The Contradictions of Capitalism

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Sometimes policy interferes with policy. Here are some examples from the headlines. If “too big to fail” is the risk in banking, then slapping together failed banks with more solvent ones increases risks. The odds are that if enough troubled banks are brought under one umbrella, it will then become too big to fail.

Another conundrum results from the new taste for gold holdings by central banks. India set off the latest upward move in the price of the yellow metal by diversifying some reserves to gold. But if they are themselves buying the stuff, how can CB’s use the gold price to track inflation expectations as they have in the past?

Bank salary caps can get regulators into a twist. Allied Irish Bank ran a search for a new CEO and wound up getting no resumes, presumably because the job pay was capped at euros 500,000 per year. So an insider at the bank is due to be promoted to CEO. But because of the pay cap, he is supposed to take a cut in salary for his promotion.

Some news from Thailand via underground jungle drum channels. Lest they be accused of lese-majeste, my Thai-speaking sources talk only of the “Highest Power” when referring to ailing King Bhumibol, who has been in the hospital since June and is believed to be dying. The succession has Thais worried as the crown prince is very unpopular and believed by superstitious Thais to have “an evil eye”.

That is even worse than the issues with Prince Charles, whose worst behavior involved marrying his mistress and (again) complaining about new architecture. This time he managed to block a Dubai royalty-funded consortium wanting to create ultra-luxury homes to replace the lovely but unused Chelsea Pensioner Barracks.

Dinner with London relatives at a USA chain which will remain nameless. The food was fair-trade, ungenetically-modified, hormone-free, and tasteless. This relative also affects Muji which offers overpriced Japanese basics lacking any style. This austere consumerism is another contradiction of capitalism.

Citigroup expects the Israel CB will raise rates a further quarter point next month.

More about our companies for paid subscribers follows. Once again there are dozens of items indicating where our stocks are going. Only those with access to the Model Portfolios are allowed to read them because our stock picks are not public and not free. Our first note is about Saudi girl power. Our second is about a way to make money as an insider trader.