Sunday, July 22, 2012

Libor Manipulation, Velocity, and Sterilization

The Libor manipulation may have had a positive purpose/effect. Not that I approve of manipulation. QE (quantitative easing bailout) money was given to banks to cover the Bank of International Settlement Basil 2 Accords. The Basil 2 Accords increased fractional reserve requirements of banks. However, had the QE money gone into the real economy, it would have caused much greater inflation than we have seen.

By artifically increasing Libor, interbank loaning was still expensive compared to buying bonds. Thus, banks who got QE, bought bonds with it instead of lending it out to smaller banks. Thus most the QE money stayed out of the real economy. When central banks buy bonds or conduct foreign currency swaps, this decreases velocity in the money supply as money is tied up in bonds or tied up in a foreign currency and consequently is not circulating in the real economy. This practice is called "sterilization".

Both overall Money Supply and Velocity contribute to inflation if they exceed economic growth.

dM/dt (money supply) + dV/dt (velocity) = dP/dt (price/inflation) + dR/dt (Real Output)

The recent LIBOR Manipulation scandal is an interesting manifestation and evidence for Velocity of Circulation.

Wednesday, July 18, 2012

D&C 93:53

And, verily I say unto you, that it is my will that you should hasten to translate my scriptures, and to obtain a knowledge of history, and of countries, and of kingdoms, of laws of God and man, and all this for the salvation of Zion. Amen.

Sunday, July 15, 2012

Velocity of Circulation

From Wiki:

The velocity of money (also called velocity of circulation) is the average frequency with which a unit of money is spent on new goods and services produced domestically in a specific period of time. Velocity has to do with the amount of economic activity associated with a given money supply.

If, for example, in a very small economy, a farmer and a mechanic, with just $50 between them, buy new goods and services from each other in just three transactions over the course of a year

Farmer spends $50 on tractor repair from mechanic.
Mechanic buys $40 of corn from farmer.
Mechanic spends $10 on barn cats from farmer.

then $100 changed hands in the course of a year, even though there is only $50 in this little economy. That $100 level is possible because each dollar was spent on new goods and services an average of twice a year, which is to say that the velocity was . Note that if the farmer bought a used tractor from the mechanic or made a gift to the mechanic, it would not go into the numerator of velocity because that transaction would not be part of this tiny economy's gross domestic product.

[ Some economic schools of thought believe velocity doesnt change.] This view has been discredited by the precipitous fall in velocity in the Japanese "Lost Decade" and the worldwide "Great Recession" and its aftermath of 2008-10. Monetary authorities undertook massive expansion of the money supplies, but instead of lifting nominal GDP as predicted by this theory, velocity fell as nominal GDP was relatively unchanged.

[Basil 1 Accords and Basil 2 Accords increased fractional reserve requirement which decreased both the overall money supply and velocity of circulation. Even with an expansion of the money supply via QE1-2, GDP has remained stagnant because of a slowdown of velocity. MPE fails to account for velocity. SSS does account for velocity]

Because "Velocity of Circulation" is difficult to control as it can depend greatly on human nature, there must be a mechanism to make adjustments to regulate the value of the currency. This is the purpose for the simple prime interest rate in SSS. Because of "Velocity" no economic system can be totally "Mathmatically Perfect." Therefore, there needs to be a corrective mechanism.

Tuesday, July 10, 2012

Obama Acknowledges Russian Violation of START Treaty

The United States has entered into several Nuclear disarmament treaties with Russia. The latest was Pres. Obama's new START treaty signed in 2011. However, an executive order released by the White House several weeks ago acknowledges that Russia has been violating the START1 and New START treaties by stockpiling large amounts of weapons-grade plutonium. From the text of the executive order it is apparent that knowledge of the violations of START1 were known back in 2000. This latest Executive Order serves to renew and expand the original declaration of a state of emergency.

Interesting details in the Order include info concerning a 1993 HEU agreement where Russia was supposed to extract HEU from 20,000 warheads send the fuel to the US for processing into LEU in exchange for money and uranium hexafluoride gas. Then the Order states that everything associated with this program should be immune from judicial investigation or prosecution.

Makes you wonder what Russia is doing with all that uranium hexafluoride gas.

Monday, July 09, 2012

Daniel L Simmons, BYU, Cox-2, Celebrex, Pfizer, and Lawsuit

Dr. Daniel L Simmons is my Mother-in-law's cousin. He teaches Biochemistry and P-Chem at BYU. I still have nightmares of those classes.

Anyways. Dr. Simmons sent clones of the Cox-2 genes to another researcher at another University who went behind his back and patented the discovery together with Montsanto. Monsanto all the while was telling BYU this sort of thing couldn't be patented.

As far as Vioxx and Celebrex are concerned. Vioxx is a very selective Cox-2 inhibiter and causes less GI bleeds but causes more heart attacks due to increased blood pressure vs ibuprofen. This is only significant when given to millions of people.

Celebrex doesn't cause as many BP problems because it really isn't that specific of a Cox-2 inhibitor compared to ibuprofen. The Celebrex study (CLASS study) cheated and stopped early at 6 months because at 1-year there was no measurable decrease in GI bleeding and ulcers vs diclofenac. Now for some people with bad arthritis, Celebrex may work better as an NSAID just because they happen to respond to it better than Motrin, Aleeve, Voltaren or Mobic. However, considering the cost. Its much cheaper and likely more effective to take Voltaren and a antacid then Celebrex alone.

I think there may be a silver lining to the fraud. It turns out that Cox-2 inhibition has not turned out not to be such a great thing. Selectively inhibiting Cox-2 may lead to less GI bleeds and ulcers, but it also leads to increases in BP and MI. Consequently, BYU should feel grateful it didn't share any of the bad press with Vioxx. But, on the other hand, now BYU has won a nice court settlement from Pfizer's Celebrex ($450 million) which isn't even a very good Cox-2. It's not the $9.7 billion they were initially going for but it's not bad.

Friday, July 06, 2012

CNN Report on HIV in Africa

I'm listening to CNN discuss the reasons behind AIDS in Africa. According to the report, they claim gay men have a hard time thinking about protecting themselves from HIV and using condoms when they feel ostracized by society and feel bad about themselves.

CNN also says gays have an issue with love because gays and HIV is also an issue of love. Because gays love each other they want to trust that their partner doesn't have HIV. So, i think what CNN is trying to say is that, among gay African men, using a condom would be a sign of mistrust. At the same time they said gay men typically have partners in multiple cities plus girlfriends to cover up the fact they are gay.

So, according to CNN, it seems we are meant to believe that it is partly society's fault that gays in Africa don't protect themselves from getting HIV by using condoms because society causes gay men to not feel accepted for their life choices and behavior.

Thursday, July 05, 2012

Problems with Mathematically Perfect Economy

Most everyone wants to live in a better world. However, it can be difficult to decide where to begin and what to do to make things better for everyone. When discussing solutions that would make the biggest difference, the top 3 are clear in my mind.

#1 is the Gospel of Jesus Christ. The gospel of Christ is based on virtue which is based on the Golden Rule of "do unto others only what you would want others to do to you".

The reason virtue is important is that when people refuse to take advantage of one another; the virtuous society fosters unity, trust, voluntary cooperation. The degree of trust and voluntary cooperation in a society is called social capital.

#2 is developing an equitable free market economy that provides an equality of opportunity and not an equality of result.

#3 is developing energy technology that provides that individuals can be energy independent and not dependent on government and corporations to provide artificially limited resources.

One idea that has been proposed as a replacement for our current Private Central Bank petro-dollar fractional banking capitalist system is an interest-free system called the Mathematically Perfect Economy.

I hope that you can have an open mind and pick out the useful parts of MPE from the not useful parts. Let me summarize the problems with MPE:

MPE Assumption #1: People trade things that are of equal value. If they trade things that are not equal in value, then one of them is being cheated.

Ignores Marginal Utility: People come away from trades with something of greater value than what they brought to them and that their valuation of things depends on how many of those items they already own.

MPE Assumption #2 (based on #1): Borrowers are trading more money in the future for less money now. It follows from premise #1 that they are being cheated.

Ignores Time Preference of Money: money today is more valuable than money tomorrow.

MPE Assumption #3 (based on #2): Any monetary system subject to interest ultimately terminates itself under insoluble debt. It follows from premise #2 that, because the charging of interest is not currently prohibited, the world economy is destined to collapse.

Ignores Velocity of Money: Money in circulation is used over and over again before debts come due.

MPE Assumption #4 (based on #3): There is class conflict between laborers and usurers as they battle over the unearned gain (surplus value) that is the proletariats’ due. By an argument similar to dialectical materialism, as the world economy collapses (see premise #3), the implementation of Mathematically Perfected Economy™ is inevitable. Montagne writes:

Absolutely prohibiting the collection of interest is a type of Socialism that requires enforcement.

The bigger problem with MPE is that no one owns anything. And since the value of everything determines the money supply, what is to prevent the banks from regulating, dictating or punishing how you use or how much you use your car or house of whatever. Everything you have in MPE is on leased. (Victor J. Aguilar)