more on their own.

"You know how much I raised to run against Gerald Ford? Zero," Carter said, referring to his 1976 general election opponent. "You know how much I raised to run against Ronald Reagan? Zero. You know how much will be raised this year by all presidential, Senate and House campaigns? $6 billion. That's 6,000 millions."

http://jessescrossroadscafe.blogspot.kr/2012/09/ex-president-carter-us-political-system.html

Apple Presents iPhone 5, Market Unimpressed

The case of Apple has been more than its competitiveness in product design and features.  In a sense, it has reflected the U.S. going in the wrong direction (e.g., deindustrialization and financialization of the economy) and the current state of the global economy (e.g., trade dispute).

From Zero Hedge:

To the complete shock of absolutely nobody,  Apple has unveiled the iPhone 4GS Botox Turbo 5

• APPLE IPHONE 5 ADDS FIFTH ROW OF ICONS TO HOME SCREEN
• APPLE IPHONE 5 WEIGHS 20 PERCENT LIGHTER THAN IPHONE 4S
• APPLE IPHONE 5 HAS SAME WIDTH, TALLER SCREEN
• APPLE SAYS NEW A6 CHIP IS 2X FASTER CPU, 2X FASTER GRAPHICS

All the market wants to know is if it will buy Spanish bonds, and if it is acceptable ECB collateral. Everyting else is now just part of the annual, soon to be semi, quarterly, and so on, facelift. AAPL shares sliding - after reaching up to yesterday's closing VWAP at $664 (now at yesterday's lows)

Finally, the most important question - when is the iPhone 6 (with the purchase funded by the iBank captive leasing arm) coming?

http://www.zerohedge.com/news/apple-presents-iphone-5-market-unimpressed

Income Disparity Widens to Most Since 1967 as Income Falls

From Bloomberg:

The U.S. Census Bureau released figures today that showed median household income fell, underscoring a sputtering economic recovery and struggling middle-class that are at the center of the presidential campaign.

The proportion of people living in poverty was 15 percent in 2011, little changed from 15.1 percent in 2010, while median household income dropped 1.5 percent. The 46.2 million people living in poverty remained at the highest level in the 53 years since the Census Bureau has been collecting that statistic.

“The gains from economic growth in 2011 were quite unevenly shared as household income fell in the middle and rose at the top,” Robert Greenstein, president of the Center on Budget and Policy Priorities in Washington, said on a conference call with reporters.

Average incomes fell for the bottom 80 percent of earners and rose for the top 20 percent, highlighting the need for “those at the top to share,” as the nation looks to reduce its budget deficit, Greenstein said.

The top 1 percent of households experienced about a 6 percent increase in income, said David Johnson, chief of the social, economic and housing division at the Census Bureau.

http://www.bloomberg.com/news/2012-09-12/u-s-poverty-rate-stays-at-almost-two-decade-high-income-falls.html

Cui Bono Fed: Who Benefits from the Federal Reserve?

From Of Two Minds:

Cui bono--to whose benefit?--is a skeptic's scalpel that cuts through the fat of propaganda and political expediency to the hard truth. Since the world has been trained (in Pavlovian fashion) to hang on every word issued by America's privately owned central bank, the Federal Reserve, it's appropriate to ask a simple but profound question: Who benefits from the Fed's existence and its policies of loaning "free money" to banks at 0% and ZIRP (zero interest rate policy)? The Status Quo's answer is "the American people," of course, a deliciously juicy layer of "Big Lie" propaganda and obfuscation. Any healthy political and financial system would have broken the fraud-based system and dismantled the failed banks en masse in an orderly fashion. One institution stopped this from happening: the Federal Reserve. The Fed exists to serve the banks. Everything else is propaganda. Ever-expanding debt leaves America a nation of wealthy banks and increasingly impoverished debt-serfs. Cui bono, baby.

http://www.oftwominds.com/blogsept12/cui-bono-Fed9-12.html

De-Industrialisation And Male Jobs in the U.S.

From Zero Hedge:

A whole lot of pundits are spending column inches trying to explain the cruel reality of the last forty years — stagnant wages for full-time male workers, falling wages for men as a whole, and a huge outgrowth of men who aren’t in the labour force. The question is why. Mainstream media pundits are suggesting that men are unsuited to the present economic landscape. It’s not at all the case that the United States is cutting back on industrial jobs because industry is less in demand. The United States still has plenty of demand for industry. America has cut back on industrial jobs because it has the ability to run huge trade deficits, through the dollar’s role as global reserve currency, and shipped its manufacturing industry abroad. Yet the present paradigm has severely damaged the prospects of young men, for whom a generation ago jobs in industry and manufacturing were once plentiful. Quantitative easing led to a jobs boom — in China, for Chinese industrial workers. And it seems unlikely that the industrial jobs are coming back any time soon.

http://www.zerohedge.com/news/guest-post-de-industrialisation-and-male-jobs

Inequality Matters: Why Nations Fail

From Jesse's Cafe:

"To Egyptians, the things that have held them back include an ineffective and corrupt state and a society where they cannot use their talent, ambition, ingenuity, and what education they can get. But they also recognize that the roots of these problems are political.

All the economic impediments they face stem from the way political power in Egypt is exercised and monopolized by a narrow elite. This, they understand, is the first thing that has to change.

Yet, in believing this, the protestors of Tahrir Square have sharply diverged from the conventional wisdom on this topic. When they reason about why a country such as Egypt is poor, most academics and commentators emphasize completely different factors.

Some stress that Egypt’s poverty is determined primarily by its geography, by the fact that the country is mostly a desert and lacks adequate rainfall, and that its soils and climate do not allow productive agriculture. Others instead point to cultural attributes of Egyptians that are supposedly inimical to economic development and prosperity. Egyptians, they argue, lack the same sort of work ethic and cultural traits that have allowed others to prosper, and instead have accepted Islamic beliefs that are inconsistent with economic success.

A third approach, the one dominant among economists and policy pundits, is based on the notion that the rulers of Egypt simply don’t know what is needed to make their country prosperous, and have followed incorrect policies and strategies in the past. If these rulers would only get the right advice from the right advisers, the thinking goes, prosperity would follow. To these academics and pundits, the fact that Egypt has been ruled by narrow elites feathering their nests at the expense of society seems irrelevant to understanding the country’s economic problems.

In this book we’ll argue that the Egyptians in Tahrir Square, not most academics and commentators, have the right idea. In fact, Egypt is poor precisely because it has been ruled by a narrow elite that have organized society for their own benefit at the expense of the vast mass of people. Political power has been narrowly concentrated, and has been used to create great wealth for those who possess it, such as the $70 billion fortune apparently accumulated by ex-president Mubarak. The losers have been the Egyptian people, as they only too well understand.

We’ll show that this interpretation of Egyptian poverty, the people’s interpretation, turns out to provide a general explanation for why poor countries are poor. Whether it is North Korea, Sierra Leone, or Zimbabwe, we’ll show that poor countries are poor for the same reason that Egypt is poor.

Countries such as Great Britain and the United States became rich because their citizens overthrew the elites who controlled power and created a society where political rights were much more broadly distributed, where the government was accountable and responsive to citizens, and where the great mass of people could take advantage of economic opportunities.

We’ll show that to understand why there is such inequality in the world today we have to delve into the past and study the historical dynamics of societies. We’ll see that the reason that Britain is richer than Egypt is because in 1688, Britain (or England, to be exact) had a revolution that transformed the politics and thus the economics of the nation. People fought for and won more political rights, and they used them to expand their economic opportunities. The result was a fundamentally different political and economic trajectory, culminating in the Industrial Revolution.

The Industrial Revolution and the technologies it unleashed didn’t spread to Egypt, as that country was under the control of the Ottoman Empire, which treated Egypt in rather the same way as the Mubarak family later did. Ottoman rule in Egypt was overthrown by Napoleon Bonaparte in 1798, but the country then fell under the control of British colonialism, which had as little interest as the Ottomans in promoting Egypt’s prosperity.

Though the Egyptians shook off the Ottoman and British empires and, in 1952, overthrew their monarchy, these were not revolutions like that of 1688 in England, and rather than fundamentally transforming politics in Egypt, they brought to power another elite as disinterested in achieving prosperity for ordinary Egyptians as the Ottoman and British had been. In consequence, the basic structure of society did not change, and Egypt stayed poor."

Daron Acemoglu and James Robinson, Why Nations Fail

http://jessescrossroadscafe.blogspot.kr/2012/09/inequality-matters-why-nations-fail.html

Stockman: "Ron Paul Is Right: The Fed, And The Lunatics That Run It, Are The Heart Of The Problem"

From Zero Hedge:

Former Reagan OMB Director David Stockman was 'allowed' on CNBC this morning - much to their chagrin now we suspect - and espoused his own brand of truthiness, starting with this epic tirade: "Ron Paul is the only one who is right about the Fed, and the Fed is the heart of the problem. They have destroyed the capital markets and the money markets; interest rates mean nothing; everything is trading off the Fed and Wall Street isn't even home - as it's now a bunch of computers trading word-clouds emitted by this central banker and that" In this environment, he goes on, everyone is being given the wrong signal - i.e. the Ryan/Romney campaign is abnout restoring vibrant capitalism; how can you do that when the financial markets are dead - the lifeblood of a capitalist system. And that is the problem today: "The Fed (and the lunatics that run it) are telling the whole world untruths about the cost of money and the price of risk." Must watch clip.

http://www.zerohedge.com/news/stockman-ron-paul-right-fed-and-lunatics-run-it-are-heart-problem

The Japanese Writing On The Walls

Excellent post.

From Zero Hedge:

With "unlimited" bond purchases confirmed by Super Mario and the ECB and the Fed essentially doing the same thing without calling it so, it is nothing short of integral to juxtapose the current western world central banking revolution with that of the Bank of Japan in the 80s. Japan faced an asset bubble that forced the nationalization decapitation of many Japanese banks whose lending practices and balance sheets depended upon the appreciation of said frothy assets (mainly real-estate, sound familiar?), which threw the country into recession in 1990...four years after the crisis was considered to have begun.

http://www.zerohedge.com/news/guest-post-japanese-writing-walls

James Miller: The Bill Clinton Myth

From Zero Hedge:

Earlier this week, former U.S. president Bill Clinton gave the keynote address to the Democractic National Convention in an effort to lend some of his popularity to Barack Obama.  With the unemployment rate still stubbornly high at 8.1%, Obama has lost many of the enthused voters who put him into the Oval Office in 2008.  Clinton was tapped to deliver the speech not only because of his image of a wonkish pragmatist but because of his presiding over the booming economy of the late 1990s.  Like a prized mule, Clinton was dragged out to give Democrats someone to point to and say that his policies were the hallmark of smart governance.  Today, Clinton still takes credit for Greenspan’s manipulated boom.  His supporters on the left love nothing more than to point at his presidency as vindication of the backwards theory that higher taxes equal more growth.  Clinton wasn’t a policy wonk; he was a politician who dipped into the Social Security trust fund to give an appearance of balancing the budget while the national debt still climbed higher. Through all of his financial scandals, womanizing, aggressive foreign policy approaches, and possible cover ups, it is actually fitting that Clinton is still looked to by the political establishment as someone worthy of respect.  He is representative of F.A. Hayek’s timeless lesson: in government the worst rise to the top and state power corrupts.

http://www.zerohedge.com/news/guest-post-bill-clinton-myth

The Socialist Counter-revolution Begins: France's Richest Man Seeks Belgian Citizenship

From Zero Hedge:

A few months ago when the new French socialist president gave details of his particular version of the "fairness doctrine" and said he would tax millionaires at 75%, we said that "we are rotating our secular long thesis away from Belgian caterers and into tax offshoring advisors, now that nobody in the 1% will pay any taxes ever again." While there was an element of hyperbole in the above statement, the implication was clear: France's richest will actively seek tax havens which don't seek to extract three quarters of their earnings, in the process depriving France (and other countries who adopt comparable surtaxes on the rich) of critical tax revenues. It took three months for this to be confirmed, and with a bang at that. The WSJ reports that Bernard Arnault, the CEO of LVMH, and the richest man in France, has decided to forego hollow Buffetian rhetoric that paying extra tax is one's sworn duty, and has sought Belgian citizenship.

http://www.zerohedge.com/news/socialist-counter-revolution-begins-frances-richest-man-seeks-belgian-citizenship

"Heaven and earth shall pass away, but My words shall not pass away. Take heed to yourselves, that your hearts will not be overwhelmed with the cares and the worries of this life, so that the Day may come upon you unawares. For like a trap it will come for all those that dwell upon the face of the earth. Watch therefore, and pray always, that you may be accounted worthy to escape these things that shall come to pass, and stand in judgement before the Son of Man."
Luke 21:33-36

Name The New Reserve Currency: China Imports More Gold In 2012 Than All ECB Holdings

From Zero Hedge:

The last time we looked at monthly Chinese imports of gold from Hong Kong in 2012, the comparable country in question was Portugal (whose citizens, if not central bank, incidentally have run out of gold to sell), because that is whose total gold holdings (at 382.5 tons) Chinese imports had just surpassed. Fast forward a month later, and the update is even more disturbing. In July, Chinese gold imports from HK, after two months of declines, have picked up once more and hit a 3-month high of 75.8 tons. While it is notable that this number is double the 38.1 tons imported a year prior, and that year-to-date imports are now a record 458.6 tons, well over four times greater than the seven month total in 2011 which was 103.9 tons, what is far more important is that in the first seven months of 2012 alone China has imported nearly as much gold as the total holdings of the hedge fund at the heart of the Eurozone, elsewhere known simply as the European Central Bank, and just as importantly considering the import run-rate has hardly slowed down in August, which data we will have in a few weeks, it is now safe to say that in 2012 alone China has imported more gold than the ECB's entire official 502.1 tons of holdings.

http://www.zerohedge.com/news/name-new-reserve-currency-china-imports-more-gold-2012-all-ecb-holdings

99 Years Of Keynesian-Monetarist "Winning"

From Zero Hedge:

99 years ago the Fed was born. Then there was a world war. Two decades later, Keynesian economics (in a somewhat mutated form than that envisioned by the author, much like the Taylor rule) became the gold standard (pardon the pun) of the status quo, as it gave the political establishment a "scientific" justification to spend and accumulate gargantuan debt loads without fear of backlash by the public. Then there was another world war. Then the gold standard was obliterated, allowing the same establishment to dilute the instrument used as money and to cross the "gargantuan" barrier in spending and debt issuance. Then the world came to the verge of complete socio-economic and systemic collapse after a ponzi pyramid of $1 quadrillion in credit money nearly imploded in on itself. Then the final chapter of the corporate takeover of the sovereign model established by the Treaty of Westphalia arrived, as private deleveraging at the terminal expense of public debt took place at a record pace. This is a nutshell is the world history of the past century. And to summarize where we currently stand, we present the chart below. In the entire "developed" world, there is only one country that runs a budget surplus, even as the entire "developed" world is now, according to the Reinhart and Rogoff definition of sustainable public leverage, insolvent.

http://www.zerohedge.com/news/99-years-keynesian-monetarist-winning

Jim Quinn: Subprime Auto Nation

From Zero Hedge:

Have you heard the news? Auto sales are booming. Total sales for the month of August were 1,285,202 vehicles, according to Autodata Corp, the highest monthly sales figure for any August since 2007, when 1.47 million autos were sold in the United States. Year to date auto sales have totaled 9.7 million and are on track to reach 14.5 million. Between 2006 and 2007, auto sales ranged between 16 million and 18 million. They crashed below 10 million in 2009. The Keynesians running our government have pulled out all the stops to restart this engine of consumer spending. First they wasted $3 billion of taxpayer funds on the Cash for Clunkers debacle. Almost 700,000 perfectly good cars were destroyed in order to keep union workers happy.  This Keynesian brain fart distorted the used car market for two years, raising prices for cars needed by the working poor. After that miserable failure, they realized the true secret to selling vehicles is to give them away to anyone that can scratch an X on a loan document, with 0% interest for 60 months, financed by Federal government controlled banking interests. Add in some massive channel stuffing and presto!!! – You’ve got an auto sales boom.... This is America, land of the delusional and home of the vain. The appearance of success is more important than actual success.

http://www.zerohedge.com/news/subprime-auto-nation

삼성의 브랜드 전략

브랜드란 단순히 이름과 디자인이 합쳐진 개념 이상이다. 브랜드란 개념에는 집합적인 고객의 경험이 녹아 있고 신뢰와 선호도, 감성적인 가치 부착 등이 복합적으로 내재되어 있다. 단지 기업에 남을만한 이름을 짓고 광고를 한다는 것만으로 브랜드를 각인시키는 데 충분하지가 않다. 브랜드란 한 기업의 가치를 요약해서 대변하는 것으로 이러한 브랜드는 일관되게 시간을 두고 개발되어야 한다. 브랜드 가치가 높기로 유명한 코카콜라의 경우, 코카콜라가 전세계적 사랑을 받는 이유는 독특한 맛뿐만 아니라, 스펜서체의 독특한 로고와 빨간색 아이콘, 콘투어 병, 북극곰 캐릭터 등 브랜드 자산 때문이다.

브랜드 자산 가치의 중요성을 인식한 삼성은 고유한 브랜드 전략을 위의 그림과 같이 추구했다. 이러한 노력의 결과로 삼성의 브랜드 가치는 매우 높아 졌다. 지난 수십년간 삼성에 대한 소비자 인식은 “값싼 복제품”에 지나지 않았지만 지금은 고급 브랜드로 세계 시장에 자리매김했다는 평가를 받고 있다.

삼성 AMLCD 사업부의 마케팅 전략

삼성전자 AMLCD 사업부는 LCD-TV가 디지털 TV의 표준으로 자리매김하고 패널 업체로써 선두자리를 차지하기 위해 마케팅 전략을 위의 그림에서 보이듯이 총체적으로 전개 했다.

LCD 패널의 주력 시장은 과거 노트북 컴퓨터의 패널에서 모니터용 패널, 그리고 대형 TV용 대형 패널로 이동했다. 대형 LCD 패널 시장에서 주도권을 잡기 위해 대체재에 비해서 차별화된 특성을 부각시키고 다른 패널 업체와 차별화시키려고 노력했다.

대체재 대비 제품의 차별화를 위해서 32” 이하의 경우에는 CRT대비 얇고 평면적인 디자인 상의 강점을 강조했고 37” 이상에서는 최고의 해상도 구현 능력을 통해 디지털 방송 환경에 최적의 디스플레이임을 강조했다. 디지털 방송이 본격화 됨에 따라서 디스플레이 중 최고의 화질을 제공하는 LCD-TV의 장점을 집중적으로 소비자에게 어필시키고, 첨단 기술과 세련된 디자인으로 고객들에게 스타일 있는 라이프 스타일을 제공하는 가장 앞서가는 TV라는 것을 집중적으로 부각시켰다.

가격 측면에서는 32” 이하와 40” 이상으로 나누어 전략을 추구했는데, 32” 이하에서는 무엇보다도 CRT 대비 2.4배까지 인하하여 Mass Market에 진입하는 것을 목표로 했다. 40” 이상에서는 40” 표준화를 위해 37” 판가와 40” 판가를 동일 수준까지 인하시키고 나아가 PDP와 같은 대체재 동일 수준까지 판가를 인하하여 40” 이상 시장에서도 대체재와 본격적으로 경쟁했다. 이렇듯 LCD TV 붐을 조성하고 수요를 확대시키기 위해 삼성전자 AMLCD 사업부는 통합적인 마케팅 전략을 추구했다.

마케팅 믹스

마케팅 믹스(4P: 제품, 가격, 촉진, 장소)는 표적시장으로부터 좋은 반응을 얻기 위해 기업들이 활용하는 마케팅 도구이다. 마케팅 믹스를 개발하는 것은 마케팅 활동의 주요부분을 차지한다. 마케팅 믹스 전략은 제품으로부터 출발한다. 제품은 욕구를 충족시키기 위해 시장에 제공될 수 있는 어떤 것을 의미한다. 제품에는 물리적 상품, 서비스, 경험, 사건, 개인, 장소, 자산, 조직, 정보, 아이디어 등이 포함된다. 제품관리는 신제품을 개발하는 것과 일단 개발된 제품을 시간의 흐름에 따라 관리하는 것을 모두 포함한다. 또한 마케팅 믹스 전략은 가격책정 전략, 촉진 믹스를 관리하는 전략, 유통망 전략, 재고관리, 물류관리 등을 포함한다.

시장 창출 마케팅 조사기법

기술이나 고객 모두 불확실할 때는 탐색 자체가 불가능해진다. 이 경우에는 가능한 미래를 상상하여 추정하거나 시행착오 및 성공을 겪으면서 시장으로부터 정보를 얻게 된다. 여기에는 다음과 같은 세 가지 기법이 있다.

◈ 동향 추정(Extrapolation of Trends): 사회적∙기술적∙환경적∙경제적∙정치적 동향을 추정함으로써 개발자들은 미래에 이러한 추세가 성숙됐을 때 현존하는 시장의 사용자들이 필요한 것이 무엇인지를 예견하려 한다.
◈ 미래에 대한 시나리오(Scenarios of the Future): 여러 가지의 대안적 미래에 대한 시나리오를 도출한다. 이는 미래를 확신을 가지고 예측한다기보다는 가능성들을 고려하는 것인데, 제품설계를 구상하는 데 유용한 자극제가 된다.
◈ 시장 실험(Market Experimentation): 실제로 기능하는 제품을 시장에 출시해서 설계특성이나 성능 등에 대한 시장반응을 탐색한다. 다양한 모델을 동시에 출시해서 시장반응을 보기도 하고, 시장에 첫 모델을 출시해서 시장 피드백을 얻어 이를 반영해 점차적으로 모델을 개량해 나가기도 하고, 다른 기업들 제품이 시장에서 어떤 반응을 얻는지를 보기 위해 시장진입을 일부러 늦추는 대림실험 전략을 쓰기도 한다.

감정이입 설계 마케팅 조사기법

위의 그림의 좌측 상단에서 대각선으로 우측 상단에 이르는 상황은 유사한 제품이 정확하게 시장에 나와 있지는 않지만 잠재적 사용자는 인식되는 경우이다. 이 경우에 고객과의 감정이입을 통해 분명하지는 않지만 관찰할 수 있는 욕구를 도출하여 이를 기술적 가능성과 접목해 상상력을 동원해 신제품을 개발하게 된다. 전통적 마케팅 조사기법들은 감정이입 설계기법들을 보강하는 역할을 한다. 감정이입 설계를 통해 개발된 제품개념은 고객 피드백을 통해 테스트되고 정제되는데 이 때에는 프로토타입이 필수적이다. 제품 개발자들이 사용자로부터 감정이입을 유인해 내는 기법에는 세 가지가 있다.

◈ 개발자의 시장 직관력(Developer’s “Market Intuition”): 개발자인 공학자들이 미래 시장이 원하는 것에 대한 직관력을 소지해 시장의 흐름을 예견해 신제품을 개발하는 경우이다.
◈ 시장 매칭(Market Matching): 기술역량을 시장니즈에 매치시키는 기법으로, 공학자들의 시장 기회에 대한 인식은 사용자에게 주어진 환경을 아주 잘 알고 있거나 이에 친숙한 사람들과 파트너쉽을 형성함으로써 얻어진다.
◈ 문화인류학적 탐험(Anthropological Expeditions): 사용자 세상을 심도 있게 알기 위해 문화인류학자들이 하는 것처럼 디자이너나 개발자들이 사용자 환경에 충분한 기간 동안 상주하면서 그들의 환경을 이해해서 욕구를 감정이입해서 도출해 낸다.

전통적 마케팅 조사기법: Inquiry

기존의 고객을 표적으로 한 이미 시장에서 검증된 제품라인의 확장일 경우에는 고객들의 선호도, 반응을 수집해서 활용하는 전통적 조사기법인 설문지와 표적집단면접 기법이 사용된다. 설문조사란 주로 설문지를 이용하여 조사자와 응답자 간에 질문과 응답을 통하여 데이터를 수집하는 방법을 일컫는다. 설문조사에서 응답자를 접촉하는 방법에는 크게 대인면접, 전화조사, 우편/팩스 조사, 인터넷 조사의 네 가지가 있다. 표적집단면접(FGI: Focus Group Interviews)이란 진행자가 6~10명의 응답자들과 함께 대화 형식으로 이끌어 가는 면접방법을 가리킨다. 몰 연구(Mall Study)가 활용되기도 하는데, 이는 신제품이나 프로토타입이 쇼핑몰에서 쇼핑하는 사람들을 상대로 그들의 반응을 테스트하기 위해 사용하는 기법이다. 이러한 기법들은 제품이 이미 시장에 존재하고 사용자들이 제품의 기능에 익숙하기 때문에 그들 자신의 욕구를 인식하여 개선점을 제안할 수 있다. 즉, 고객들이 이미 알고 있고, 표현할 수 있는 욕구를 발견하는 데 활용된다. 주도적 고객기법과 잠재적 니즈분석도 이 카테고리에 속한다고 볼 수 있다. 주도적 고객들은 일반 소비자들이 인식하기 훨씬 이전에 욕구를 느끼고 이러한 욕구를 충족시키는 솔루션으로부터 혜택을 받는 집단으로 제품개발을 가이드하는 데 도움을 준다. 잠재적 니즈분석에는 질적 데이터를 수집하고 분석하기 위한 브레인스토밍 프로세스인 “K-J’ 분석, 가치 매트릭스(Value Matrix) 기법 등이 있다.

신제품 유형에 따른 마케팅 조사

Note: 마케팅 조사 기법에 대한 수많은 문헌들이 있지만 이는 current markets의 current needs에 관한 것이어서 기존의 제품과는 다른 혁신적인 제품을 연구하고 개발해서 시장에 내놓을 때 도움이 되는 문헌은 매우 드문 실정이다. 이를 염두에 두고 다음의 마케팅 조사기법에 대한 몇 개의 포스트들을 읽으면 도움이 될 것이다.

대부분의 기업들이 다양한 신제품 유형을 개발함에 따라 요구되는 시장으로부터의 정보유형도 다르게 된다. 위의 그림은 제품라인을 지탱하는 기술적 디자인의 성숙도와 제안된 제품라인과 현존하는 고객베이스와의 일치 정도에 따라 신제품 개발자들이 직면하는 불확실성의 수준과 유형이 다르기 때문에 필요한 시장정보의 유형도 다르다는 것을 보이고 있다. 수직 축은 기술수명주기를 따르고 있다. 한 산업에서 지배적 제품이 등장하고 소멸하면서 다음 세대 기술혁신이 이루어지고 다음 기술주기로 넘어가는 패턴을 띠게 된다. 수평 축은 제안된 제품이 현존하는 고객베이스의 욕구와 일치되는 정도를 나타낸다. 시장의 불확실성은 수평 축의 오른쪽으로 갈수록 증대된다. 신제품을 개발하는 데 있어서 개발하려는 제품이 수평축의 어디에 놓이느냐에 따라 상이한 시장조사 기법들을 활용해야 하므로 이들 기법들을 숙지하고 제품개발에 접목시켜야 할 것이다.

시장조사 단계

시장조사를 하는 단계는 네 가지 프로세스로 나누어 실시할 수 있다. 첫 번째로 정보니즈를 평가하는 단계에서는 어떻게 데이터가 사용될 것인지, 어떤 데이터를 수집할 필요가 있는지, 어떤 분석 방법을 사용할 것인지 등의 질문을 던지게 된다. 두 번째 단계에서는 2차 소스를 먼저 조사하게 되는데, 여기에서는 고객의 인구통계적 특성은 무엇인지, 소비자의 구매습관과 같은 사이코 그래픽스는 무엇인지, 시장이 얼마나 큰지, 시장이 성장하고 있는지, 시장이 지리에 따라 영향을 받는지, 어떻게 시장을 공략할 것인지, 어떻게 경쟁사가 시장을 공략할 것인지, 어떤 시장전략이 고객에게 성공적이었는지 등의 질문에 대한 답을 구하게 된다. 세 번째 단계에서는 1차 조사로 표적시장을 측정하게 되는데 여기에서도 역시 고객의 인구통계적 특성이 1차 조사로 도출되고, 소비자가 제품을 구매할 것인지, 산다면 왜 구매하는지, 얼마나 또 언재 구매할 것인지, 어떻게 소비자가 그 제품에 대해 알게 되기를 선호하는지, 그들이 경쟁사 제품의 어떤 점을 마음에 들어 하는지 등이 조사된다. 마지막 단계에서는 제품이나 서비스에 대한 수요를 예측할 필요가 있는데, 소비자와 중간상들이 예측하는 수요는 무엇인지, 자사 제품을 한정적으로 생산하거나 테스트 마켓할 수 있는 지가 조사된다.

기술수용주기와 캐즘

신제품이 소개되고 일반대중에 수용되는 과정을 설명해 주는 모델이 기술수용주기(Technology Adoption Life Cycle)이다. 이 모델에는 다섯 가지 유형의 소비자 집단들, 즉 혁신수용자(innovators), 선각수용자(early adopters), 전기 다수수용자(early majority), 후기 다수수용자(late majority), 지각수용자(laggards)가 존재하는데 혁신수용자들은 기술 자체에 대한 관심이 높아 첨단기술제품을 적극 구매하는 집단이다. 선각수용자는 신기술을 활용해 이익을 얻을 수 있다고 판단할 때마다 구매를 결정한다. 전기 다수수용자는 실용적인 측면에 더욱 큰 관심을 두고 있는 구매계층으로서 총구매 인수의 3분의 1 가량을 차지한다. 후기 다수수용자는 신기술 제품이 확고한 표준으로 자리 잡을 때까지 기다리는 보수적 성향의 구매계층으로서 역시 총구매 인구의 3분의 1을 차지한다. 마지막으로 지각수용자는 신기술과 관련된 그 어떤 것도 원하지 않는 집단으로서 마케팅 활동에서 제외시켜도 되는 사람들로 간주된다. 이 모델에 의하면 첨단기술시장의 개발과정은 기술수용주기 곡선의 왼쪽에서 오른쪽으로 가면서 진행되는데, 한 시장 안의 다음 집단으로 이동하기 위해서는 그 집단에 속하는 특정 집단을 준거집단으로 이용해야 한다. 예를 들어, 선각수용자의 추천이 전기 다수수용자에게 설득력을 갖게 되는 식으로 이어지는 것이다. 이 모델은 구전창출효과를 중요시 여기고, 단계별 이행이 오래 지연되지 않게 다음 집단으로 옮겨가는 추진력을 유지해야 한다고 본다. 한 기업이 전기 다수수용자 영역에 도달해 사실상의 표준으로 정착될 수 있다면, 그 기업은 곧이어 다가올 고수익의 주류시장을 점령하게 된다는 것이다.

캐즘 마케팅

혁신적인 제품을 개발하는 일 못지않게 그것을 시장에서 포지셔닝하고 확산시키는 일 역시 매우 중요하다. 첨단기술제품은 소비재와 달리 기존의 모든 것을 무너뜨리는 불연속적인 혁신의 형태를 띠고 나타나기 때문에 그것이 시장에 널리 받아들여지기까지는 지연 단계를 거칠 수밖에 없다. 다시 말해서 첨단기술제품 대부분이 초기 시장에서는 기술 애호가들의 호기심을 끌어 작은 성공을 맛볼 수는 있지만, 주류시장은 일상용품을 원하는 성향이 있기 때문에 이 시장에서는 정작 진입하지도 못하고 캐즘에 빠져 사라져 버린다는 것이다. 소비자들이 첨단기술제품의 유용성을 관망하는 기간이 캐즘인데 이를 뛰어넘는 것, 다시 말해 관망기간 동안 소비자에게 유용한 가치와 적당한 가격을 제공해 주류시장을 만들어 내는 일이 중요하게 된다. 이처럼 첨단기술시장의 역학을 이해하고 극복하기 위해 제시된 마케팅 모델이 캐즘(Chasm)이론이다.

세분화 분석

산업마다 경쟁의 본질과 강도는 다르지만, 한 산업을 세분화하여 각기 다른 산업 세그먼트의 구조적 특성을 분석하는 것은 유용하다. 세분화 분석은 각기 다른 세그먼트의 매력도를 평가함으로써 어떤 세그먼트에 진입할 것인지 아니면 퇴출할 것인지, 세그먼트간에 자원분배를 어떻게 할 것인지를 결정하는 데 도움을 준다. 또한 세그먼트 간의 구조와 경쟁에 있어서 상이한 점은 세그먼트간에 주요 성공요인이 달라야 함도 의미한다. 세분화 분석은 위의 다섯 가지 주요 단계를 거친다.

세분시장 마케팅 전략

기업들이 소비자를 만족시키기 위해서는 이들의 욕구를 파악해야만 한다. 특정 시장에서 모든 소비자를 만족시키는 일이 어렵기 때문에 기업들은 시장을 세분화하고, 표적시장을 정하여, 포지셔닝을 하게 된다. 세분시장을 도출하기 위해서 세분화 분석을 수행하고, 표적시장을 정할 때에는 세분시장 매력도, 경쟁우위, 적합성을 고려하여 선택해야 한다. 여기에서 포지셔닝이란 한 기업의 제품이 표적시장의 소비자 마음 속에 유리하고 독특한 위치를 차지하도록 만들기 위해서 제품의 어떤 특징을 적극적으로 커뮤니케이션하는 활동을 가리킨다.

마케팅 전략 수립 프로세스

시장환경 분석에는 내∙외적 환경분석을 실시하고 시장조사를 하는 것이 포함된다. 전략적 목표를 수립하는 데는 이전 포스트에서 소개된 SWOT분석이 활용된다. 세분화된 시장에서 마케팅 전략을 수립하는 것은 시장을 세분화하여, 표적시장을 잡고, 포지셔닝 하는 STP 활동을 말한다. 그리고 나서 마케팅 믹스를 개발하게 되는데 이는 4P, 즉 제품, 가격, 장소, 판촉에 관련된 전략을 수립하는 것을 의미한다. 마지막으로 마케팅 활동들을 통제하게 된다.

가치전달 마케팅 프로세스

오늘날 시장은 점점 세분화되고 있으며 각 시장별로 욕구, 선호하는 것, 구매기준 등이 각기 다르다. 따라서 현명한 경쟁자는 잘 정의된 표적시장을 겨냥한 제품들을 설계해서 전달해야 한다는 믿음이 비즈니스 프로세스에 대한 새로운 견해의 중추가 되고 있고, 마케팅을 기획 프로세스의 시발점에 놓고 있다. 제조해서 판매하는 것을 강조하는 대신에 기업활동 가치를 창출하고 전달하는 일련의 과정으로써 인식하고 있다. 이 과정은 세 가지 부분으로 이루어져 있다. 첫 번째 단계에서는 시장을 세분화하고, 표적시장을 선정하고, 제품의 가치 포지셔닝을 개발한다. 이 세 가지 활동은 STP(Segmentation, Targeting, Positioning) 공식으로 전략적 마케팅의 엣센스라 할 수 있다. 가치가 선정된 다음에 두 번째 단계에서는 가치를 제공하게 된다. 특정 제품의 특성, 가격, 유통 등을 전술적 마케팅의 일환으로써 결정해야 한다. 세 번째 단계에서의 임무는 그 가치를 커뮤니케이션 하는 일이다. 여기에서는 제품을 알리고 선전하기 위해 영업인력들을 활용하고, 판촉 및 광고활동을 벌이는 전술적 마케팅 활동이 이루어진다.

마케팅이란 무엇인가

마케팅 구루라고 불리우는 Philip Kotler에 의하면 마케팅이란 개개인이나 그룹이 가치 있는 제품을 창조하고 교환함으로써 그들이 원하는 바를 얻는 사회적 경영 프로세스이다. 마케팅 학회의 정의에 따르면 마케팅이란 고객의 니즈를 충족시키는 아이디어를 창출하고 유통, 영업, 가격 등에 관한 계획을 세우고 실행하는 프로세스이다. 마케팅이란 영업개념과는 구별되어야 한다. 영업은 고객에게 제품을 판매하기 위한 활동을 일컫는 데 비해, 마케팅이란 경쟁사보다 훨씬 신속하게 히트제품을 개발하고 출시하며, 제품을 판매하기 위한 모든 활동을 지칭하는 포괄적이고 총체적인 개념이다.