Stocks are still climbing. The Dow was up over 14,500 last we checked, buoyed, say the papers, by some encouraging jobs numbers. Here’s The Financial Times, abusing its readers with the details:
Overall, US equity markets rose by midday, boosted by better than expected jobless claims.
Weekly jobless claims fell more than expected to 332,000, while the four-week moving average dropped to the lowest level since 2008, indicating continued improvement in the labour market.
Gold, meanwhile, is lurking dangerously close to a two-year low. Hmmm… What to make of it all?
We don’t know any more than you do, Fellow Reckoner. If we had to guess, we’d abstain. And if pressed, we’d double down on that position. Perhaps that sounds lazy. Maybe it is. But that’s not, in and of itself, a bad thing. There are times when a lot of inaction is better than even a little over-action. Now might be one of those times…
Besides, the Feds take most of the fun out of the guessing game anyway. Those jobs numbers stink to high heaven. Here are figures that couldn’t lie straight in bed…cooked up by politicians that can’t spell the word “save” without the letters S, P, E, N and D (in caps, no less!). Invest four minutes analyzing their figures and you’ll quickly find you’ve wasted five.
Of course, the propensity to stretch the truth is not unique to US politicians. All over the world, in countries near and far, people posing as statesmen are fudging the data, massaging the message and generally picking their neighbors’ pockets. Here in South America the story is no different. Back across the Rio de la Plata, the Argentine government is doing what it does best, which is to say, it’s destroying its currency. Poor folks trying to save are forced to invent all manner of creative workarounds to escape the state’s tragic narrative. One measure is to bank outside the country, usually somewhere here in Uruguay.
Montevideo, Uruguay’s capital city, is a dump. There are some pretty, old buildings, sure…a few nice parks…a plaza or two. But overall, the place boasts a palpable paucity of attractive features. When the gods were handing out redeemable characteristics, Montevideo’s representative must have been taking a lunch break. But it does have a couple of things going for it (at least for now): a relatively safe and secure banking system and a currency that’s not yet singed around the edges. As such, wealthy porteños have been banking here for decades.
One might, if one were so inclined, hold a portion of his wealth at a bank here in Montevideo. It’s still relatively easy to open an account and, although the process is not quite “sin preguntas,” it’s much simpler than in Buenos Aires. A document proving income and a passport gets you most of the way through. Having opened an account, our hypothetical individual might choose to hold his savings here in US dollars (a relative bastion of security for those forced to use pesos). Then, once a month or so, this individual might journey to Uruguay to make a withdrawal. Returning home with a few dollars in his pocket, he might then choose to exchange them on the “blue market” at a far more favorable rate than what the government there claims as “official.”
The brecha, or spread, between the government’s 5-to-1 rate and the blue market’s near-8-to-1 is not insignificant. Those who can deal in dollars, therefore, do. Gresham’s Law: “When a government compulsorily overvalues one type of money and undervalues another, the undervalued money will leave the country or disappear from circulation into hoards, while the overvalued money will flood into circulation.” (Wikipedia)
The phenomenon can also be seen with regards to that fringy cyber currency, bitcoin. A single coin goes for a little under $50. At the official rate, that’s about 250 Argentine pesos, give or take a few notes. But the market demands 400 pesos per coin. Contrary to the government’s assertion, markets — which is to say people — know their daily needs and wants better than any policy maker ever could.
Joel Bowmanfor The Daily Reckoning
Joel Bowman is a contributor to The Daily Reckoning. After completing his degree in media communications and journalism in his home country of Australia, Joel moved to Baltimore to join the Agora Financial team. His keen interest in travel and macroeconomics first took him to New York where he regularly reported from Wall Street, and he now writes from and lives all over the world.
Government life support…liquidity injection… or a giant Band-Aid…whatever you want to call it, quantitative easing is the keeping the global economic ship afloat – but for how much longer? Richard Duncan explores…
Ben Bernanke introduced the world to the concept of "quantitative easing" back in 2002. It was an "unorthodox plan" to save the economy from the horrors of deflation. But the monstrous economy it has actually created is in some ways far worse. And as Richard Duncan explains, it's not going to end any time soon. Read on..
While the technical details of Bitcoin may intimidate the novice, they shouldn’t keep him from getting in on a digital currency revolution that -- while taking different forms -- isn’t going away. How do you get the simplest, easiest-to-act-on tips about how to invest, safeguard and grow your digital wealth? Dominic Frisby has more…
The duality is stark. In one hand, we have an energy renaissance underway, in the other, a virus is threatening to wreak havoc on the markets and, potentially, your life. Nothing we’re currently doing to fight the Ebola virus will work in 2014, say the researchers. Nothing we’re currently doing will beat it in 2015, either. We need a new game-plan. Read on…
Lose your shirt in 3D printing stocks this year? Don’t kick yourself. You’re not alone. (Okay, kick yourself a little if it’ll make you feel better.) You need to make sure you don’t lose your 3D-printed shirt in the next tech craze. Because there will be a next time. Look, it’s really not your fault if you got taken for a ride on 3D stocks. Greg Guenthner has more...