2010 July | Capital Flow Watch

Phony financial reform

Dodd-Frank won’t make better markets

By John Schroy, on July 17th, 2010 |

Financial markets can be extremely complex, with many areas that can fail and break.

Unfortunately, instead of a ‘game-changing’ confidence-inspiring reform, the Obama administration presented the United States with the Dodd-Frank Act — a legislative miscarriage that has the potential to hold back recovery and impair the position of New York as a world financial center for decades — unless repealed or drastically amended.

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Corporate Governance:

Stock buybacks are still bad for investors

By John Schroy, on July 7th, 2010 |

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The evidence against the wisdom and fairness of stock buybacks continues to build, but the Main Stream Media still doesn't understand.

M. A. Gumport of MG Holdings has published the July 2010 edition of the Buyback Monitor, showing corporate stock profits for 275 firms over the period 2000-2010. Without buybacks, share prices for the group now would be at least 5.3% higher (nearly 10% higher after adjustment for foregone interest income).

The lack of attention to protecting long-term investors against the massive fraud of stock buybacks is just one more sign that it will be some considerable time before the US works its way out of the present financial morass.

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Euros versus the dollar

Multiple central banks weaken the euro

By John Schroy, on July 2nd, 2010 |

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The reputation of the euro will depend upon the reputation of the European Central Bank and its ability to control the volume of euros in circulation.

The multiplicity of independent central banks is the Achilles heel of the eurosystem. A bank, controlled by the government, in a fiat money environment, that acts as the paying agent for that government, has — in effect — the capability to print money (although not necessarily banknotes).

Imagine, tomorrow the headlines in the Wall Street Journal read “$100 billion is inflationary euros issued without the knowledge of the European Central Bank”. What would be the effect of the news on the value of the euro as a reserve currency?

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