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While some harp on about the growing dangers of yet another housing bubble in the western world, there are other more important things perhaps that are going on in other countries in the world. But, they are of little interest since we are not directly concerned by them. How is it that we only care about what’s actually happening in the back yard while someone round the block might be doing something or on the receiving end of something pretty bad and yet we don’t give a damn about what happens to them? While we are concerned with our bubbles, there are people in India that are suffering from the rise in prices that is drastically changing the way they live.

Over the past year inflation has been driven up by food prices. In September alone food prices were at their highest level for the past seven months and it seems that India is now going through the worst financial crisis that it has ever experienced since 1991.

• The Indian wholesale price index (WPI) rose by 6.46% in September.
• This was largely due to the fact that food prices have increased beyond control.
• Since the start of this year onions have increased by 322%, for example.
• Food prices have increased by an annual rate of 18.4% so far according to data released by the Indian government on Monday this week.

Food prices have been increasing due to supply shortages in India which were brought about to climatic conditions and rain. Today the price of a kilogram of onions amounts to 75 rupees today (or $1.22). One third of the Indian population still earns less than $1.25 per day in the country and that means that buying basic foodstuffs is pretty much out of their price range today. Food prices have hit the political agenda as a result and have been made a key issue in the run-up to the general elections that are going to take place within the next 7-month period.

Traders and shop owners are reaping the rewards of a rapid rise in prices today. But, the shopkeepers will not be able to keep hiking prices to recoup on the price increases as the people will run out of money. The real people are at the short end of the stick and suffering from the consequences of the hike that is almost daily now.

India is not the only one suffering from high inflation today in the world. Other emerging countries have also recently seen highs in their own rates. China had a consumer-inflation rate that hit3.1% in September. That was also the highest it had been for the past seven months. Food prices in China have increased by6.1% so far this year. However, in comparison with Indian data, that seems as if it is insignificant.

• India is having immense difficulty increasing economic growth in the country and it has a 5%-growth rate that hasn’t been seen for the past decade.
• The rupee has already hit lows that have rarely been seen before (it has lost 10% since the start of the year against the dollar) and inflation looks as if it will be fuelled by the interest rates that have been increased by theReserve Bank of India.
• There has been a general outflow of capital from India since the start of this year due to the slow-down in the economy.
• Inflation stood at 2.1% in September for India and it’s that which is the most worrying element perhaps today (at least for the population).

While India has problems with its economy and price stability, it’s the people that will be suffering the most. When food prices increase and they get out of control, it’s the third of the population that is living with just over a dollar a day that will have trouble making ends meet more than they already did in the past.

Originally posted: Indian Inflation: Out of Control?

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via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/Im1dVrndkFE/story01.htm Pivotfarm

Following the slaying of two members of Greece’s far-rght Golden-Dawn party (and wounding of a third) on Friday evening, the Greek government’s crackdown on the country’s ‘extremist’ party has revived a vexing question that seemed to have disappeared with the Cold War’s end: Is there a place within liberal democracies for apparently anti-democratic parties?

 

Via AP,

Police investigating the slaying of two members of the far-right Golden Dawn party and the wounding of a third say the gun used in the Friday evening attack had not been used in previous terrorist attacks.

 

The assailant fired 12 rounds from a Zastava Tokarev type semi-auto pistol, police say.

 

A police source, speaking on condition of anonymity because officers were not authorized to comment on the ongoing investigation, said Saturday that a video from a nearby security camera confirmed accounts from Golden Dawn lawmakers that the assailant started firing from 15 meters (yards) away and finished off his victims from point-blank range. The gunman fired at a fourth Golden Dawn member, who managed to enter a building unharmed.

One can’t help but get the sense their is a growing ‘instigation’ of more killing in Greece, which got us thinking of the following discussion…

 

Authored by Jan-Werner Mueller, originally posted at Project Syndicate,

Should Extremist Parties Be Banned?

To be sure, liberal democracies have felt threatened since communism collapsed in 1989 – but mostly by foreign terrorists, who tend not to form political parties and sit in these countries’ parliaments. So, should extremist parties that seek to compete within the democratic framework be outlawed, or would such a restriction on freedom of speech and association itself undermine this framework?

Above all, it is crucial that such decisions be entrusted to non-partisan institutions such as constitutional courts, not other political parties, whose leaders will always be tempted to ban their competitors. Unfortunately, the moves against Golden Dawn are mostly identified with the government’s interests, rather than being perceived as the result of careful, independent judgment.

On the face of it, democratic self-defense seems a legitimate goal. As US Supreme Court Justice Robert Jackson (who was also the chief US prosecutor at Nuremburg) put it, the constitution is not “a suicide pact” – a sentiment echoed by the Israeli jurist Aharon Barak, who emphasized that “civil rights are not an altar for national destruction.”

But too much democratic self-defense can ultimately leave no democracy to defend. If the people really want to be done with democracy, who is to stop them? As another US Supreme Court justice, Oliver Wendell Holmes, put it, “if my fellow citizens want to go to Hell, I will help them. It’s my job.”

So it seems that democracies are damned if they ban and damned if they do not ban. Or, in the more elevated language of the twentieth century’s most influential liberal philosopher, John Rawls, this appears to be a “practical dilemma which philosophy alone cannot resolve.”

History offers no clear lessons, though many people like to think otherwise. In retrospect, it appears obvious that the Weimar Republic might have been saved had the Nazi Party been banned in time. Joseph Goebbels, Hitler’s propaganda minister, famously gloated after the Nazis’ legal Machtergreifung (seizure of power): “It will always remain one of the best jokes of democracy that it provided its mortal enemies with the means through which it was annihilated.”

But a ban might not have halted the German people’s general disenchantment with liberal democracy, and an authoritarian regime still might have followed. Indeed, whereas West Germany banned a neo-Nazi party and the Communist Party in the 1950’s, some countries –particularly in Southern and Eastern Europe, where dictatorship came to be associated with the suppression of pluralism – have drawn precisely the opposite lesson about preventing authoritarianism. That is one reason why Greece, for example, has no legal provisions for banning parties.

The fact that Greece nonetheless is effectively trying to destroy Golden Dawn – the parliament just voted to freeze the party’s state funding – suggests that, in the end, most democracies will want to draw the line somewhere. But just where, exactly, should it be drawn?

For starters, it is important to recognize that the line needs to be clearly visible before extremist parties even arise. If the rule of law is to be upheld, democratic self-defense must not appear ad hoc or arbitrary. Thus the criteria for bans should be spelled out in advance.

One criterion that seems universally accepted is a party’s use, encouragement, or at least condoning of violence – as was evidently the case with Golden Dawn’s role in attacks on immigrants in Athens. There is less consensus about parties that incite hatred and are committed to destroying core democratic principles – especially because many extremist parties in Europe go out of their way to emphasize that they are not against democracy; on the contrary, they are fighting for “the people.”

But parties that seek to exclude or subordinate a part of “the people” – for example, legal immigrants and their descendants – are violating core democratic principles. Even if Golden Dawn – a neo-Nazi party in appearance and content – had not engaged in violence, its extreme anti-immigrant stance and its incitement of hatred at a moment of great social and economic turmoil would have made it a plausible candidate for a ban.

Critics warn of a slippery slope. Any disagreement with a government’s immigration policy, for example, might eventually be deemed “racist,” resulting in curtailment of freedom of speech. Something like the classic American standard – the speech in question must pose a “clear and present danger” of violence – is therefore essential. Marginal parties that are not connected to political violence and do not incite hatred should probably be left in peace – distasteful as their rhetoric may be.

But parties that are closer to assuming power are a different matter, even if banning them might automatically appear undemocratic (after all, they will already have deputies in parliaments). In one famous case, the European Court of Human Rights agreed with the banning of Turkey’s Welfare Party while it was the senior member of a governing coalition.

It is a myth that bans turn leaders of extremist parties into martyrs. Very few people can remember who led the postwar German neo-Nazis and Communists. Nor is it always the case that mainstream parties can cut off support for extremists by selectively coopting their complaints and demands. Sometimes this approach works, and sometimes it does not; but it always amounts to playing with fire.

Banning parties does not have to mean silencing citizens who are tempted to vote for extremists. Their concerns should be heard and debated; and sometimes banning is best combined with renewed efforts at civic education, emphasizing, for example, that immigrants did not cause Greece’s woes. True, such measures mi
ght come across as patronizing – but such forms of public engagement are the only way to avoid making anti-extremism look like extremism itself.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/IBAM8Vhz6G8/story01.htm Tyler Durden

With the recent adoption of explicit forward guidance as a stimulative policy tool by the major European central banks, virtually every major central bank is now using the tool in some form. The potential benefits and dangers of such policies as central bank communications have evolved are unclear as "the form of guidance" matters. As Robin Brooks notes, and is so well illusrated below in the example of the Riksbank's and Norges Bank's 'failures', "[In terms of implications for rates] the jury is still out on how well forward guidance works. What is clear, though, is that markets prefer 'deeds' to 'words'."

Forward Guidance has become extremely important…

As Central bank communications (whether at extremes of policy or not) have evolved dramatically over the past 20 years…

(click image for massive legible version)

Especially intriguing is Janet Yellen's note:

As recently as two decades ago, most central banks actively avoided communicating about monetary policy. According to Janet Yellen, the current Vice Chair of the Federal Reserve who was recently nominated to succeed Chairman Bernanke: “Montagu Norman, governor of the Bank of England in the early 20th century, reputedly lived by the motto “never explain, never excuse”.

 

The conventional wisdom among central bankers was that transparency was of little benefit for monetary policy and, in some cases, could cause problems that would make policy less effective.

Source: Janet Yellen, Speech: “Communication in Monetary Policy”,
April 4, 2013.

We have little historical precedent for judging the efficacy if explicit forward guidance. However, as Goldman Sachs notes, Norway’s Norges Bank introduced a form of forward guidance in 2005, while Sweden’s Riksbank followed soon after in 2007; and so we look to how well their "guidance" has fit reality (or shaped markets at the time)…

Lessons From Forward Guidance Pioneers

Forward guidance is not a policy reserved for only extreme situations. Indeed, well ahead of the global financial crisis and before the “zero lower bound” of policy rates motivated some central banks to explore the role of communication tools to achieve further easing,

Explicit but conservative

The Scandinavian central banks’ form of forward guidance is among the most explicit in nature: both Norges Bank and the Riksbank publish a “policy rate path” several times a year detailing the level of the policy rate expected by the (majority) of the Executive Board of the central bank over their forecast horizon (around three years). In addition, the Scandinavian central banks publish a range of economic forecasts, such as growth, inflation, the output gap and the unemployment rate.

Although the form of forward guidance may be one of the most explicit currently in place, the nature is more conservative: the “policy rate path” is a conditional estimate of future policy rates – based on the economy and market conditions – not a commitment.

With no intention of attempting to “tie their hands” in the way that Fed-style forward guidance aims to do by promising to keep rates “lower for longer” than would normally be the case, Norges Bank and the Riksbank maintain full discretion at all times. Forward guidance in Scandinavia is therefore a pure communication tool rather than an innovation in monetary policy strategy.

Relevant for the ECB?

Scandinavian central banks’ lengthy experience with forward guidance may be more relevant for the ECB’s nascent forward guidance than what one might immediately think. While the ECB’s style of forward guidance is rather vague, stating only that policy rates will remain at current or lower levels for an “extended period of time”, compared to the Scandinavian central banks’ detailed policy rate paths, both the ECB and Norges Bank/the Riksbank maintain full discretion of their policy rates at all times.

This is a crucial similarity. And with a shared fundamental underpinning of forward guidance, the Scandinavian experience may shed light on whether a more explicit form of forward guidance by the ECB, while maintaining full discretion, might help the ECB more effectively influence Euro area money market rates.

Gains from transparency despite discretion

A look at how past shifts in the Riksbank’s published policy rate path have impacted market pricing suggests that changes to the policy rate path can be just as important to shaping forward market pricing as changes to actual policy rates. Because the form of communication at the Riksbank is so explicit, this experience provides a likely upper bound to what can be achieved (e.g., by the ECB) with a fully transparent form of forward guidance that still allows for full discretion.

 

While we do not expect the ECB to adopt much more explicit forward guidance, let alone to actually publish a policy rate path any time soon, the Riksbank experience suggests that the ECB’s impact on market rates may be enhanced by increasing the information available to the market regarding the ECB’s view of future likely policy developments. This could take the form of increasing the length of the ECB’s forecast horizon (currently only between 1 to 2 years) or providing a greater account of the Governing Council’s deliberations.

 

[ZH: While the result is still out, one thing seems very clear from the two charts above… Central bank "forward guidance" appears always and forever overly-confident of their ability (or willingness) to tighten…]

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/QC8qjWwfvyU/story01.htm Tyler Durden

The ironically-named Quality Software Services Inc (QSSI) responsible for the SNAFU that is the Obamacare website’s data hub has, incredibly, been named the new general contractor in charge off repairing the glitch-plagued HealthCare.gov. As The NY Post reports, as if the $150 million so far paid to this UnitedHealth subsidiary for its farcically bad implementation was not enough, the executive vuce president of the firm (Anthony Welters) and his wife were among Obama’s largest personal campaign contributors during the 2008 election cycle (and the firm has spent millions “lobbying” for Obamacare). The cronyism runs deep as the Post also notes, visitor logs show at least a dozen visits between the two by the end of 2012, the most recent information available.

 

The man at the center of the “cronyism”… Anthony Welters

 

Via NY Post,

A tech firm linked to a campaign-donor crony of President Obama not only got the job to help build the federal health-insurance Web site — but also is getting paid to fix it.

 

Anthony Welters, a top campaign bundler for Obama and frequent White House guest, is the executive vice president of UnitedHealth Group, which owns the software company now at the center of the ObamaCare Web-site fiasco.

 

UnitedHealth Group subsidiary Quality Software Services Inc. (QSSI), which built the data hub for the ObamaCare system, has been named the new general contractor in charge of repairing the glitch-plagued HealthCare.gov.

 

Welters and his wife, Beatrice, have shoveled piles of cash into Obama’s campaign coffers and ­apparently reaped the rewards.

 

…

 

The couple have been frequent guests at the White House.

 

Visitors logs show at least a dozen visits between the two by the end of 2012, the most recent information available.

 

The entire Welters family has gotten into the donation game.

 

The Welters, along with their sons, Andrew and Bryant, have contributed more than $258,000 to mostly Democratic candidates and committees since 2007.

 

What’s more, UnitedHealth Group is one of the largest health-insurance companies in the country and spent millions lobbying for ObamaCare.

 

…

 

The insurance giant’s purchase of QSSI in 2012 raised eyebrows on Capitol Hill, but the tech firm nevertheless kept the job of building the data hub for the ObamaCare Web site where consumers buy the new mandatory health- ­insurance plans.

 

QSSI has been paid an estimated $150 million so far, but officials couldn’t say how much more the company might collect on the ­repair contract.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/h3KZCM_am7w/story01.htm Tyler Durden

Paper gold in the developed world may trade based on the whims of marginal momentum chasers, and of course, the daytrading mood of the BIS gold and FX trading desk, but when it comes to physical gold and China’s appetite for it, one word explains it best: unstoppable.

After rising to a gross 131 tons imported from Hong Kong alone in August, which was the second highest ever monthly import tally, September saw a modest decline to “only” 116 tons: “only” because it is still 67% more than the amount imported a year earlier. 

The total gross imports since September 2011 is now a whopping 2232 tons. Why September? Because that is when we posted: “Wikileaks Discloses The Reason(s) Behind China’s Shadow Gold Buying Spree.” The chart below confirms precisely said reason.

The gross imports year to date are now over 1,113 tons, 91.3% more than the amount of gold imported through September of 2012.

Netting out exports to Hong Kong, September was virtually unchanged from August, at 109 metric tons vs 110 a month earlier. In other words, September was tied for the third highest net import month in Chinese history.

And yes, we realize that to western thinking buying more when the price is dropping in explicable: ironically even the vast majority of gold bugs are merely interested in a momentum conversion in and out of fiat, thus treating gold as an investable, fiat-denominated asset and not as a currency. China, on the other hand, continues to show that when one’s only intention is to purchase as much gold as possible to preserve wealth and purchasing power and/or unleash the gold standard back on the world (either alone or jointly with Russia and/or Germany), dropping or plunging gold prices are merely the icing on the cake.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/VCKePCkQ6D0/story01.htm Tyler Durden