Wise words from an American artist

James Abbott McNeill Whistler (From “Alive to the fingertips” in TLS April 4, 2014)

·         At West Point military academy – to which he was sent, following in his father’s footsteps – he veered from one scrape to the next until finally failing a vital set of exams through “deficiency in chemistry”.  In later life he like to claim, “if Silicon had been a gas I should have been a major-general.”

·         Among his dicta was the assertion that “two and two continue to make four, in spite of the whine of the amateur for three, or the cry of the critic for five.”

·         Whistler was very self-promotional:  Degas, who admired Whistler’s work, said, “Really Whistler you behave as though you have no talent.”

100 Years of Inflation-Adjusted Gold Prices: What's next?

The Crash of 1929, as seen by Paul Cabot in 1930

From the State Street Research and Management 1930 Annual Report. (as quoted in Michael Yogg's Passion for Reality):

"All common stock investors lost, irrespective of the care with which their investments were made or supervised. No amount of research work could have prevented such losses unless it was decided that no equities should be used.

"One has only to review the utterances of leading economists, research organizations, and businessmen during the past eighteen months to discover how small is the amount of real knowledge and understanding concerning problems of major economic importance. In spite of all the research work that has been done on such prolems, it appears that common sense will remain the intelligent investor's most reliable and useful asset." (p. 55)

And yet, common sense is all too uncommon.

Mary Barra's Haiku

Andrew Capon has proposed a haiku for Mary Barra:

Ignition broken
On a side road to nowhere
The future darkens

Can Mary Barra match this?

The FT printed a poem by Li Shufu, chairman of Geely and Volvo, today:

Winter goes, spring arrives.  We quietly bury ourselves in work.
Don't argue, don't make noise.  Support Chinese brands.
Winds from Europe and America, waves from Japan and Korea.
       Why revere foreign things?
Chinese cars fly even higher. Fight bravely for a decade to make great changes.

(translated by Tom Mitchell)

The beatings will continue until morale improves: businesses lack animal spirits.

In the General Theory, Keynes pointed out that the psychology of businessmen is actually quite fragile. That is why that once they were scared (e.g. by the crash and depression) it was hard to get them investing again. "Animal spirits," according to Keynes, had to be nurtured and encouraged or they would not appear. He actually said that making new investments is usually irrational and that a mood of unrealistic optimism is needed for this to occur.

Those in government seldom understand this. They think business people are raring to go at all times and that restraining, not encouraging, them is the best policy. The truth is that businesses all over the world are now sitting on their hands and reacting to demand rather than anticipating it. They are dispirited.  Increasingly anti-business policies around the world are making the situation worse. Negative psychology is the big risk of recession/depression today.

Will Zimbabwe's central bank emerge as the world's most effective?

Perhaps. It centrainly has less scope to harm its citizens than does the Fed, for example.  

From Reuters:

Zimbabwe appoints banker Mangudya new central bank governor


Sun Mar 23, 2014 7:18pm IST
* Mangudya is CEO at Zimbabwe's largest bank by assets

* RBZ influence diminished after adopting foreign currencies

* Central bank gets $100 million for inter-bank market

HARARE, March 23 (Reuters) - President Robert Mugabe has appointed banker John Mangudya to head the Reserve Bank of Zimbabwe (RBZ) at a time when the central bank's power and influence have greatly diminished, finance minister Patrick Chinamasa said on Sunday.

The southern African country ditched its local currency in 2009 in favour of the U.S. dollar, leaving the RBZ unable to set interest rates or bail out troubled banks.

An economist by training, Mangudya is chief executive at CBZ Holdings, the country's largest banking group by assets. He takes over from Gideon Gono, who put the RBZ printing press into overdrive to keep pace with hyper-inflation.

"I can confirm that the president has appointed John Mangudya as the new governor of the Reserve Bank of Zimbabwe," Chinamasa told Reuters.

Mangudya worked for the central bank as an economist for 10 years until 1996 before joining the African Export-Import Bank (Afrexim) as its manager for southern Africa.

His five-year term will start on May 1.

Zimbabwe was plagued by acute shortages of foreign currency and basic goods at the height of its decade-long economic crisis and inflation spiked to 500 billion percent in 2008.

By that time, funding for most government departments was coming via the central bank, and official government records show that it added $500 million in debt during Gono's tenure.

Mangudya will take over at a time when the central bank is seeking to establish an inter-bank market for the first time in five years.

The Afrexim bank gave the RBZ a $100 million loan on Saturday to set up the market, which allows the central bank to set an overnight accommodation interest rate that would act as the benchmark for market rates.



The central bank in January published an interest rate range guide for the money market to try and rein in large disparities in deposit and lending rates that it said were squeezing liquidity. (Reporting by MacDonald Dzirutwe; Editing by Sonya Hepinstall)