What I’ve Been Reading

Part of my morn­ing com­mute usu­ally involves catch­ing up on Twit­ter and most recently the finan­cial infor­ma­tion com­ing out of Zero Hedge along with a cou­ple of other sources from Maudlin Eco­nom­ics. Many of these arti­cles prob­a­bly don’t war­rant a full blog post but I thought I might start aggre­gat­ing them on Sun­day morn­ings with any thoughts I had. This has the poten­tial to hap­pen only this Sun­day but it’s good to have goals.


Mara has appar­ently been read­ing every arti­cle on the Atlantic lately based on my inbox but this one caught my eye. A cer­tain fac­tion of con­ser­v­a­tives, namely goody goody two shoes in Nebraska and Okla­homa are fight­ing Colorado’s mar­i­juana legal­iza­tion say­ing that the states have no right to pre­empt fed­eral drug laws, the irony being that it’s almost always the con­ser­v­a­tives who yell the loud­est about fed­eral encroach­ment on their rights when it comes down to health care, wel­fare or any­thing else that might help peo­ple who actu­ally need it. In this instance, the issue is being fought brought by law and order type con­ser­v­a­tives who don’t like that cit­i­zens of those two fine states are going to Col­orado to buy their pot. The issue here that the arti­cle high­lights is that the states are under no oblig­a­tion to enforce fed­eral laws passed by Con­gress that are too sweep­ing for the feds to enforce on their own.

Fed­eral drug law has always relied on the states for enforce­ment because the feds don’t have the man­power to enforce it. States go after lit­tle deal­ers in the sys­tem (which is why our incar­cer­a­tion rate has quin­tu­pled since Reagan’s mis­guided and dis­as­trous drug war went into effect. States throw peo­ple in jail for non-violent pos­ses­sion crimes while the Feds can go after the traf­fick­ers. How­ever, the states are under no oblig­a­tion to actu­ally do this and in the case of states like Col­orado, can actu­ally pass laws that are incon­sis­tent with that. Think­ing of it another way, if Con­gress passes laws that are too broad in scope, the states are in no way oblig­ated to fill in the gaps. This is actu­ally a good thing for democ­racy as it keeps an impor­tant check on fed­eral power. It will be inter­est­ing to see how the suit of Nebraska and Okla­homa against Col­orado pro­ceeds. If the con­ser­v­a­tive side wins, we will have set a prece­dent for remov­ing one of the last checks on Fed­eral power and take a big step far­ther down the path of cen­tral­ized government.


This week, the Swiss National Bank (SNB) decided to end its 3 year old cap on the franc to the euro and let the mar­ket move freely in rela­tion to the franc’s value. In response, the franc soared in value related to most major cur­ren­cies, the euro being the biggest move where it appre­ci­ated 17% or so. The cap was orig­i­nally put in place back dur­ing the last finan­cial cri­sis when the SNB decided to limit the volatil­ity of its cur­rency. And so for years, the franc has been excep­tion­ally sta­ble against the euro. The mech­a­nism for how this was done is beyond the scope of this post but the short ver­sion is that the Swiss would print francs and buy Euros to sup­port the cap. By doing this they acquire lots of Euros in their for­eign asset fund which seemed like a good idea at the time because the Euro was one of the strongest cur­ren­cies around.

Fast for­ward to 2015 and sud­denly the Euro is a mess. We’re talk­ing more and more about a Greek exit from the euro which is a total unknown. Defla­tion is sweep­ing Europe which is a BAD THING in the grand scheme of things for an increas­ingly indebted world. On Thurs­day, the Euro­pean Cen­tral Bank (ECB) will almost assuredly begin its own qual­i­ta­tive eas­ing where it floods the mar­ket with Euros to fight the defla­tion. All signs are point­ing to a weak­en­ing Euro and there is no end in sight. Imag­ine you are the SNB hold­ing a buck­et­ful of Euros and you might see why they want to bail out on drag­ging their own cur­rency down with the Euro. Of course, this move has lots of impli­ca­tions. On a imme­di­ate level, allow­ing the franc to appre­ci­ate is bad for Swiss exports. In the ongo­ing cur­rency wars, coun­tries try to improve their economies by weak­en­ing their cur­rency which typ­i­cally increases exports. So why would the Swiss do some­thing to actively hurt their own exporters? For one, they may have decided they don’t export that much stuff to the EU any­more and in fact they don’t. With the excep­tion of Ger­many, the only coun­try in the EU doing well (also a topic for an entirely dif­fer­ent post), Euro dom­i­nated coun­tries don’t account for a big chunk of Swiss exports. Instead, economies like Japan, the US and China are the ones buy­ing expen­sive Swiss watches and fancy cheese.

Because Switzer­land never joined the EU, they now have the flex­i­bil­ity to pivot their econ­omy and make it less depen­dent on the dis­as­ter that is unfold­ing across Europe. That is what they are prob­a­bly doing. One of the inter­est­ing side effects of this move is how it can roil mar­kets. That’s because in our over lever­aged, low inter­est rate finan­cial sys­tem, investors are always reach­ing for yield. One strat­egy is to trade in a cur­rency that has low volatil­ity like the franc. Firms were happy to loan francs to day traders at highly lever­aged rates (loan­ing 50 francs with only 1 franc as col­lat­eral is lever­age). They could do this because over the last two years, the franc had an aver­age volatil­ity of .1 per­cent. It seemed totally safe. Until it wasn’t when the franc got really volatile this week. Ever­est Cap­i­tal, a hedge fund in Miami, shut down a $830 mil­lion fund that hem­or­rhaged cash. Other hedge funds are in the same boat.

The take­away from all this is that times, they are a changin’ in 2015. The dol­lar looks to get stronger as the EU begins fight­ing defla­tion. Even in the US, prices are falling and retail sales aren’t too great. In look­ing at retail sales, if you remove auto sales, this Christ­mas sea­son was the third worst this cen­tury mean­ing only the Christ­mases of 2001 and 2008 were worse. Mmm, that doesn’t sound like a recov­ery to me. That sounds more like the US con­sumer is con­tin­u­ing to delever­age in an attempt to get their finan­cial house in order. And when the US con­sumer doesn’t buy cheap Chi­nese crap, China’s econ­omy gets slug­gish. And when that hap­pens, well, who knows what the end result is.

If you have a per­verse affin­ity to mon­e­tary pol­icy and its effects on our global finan­cial sys­tem, it should be a fun year.


Appar­ently the peo­ple who lived in our house for the last 50 years didn’t ever want a back yard and had no fence. With a road behind us that cuts through from one major street to the other, it felt like we lived next to a free­way at times. This week, we had a fence put in which has also allowed the garage to be cleaned out since it was hold­ing all the lawn fur­ni­ture. It’s start­ing to feel more and more like we don’t live in a home­less shelter.


On Maintenance And Repair

When I was a kid, not so many years ago geo­log­i­cally speak­ing, I found a .22 rifle in the barn at my grand­par­ents farm. It didn’t really work and it was hard for me to ascer­tain exactly why given my rudi­men­tary gun­smith skills as a 13 year old. But I didn’t have a .22 rifle […]

On Defining Goals

I recently read an arti­cle in Gar­den & Gun (an excel­lent mag­a­zine if you love the cul­ture of the South) on three women who returned to their fam­ily farm to make a liv­ing off what they could grow and cre­ate from their own labors. One of the women was a musi­cian who had strug­gled through […]

On Understanding Currency Wars

Imag­ine if you will the fol­low­ing sce­nario: Nigel lives in the Land of Peo­ple with Below Aver­age Den­tal Hygiene (LOPWBADH). Bob lives in a neigh­bor­ing coun­try, the Land of Guns and Large Bor­der Fences (LOGALBF). Both Nigel and Bob own dairies. Nigel makes excep­tion­ally good clot­ted cream in his dairy while Bob makes organic grass […]

Easy Summer Breakfast

It’s the height of tomato sea­son around here and we’re over­whelmed with toma­toes. I may or may not have over­planted this year but I just picked a pound of yel­low pear toma­toes and there are more on the vines. With that kind of pro­duc­tion, you have to find inter­est­ing ways to eat more toma­toes. I […]

The Blood Moon and Inflation

Last night at around 3 AM I watched the blood moon eclipse from the back­yard. It was a fas­ci­nat­ing expe­ri­ence that felt pri­mal as if I were liv­ing 400 years ear­lier when an occur­rence of a total eclipse would have been some­thing peo­ple revered or even feared. Watch­ing the moon go dark would have been […]

Consistency Is Hard

One thing I’ve learned from try­ing to write every day for 40 odd days is that it’s very hard to do. Even if you aren’t par­tic­u­larly wor­ried about qual­ity (and it’s clear I’m not), doing any­thing other than eat­ing and breath­ing for 40 days in a row is dif­fi­cult. Other things get in the way […]

Falling Out of Rhythm

The days seem to be get­ting shorter and I don’t find time to write. Today there was plenty of time but I chose to spend it watch­ing the Mas­ters. I’m ok with that trade­off. I wrote my grand­mother a let­ter tonight so all in all, I fig­ure it’s a net positive.

On Garage Sales

I find the inter­sec­tion of human behav­ior and garage sales fas­ci­nat­ing. I men­tion this only because I just had one this week­end where I made a whole $46 dol­lars before sub­tract­ing expenses. I watched 5 peo­ple open the lid on a wash­ing machine as if what they saw inside told them the value of said […]


Today it rained all day which for this time of year shouldn’t be that out of the ordi­nary but we’ve been so dry for so long that it’s a wel­come change. Won’t make a dent in the lake being 13 feet low but at least the sprin­klers don’t have to run tomor­row. We saw the […]