Money matters: A short history of nearly every fiat currency
MBMG International Ltd.
Today the so-called “dollar” is deemed by US government
fiat to be legal tender in payment for all debts. In other words, the government
is saying: “Here, we deem this stuff we print to be money, and it shall be
used in payment of all debts.” The meaning of this outrage has been lost
through the passage of time through laziness and ignorance. Let us see what the
currency markets have to say before I share with you a brief history of how we
got to fiat money in the US:
We identify two main drivers for the USD rally through 2005,
and in both cases think the effects look rather stretched already. This is NOT
to say that this trend won’t continue, but the same old fundamental arguments
are reaching maturation:
1) Firstly, the sell off in EUR/USD after the rejection of
the EU constitution in France (55%) and Netherlands (62%) is over done. Despite
the hysteria about the imminent break-up of the European Economic and Monetary
Union (EMU) and the demise of the euro, this is only slightly more probable than
Texas seceding from the rest of the U.S., given the absence of readily available
exits for member states. EU officials failed to quell investors’ concerns by
refusing to quash rumours that the Bundesbank and the German Finance Ministry
had discussed the possible break-up of the EMU back in mid May. But with the
European constitution in its current form now effectively dead and the
contentious issue of the EU budget likely to go on the back burner for at least
the next six months, the worst of the political “crisis” in the Eurozone is
now behind us.
2) Secondly, the U.S. economy’s ability to deliver
consistent positive economic surprises relative to the rest of the world is a
transitory phenomenon. To measure economic news flow in a more objective manner,
Royal Bank of Canada (RBC) Capital Markets has constructed Economic Surprise
Indices for the main countries and regions. The indices are based on rolling
one-month “windows” of the main activity releases’ outcomes relative to
consensus, expressed as diffusion indices. The graph here shows the Eurozone
index minus that for the USD against the three-month change in EUR/USD.
From a fundamental viewpoint, the three significant USD
bounces in the current bear market have all been associated with the U.S.
delivering strongly positive economic surprises relative to the Eurozone. But
economic surprises are by their nature transitory - expectations will inevitably
catch up with the positive news flow, as was the case in the last two USD
bounces. And as this happens, the structural factors that have been driving the
USD lower for the last three years come back into play and, in our view, the
trend decline resumes.
From a fundamental viewpoint, the three significant USD
bounces in the current bear market have all been associated with the US Dollar
Index being oversold (as measured by the RSI at the top of the graph).
Intermarket analysis is often a powerful tool utilized by
technicians in order to identify key inflection points in various markets and
asset classes. The main premise of intermarket analysis is that markets rarely
move in isolation to one another.
Therefore, it is often helpful to identify market linkages in order to follow
trading themes as they develop and evolve over time. Since the U.S. dollar
reached a cyclical peak in 2001, one intermarket theme that has been prevalent
has been the negative correlation between the U.S. dollar and the price of gold.
This relationship is presented on your left, where the U.S. dollar, as
represented by the U.S. Dollar Index (DXY), has been within a long-term
downtrend while gold prices have been trending higher. Note that the DXY reached
a cyclical low at 80.39 in December 2004 - just as gold prices peaked at 458.70.
However, this key intermarket linkage has broken down sharply in recent weeks,
as the DXY has risen in tandem with gold prices. Notably, voter rejection of the
European constitution in France and the Netherlands in late May has served as
the catalyst for this development. The breakdown in this relationship has
important implications for the U.S. dollar, which we examine next week.
The above data and research was compiled from sources believed to be
reliable. However, neither MBMG International Ltd nor its officers can accept
any liability for any errors or omissions in the above article nor bear any
responsibility for any losses achieved as a result of any actions taken or not
taken as a consequence of reading the above article. For more information please
contact Graham Macdonald on [email protected]
Snap Shots: Polar bears and black cats
by Harry Flashman
Have you ever tried to photograph a polar bear? Or a
black cat? Or even a white car, or a plain black one? If you use an
automatic camera set on A (for “amnesia”) then the chances are very
high that you ended up with a grey polar bear and a grey cat. Very highly
likely. The reason for this is the magic photographic number known as 18
photographers should become acquainted with the colour known as 18 percent
grey. Why? Because after you understand 18 percent grey, you have complete
control over blacks and whites in your photographs - and by that, I mean
in colour photography, not just the B&W kind.
The really dedicated photo buffs will recognize 18
percent grey as being the cornerstone of the “Zone System” and Ansel
Adams superb prints are trotted out with sage mutterings that if you
understood the zone system, then your photos would look like his too. This
is, of course, frog spawn. Ansel Adams spent many hours painstakingly
printing his B&W work, specifically burning in some areas, holding
back others and if you think he didn’t then think again.
However, here is the “short course” on the Zone
System. What you have to remember at all times is just the simple fact
that the meter in your camera knows intimately what is 18 percent grey,
and is programmed to produce as much 18 percent grey as possible. In other
words, point the camera at your subject and the meter will work out a
combination of shutter speed and aperture to give an exposure to get the
whole shot as close to 18 percent grey as possible. This is irrespective
of whatever name the camera manufacturer gives to the metering system and
how many points it meters from. The common denominator is 18 percent grey.
Now this works for the majority of shots - 18 percent
grey is close enough, and the processor at your friendly photoshop can
adjust the rest from there - but it is always a compromise. You do not
even realise what a compromise it really is until you take a photograph of
that aforementioned white car or a black cat, and see that it has been
This is one reason why I keep on saying that if you run
the camera in the fully A for automatic mode, you will only get A for
“average” pictures. What you have to do to get whites or blacks is to
run the camera in the metered manual mode instead. Remember that when you
are photographing the white car the exposure indicated by the camera is
the one that will make the white colour 18 percent grey. To get the colour
back to white it will need more light on the film.
Here’s what you do. Let us imagine that your camera
tells you that the exposure should be f16 @ 1/60th of a second. You need
more light to fall on the emulsion, so make your exposure f 11 @ 1/60th
and another at f8 @ 1/60th. That gives you both one and two full stops of
light more. One of those two will give you a white car, irrespective of
such fancy terms as automated multi-phasic metering, centre weighted
metering or whatever.
Now when photographing a black object, the camera meter
will indicate a shutter speed and an aperture to give you another 18
percent grey object. There is too much light falling on the film emulsion
this time. What you have to do is cut down on the amount of light getting
into the camera. Again imagine that the indicated exposure is f16 @
1/60th. You want to darken things, so take two shots with one at f16 @
1/125th and another at f16 @ 1/250th. Again this is one and two stops
decrease in light levels. One of these will give you a black cat!
Put the camera in metered manual mode and then if you are photographing
something white, give it one and two stops more light than indicated.
Conversely, if photographing something black, set the camera for one and
two stops less light than indicated. It works! Try it this weekend.
Modern Medicine: Is cloning the way forward?
by Dr. Iain Corness, Consultant
is a movie coming called The Island. This portrays a future direction for
mankind, though a rather well-heeled mankind, I have to say. The plot is,
that for five million dollars, you can have a clone made of yourself, which
is kept safely away from prying eyes or accident, ready to be used when you
need the odd organ or three, either through disaster or disease. And while
you are lying on the operating table, the new kidney/liver/heart is winging
its way to you by helicopter. Great for you, though not quite so great for
Now that’s the Sci-Fi movie, but has it a chance of
being our real future? After all, many concepts that were wild dreams years
ago, are reality today. Remember Dick Tracey’s two way wrist radio? The
fore-runner to today’s mobile phone. You can add in much more from the
annals of science fiction, including space travel, with people floating
around in a space station as I type this. So will we all have our own spare
parts clone, an (un)willing donor to keep us going? I believe the answer is
There are many reasons for my negative feelings, even
leaving aside the very vexed question of the ethics of cloning human beings,
especially as mobile organ replacements. The first item to consider is
whether cloning does indeed produce a “new” you? The simple answer is
that it does not. It produces an “old” you. The cells that are taken to
produce the clone are already running down their internal time clock. It
seems that the “new” cells are already the same distance down the time
line as the donor. Simplistic, I know, but it does go some way towards
understanding the problems associated with cloning.
One prediction that is true from the movie, is the cost.
Cloning is expensive. One reason is high-tech and another is the failure
rate. The famous first sheep clone called Dolly was the only success in 276
attempts! Figures indicate that more than 90 percent of cloning attempts
fail to produce a viable result, and it takes more than 100 nuclear transfer
procedures to produce one viable clone.
Even if the animal survives initially, cloned animals
tend to have more compromised immune function and higher rates of infection,
tumor growth, and other disorders (Dolly was young when she died of cancer).
Japanese studies have shown that cloned mice die early. About a third of the
cloned calves born alive die young. Just looking healthy is not a good
indicator of long term survival. For example, Australia’s first cloned
sheep appeared healthy and energetic on the day she died, and the results
from her autopsy failed to determine a cause of death.
Not only do most attempts to clone mammals fail, about 30
percent of clones born alive are affected with “large offspring
syndrome”. The same problems would be expected in human cloning.
Additionally, what about mental development? These are not important factors
in cloning sheep, not the brightest animals in the farmyard, but an
important factor in the development of humans.
A more possible way forward could be cloned organs. This
requires harvesting stem cells, and producing organs from them. In 2002,
scientists with the biotechnology company Advanced Cell Technology reported
that they had successfully transplanted kidney-like organs into cows. The
researchers created a cloned cow embryo then harvested fetal tissue from the
clones and transplanted it into the donor cow. In the three months of
observation following the transplant, no sign of immune rejection was
observed in the transplant recipient.
Another potential application of cloning is the creation
of genetically modified pigs from which organs suitable for human
transplants could be harvested (xenotransplantation). Tomorrow’s breakfast
order could be bacon and eggs and a little kidney! But that is the stuff of
Science Fiction, isn’t it?
Learn to Live to Learn: Postcards from Oxford – Part Two
with Andrew Watson
Still in Oxford. The weather is closing in. Another
opportunity then, to spend real time, with real people. Dr Helen Fail is
a leading figure in international education, with a global reputation
for cutting edge research, particularly in the area of Third Culture
Kids (TCK’s). I was lucky to be able to snatch a few moments with her
over tea and biscuits, as the rain continued to lash down outside.
Why education, Helen?
Helen Fail: “On the Lord’s Side”
I suppose it comes down to a desire to influence, shape and change
people’s perceptions and understanding of things.
That puts the teacher in a pretty powerful position?
Yes, there’s a feeling of power because you have a voice. In a sense,
people are listening to a certain perspective which they can either
accept or reject. You have the opportunity to express your perception
and understanding on whatever the subject may be.
Can you expand a little on your desire to “influence, shape and change
people’s perceptions and understanding”?
Yes. I’ll give you an example. I started as a language teacher,
enabling people to communicate and understand and relate to the world in
a different way by giving them language tools. In this way, they were
able to see and understand things differently, in a way that they
couldn’t see before. One of the things I’ve realised is that the
things I’ve wanted to communicate have changed. For example, once I
started learning about TCKs, I realised that this way of understanding
myself helped me to make decisions about my life and career. Then, I
wanted to empower other people in the same way. So, by helping teachers,
parents and kids understand the concept, I was giving them the power to
change their reaction to their life experiences.
Regarding terrorism, how does the desire to influence, shape and change
people’s perceptions and understanding of things differ from the aims
of Islamic fundamentalism?
HF: I guess
the difference between teaching and indoctrination is that, (thinks)
what you want is for people to think, read and reflect for themselves.
Certainly from a Christian perspective, people make up their own mind
and are invited to engage with a concept or theory. Religious education
in Britain, for example, is about teaching about world religions without
AW: Tony Blair talks about
“evil ideologies”. What’s your position?
The Muslim response is to draw a line between Islam and fundamentalists
talking about jihad. The actions of a minority result in bad press for
Islam. I once wrote an article in upstate New York, which I thought
nobody would ever read, about what I really thought about the situation
in Israel. (Helen and I worked at the same school in Jerusalem,
although not at the same time). People used to ask, “Whose side
are you on?” To which my response is, “The Lord’s side”. It’s
not black and white. There are so many greys.
Do you think an educationalist can be equated with an evangelist?
No, because the difference is in persuasion. The difference between
coercing you to adapt your view and asking you to make up your own mind.
Yes, I influence and try and persuade and of course there’s a danger
that teachers can abuse their position by persuasion. Teaching, to me,
is about introducing knowledge and information in order to elicit a
personal response but it’s also about respecting someone’s free
choice. For example, I can tell or advise a teenage girl about
contraception but I cannot force her to use it.
So what if you were teaching a student who supported the suicide bombers
and aspired to emulate them? How do you teach a potential “martyr”
that he or she shouldn’t do it?
think you’d no longer be in a purely teaching role. If you knew a
student was like that you’d have to take on a mentoring role and ask
them to question those areas where they’d received indoctrination.
Did you travel by bus in Jerusalem when bombings were going on?
Yes. The last time I went home in the bus I was with a student in Grade
7 and she said to me, “I’m really surprised you’ve come on the
bus. Everyone else is too scared.” I asked her if she was afraid and
she said that she was. But her mother had told her to pray and not to be
Next week: Postcard from Oxford part 3.
Heart to Heart with Hillary
I have provided for my wife for the past six years of our marriage. I
have provided for her family as well, building a small house on the
farm. She has never had to want for anything. I am a model husband, good
looking, never play up, only drink in moderation, in perfect health, a
witty intelligent companion, and considered by everyone as a “good
catch”. This week she calmly announced that she wants a divorce. I
can’t get it out of her as to why - just that she wants a divorce.
Why, Hillary, why? I have given her no cause for this. I am really
astounded by her actions. Do you have any ideas?
Yes, I have lots of ideas. Firstly, it’s probably because she has
found out after six years that she is married to a smug self satisfied,
arrogant, pompous twit. I think I’d divorce you too, but it wouldn’t
have taken me six years.
This isn’t really a heart problem, but is one that worries me every
day. We are often in Thailand and the one thing that completely confuses
me is the subject of tipping - when and how much? If the establishment
charges a “service fee”, should you tip as well? What do you do as
someone living there, for example? I believe that the wages are not high
for some of the people in bars and restaurants and they need the tips,
but I do not want to throw money away either? What’s your tip about
There are many factors to take into consideration here. Firstly, Service
Charge or no Service Charge. If the establishment adds on 10 percent
(the usual amount), then as far as Hillary is concerned - that’s the
tip. There are some places that no doubt pocket the Service Charge, but
that’s not anything of your doing, nor can you change it. That is
something between the employees and the owners to work out. However, if
Hillary feels that the waiter or service provider has gone well beyond
that which could be expected, then I reward with a little extra
something for that person, irrespective. You know the sort of things I
like - a little fawning, groveling, heavy handed refilling of the wine
glasses, complimentary chocolates at the end of the meal and lots of
In an establishment that has no standard add on Service Charge, then it
really is up to you. Small change left over or up to 10 percent is quite
normal. The Thai people are grateful for anything you leave them. It all
adds up by the end of the day.
By the way, if you leave the change (tip) on the plate, this means the
tip should go into the tip box and shared amongst all personnel. If you
place the tip in the service person’s hand, then the tip is all
theirs. This is particularly so in the bars, so remember.
Where would you suggest I take my girlfriend for a quiet romantic
evening? I intend to propose to her then, so want the surroundings to
make it an evening to remember. Have you any suggestions?
Soon to be Married
Dear Soon to be Married,
You didn’t say in your email just what it was that you wanted to
propose to the young lady. Marriage, m้nage a trois or a dirty
weekend in Chiang Rai? If you are so indecisive and wishy washy as this
all the time, I hope she says No! to all three of your proposals.
Really, my palpitating Petal, you should know your girlfriend’s taste
more than I do (I’ve never met her I am sure, and as far tasting...)?
Take her to someplace where she is happy and enjoys the surroundings and
go from there. Best of luck!
You are forever telling people that they live in Thailand and should
learn Thai if they are living here for some time. I have retired here,
but at my age (62), I find it very difficult to learn a new language. Is
there any quick way of doing this, or do you have any special tips for
people trying to learn this Thai language? I can assure you this
question is genuine and a genuine answer is appreciated.
Yes, Petal, I do have to remind many expats that this is not their
country, so why should the locals have to learn your language? I also
realize that for many expats, Thai is a difficult language to learn, as
it is not derived from Latin roots like so many European languages. Try
and find a good language school in your area (ask around fellow expats),
and then go and learn written as well as spoken Thai. I know that many
of you will say, “We just want to be able to speak it,” but by
learning the script, it gives you a greater understanding of the sounds,
which is the all important factor with the Thai language. And it
certainly makes it easier when traveling up-country, to know which
direction you are headed! It is worth the effort, Petal. Try for six
months at an hour a day. And do the homework!
Psychological Perspectives: What makes us the way we are?
by Michael Catalanello,
Prime Minister Thaksin Shinawatra
recently appeared alongside former Prime Minister and chairman of the
National Reconciliation Commission (NRC) Anand Panyarachun in a televised
interview to discuss their respective approaches to the political unrest
and violence in the Southern Provinces of Yala, Pattani, and Narathiwat.
Mr. Anand has proposed strategies for building trust and reconciliation
between the government and local Muslim communities. Prime Minister Thaksin
has promoted a tougher stance, emphasizing the use of policing tactics to
quell the violence.
It was interesting to notice the stark contrasts between
these two Thai leaders. While both men have risen to positions of national
and international prominence, their respective personal styles, their
politics, and their approaches to the challenges posed by the situation in
the South appear fundamentally different.
We usually take it for granted that people exhibit
distinctive differences from one another in many of the attitudes that they
hold, in their social behavior, and in the way they respond to events.
Psychologists use the term personality to refer to an individual’s
characteristic pattern of thinking, feeling, and acting.
Numerous theories of personality have gone in and out of
fashion during the 100 or so years since Freud proposed the first
comprehensive theory of personality. Theorists have proposed personality
traits such as introversion and extraversion to try to
capture the individual differences we attribute to personality. Even
attitudes that underlie different political persuasions like those of Anand
and Thaksin have been tied to personality characteristics.
Psychologists who study personality have generally
attempted to narrow the number of personality traits to a minimum, while
still capturing the rich variety of personality styles found among humans.
They have worked to develop valid and reliable instruments to measure those
traits, and have looked for relationships among the proposed traits and the
behavior of those possessing them.
When we think of all the ways people can vary in
personality, the question arises as to the origins of these differences.
How do we account for the fact that some people seem much more conventional
in their thinking, while others exhibit a great deal of originality? Why do
some people crave adventure and risk, while others routinely appear more
cautious? Why do some people characteristically exhibit hostility and
aggressiveness, while others seem more even-tempered and sociable in their
Answers to these questions are usually variations on the
theme of “nature versus nurture.” Our attitudes, emotions, and
behavior are influenced by our biological nature, by our experiences in
life, and by interactions between the two. Differences of opinions usually
revolve around the relative importance attributable to heredity versus the
Psychologists have traditionally emphasized
environmental influences on behavior. Since personality differences appear
to begin to emerge very early in life, a major focus was placed upon early
childhood experiences, relationships with parents, and exposure to early
trauma. Recent research, however, has suggested that heredity plays a much
more important role than previously imagined.
In order to sort out personality differences
attributable to heredity versus environment, psychologists typically study
twins. They select samples of identical and fraternal twins raised
together, as well as those raised apart. Identical twins raised together
share a common genetic make-up, and similar upbringing. Measured
differences in their personalities can serve as a baseline for comparing
differences found between identical twins reared apart, fraternal twins
reared together, and fraternal twins reared apart.
Psychologist Auke Tellegen and his colleagues at the
University of Minnesota reported on a very well-designed investigation of
this type in 1988. Results indicated that the effects of environmental
factors upon most measures of personality appeared negligible. Genes, it
appeared, were the primary determinants of personality differences. These
findings, contrary to widely held beliefs at the time, are, nevertheless,
consistent with other studies of personality differences using twins.
Investigations of this sort typically reveal some pretty
amazing parallels between the lives of identical twins raised apart and in
isolation from one another, in terms of similar interests, habits, family,
and career paths. In one particularly remarkable example, a set of
identical twins born in Trinidad were separated shortly after birth. One
was taken to Germany where he was raised Catholic and exposed to Nazism.
The other was raised in Trinidad as a Jew.
When reunited by researchers in their late forties, both
men appeared for the study wearing blue double-breasted suits, mustaches
and wire-rimmed glasses. They exhibited similar gestures and mannerisms.
Both had a taste for spicy foods and sweet liqueurs. They had a habit of
flushing the toilet before using it, liked to dip buttered toast into
coffee, and enjoyed sneezing in elevators to startle others.
The conclusion that genetic factors are a prominent
determinant of personality may be disappointing to those psychologists who
devote their lives to studying the effects of environmental variables like
child-rearing practices, socioeconomic status, and parental educational
status. Compared to the influence of our genes, it appears that
environmental factors amount to small potatoes when it comes to shaping our
Dr. Catalanello is a licensed psychologist in his home State of Louisiana, USA, and a member of the Faculty of Liberal Arts at Asian University,
Chonburi. You may address questions and comments to him at [email protected], or post on his weblog at