Possibly not.
You read it here first: Mad Mark Carney, the incoming Bank of England Governor, is already fuelling speculation that he will try to relaunch quantitative easing (QE) and slash the Pound’s value when he arrives in the UK. Yesterday, he once more applauded Japan’s bonkers drive for growth. Carney has already said, bewilderingly, that Japan’s “bold policy experiment” to boost its QE programme and drive down the Yen is “not devaluation”. It looks like my tipster of last February was on the money, so if your money is in Sterling, it might be a good idea to get it out.
Quite why Mr Carney (or Tokyo) think that spending more money we haven’t got, making our imports more expensive, and driving up the national debt still further are the answers to a global systemic crisis may well elude most of you. All it does is kind of confirm the desert of policy creativity I was posting about last night.
Even Carney, however, doesn’t appear quite as deranged as Yahoo’s fragrant Melissa Mayer, who has just forked out a billion bucks for Tumblr, a company whose 2012 revenue was just $13m, and has never made a profit. It has earned the owner David Karp $250m.
Just to put that lunacy into perspective, the gearing ratio on price to earnings is infinity, the gearing ratio on Karp’s take alone is four, the price to turnover stands at 80-1, and Mr K has trousered almost twenty times more than Tumblr’s entire cash volume. Yahoo loons are rushing about saying how the business they can put through it will “dramatically increase turnover in 2014 alone” which is fine, so why didn’t they just set up a better competitor and save the shareholder’s billion?
The deal gave me a tremendous sense of ABNAmro deja-vu, and we all know what happened after that.
So, Carney and Mayer have completely lost their minds, and will soon have mislaid their shirts as well, right? Well, not so fast. I am absolutely sure neither of their ventures can pay for themselves, let alone deliver a viable return. But with every day, it’s becoming clear to me that these two are really only doing what I’m doing – just on an unimaginably huge scale. Let me explain my reasoning.
It’s now very clear indeed that the G7’s central bankers intend to flood the world with fiat money. Hence Carney’s approval of blatant Japanese currency wars, and last week’s G7 in turn giving their approval to it. Ben Bernanke is banging in $85bn a month – over a trillion per annum – despite the glaringly obvious fact that it’s not working. Everyone in authority wants assets at the other end of this disaster: hence the continuing upside-down Gulliver’s Travels formerly known as the gold market. Let’s look a little more closely at the shiny stuff.
It was in late 2008 that I first pointed out to the chairman of a UK wealth management consultancy how the Asians kept buying gold overnight, and then as London and in turn New York opened, the price would go down again. There are lots of reasons why this might happen (seasonality, Chinese obsession with the stuff, religious festivals and so on) but not day in day out for months on end. I’ve become m0re convinced over time that – despite gold’s useful flurry upwards during 2011 – this has settled into the East buying it to stop the West devaluing it, the West in turn devaluing it for reasons to do with the stock market confidence and debt.
As of a few months ago, the G7 has been both manipulating the gold price and carrying on with reasonably daft QE. Now – as in so many other areas – they have abandoned all pretence, and opted for veritably pumping out money and slashing the gold price. Once they have enough gold, they’ll leave the price alone. We the People, meanwhile, won’t be buying much of it on account of hyperinflation having made our Pounds, Dollars and euros worthless.
I’m now waiting to see how and when Draghi will turn the cash-tap full-on. So are the Germans, in case you hadn’t noticed: like China, they’re in a rather different position to everyone else, in that they’re flogging every car they can make regardless of the price. For much of last year, SuperMario insisted that printing money wasn’t the answer, but after Cyprus and the ECB’s further interest rate cut, he’s been rather more quiet on the subject….and the Bundesbank’s Lens Weidmann has been more eagle-eyed than ever in watching his every subterfuge.
We are, of course, still waiting for any data about European capital flight to appear, but all the bits and bobs of info out there suggest that EU investment is disappearing fast. Draghi will have to print to replace it – as he also must in order to refinance the banks of Greece, Spain and Ireland. Once the French fiscal mess begins to make a larger blip on the radar, his main problem is going to be the water supply required to keep the printers cool. And something to stop the top of Herr Weidmann’s head from blowing off.
So to sum up, currency devaluation will hyperinflate every penny you have in cash away….at some point. After that, they’ll come after whatever assets you have. Hopefully, before that happens they’ll have been dissuaded from this path by the citizenry. But don’t bank on it. Speaking for myself, I’m going to go out and buy things that are too heavy for thieves to carry.
The Slog 