Before we get to JQ’s main article today, I just wanted to address an interesting comment we received this week from a reader referring to our views as leftist! So I looked up a concise definition and came up with:
“One who holds a left-wing viewpoint; someone who seeks radical social and economic change in the direction of greater equality. ”

I can see how the valued reader may have come to this conclusion, after all we are all too often having digs at ‘the establishment’. But, just to clarify for the benefit of all, we are not at all anti-establishment. Neither are we particularly socialist.

Au contraire mes amis we believe that ‘free market’ capitalism, though not perfect, is the best system we currently have. We believe that human enterprise should be rewarded in direct proportion to the inspiration and perspiration applied. Most of the time it works pretty well, sometimes perhaps too well (ask the Chinese!) Hence on occasion some powers feel compelled to manipulate it (ask the Americans), for example with trade barriers, subsidies, bailouts, credit pumping and so on. Fortunately though, in its truest form, the free market is a force of nature. It is the combined sum of all human economic endeavour.

In the short term markets can be somewhat manipulated by those with vested interests, be it market makers including the banks, cartels such as OPEC, government policy makers or hedge funds. Their activities influence the herd-mentality bubble-brigade (that includes many of us) who as a group are the end ‘voters’ who bid up assets such as stocks and houses.

As they say in stock market parlance, “In the short term the market is a voting machine, but in the long term it is a weighing machine“. Speculation might work short term, but only sustained hard work or skill pays off long term. In the end the market is far too complex to remain under any one group or nation’s control. It always reverts to its optimum state, and the force of the snap-back tends to be directly proportional to the degree of manipulation (or dumbness) which preceded it.

So, fellow comrades…err….citizens….we are not fuzzy thinking leftists after all. We don’t want to change the world – heck we wouldn’t even know what to change it to. We just want to see through the haze and perhaps get a few faint glimpses of the reality that is so often hidden from us. We want to expose the world of economics ‘as it is’ with a view to steering a course through the murkiness without getting our fingers burned; without ending up penniless towards the end of our miserable existences. Furthermore, being the nice people that we are, we want to share it all with you, our readers. Ultranomics commentary is meant to inform and entertain and to make you think. There are no political agendas or aims to be found on these pages. Honest, guv……

The award for the most depressing story of the week goes to……..

First the Somali pirates, now the Mumbai terrorists. At least the former were in it just for the money. The latter have proven more blood-thirsty. In the last Ultraletter we spoke about the 23rd century utopia of Star Trek. How far we truly are from that ideal.

With just under 200 dead we have no clear idea who they are and why they’ve done it. One thing we do know, they were highly organised and well equipped. They had insiders at the hotels who smuggled in the explosives. They had boats to drop them off, off the coast of Mumbai. They specifically targeted India’s financial hub and went after Westerners in particular. They planned it so well yet left an easy peasy trail of breadcrumbs back to…..you’ve guessed it…Pakistan. Doh!

I am no conspiracy theorist by nature – I even believe that the Americans really did go to the moon, much to the disdain of JQ ! – but you have to ask yourself who would have most to gain from this crime at a time when India and Pakistan are building bridges and getting pally once more? What’s worse is that the average man in the rickshaw falls for it. As surely as A is followed by B the terrorists cause some carnage and hey presto, the steadying relations of the two neighbours are blown to smithereens together with the perpetrators themselves. At who’s behest though, that is the question.

Perhaps Kashmiri activists making a point over territory? Perhaps Pakistan-based Islamic militants making trouble for the Pak govt over their support for America? Perhaps insiders who can’t abide any Friendship with the old enemy? Perhaps it could even be some other nation (or nations) that fear the possibility of an IndoPakChinese Superpower in the sense of military (nuclear) capability or economic strength? Who’s playing the long game here…..?

…..jq takes it further……..keep reading folks

WAR is RAW

12th November 2008, JQ (co-editor)

Every crime has a motive. To actually pick up a gun or knife or whatever and then take a human being’s life usually needs a planned state of mind which caters for that motive.

I used to read stories of the Indian and Pakistani police when the British were ruling and just after the partition. In those days they knew the art of investigation. Back then they used people called “khojis” [the C.S.I. of back then] who could find the clues and track the foot steps of the criminals helping the law enforcers to the motive of that crime! Coming back to these Bombay….oops Mumbai….attacks sit down and relax and then think why don’t the police or investigators with all the modern tools of the trade not actually investigate and plainly start naming names of their arch enemies [or ex arch enemies]? Could it be procrastination or maybe some ulterior motives – but tell me one thing if you can, who has most to gain from an on going Pakistan India scuffle? Now narrow it down to one nation. I don’t have to write the name you know it already.

Imagine India & Pakistan at peace with no lingering Kashmir or river water issues then we can move on to become an economic hub of power, with China we can take on the world, but somehow this probably won’t happen – the “un-named” nation won’t let it happen.

It is all to do with the Art of War which incidentally is one of the oldest books on military strategy in the world. It has had a huge influence on Eastern as well as Western military thinking, business tactics and beyond. Its writer Sun Tzu was the first to recognize in 6th century BC the importance of positioning in strategy, and that your position is affected both by objective conditions in the physical environment and the subjective opinions of the competitive actors [there may well be an Oscar category for politicians] in that environment.

He taught that strategy was not about ‘Planning’ in the sense of working through a to-do list, but rather that it requires quick and appropriate responses to changing conditions [for example in recession create a war to get the economy moving or in case of the subprime crisis create an arch enemy or better still create an alien attack].

‘Planning’ works in a controlled environment but in a competitive environment competing plans collide [race to the moon, missiles and anti-missiles defences etc] creating unexpected situations [9/11, attacks on Pakistan, attacks on India]. So WAR is indeed RAW [incidentally RAW is also the acronym for the Indian spy agency Research And Analysis Wing!]

New World Order

Somehow this reminds me of the term New World Order which refers to a conspiracy theory in which a powerful and secretive group is plotting to eventually rule the world via an autonomous world government. This powerful group would apparently replace sovereign states and other checks and balances in world power struggles.

H.G. Wells advised in his 1940 work “The New World Order” that “when the struggle seems to be drifting definitely towards a world social democracy there may still be very great delays and disappointments before it becomes an efficient and beneficent world system. Countless people will hate the new world order and will die protesting against it”.

You may ask it can’t be. How come sovereign governments are following old bygone theories of H.G. Wells or Big Brother like controlling tactics thought of by George Orwell in 1944 but look around you. Isn’t this world full of seeds of doubt sprinkled everywhere, surveillance cameras to protect us! [normally they are not where protection is really required] speed cameras to protect lives [see my article on speed cameras] biometric passports to protect our identities [we need more protection from bureaucrats losing our identities in the first place] identity cards to protect our freedom from invaders [to be trialled on poor foreign students who have no say hence are targeted to up the statistics in the labours' favour] pay as you drive road charging system that keeps track of your movement! And best of the lot is an airport scanner that can read your mind [for George Orwell's thought police in action see Tom Cruise's action flick Minority Report]

Read the full story here of the real thought police in today’s world

Need I say more to prove that we are slowly moving towards a totalitarian police state at least in the Western world [I am humming hold me kiss me thrill me kill me as I type].

One of the more enduring myths in Western society is that wars are somehow good for the economy. Many people see a great deal of evidence to support this myth, after all World War II came directly after the Great Depression.

I believe it is a faulty belief which stems from short sighted and shallow economics thinking. Let me explain. The flawed logic of this myth is an example of something economists call “The Broken Window Fallacy” which is brilliantly illustrated in Henry Hazlitt’s 1946 book “Economics in One Lesson.”

In it Hazlitt gives the example of a vandal throwing a brick through a shopkeeper’s window. The shopkeeper will have to purchase a new window from a glass shop for a sum of money say £250. A crowd of people who see the broken window decide that the broken window may have positive benefits after all. If windows were never broken what would happen to the glass business? Then of course the train of thought is endless. The glass merchant will have £250 more to spend with other merchants and these in turn will have £250 to spend with still other merchants and so on. The smashed window will go on providing money and employment in an ongoing stream.

The logical conclusion from all this would be that the little hoodlum who threw the brick, far from being a public menace was in fact a public benefactor [Britain has quite a few of these benefactors in ASBO rich areas although they have yet to stir up some economic activity - perhaps not enough bricks - Gordon Brown may consider distributing free bricks at Tesco].

The crowd is correct in realizing that the local glass shop will benefit from this act of vandalism. What they have not considered however is that the shopkeeper would have spent those £250 on something else if he did not have to replace the window. He might have been saving that money for a new set of golf clubs, but since he has now spent the money he cannot do so and the golf shop has lost a sale.

He might have used the money to purchase new equipment for his business or to take a vacation or maybe to purchase new clothing. Instead of having a window and £250 the poor shopkeeper now merely has a window which was there anyway. Or as he was planning to buy a suit that very afternoon instead of having both a window and a suit he must now be content with the window or the suit. If we think of him as a part of a given community then that community has actually lost a new suit that might otherwise have come into being and is just that much poorer. So the glass store’s gain is another store’s loss hence there has not been a net gain in economic activity. In fact there has been a decline in the economy of that community!

No wonder I see the sun of tomorrow shining in the east and it is shining its brightest over China because the only bricks they carry are for building new projects. They don’t seem to plan on breaking neighbourhood windows or even the windows of the next town and they are certainly not trying to “SORT” the world.

jq@ultranomics.com

more ultranomics below…..

Back with TK in UK……………

Companies…….

The classic Atari videogame: Breakout

Do you remember that old Atari videogame called Breakout, where the ball would bounce around the screen smashing any brick that it touched? That reminds me of the toxic debt originating in the US subprime debacle, the effects of which are still ping-ponging around the globe smashing companies and financial institutions in their wake.

After knocking out Iceland (the country, not the UK frozen food retailer which probably is worth more) and giving the worlds largest bank, Citigroup a hefty thwack, the latest UK bricks to be smashed last week were two household names in retail – I am referring of course to Woolworths and MFI. Who would have thought that good old ‘Woolies’, founded in 1909, having survived the Great Depression, two world wars and several recessions would meet its demise in the crash of ‘08? We are wondering where that wrecking ball is on its way to next? The world it seems is smaller than we ever thought and remarkably its all interlinked through the subprime debt network. John Lewis, Marks & Spencer – batten down your hatches. Ford, General Motors, Chrysler – run for cover now!

Houses…….

Well you would hardly be surprised to know that UK house prices fell again in November, albeit by only 0.4%, a much more moderate slowdown compared to the 1.3% fall of October. This is according to the statistics from Nationwide, UK’s largest building society.

Prices are down from a year ago by an average of 13.9%. Mind you you’re still doing OK as long as you bought more than a couple of years ago. Average prices are still £25,000 higher than they were in 2003. Those who bought more recently will need to ride out the storm – but if you do need to sell try to avoid those ‘buy and rent back’ profiteers. There may be some genuine companies out there but there’s plenty of sharks roaming the waters right now.

As for where we are headed in 2009 with house prices, its anybody’s guess – including ours. We do dabble in property so we have a gut feeling you see. Mine says that falling interest rates are going to tempt professional landlords into the market in a sustained way from here on in, although that won’t be enough to revive the market. Thus there will be no recovery in 2009 although a bottom may well be reached during the middle of the year.

How we go from there will depend on other factors such as bank lending improving, recession abating, unemployment steadying etc. The other main factor will be human psyche. We will as a nation need time to forget the panic of 2008 and the fear instilled by the subprime meltdown. Once we forget we will then start dippping our toe back in. At the moment though fear and worry are still the order of the day. That’s all my gut has to say on the matter for now, apart from some gurgling.

Jobs……..
The chancellor Alistair Darling was on BBC Radio 4 last Tuesday (25th Nov) insisting that Labour had reduced unemployment so significantly since coming into power and that most of the jobs created by Labour had been in private sector. I mean “Wow” – the art of propaganda and misdirection is obviously very much alive and kicking.

It is true that between 1998 and 2006 there seems to have been around 2.2 million new jobs added. Unfortunately 1.3 million of these have been public sector, inc admin, health, teaching, social work. As for new jobs for women, a whacking 90% all job growth for women was in the public sector, i.e. funded by the taxpayer! The West midlands actually saw a drop in private sector jobs of 2% while public jobs increased 25%!!

Why is this important – after all isn’t a job still a job, regardless of public or private sector? Well true at an individual level its great for those getting the job. Yet by creating all these government jobs they do not directly benefit the nation’s economy. Instead we all as taxpayers have to pay these public wages.

Of course we don’t mind the teachers, doctors, nurses – give us more. But its the pointless pen-pushing jobs in City halls up and down the country that we object to, each with attractive salaries, bonuses, generous final salary and index linked pensions. These public workers spend more days on strike and are 25% more likely to take sickies than those working for private companies. There are 818 workers in town halls earning more than £100k, paid for by me and you. Yet as a nation if we want to prosper we need industry, and people employed in industry. Thats the only way to turn a profit – by making products and offering services and exporting them to other countries. Paying each other to potter about organising this and that does not create wealth.

And…guess what? Its going to get worse! The Centre for Economic and Business Research (CEBR) reckons the state will be hiring another 50,000 workers while at the same time private jobs will continue to slide as the economy falters. The old soviet communists would be proud. What a warm feeling, being in the embrace of the all-knowing nanny state. Yes Gordon, take our taxes and spend them as you see fit. You are wiser and cleverer. Give us our daily bread, and our jobs. Since you employ us, we will of course return the favour and vote for you. After all, those nasty Tories might take away our cushy jobs. Lets not call it buying votes though – lets just call it mutual back scratching!

For another take on the Mumbai Terror attack check out pkpolitics.com here.

23rd November 2008, TK

With America in the throes of its worst slump since the 1930s and the rest of the world not far behind, Americans have been keen to latch on to any glimmer of hope they can find – Barack Obama’s recent election being a case in point. Hopes and expectations are riding high on the new president elect and a wave of optimism could be felt washing over the country during the recent elections. The public turned out in record numbers to vote, in fact it was the highest turnout since 1960, when JFK beat Richard Nixon to take over from the outgoing Dwight Eisenhower. JFK promised “to get America moving again” after claims that the Republicans had allowed America to fall behind the Soviet Union in the Cold War, militarily and economically. He managed to win the election, albeit closely, despite widespread prejudice against his Roman Catholic faith, with people fearing he would be taking orders from the Pope. A case of hope and optimism winning over prejudice and fear? We’d like to think so. In any case, some interesting parallels with Obama. No doubt in both cases, the film star personas also helped to win over the celebrity-loving US denizens.

“During the Depression, when the spirit of the people is lower than at any other time, it is a splendid thing that for just 15 cents an American can go to a movie and look at the smiling face of a baby and forget his troubles.”
-President Franklin Roosevelt

Hope and optimism also manifest in films directly during times of economic strife. The era of musicals in the 1930s, during the last Great Depression, gave rise to hits such as Gold Diggers of 1933, 42nd Street, and Footlight Parade, which all portrayed the possibility of ‘making it through’ with hard work and perseverence. The Wizard of Oz provided escapism and fascinated audiences in 1939, following Dorothy as she was whisked away from black and white Kansas to the far off and beautiful, ‘Technicolor’, Oz, yet asked that in the end the audience believe that “there’s no place like home”.

   

Film Posters: 42nd Street (1933), Footlight Parade (1933), The Wizard of Oz (1939), Star Trek (2009)

Coming up to date then, what of the next couple of years? Perhaps we should be looking forward to some spirit-lifting Hollywood movies for some years to come? The wane of the Horror slashers and Vampire Slayers then?……Perhaps.

In fact only yesterday I was watching a trailer for the new Star Trek movie, due out in May 09. As an aside, it seems there is a current fashion with film franchises of “returning to the beginning” or doing prequels, with recent examples such as the Bond and the Batman films (both superbly done in our humble opinion). And so it is with Star Trek – J.J. Abrams, the creator of LOST, is going back to the beginning and giving a new edge to Kirk and Spock (I wonder if he considered renaming it ‘Lost in Space’??) At first look it appears to be one movie worth waiting for. But I would say that, having been a bit of a Trekky in my time.

Star Trek is known for its utopian view of the future. A future where all of humanity has reconciled its differences and the entire planet is at peace. There is no hunger and no poverty. Maybe because in the Star Trek 23rd century, neither is there any longer such a thing as money! Everyone has whatever they could need, and instead we pursue higher goals such as self advancement and exploring space. So, perfect escapism from the current world, the new Great Depression of the 21st century, and the rampant warring across the globe.

A world where those pesky somali pirates are still holding on to their loot over in the Gulf of Aden, the Saudi ‘Sirius Star’ with its 25 crew and 2 million barrels of oil. They don’t want much in ransom either, only $25mill in return for the $100mill cargo. What an insane world, where pirates are still able to do roaring business. This year alone they’ve managed to attack 95 ships, hijack 39 of them and collect $50mill in ransom. Not bad work for those with serious disabilities such as one eye or a missing leg. Abu Hamza could get on to a nice earner if he got bored of the preaching.

What with the ever present Israel-Palestine issue, no end in sight in Iraq or Afghanistan and now bombings all over Pakistan, the world is about as dangerous a place as I can remember. Not that I want to do the work of the NeoCons for them, but that’s just the way it will always be while people quibble over finite commodities, whether it be land, oil, water or food.

Perhaps one day the Americans will finally colonise the moon and mars, begin asteroid mining, and manage to harness direct solar energy and beam it all around the world for free. And maybe one day the guys at CERN in Geneva will manage to capture enough antimatter and in partnership with the Russians build a stable containment system for it. And perhaps, just perhaps, some brilliant Pakistani and Indian mathematicians will do some out of the box thinking and instead of VAT fraud, they will engineer the world’s first prototype Warp Engine. Then maybe the Chinese and Japanese will do a joint venture (for a fraction of the cost and twice as fast as the Americans) to build the first Galaxy Class Space Ship, with the whole venture under the watchful eye of Richard Branson no doubt.

Will we ever really make it to that utopian 23rd Star Trek century we wonder? Well as pakistanis, indians, chinese etc. we had better be trying extra hard. As nations of the Asian subcontinent if only we could realise the futility and wastefulness of our quarrels and wars, maybe our efforts could be directed to peaceful coexistence, partnership and mutual advancement. After all, Star Trek must be proved incorrect in one way, and that is that there will indeed be a pakistani on board the Enterprise one day. You bet!

As Jamshaid steps onto the Bridge he gives his Salaam to the Crew

as jq ponders on his next car……


Speed Cameras – Big Brother’s Ever Grazing Cash Cows

23rd November 2008, JQ (co-editor)

Ever had a feeling of being watched? Well I did today as Specs3 stood still watching with his peering eyes waiting for one wrong move, my hands were stiff, my knuckles went white due to my tight steering grip, my eyes were aching due to the constant monitoring of speedometer and traffic, my right foot was trembling for fear of pushing too hard on the accelerator and getting caught by the dreaded average speed camera and I had only done about 500 meters out of a 5 mile stretch at 40mph limit! I would be over the edge any second now.

The Specs 3 gatso

Can anyone hear the climatic horror movie music when the dude is about to get it? Ching ching ching AAAAH. Well ching ching ching was the cash clocking music to the ears of the British Government and guess who gets stabbed countless times everyday? The poor British motorist that’s who!

The Association of British Drivers, which campaigns against speed cameras also made an interesting point about the Specs3 as they would make, “People put the car in cruise control and the mind in neutral. It’s so boring driving through these sections at a constant slow speed that people are going to drop off.”

Maybe I’m missing something here, but why does the UK government allow cars to be sold that are capable of achieving almost twice the 70mph speed limit which was set back in 1977 when the Ford Anglia had a stopping distance of 2 miles or so. If according to their laws no cars should ever go over 70mph why don’t they simply force the car manufacturers to install speed limiters in every new model and fit one in every existing car during the yearly MOT? The simple answer is that they don’t want to because the UK government would make less cash from the car industry & less cash from the speed fines.

Every UK driver has to go through the stringent British road test which tests the drivers to their limit. Oppressive tactics by the police like constant detection and dictation are an insult to their intelligence and road manners. The new average speed cameras known as Specs3 will appear in clusters of 50 working in a network and will monitor “every” driver’s average speed as they travel. Not only that but an ‘eye in the sky’ helicopter targeting speeding motorists in Essex at a cost of £1,000 an hour is adding misery to the once enjoyable driving.

This recent Canadian report (Review and Analysis of Posted Speed Limits and Speed Limit Setting Practices in British Columbia) has a clear view of the role of speed limits and speed enforcement.

It includes such straightforward common sense items as:
• The majority of motorists drive at a speed they consider reasonable, and safe for road, traffic, and environmental conditions. Posted limits which are set higher or lower than dictated by roadway and traffic conditions are ignored by the majority of motorists.
• The normally careful and competent actions of a reasonable person should be considered legal.
• A speed limit should be set so that the majority of motorists observe it voluntarily and enforcement can be directed to the minority of offenders.

Ready for another eye opener, this time from the Australian police! Apparently a recent survey by the Herald Sun has found that more than 70 per cent of Victorian police believe speed and red light cameras are more about revenue-raising than preserving road safety. A point every motorist [or majority of] has tried so very hard to get across.

The politicians will keep on preaching that speed cameras are there to promote safety and the high fines associated with them are just to slow people down, well this is a baseless argument because the truth about this hypocrisy is coming out. The UK Department for Transport first funded and then suppressed a study that shows a 55 percent increase in injury accidents when speed cameras are used on highway work zones and a 31 percent increase when used on freeways [or non freeways as I would like to think] without construction projects. According to the Transport Research Laboratory, the “non-works [personal injury accident] rate is significantly higher for the sites with speed cameras than the rate for sites without.” You can see the full report here.

Sher Shah Suri turns in his grave wondering why he didn't think of Speeding fines

So what should the regular Joe think about BBC Topgear now when he sees the likes of Jeremy Clarkson, Richard Hammond and James May blast their gravity busting 500bhp+ monster machines? Is this entertainment or fact based “drama”? Where are those roads where they drive at a million miles an hour without the fear of any Specs3, gatso or speed camera ever passing them by? Why is it that the average Joe is now under the £1000 an hour surveillance eye in the sky?

With modern technology there are better ways of keeping drivers to the speed limit. Unfortunately none puts money in the government’s, council’s or police authorities’ pockets. It would be perfectly possible to install a GPS based device, not dissimilar to a SatNav, in every car, telling the driver what the speed limit is for that stretch of road. The signal would automatically change when the car entered the next speed zone. Should the car be speeding (easily assessed from either a gps signal or directly from the speedometer) an alarm in the vehicle would sound, alerting the driver to the fact he is going too fast similar to the ones installed in BMW cars. The only way of silencing the alarm being to get the speed back under the speed limit. This ensures the driver’s attention is fixed on the road and it’s hazards, not constantly watching the speedometer. Attention to the actual driving is increased and therefore the roads made safer. No need for [you should have gone to] Specsavers Speksy3 and other gizmos – but I don’t see that happening because how then would the UK government milk its cash cows?

But there is still hope for the joy of driving as long as good Samaritans like Swindon councillor Peter Greenhalgh are taking the common sense approach. It is after he objected to the central Government receiving all the cash from fines while Swindon council paid £320,000 a year for the cameras’ upkeep that the Swindon Borough Council became the first to ditch the yellow boxes. Now towns all over the country are joining the rush to get rid of fixed speed cameras. Portsmouth, Walsall and Birmingham may copy Swindon in ripping out the hated cameras, and others are expected to follow suit.

jq@ultranomics.com

…..continues below……

lastly, some more down-to-earth economic dishes, served cold by tk…….

Here in the UK on Friday, the Council of Mortgage Lenders revealed that the number of properties repossessed rose by 12% to 11,300 in the third quarter of 2008. The number of borrowers in arrears went up by 8% compared with the previous quarter, to 168,000. Watch out readers, those of you with cash in your pockets and iron-clad hearts will have ever increasing casualties of the crunch to pick over in the coming months. We expect a yet larger wave of repos in the next few months, as the earliest defaulters (those who went backrupt a year ago) come to the end of their 12 month grace period which they were given if they had a wife or kids (or both). A Charles Dickens christmas is forecast across much of the country.

In the US on Thursday, Detroit car makers went up Capitol Hill to fetch a pail of money. Unfortunately they came tumbling down without a crown! Boo hoo. The silly sods went with begging cap in hand, yet when asked by congressional leaders how much they wanted and what for, they sat there scratching their heads like Stan Laurel (you remember Laurel & Hardy don’t you??). The Californian Democrat, Nancy Pelosi, who is the Speaker of the House of Representatives, said that the 3 Amigos, the bosses of General Motors, Ford Motor and Chrysler LLC have 12 days in which to come back with a viable plan of what they need and how they’re gonna spend it. Can you imagine going to see your bank manager and asking for a loan, then telling him he can give you as much as possible although you’re not sure what you want to spend it on yet. What a hoot!

As well as record levels of idiocy and farce, it seems the US is setting records daily across the board. The share price of General Motors hit $1.27, the lowest since 1938 ( a year before The Wizard of Oz). The US unemployment claims have hit 4 million – the highest since 1982 and factory output is now the lowest since 1990. Oil closed at $49.62 (the first time its been below $50 since 2003). Furthermore it seems that the cost of living in the US is falling at its fastest rate since records began in 1947. That might be much worse than it sounds. The same thing happened in Japan in the 1990s where the domino effect of dropping prices meant consumers wouldn’t buy large items since they’d be able to get them cheaper if they waited, leading to catastrophic demand slump and hence further price falls. Already in the US, retailers have begun to go out of business literally overnight. The double-edged sword of deflation might appear great for the consumer, but is in fact a guillotine to the neck of the economy. More detailed commentary on the deflation issue is promised for a future Ultraletter…..

Have a great week readers and we promise to catch up with you again soon.

tk@ultranomics.com