Three coins in the fountain.

Technocrat

Three coins in the fountain.

GuyFawkes

Wed Oct 08 17:07:00 -0700 2008

Politics.

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There are three separate news stories floating around today, apparently with nothing in common.

The UK couple who sold their house and put the lot into gold.
The largest volume air freight route last year was China to Mexico.
Fear and loathing in a rich suburb of Leeds.

Truth is often far stranger, and more interesting, than fiction, and while these three stories exemplify that, they also all form a part of the same picture, but it isn't the picture it at first appears to be.

The "we sold our house and spent the lot buying gold" couple is an interesting story, with a little twist in that the man of the house is a retired croupier, and cue the bullion fanboys stories about the roman nobleman who paid an ounce of gold for a fine suit of clothes, and while the man and his clothes have long since turned to dust, that ounce of gold will still buy a fine suit of clothes.

Hang on, where do mr and mrs homeless retired croupier keep this thousand ounces of gold? Ah, well, they have never actually seen or touched the gold, but it has been verified and all that and it is nice and safe in a vault in switzerland, apparently.

Yeah, so if this gold exists, it is a thousand miles away in another country, and not in your own personal safe deposit box, and gold being what it is who is to say that these ingots are yours, or even that you have first dibs on them.

But it is so reassuring to know that your money is safely away from all the financial shenanigans innit.

The second story is that the Chinese are outsourcing, suddenly the costs of raw materials and energy are at least as important as the cost of labour, so instead of shipping assembled goods to the west the chinese are moving manufacture away from the now expensive areas of china to the cheaper provinces, and shipping the bits for assembly closer to the target markets, so eastern europe for mainland europe and mexico for north america.

Scott Price, chief exec of DHL europe describes the logistics industry as being in turmoil, and says that the model is moving extremely rapidly from globalisation to regionalisation and protectionism.

The third story is suburban Leeds, these houses sold for 3,500 pounds in 1960, 100,000 pounds in 2000, 200,000 pounds in 2004, and 430,000 pounds in 2007.

In the past 4 weeks the local, quality, indian restaurant has seen a 40%+ drop in takings.

Meanwhile my local trade cash and carry and my local locksmith have both literally sold out of small safes, "been here since 1964..." says my local locksmith "... and never seen anything like it" I was in buying a new lock and chain for the girls new pushbike, "these are selling like hotcakes too" he says "and garage security locks"

And this all begs another question.

We all know that the pension funds have been, by proxy, playing the stock markets, so sad, too bad, there goes your retirement.

But another big pillar of society that has much more immediate effects than far off pensions has been playing the same game, and nobody is talking about them, them being the Insurance companies.

HBOS bank, which is in dire straits, has been trying to sell Direct Line auto and home insurance for a year, no takers. And Direct Line are a BIG insurance company, but if their parent company is basically bankrupt (apart from being too big to fail and playing by different rules to thee and me) then how healthy can a subsidiary be?

Foxconn, the taiwanese electronics people, recently caused panic in czechezlovakia when rumours spread that the pc manufacturing plant was going to hungary, when in fact Foxconn are just adding to their portfolio.. they have also bought plants in mexico.

The chinese steel industry is in recession, the head of Beosteel has stated that output this year is going to be significantly down, and china no longer buys iron ore from brazil, just too expensive see, and they are trying to squeeze the pips out of the indians, and failing.

Global demand for steel has tanked too, the US carmakers have basically joined the undead, they are staggering around but it is zombie action, there are no lights on and nobody at home, demand for steel there has fallen off a cliff, still, tanking now means not having to make good on all those pesky pension plans.

Aluminium, one of the few 100% recyclable metals, is creeping up in price for the first time in twenty years, particularly "North American Special" grades, and of course the mega alcoa icelandic hydro powered aluminium smelting operations will play a part in this.

For sure, some interesting times ahead, still, unlike Shenzen, I can at least drive to Budapest and look for work... rofl.

Bullion Fanboys on Marrs

Uncle Entity

Wed Oct 08 22:24:21 -0700 2008
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The Swiss don't go around confiscating bullion at the drop of a hat like the US Treasury Dept. proxied through the DOJ because it could be used by terrorists, drug traffickers and pedophiles. Not that it ever was but it could, mind you. That's the cover story at least.

Or snatch it up because someone minted a bunch of coins that have the $©(US Treasury Department) printed on them because of an implied monopoly. Not a legal monopoly but an implied one, mind you. That's the cover story at least.

I actually believe that the Swiss pride themselves on their banking system and financial services and would look down on someone running a bullion scam out of their country. I do know for certain that there are 100% reserve bullion banks that audit their holdings through an independent agency in a transparent manner for the sole reason that they want customers to have confidence in their operations.

I'd trust my gold in Swiss hands any day over the US or UK when there is a financial crisis of biblical proportions brewing as they don't have a very good track record of not seizing it when it is convenient for them.

The house for gold actually sounds like a good bet as the price of gold will probably go up a lot for various reasons while the price of houses are looking to be in a tailspin unless they can manage to 'stabilize' them through hyper-inflation.

But that's all irrelevant if you have to start accessorizing the minivan Mad Max style to take a trip to the corner store.

In more important news, the local distributors have finally started to move from the second to third phase of price inflation so the beer prices are going up at my bar again. That's the cover story at least.

Bullion Fanboys on Marrs

Thomas Lord

Thu Oct 09 00:06:48 -0700 2008
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Out here it's the damndest thing and I can't get a consistent story as to proximate cause but for whatever freakin' reasons (demand swell, bad seasons, who knows) hops are locally through the roof with other significant ingrediants not far behind. And, yeah, the brewers have no damn choice but to pass it on to an extent.. approx. 25% (!) inflation in the pint over about the past year. "Back in [not so long ago] day" not only was the pint 25% less expensive but (a) if an interesting batch of hops were passing through you'd sometimes find a bowl of them at the bar to chew on for reference; (b) no, really, an extra buck a pint?!? really?!?

-t

Bullion Fanboys on Marrs

President4242

Thu Oct 09 08:42:30 -0700 2008
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Cost of diesel fuel this summer perhaps? Just a thought, but the manufacture of MOST of what goes into beer is highly mechanized in the US (sure, you can find "home grown hops", I've got 3-4 local microbreweries that raise their hops onsite, but for the most part, hops are farmed in such a way that you have to run something that looks like a cross between a tractor and a helicopter to harvest them, as you get the most buds from 30' tall vines spaced 10 feet apart- you'll never forget a hop field if you ever see one). Hops, Grain, Yeast and Water are your three main inputs into any beer- I'm not sure about the production of Yeast, but certainly the grain as well as the hops need large complex vehicles that run a lot of fuel to produce.

Bullion Fanboys on Marrs

Thomas Lord

Thu Oct 09 09:33:44 -0700 2008
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The most consistent accounts I hear are about supply shortages. Nobody has mentioned fuel prices. Home grown hops are fine and dandy but the premium commercial ones command a premium for a reason.

What's unclear to me is whether the supply shortages are mainly due to bad crops, growers exiting the business, or sharply increased demand. I guess its some mix of those but I'm not sure in what proportions.

I also wonder, for some of the nicer varieties, if it isn't the weak dollar making the problem.

-t

Bullion Fanboys on Marrs

President4242

Thu Oct 09 10:28:56 -0700 2008
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I'd expect that for imported varieties, but now that "Cascade" hops seem to compare favorably in reviews with any of the Bavarian breeds, you'd think that domestic would be cheaper for even the nicer varieties.

Supply shortages...hmm...I'm not sure how our wierd weather this year would have affected hops in specific. Grain would be coming in slightly later, apples came in slightly earlier.

Bullion Fanboys on Marrs

Uncle Entity

Thu Oct 09 10:42:48 -0700 2008
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I thought I'd remembered reporting on this a few months ago.

Three coins in the fountain.

Robert Leroy Parker

Thu Oct 09 00:45:21 -0700 2008
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"suddenly the costs of raw materials and energy are at least as important as the cost of labour, so instead of shipping assembled goods to the west the chinese are moving manufacture away from the now expensive areas of china to the cheaper provinces, and shipping the bits for assembly closer to the target markets, so eastern europe for mainland europe and mexico for north america"

I would guess that component shipments to Mexico and East Europe are to bypass high duties for importing finished good into North America and EU markets.

Now, factories being set up in Vietnam, that would have more to do with labor costs in China.

Three coins in the fountain.

Alan

Thu Oct 09 08:24:57 -0700 2008
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The second story is that the Chinese are outsourcing, suddenly the costs of raw materials and energy are at least as important as the cost of labour, so instead of shipping assembled goods to the west the chinese are moving manufacture away from the now expensive areas of china to the cheaper provinces, and shipping the bits for assembly closer to the target markets, so eastern europe for mainland europe and mexico for north america.

No, that's not about cost of labour, but being able to declare the goods "Made in North America/Europe" and avoid quotas, taxes, etc on "foreign" goods.

NAFTA

Charles E Hill

Thu Oct 09 08:50:57 -0700 2008
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And this, boys and girls, was the entire logic behind NAFTA and why NAFTA is a *good thing*.

The idea was not to drive jobs to the far east, but to pull many of those heading there back to Central and South America.

Supply and Demand is the ultimate law. There really is no way around it.

For several years prior to the financial meltdown the U.S. has had an issue with illegal immigration. Lots of people want in, because for all its warts, the U.S. is still "the land of opportunity".

You can't walk here from Asia, Africa or Europe. The bulk of U.S. illegal immigration is from Mexico and Latin America, where their economies are crap compared to ours.

Notice how we don't have immigration issues with Canada? That is because Canada has a good economy relative to the U.S.

In order to permanently deal with illegal immigrants from South of the Border, there are only two viable options.

1. Destroy our economy, so they have no incentive to come here. Note that 2008 looks to be the first year in decades where legal immigration to the U.S. outstrips illegal immigration. Thanks to the financial crisis, fewew people want to come here.

2. Bolster the economies of emigrant nations so they have better opportunities at home.

NAFTA was designed to bolster the economy of Mexico to the point where they were approaching parity with the U.S. and Canada. If that were the case, illegal immigration would fall off a cliff and the U.S. would have a strong trading partner.

Follow it up with CAFTA (Central America Free Trade Agreement) and we extend that idea throughout the entire hemisphere.

The main thing that slowed NAFTA down was cheap transportation costs. Cheap oil. If oil wasn't $20 / bbl for so long, this would have happened years ago.

So what we'll see is more factories and jobs created in Central America in general and Mexico in particular. As that happens, things like unions will form and get more power. Working conditions will improve and more Mexicans will want to stay at home in Mexico. They'll have jobs and not need to come to the U.S. for menial labor.

It is, by far and away, in the best interests of the United States and Canada to help the Mexican economy improve as much as it can. Free trade (NAFTA/CAFTA) and increased transportation costs (oil) is the best way to do this.

NAFTA

President4242

Thu Oct 09 10:31:13 -0700 2008
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Notice how we don't have immigration issues with Canada? That is because Canada has a good economy relative to the U.S.

Speak for yourself, I've got *specific* immigration issues with Canada. Mainly due to their lack of good border examination of cargo crates from Hong Kong and the Mideast, they're a huge hole in our border from a national security standpoint.

I'd also point out that in Mexico at least, while the *intention* of NAFTA might have been to increase standard of living to parity with the United States, the *effect* of NAFTA has largely been to cause agriculture to drop into bankruptcy and certain native tribes who have previously resisted assimilation into Hispanic culture to have completely lost their livelihood, thus INCREASING non-hispanic Mexican illegal immigration. This has become a major problem in places like Oregon where liberals were completely willing to provide bi-lingual education, but have suddenly gotten hit by a bunch of Mexican nationals who speak neither Spanish nor English.

As such, the members of these tribes, being outsiders to the invaders that took over their nation 500 years ago, are not likely to benefit from industrial jobs; in fact, they've got some rather curious local anti-industrialization traditions (to the point that Mexico has had some major problems implementing rural electrification the few times it has been tried, the Maya simply cut down the poles to use for firewood).

NAFTA

Charles E Hill

Thu Oct 09 12:12:47 -0700 2008
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Speak for yourself, I've got *specific* immigration issues with Canada.

No, you don't. You have a problem with customs (goods), not immigration (people). Different agency, different agenda.

Much of the benefits of NAFTA were delayed or negated by cheap transportation cost. As that goes away, NAFTA will have more of an effect.

I'm not sure how I see people who resist assimilation into the Mexican-Hispanic culture are thinking they're going to have a better chance in the Anglo-American culture.

Still, the net effect will be for immigration from Latin America, including Mexico, to drop as their economy improves. Will it be 100% effective? No, but it should make a significant impact.

NAFTA

President4242

Fri Oct 10 06:59:57 -0700 2008
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No, you don't. You have a problem with customs (goods), not immigration (people). Different agency, different agenda.

Both are about the common defense to me: whether goods or people (and people can sneak in with cargo containers to, they do it all the time), both are harmful to our economy, and are therefore an act of war.

Much of the benefits of NAFTA were delayed or negated by cheap transportation cost. As that goes away, NAFTA will have more of an effect.

Hopefully the right one.....

I'm not sure how I see people who resist assimilation into the Mexican-Hispanic culture are thinking they're going to have a better chance in the Anglo-American culture.

It's more along the lines of "no other choice". As in, it's either emigrate or it's suicide.

Still, the net effect will be for immigration from Latin America, including Mexico, to drop as their economy improves. Will it be 100% effective? No, but it should make a significant impact.

Hopefully, if it doesn't utterly destroy their traditional economies first.

NAFTA

Farrell J. McGovern

Fri Oct 10 07:03:58 -0700 2008
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Us Canadians have border issues with the US, as *someone* is flooding the Canadian market with handguns, which are essentially illegal here, so there is no legal market for them. But this flood has caused a dramatic increase in handgun violence, especially in larger metropolises like Montreal, Toronto and Vancouver.

ttyl

Farrell

NAFTA

Alan

Thu Oct 09 17:38:52 -0700 2008
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The main thing that slowed NAFTA down was cheap transportation costs. Cheap oil. If oil wasn't $20 / bbl for so long, this would have happened years ago.

I doubt that. I used to work for a company that did a bit of import/export. If you're shipping containerised goods by sea, the costs have very little relation to distance (i.e., fuel consumption). Once you get your goods on a freighter, it almost costs the same to go a hundred miles as ten thousand. The major part of the cost were the port fees, handling and warehousing. Fuel costs would have to rise a lot more before they become a major consideration. (Though I'm sure they're giving shipping companies nightmares now.) I guess most goods from Mexico would be brought to the US by road; that is much more affected by fuel costs, so the effect, if any, is probably the reverse.

NAFTA

Charles E Hill

Thu Oct 09 18:02:52 -0700 2008
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I need to check now, but I know that when the United Fruit Company ran a few countries in Latin America, there were extensive rail networks thruout the entire region, heading back up to the U.S.

That would beat the daylights out of trucks and roads.

That being said, I don't know the status of those rails today. I suspect many of them south of Mexico are in disrepair or are abandoned.

NAFTA

President4242

Fri Oct 10 12:43:03 -0700 2008
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Once you get your goods on a freighter, it almost costs the same to go a hundred miles as ten thousand.

Why does this remind me of claims of perpetual motion machines? There must have been some hidden subsidy going on there- it's not like we've got frictionless oceans.

NAFTA

Alan

Fri Oct 10 18:35:51 -0700 2008
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Why does this remind me of claims of perpetual motion machines? There must have been some hidden subsidy going on there- it's not like we've got frictionless oceans.

Why don't you investigate it before implying that I'm a liar.

Obviously the fuel cost does depend on distance. But a containerised freighter is the most efficient method of moving goods known to man. Unloading, loading, paperwork, and port fees dominate the cost to the user. That's a fact, sorry if it doesn't gibe with your intuition.

I remember once we shipped a few thousand books to New York from Hong Kong. Freight cost a couple of hundred dollars. Getting them from the port to the warehouse in New Jersey, two or three times that. Maybe Tony Soprano was taking his cut. Regardless, that's the cost structure.

I don't know anything about bulk freight, I guess that may be more linear with distance, as there are fewer, larger, transactions.

NAFTA

President4242

Mon Oct 13 07:31:39 -0700 2008
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Obviously the fuel cost does depend on distance.

The fuel cost is the actual highest cost, because it's the one that is charged to the entire world in worsening climate and reduced fuel reserves.

This is why, at times, I think we need higher fuel prices- to reflect more accurately that cost.

There should be NO reason why, given your restraint of containerised freighter, that a container shipped from New York to London should be EXACTLY the same cost as one shipped from New York to Bangalore. It might be only pennies, but there should be some difference in the cost regarding the greater distance.

NAFTA

Alan

Mon Oct 13 09:39:25 -0700 2008
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There should be NO reason why...

There is, and I have already explained why.

a third illegal immigrant option

eckenheimer

Sat Oct 11 04:08:29 -0700 2008
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Mr Hill stated: "In order to permanently deal with illegal immigrants from South of the Border, there are only two viable options.

1. Destroy our economy, so they have no incentive to come here. Â Note that 2008 looks to be the first year in decades where legal immigration to the U.S. outstrips illegal immigration. Â Thanks to the financial crisis, fewew people want to come here.

2. Bolster the economies of emigrant nations so they have better opportunities at home."

I strongly disagree. A third option is to make it more expensive for US employers to hire "illegals" or "undocumented workers" than to hire "legal" US residents. As long as employers can cut labor costs (thus making their company more competitive) by hiring undocumented workers, some will do so. If fines and other penalties were the expected result of this illegal action by employers, then the incentive to hire undocumented workers would disappear. With few available jobs, the flood of illegal workers would become a trickle.Â

There are many other facets to this complex issue, but reducing the number of illegals entering the US is one aspect that could be dealt with effectively. The government has chosen not to do so, as shown by the number of companies in the US fined for hiring illegal immigrants in recent years: 2001 - 141, 2002 - 73, 2003 - 15, 2004 - 4. (Newer date wasn't readily available via a Google search.) The administration has made a few noises recently about enforcing laws against employers who hire undocumented workers, but you are more likely to win the lottery than to get fined for doing so.

a third illegal immigrant option

Charles E Hill

Sat Oct 11 06:27:33 -0700 2008
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What you're talking about is essentially prohibition. While sanctions like this are certainly part of the equation, they will not work by themselves. They're the stick. You also need a carrot -- better job opportunities at home.

The costs of enforcement in terms of dollars spent by the government in manpower, investigation, prosecution, appeals, deportation, etc. is prohibitive. It won't last.

As the U.S. becomes more and more prosperous, less and less Americans want to do manual labor. Other opportunities are available for them.

Like it or not, the law of Supply and Demand is inviolate. If you think you can change it with prohibition and sanctions, you aren't being honest with yourself.

We prohibit, and have fairly heavy sanctions on all parties for underage drinking, drug use, DUI/DWI and the like. Have they stopped any of the above? Not by a long shot.

The most extreme case is drug use in prisons. We're talking about a place where people are monitored 24x7, kept in cells, movement and visitors restricted, searched on a whim and punishment of infractions are severe. Yet there are still drug deals and usage.

Prohibition, by itself, doesn't work.

Three coins in the fountain.

Peter Tolgyesi

Thu Oct 09 09:14:21 -0700 2008
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Hi, I am indeed working in Budapest...

As somewhat off topic, I approached some banks in the summer to get offers for mortgage-based loan. Later I was surprised at the scale of the crisis I caused. Sorry about that. I could have known, from last time when I bought stocks... :-)

Peter