Food for thought, a black horse and a view from Saturn

Anyone can throw a bunch of graphs together and draw a conclusion whether it sticks or not. In fact it seems that most media, newspapers and journalists do just that and present their view on what reality should look like contrary to what their real job description should be: report on the facts, not opinionise their own views. In the spirit of "if it's good enough for them it's good enough for me" I have... No wait, lets do it differently. I am going to present you three graphs and there is a relation between two. The third one I have thrown in for your contemplation. I didn't make up the graphs either, I'll give you the references where they can be found.

First let me tell you that we are not looking at Europe this time but at the US. And the first graph show you the Dow Jones and Nasdaq since 2007. You can see the crash in 2008/2009 and the breathtaking recovery since (you can find these graphs on any financial website, I took mine from http://www.tijd.be). The second one comes directly from the US-FED website and shows the ballooning balance sheet since 2007 (http://www.federalreserve.gov/monetarypolicy/bst_recenttrends.htm). No the synchronised rise in the stock markets and the FED balance sheet is not a coincidence. The stock exchange recovery is a result of the FED quantitative easing programs that have exploded the FED balance sheet. Everyone agrees on this, that is why the stock markets get very nervous every time Ben Bernanke sneezes. Some are even so worried that when looking at these graphs they get Tourette-like symptoms as they can't help scream "BUBBLE".

Now for the last graph, number of US citizens who depend on food stamps, I made this one myself based on data from the USDA (http://www.fns.usda.gov/pd/SNAPsummary.htm) and I normalised it to the total United States population so it shows you the US citizens on food stamps as a %.

Since the seventies, this percentage hovered around 6-10%, since 2007 it started to rise and now they are approaching 15%. That's > 46 million Americans who are on food stamps. Is there a relation between this rise of food stamp dependent Americans and the US-FED balance sheet? I leave it up to you to draw your conclusions. If you need some guidance, read Joseph Stiglitz 'The price of Inequality' (http://www.amazon.com/The-Price-Inequality-Endangers-ebook/dp/B007MKCQ30).

Last week I told you I was reading a book in my hammock (no surprise there!), but I didn't tell you which one. The title is 'Ten Oorlog' ('To war'), and it is the book based on the documentary that was broadcasted this Winter on Belgian public tv in commemoration of next year's 100th anniversary of the start of WWI. It featured 3 friends who walked the complete European front line from West (Nieuwpoort) to East (Gallipoli), guiding us along the way through WWI, the monstrosities, the battlefields, the trenches ... But it was much more than a history lesson, their journey showed how WWI still affect today's lives of those who live in the area where fierce battles where fought. How the stories of then still live on in their families and how it changed their lives. It was an amazing road-movie with lots of memories quoted from the diaries and letters of soldiers who died and those who survived. The book is equally good. It is only in Flemish and I can recommend it to anyone who masters our language.

One of the diaries quoted from is the one of Earl Fransesco Baracca. He was a pilot and achieved 34 victories in air combat. On the side of his airplane (he flew the Nieuport 17 and Spad VII / XIII) he had a black stallion painted as tribute to his former regiment in the cavalry. In those early days of aerial warfare the respect for enemy pilots was high and the Earl was a real gentleman. Apparently he visited the pilots in hospital after he shot them down, or he paid tribute to them at their grave. Baracca didn't survive the war and was killed on June 19, 1918. His mother donated Baracca's personal emblem, the prancing black stallion, to car racer Enzo Ferrari and he immortilised it.

I have to show you one more image I came across this week. A view on Earth (where the arrow is) taken from Cassini which is orbiting Saturn. Images like these always take my breath away.

A German in Athens, an old Aunt and a full house of Queens and Kings

Der Spiegel Online published an article following Mr Schäuble's (German minister of finances) visit to Athens this week. With latest estimates for a debt/GDP ratio back on the way to 180% (jeee those 3(!) rescue packages really helped didn't they - see graphs based on Eurostat data up to 2012 and presented without further comments), they claim that the only way out is a haircut on the debt. True (if you delete leaving the €zone as the other option, which would de facto come down to the same thing as Greece would immediately default on its debt). But Der Spiegel immediately touches the sore spot because such a haircut would be felt by governments (and thus citizens) outside of Greece. Der Spiegel agrees with my analysis of last week (see New democracy) on why we won't see a haircut this Summer: "At this point, the worst cannot be prevented -- it can only be delayed by repeatedly providing Greece with new loans and leading the people to believe that the sums given will someday be paid back. If need be, they can also just extend the period on the loans to future generations of politicians. That's precisely the approach being taken by Schäuble and Chancellor Angela Merkel. Federal elections in Germany take place on Monday, Sept. 22 -- and neither wants to negotiate under any circumstance any haircut or possible liabilities for Germany before that time." That's exactly what I said in my blog last week .


I was in my hammock reading a book (more about the book next week) when I heard something heavy approaching at a low altitude. I knew it was heavy and low because of the noise. It was not this modern high squealing sound of turbines, no it was a deep back-of-the-throat growling. You could almost hear every piston going through its cycle. That kind of noise. Okay so I exaggerate a bit, you couldn't hear every single piston of course but you get the picture. As the airplane approached, I could hear not one, not two but three engines!  Some moments later a Junkers Ju52/3m flew directly overhead my house at about 1500 ft AGL, the separation of the trailing edge and the flaps/ailerons clearly visible against the sky. O what a lovely sight! There are few planes that are as recognisable as the Ju52/3m with its three engines, the gulf-plated like skin and its sharp-edged silhouette. I couldn't distinguish the livery nor the registration but the sheer sight of it made me put my book at the side and take another one I have in my library since years (published in 1991):

The Ju52/3m has a interesting history and almost single-handedly established the European Luft Hansa network in the thirties. For those who are wondering about the '3m', of course it refers to it having 3 engines but why specify it in the name? Well because the type started off as a single-engined Ju52/1m! As it was underpowered and after the construction of seven prototypes, they switched to the three engine configuration. A list of still airworthy Auntie Ju's can be found here: http://en.wikipedia.org/wiki/List_of_airworthy_Ju_52s


Next Sunday on Belgium's National Day (July 21) our King (Albert II) abdicates and his son (Filip or should I say Philippe...) takes over his reign. So as of Sunday we will have 2 Kings (Filip/Philippe and his father Albert II who keeps his title) and 3 Queens (Mathilde - wife of Filip/Philippe, Paola - wife of Albert II, and Fabiola - wife of the late King Boudewijn). A full house of Queens and Kings! Not bad for a little country of 10,5 million inhabitants, of which many don't support our royalty at all. The old King (Albert II) will get a pension of 923000,-  €/year and 10 servants. No I'm not making this up, that's what our government decided. Their justification: he will continue to receive a letter once in a while that needs answering and when you are used to a certain lifestyle it is hard to do with less when you retire. I take the point my dear government and will use it against you if ever I am unemployed or if ever I reach my retirement age.

If you are surprised about our full house, let me remind you that it is not so strange for Belgium to multiply its institutional bodies.
We have:

• 6 governments: federal, Flemish, Walloon, Brussels, French Community and German Community totaling 46 ministers and 9 secretaries of state.
• 6 parliaments: (same split as above) totaling 559 parliamentarians and 74 senators.

As a comparison, in the Netherlands (population > 16 million) they have 225 parliamentarians and 20 ministers and secretaries of state...

The song that has to go with it, is from La muette de Portici by Daniel Auber. The opera was very popular in the 19th century and renowned to this day because it sort of started the Belgian revolution in 1830. The opera was playing in the Brussels opera house on August 25 1830 and one aria (Amour sacré de la Patrie) moved the audience so much that anti-Holland riots broke out (Belgium was then part of Holland). A couple of months later, Belgium declared its independence. The opera was played in honour of the birthday of the Holland King Willem I ...

Maybe it is time for another revolution? In any case let's listen to 'Amour sacré de la Patrie' and see what happens: https://www.youtube.com/watch?v=W1FiMPAPo8c

New democracy, tipping points and a washing machine in space

So Greece got its extra money. Regardless if Greece is really on the right track or not, there is no surprise in this decision. End of last year the eurogroup decided Greece would remain in the euro. Not giving them the extra money now would mean they would not be able to honour their financial commitments and a full blown government crisis. In other words, back to full crisis mode and this only 3 months before elections in Germany. No way this would happen. So the money is on its way (thanks to Reuters we have access to the full troika document http://t.co/pcQAlSgyts). Greece did commit to fire 150000 of its 750000 civil servants. By now we all know the stories of many of those who got a government job and salary but don't actually work. Well that may be but the redundancies are aimed mostly at teachers, police agents and cleaning personnel who have been working last 6 months without being payed. All of this does not sound really fair to me, nor to many Greeks. More strikes and demonstrations are expected but Greece will stumble on until after the German elections. After that, expect another full blown eurocrisis around Greece with Cyprus and Portugal in close pursuit.

By the way the Cypriot president said this week that in practice his country is no longer part of the euro (because of the capital controls - did you read my blog of last week Mr President?). And the Portuguese prime minister made a public speech saying that after 2 ministers leaving he prefers not to call for new elections but asks for a government of technocrats supported by all political parties in order not to loose support from the troika. Organising elections now would not be in the benefit of the country he said. Maybe so, but where do these people find the democratic legitimacy to continue ruling as they please? After Greece and Italy who both had their own technocratic governments now it is Portugal that is heading down that road. So what Europe really seems to be about is a new democracy: as long as you do what we say you get your money, if you can't do it as a democratically elected government, then you do it as a technocratic one and we will tell you who to put in charge. Is this the Europe we want???

I read 'The Tipping Point' by Maxwell Gladwell, a book I was made aware off about a year ago but is in fact a lot older (published in 2000). I must say that I am somewhat disappointed. The book is about the moment when something goes over a tipping point and becomes a success or an epidemic. But this is a bit misleading, the book is more about what helps that something to tip over a specific point rather than about that point itself. It is interesting but what it comes down to is how can you influence something and help it reach that tipping point. Now if this is what you are after then I have another much better book to recommend: Influence: science and practice by Robert Cialdini.

Proba-V is a satellite launched on May 7 and 100% Belgian (yes!). It's about the size of a washing machine and its task is to map land cover and vegetation growth across the entire planet every two days. The data can also be used for day-by-day tracking of extreme weather, alerting authorities to crop failures, monitoring inland water resources and tracing the steady spread of deserts and deforestation. They just released the first image:

You can read all about it here: http://www.esa.int/Our_Activities/Observing_the_Earth/Probing_vegetation_across_the_globe

The news you may have missed, debt and a walk on Mars

Midway my holiday and to stay in tune with the first 10 days, it is rainy and cold today. What happened to the world in the mean time? You have all heard that our european family grew with one member (Croatia). Surely you are following the developments in Egypt as well where the people is having its second revolution in one year. Rudy Vranckx, journalist at the belgian broadcast vrt, tweeted this breathtaking picture of a helicopter being lasered by the crowd above Tahrir.

What may have slipped by you however is following:

Cyprus is in the 19th week of the 'temporary' capital controls. They do however remain welcome in the united and harmonised eurozone. Only their bonds are not welcome anymore. The ECB decided not to accept cypriot government bonds anymore as collateral. In other words they are junk.

Portugal is in the midst of a political crisis. Two key ministers offered their resignation. The result is the interest on goverment bonds went sharply up. But no worries, Merkel declared the eurocrisis is under control and on hold until after the german elections after Summer. There is nothing to see in this graph, move on.

The big european summit of last week took some decisions about future bank rescues. The tax payers should bail outbanks only in the last resort. First the shareholders have to take a loss, then the bond holders, then the deposit holders but only those who have more than 100000 euro on an account. And only then the taxpayers. So anyone with more than 100000 euro on one account knows now that (s)he is betting the surplus on the survival of the bank. But how do you know if a bank can survive? Banks are good at hiding risks, so how can a simple account holder know? Maybe those famous stress tests can help out? Well... last time those stress tests declared Dexia being safe and one week later Belgium had to bail out the bank and nationalise it. And the 3rd round of stress tests has been postponed, surely this is not because all is well in banking land. Conclusion: you have no possibility to know if your bank is trustworthy or not. If you think this is a problem for individuals, just consider a company, even a small one. It's liquidity is very quickly bigger than 100000 euro. Just the account for paying the wages alone would be. So how can a company guarantee it can pay next months salaries if it does not know if its bank can survive? Seems to me that as sensible the EU summit decision might have been, our financial survival is now more than ever built on the quicksand of our trust in banks.

O and as a reminder: how did the (western) world end up in this financial mess? Too much debt. The BIS (bank of international settlements) is like the central banks of central banks. When they speak one better takes notice. They did warn the world about the (hidden) debt back in 2007 and no one listened. In their latest report (you can read it here: http://www.bis.org/publ/arpdf/ar2013e.htm) they state that we have only been borrowing time since the outbreak of the crisis. That is to say that all the extra money created through quantitative easing (by the US, UK and Japan), and the long term refinancing operations (by the ECB) has not solved anything, but just kicked the can further down the road. The can in the mean time got a whole lot bigger. The BIS shows that since 2007, global debt has risen with 23000 billion euro (no this is not a typo). Hello??? Anybody listening???

Some distracton from this ongoing debacle is offered by NASA who put online all pictures taken by the Mars Explorer such that you can have a stroll on Mars! Thanks NASA and enjoy the walk: http://mars.nasa.gov/multimedia/interactives/billionpixel/