World by charts

I have imported silver prices from Kitco. The numbers may contain errors but overall, they should be roughly right. There are two series: a yearly series from 1792, and a daily series from 1984 onwards.

There are several points in history which may be interesting to look at.

1. 1785, US adopts a silver standard.
2. 1803, Jefferson buys Louisiana.
3. 1821, Britain adopts the gold standard.
4. 1848, the gold rush begins in California.
5. 1861, civial war following the 1857 banking crisis.
6. 1870, major silver mines are found in CA, NV, etc.
7. 1873, the US adopts the gold standard (the crime of 73), leaving China alone on the silver standard.
8. 1929, the Great Depression begins.
9. 1935, China goes off the silver standard following the act of 1934. Hyperinflation follows the civil war.
10. 1979, the Hunt brothers corner the market and get a margin call. Volcker is sworn in and reins inflation by raising interest rates to the roof.
11. Feb 1, 2006, Ben Bernanke is sworn when the silver price is at $9.77 per oz and gold at $567 per oz.

I found a chart on the web from year 1344 to 2004, which I am including here. I don’t know who is the author of this wonderful chart.

Links:

Kitco

Books:

A Monetary History of the United States, 1867-1960

This Time is Different: Eight Centuries of Financial Folly

The Great Wave: Price Revolutions and the Rhythm of History

Series of interest:

Historical silver price since 1792

Gold per silver, recent daily series

Gold per silver, annually since 1792

Silver price and US inflation

One way to look at this is: how much money does the government take as a percentage of GDP? This is suggested by Martin L. Gross in his book, National Suicide, where he suggests that taxes now account for 41% of GDP. It looks otherwise, and it’s hard to say which numbers he used in his calculation. Here’s the chart below of federal receipts, which include tax receipts.

Note that Bill Clinton presided over the 1992-2000 period, and Gerald Ford from 1974-1979, followed by Jimmy Carter.

Taxes go up during world wars, but do not come down once the threat has subsided.

Links:

Martin Gross interview

Books:

National Suicide: How Washington Is Destroying the American Dream from A to Z

Series of interest:

Federal receipts as a percentage of GDP

Bloomberg announced today that the difference between the 30-year bond yield and the 2-year bond yield hit a high not seen in 30 years (about 4%). Why this might be true, I think it’s both misleading and rather uninformative.

As you can see from the graph below, which shows the difference between the 30-year low and the 2-year low, the spread was above 3.5% in October 1992, just prior to Bill Clinton getting elected with the motto: “it’s the economy, stupid”. Notice the nice build-up before that.

Why is that not surprising? The 2-year bond is essentially controlled by the Federal Reserve through its Fed funds rate. The long bond reflects the credit-worthiness of the US. When the economy stalls, the Fed dutifully lowers interest rates to “stimulate” consumption, the government spends more, and everyone gets worried about a chance of outright default or devaluation.

Here’s the chart for bond yields for the 3-month, 2-year, 5-year, 10-year, and 30-year bonds. (It is missing some data points because the 30-year bond was discontinued for a few years.) As Peter Warburton pointed out in his book, “Debt and Delusion,” during good times there is a convergence of bond yields, while the spread widens during bad times.

Links:

Bloomberg article

Mish’s follow-up

Market folly on curve steepeners

Market folly on curve caps

Books:

Debt and Delusion: Central Bank Follies that Threaten Economic Disaster (Deluxe Edition)

Manias, Panics, and Crashes: A History of Financial Crises (Wiley Investment Classics)

This Time is Different: Eight Centuries of Financial Folly

Series of interest:

Yields since 1984.

Long bond (30 year)

Yield spread (30 and 2)

Two year and Fed Funds rate

There has been some agitation around the situation with wheat. Like a commodity, its long-term price is determined by supply, demand, and inventory.

The graphs below shed some light on the current inventory in the context of the last quarter of century. USDA’s Economic Research Service provides the freshly imported data.

As you can see, the supply is roughly constant after 1989. In the 90s we saw a similar period of relatively low inventory, which tended to maintain price at levels comparatively similar to today’s, with some volatility.

Because of technological advances and global warming, one might believe that the secular trend for price per bushel is down.

Series of interest:

Inventory (beginning and ending each quarter)

Monthly wheat commodity price

Monthly wheat commodity price, adjusted by CPI

Total wheat supply

Bread consumer price

Bakery and products employment

Agriculture ETF (DBA)

Grains ETN (40% wheat)

Mortgage rates have been stayed incredibly low, and some argue that now is the time or never to jump in a get a giant mortgage, courtesy of the government.

There is a striking correlation between the Federal Funds Rate and mortgage rates. And it is politically inconvenient for the Fed to increase rates while unemployment remains high. And at the rate we are going, it looks like unemployment might even go a bit higher before it plateaus.

Who knows? Mortgage rates might stay low well into 2010.

Series of interest:

Mortgage rates and Fed funds rate

Mortgage rates VERSUS Fed funds rate

When I return from travel in poor regions in the world, I am sometimes asked, half jokingly, whether I have tried dog meat.

Westerners themselves are no strangers to the idea, although Grand Ma’s recipe has been lost. Perhaps unfortunately, one might say, due to cultural prejudice. Luckily, entrails and snails recipes survived.

Quoting from Constantino Bresciani-Turroni, an eye-witness of the German hyper-inflation,

The statistics of meat consumption reveal some curious details which throw an interesting light on social conditions in Germany in 1922 and 1923. While the consumption of the better quality meats (bullocks, calves, pigs, and sheep) declined, the consumption of horse-flesh and still more, of dogs increased: obvious proof, as Wirtschaft und Statistik wrote, of the increasing poverty of the German people. From the last quarter of 1921 to the last quarter of 1922 the number of pigs killed fell from 1,416,051 to 1,131,148, while the number of horses increased from 30,967 to 47,652. During 1923 the fall in the consumption of pork continued, and at the same time the conditions of some classes became so bad that they were eventually obliged to reduce their consumption of horse-flesh. But consumption of dog-flesh increased. Statistics show that 1,090 dogs were slaughtered in the third quarter of 1921; 3,678 in the third quarter of 1922, and 6,430 in the third quarter of 1923.

Unfortunately, we stopped tracking these products. All we have on file is the Bank of Japan (BoJ) consumer price index for some odd item called “Salted and dried horse mackerel”.

Links:

Google books entry

Books:

The Economics Of Inflation – A Study Of Currency Depreciation In Post War Germany

Series of interest:

Horse mackerel and pork from the BoJ

For those of you who like to take the longer view, our problem with 1753 was fixed. It is now possible to have dates prior to 1753. For the curious, 1753 is the date when the Gregorian calendar was introduced in the UK – and the leading database company, Sybase, was based in the UK, so they banned all dates prior.

Our site’s computational engine was modified to handle dates starting 1 A.D. We don’t have a lot of new data to show you, however. It is mostly data coming from measuringworth.com and Maddison/Gapminder. That’s mostly UK inflation, and GDP and population of countries around the world.

The UK and US inflation charts show how volatile inflation was, even in periods of relative prosperity and economic development.

Books:

The Great Wave: Price Revolutions and the Rhythm of History

Tomorrow’s Gold: Asia’s age of discovery

A History of Interest Rates, Fourth Edition (Wiley Finance)

Forty Centuries of Wage and Price Controls

Series of interest:

UK population

UK inflation rate

UK Real GDP per capita

Population of China

The site has been extended to import Yahoo Finance series! Those series can be used alongside our series. Just prefix the symbol name with “ystock:”. For instance, “ystock: ^VIX” will get you the CBOE volatility index (looking unreasonably low, I might add).

Also, our charts search boxes now include auto completion (suggestions): type in “treasury bonds” and wait — you will see suggestions of series.

Links:

Yahoo finance

charts search engine

Series of interest:

VIX (from Yahoo), Fed funds rate, and 10 year bond.

Dow Jones transportation index (from Yahoo) and US Real GDP.

AMD and Intel share price.

S&P500 and Dow Jones Industrial Average.

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We have moved the site to faster servers. Hosting costs are up quite significantly, but it should be much faster now.

One early international banking services partnerships was the Order of Knights Templar – the famed military order which inspired so many fanciful stories, including the Da Vinci code. Because of their credit-worthiness, they were able to issue paper. You could have deposits with them (apparently, they did not engage in the derelict system of fractional reserve). You could write a check with them and make international wires. That’s right, folks, they had a pretty good system working back then in the twelfth and thirteenth centuries. They had their act together and grew extremely powerful. So powerful that they loaned heavily to one of the most powerful nations in Christendom: France. But the profligate French King, being an irredeemable spender, needed a new, much larger loan. And they refused to extend credit. What happened next, some say, gave rise to the superstition of Friday 13th, of which we are still wary, 700 years later.

On Friday Octber 13, 1307, Philip the Fair arrested all the Templars he could find, tortured them, had them confess abominable crimes, then burned them alive at the stake. With the tacit approval of the Pope. That’s a Fair treatment.

Last week, I spent many hours on the phone fixing a money transfer with a bank that shall remain unnamed. All the while, images of people engulfed in flames were what kept my frustration at bay. OK, not really. Actually, about 60% of the operators I talked to were trying to be helpful in their narrow range of action. But the customer service (poor choice of words, really) was so inefficiently fragmented that I spent a whole week on the phone, getting nowhere.

It was always Somebody Else’s Problem. Bank transfer? Call this number. Ah, sorry, this is not a SWIFT transaction. ACH transactions, call this other number. Initiated online? Not us, try the online service number. Account in CA? Try this one. Oh, it’s about a transfer! Call the bank transfer number (back to square one!).  Try calling the bank on the other side of the transfer. No, sorry, wrong number. Try this other one. Woops, this an ACH number, try this one instead. Nope, sorry, we can’t do anything about this, it has to come from the other bank: ask them to write a letter of indemnity. Oh, we can’t locate your transaction anymore. Perhaps the fraud department could help. Initiated online? You have to visit a local branch. From the local branch, called a bunch of other numbers. Closed today, but we have this number that you can try tomorrow. OK, let’s elevate you. And again. And again, but we refuse to give you the contact number and the case ID has not been assigned yet, just wait for a call. Which never came. Now I’m threatening to sue. That seemed to have fixed it.

Finally! I am back to square one, the money is exactly where it started, after a couple more days of haggling, and less the transaction fee, and twenty days after it departed. But I feel lucky. Sometimes it’s just a matter of setting expectations. But now, burning people after a bit of torture doesn’t seem so objectionable after all…