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vineri, 1 aprilie 2011

SEOmoz Daily SEO Blog

Introducing FutureRank BETA - A Rank Predictor With Surprising Accuracy

Posted: 01 Apr 2011 02:18 AM PDT

Posted by adamf

I'm pleased to announce SEOmoz's latest tool, FutureRank, is now available in beta and is free to anyone for the the next 48 hours (afterward it'll be PRO only). FutureRank attempts to predict what might seem impossible: how your pages will rank next week, next month and next year. Before you dive in and try this exciting tool yourself, it's important you understand how it works, and it's limitations.

You start by entering a keyword, the URL of a page that currently ranks for that keyword, and the approximate current rank. (Why approximate? Because most of the prediction is based on the data in our existing data store; what you enter is used a start point for our prediction models.)

Tool

After clicking the button, it will take about 30 seconds to run the prediction model (we'll try and keep you entertained while you wait). After the calculations are completed you'll be presented with the predicted ranks for next week, next month and next year, and the corresponding level of confidence.

Result

I know your wondering how could we be so confident with predictions so far in the future? Well, it depends on one big assumption that it's important to understand before using the tool.

The accuracy depends on one big assumption

The FutureRank tool runs with one big assumption: that the SEO activities you've been performing for a given keyword and page will remain stable over the next 12 months. What does this mean? To use the Zappos screenshots above as an example: let's pretend Zappos has been spending about 10 hours each month to try and rank for keyword Yellow Shoes (not likely, but let's pretend). The tool assumes that Zappos will continue that same level of effort of 10 hours a month for the next week, month and year. For the tool to be accurate your level of effort towards optimization for a given keyword / page must remain constant. It doesn't matter if that's no effort put toward optimization or 40 hours a week, it just needs to remain constant.

The accuracy of the model also depends on the keyword because we have a varying amount of data for our each keyword that's entered. Despite this, we were shocked that keywords that our system has never seen yielded surprisingly high accuracy-- our brilliant engineers have told us they were able to approximate changes to a given SERP by analyzing root words in a given keyword phrase. The tool is less accurate however, with one word keywords that our system has never seen and the confidence scores in the tool will reflect this.

We've been testing the tool internally for the past few months and have been quite surprised by the accuracy. In the cases where the tool incorrectly predicted the rank, it was often keywords that we had been ignoring and began optimizing soon after making the first prediction, but after a month of optimizing we found that the tool adjusted for this change and became more accurate when we ran a prediction a month later.

Free access for the next 48 hours, limited to PRO afterwards

We'd like everybody to have an opportunity to try the tool and provide feedback. After 48 hours, the tool will only be accessible for SEOmoz PRO members. Please give it a try, and let us know what you think using the Feedback link the left side of the screen.

How does FutureRank work?

It may seem like we're using a time machine to make these predictions, and our design team had a little fun with that idea. While I'd love to say that SEOmoz has harnessed the power of space and time, it's actually not as complicated as you might think-- it just requires a lot of data - no flux capacitor required.

Between crawling the web to create our Linkscape index and monitoring aggregate performance data for tens of thousands of websites, SEOmoz collects a large set of data on the web's link graph, ranks, traffic and the composition of a wide range of SERPs. During a brainstorm session on how we could use this valuable data to create new tools for our PRO members, Cyrus from the customer team, jokingly suggested we create a tool to predict the future rank of a given web page.

While most of us chuckled at the idea, a few of our engineers began looking at our data and creating some simple prediction models. Within a few weeks they had developed an internal alpha tool that was moderately accurate and after a few months of tuning to the prediction model to real results we thought it was time to release the beta to the Moz community.

In short, our prediction model is based on analyzing the prior ranks of both your page, and the other pages in the SERP, the Moz metrics numbers over time (Domain Authority, Page Authority, MozRank, MozTrust), and machine learning models of the search engine's ranking factors. In the next few weeks we'll post a more detailed explaining more details about the prediction model.

Beta limitations

The tool currently requires you to enter the approximate current rank of the page (in a future revision we'll do this automatically).
Only works for Google US search at the moment (we hope add other locales soon)
As mentioned previously, the predictions are only accurate if you continue SEO activities at the same level of effort (regardless of if that's low, medium, or high).
The accuracy varies by the which keyword you choose to analyze the more common the keyword the more accurate the prediction, but the tool works surpassingly well with long tail keywords as well.

Does rank matter anymore?

Many have been discussing the merits of monitoring rank given how much it varies by search, their geolocation, and the influence of the social signals. Given this variance amongst users, the more valuable performance indicators might be traffic or an average rank among a wide range of searchers/locations. However, until a robust method exists to measure average rank across all your keywords, we believe rank is still worthwhile performance indicator (so long as you're also measuring the traffic you receive from said keywords).

We'd love your feedback

Please try the tool out and let us know what you think of the tool in the comments below!

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Which Link Metrics Should I Use? Part 2 of 2 - Whiteboard Friday

Posted: 31 Mar 2011 02:19 PM PDT

Posted by Aaron Wheeler

We all know that, at first, it can be really difficult to decide what the most valuable link metrics are and when to use them. Last week, Rand outlined and defined a variety of metrics that are used to assess the respective values of domains, pages, and links between them. This week, he's back with the stunning conclusion: how to actually use these link metrics in your research and how to choose which metrics to use for given research situations. If you were ever confused about when you should be using PageRank and when you should be using mozRank, fret no longer!

Video Transcription

Howdy, SEOmoz fans! Welcome to another edition of Whiteboard Friday. Today the exciting conclusion, Part 2 of 2, on which link metrics to use. So, last week we discussed in depth a ton of the link metrics that are available, what they mean, what they do, how you can interpret them. Today I want to walk through some of the specific tasks and projects that you are going to be involved in when you are doing SEO kinds of things and which metrics can help you to accomplish those specific tasks.
First up, let's say I am doing a high level SERPs analysis, something like the keyword difficulty tool output report where it is trying to give me a sense of who is in the top 10, who is in the top 20. Why are they ranking there? Is it because they are an exact match domain? Do they have a lot of good anchor text? Do they have a ton of links into them? Is it because their domain is important or their page is important? We can look at a few key metrics. I like looking at page authority, which is that aggregate of all the mozMetrics and domain authority and then maybe the number of linking roots and C-blocks just to give me a rough idea of kind of what I am dealing with. That high level SERPs analysis is great when I am doing like a keyword difficulty report trying to determine which keywords to go after, whether it is roughly possible for me to be ranking in those sectors.
If I want to do some link quality analysis, so I am looking particularly at a link and trying to determine is this link helping me to rank? Is it potentially hurting me? If I am looking maybe at a client's website, say I was doing consulting or I am a new SEO in an in-house position and I am trying to analyze whether some links that were built previously are questionable or not, there are some really good ways to do that. One of my favorites is looking at PageRank versus mozRank and mozTrust.
Normally, what you should see is that PageRank and mozRank are pretty close. If PageRank is a 3 and mozRank is like a 4.5, it might be okay. It's a little on the border. If is a 3 and a 3.5, oh, that's, you know, that's perfectly fine. That's normal. We should expect that. If, however, I am looking at like a 3 and a mozRank is like a 5.8, something is fishy, right? Clearly, I mean, Google probably knows about more links than SEOmoz does and mozRank, boy, for it to be that high and PageRank to be that low, something might be up. Something might be going on where this site is selling links, Google has caught them, they are doing something manipulative. This could be a problem. Then I also like comparing mozTrust, because a lot of times, you won't see PR scores, especially for a lot of new sites and pages. Google hasn't gotten the data there, or they have an updated PR, but that site has built a lot of links in the meantime. By the way, you do want to be careful of that too when you are comparing PR and MR. But mozRank and mozTrust, if I see like a 5.8 and a 7.2, this is probably a phenomenal link. If I see a 5.8 and a 2.2, that's really, that's a bad sign. That usually means that this page, this site or this page has gotten a lot of links, but from a lot of very questionable sources. Otherwise, their mozTrust should be quite a bit higher.
So, those types of analyses along with looking at not just the number of links but the number of external versus internal links, if it's a lot of internal links, maybe that is boosting up the ranking, but it will be easier to overcome than a high number of external links and followed/no-followed. If it is a lot of no-followed links coming to the site, oh that is a different story than if all the links are followed.
Now, if I am looking at outreach and popularity, I am trying to say, how popular is this blog? How important is this news website? How big and popular on the Web do I think this forum is or Q&A site or community? Then, I want to be looking at some of those high level metrics, but I might want to dive sort of one step deeper and look at, yes, domain authority. I really care about domain metrics here, right? Not individual pages on those sites. So, I am looking at Domain mozRank and Domain mozTrust, which are the same thing as mozRank and mozTrust but on the domain wide level, and then I might care a lot about the linking roots and C-blocks, because that tells me a raw popularity count. How many people on the Web have referenced this guy compared to other people?
Now, if I am looking and trying to sort by the most helpful links to raise my ranking, say I am analyzing a set of 50 blogs and I want to decide, who am I going to guest blog for first? Who do I really think is going to be providing that value? Or I have the opportunity to sponsor or speak at a conference or contribute in some way, and I know that I can contribute the content or whatever I need to, to get those links. I really care a little bit less about the metrics and a few about these big three questions. So, I would ask you before you look at the metrics to ask yourselves these three questions, particularly if you are doing that sort of detail level analysis.
Number one, how well does that page or that site rank? If you search for a few keywords that are in the title tag of this particular page or the homepage of the site and it does not come up in the number one or number two positions, that might not be a good sign. If you search for four or five keywords that compose a phrase in the title and it is still not coming up, something is seriously wrong there. There might be some issue with that site in Google.
How relevant and useful is it? Is this site going to send actual traffic? Was the link editorially given? Is it a true citation that represents an endorsement from one site, one page to another? If that is not the case, you might be in trouble in the future. Even if Google hasn't caught it yet, Bing hasn't caught it yet, in the future, that might be causing problems. It is just not worth it. Go spend your time on other links that are editorial, sincere citations.
Do the sites and pages it links to rank well? This is a great way to analyze directories or link lists or those kinds of things and say, oh, this looks highly relevant. It is a pretty good site. If the pages that it is linking to don't rank well for their keywords, that's a bad sign. If a few of them don't, okay maybe, you know, everybody links to a few bad apples. But if a lot of them are not ranking well, something is going on there, right?
Next, I might look at some metrics like mozRank versus PageRank as we did above, mozRank versus mozTrust, the number of links and linking root domains just to get a sense of these. But those three questions, more so than any metric, are going to really answer the question of how helpful will this particular page or site be in raising my rankings if I get a link from them. Next, second to last here, is sorting of links. So if I want to do a rough or a raw sort, I have a bunch of links that I exported from Google, that I exported from a tool that ran that analyzed a bunch of pages and figured out whether there was usefulness. Maybe I used the – in SEOmoz Labs there is that great tool to help me find all the search queries that I could use to find potential links. I think it is the, what is that called? I think it is the Link Acquisition Assistant. So, the Link Acquisition Assistant might export a bunch of raw lists of pages, and if I want to do some just raw sorting to get a general sense of importance before I start asking these questions, PA/DA are really good for that and so is number of linking roots. So inside the web app, you will see a lot of these. We tend to show at least those three metrics on most everything so you can do a rough sort.
Finally, last but not least, if I am doing a deep SERPs analysis, where I really want to know why does this particular page, why does this particular site rank where it does? Why is this 3 and this 2 and this 4? I want every metric I can get my hands on. The reason is because when you analyze these things all together in Excel, you can see weak points, strong points. You can get a sense of what Google is using or Bing is using in that particular grouping or algorithmic result to try to determine who should rank higher and lower, and that will give you a great sense of what you might need to do to accomplish those rankings.
All right everyone, I hope that this two part Whiteboard Friday extravaganza has been great for you. I look forward to the comments on the blog. Take care.

Video transcription by SpeechPad.com

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Seth's Blog : Don't be a fool

Don't be a fool

There's a day (actually, two) reserved for swapping out the batteries in your smoke detector.

Perhaps today could be a day for backing up all the data you care about. All your music, say, or your passwords or your files.

If you need a hard drive, here are three. (Or be double safe and use Dropbox.) But that's not the hard part. The hard part is doing it before you go to bed tonight. And storing it at a friend's house when you're done.

If you care about it, back it up. (After I wrote this, saw this well done pre-steal).

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West Wing Week: "Under the Big Blue Whale"

Your Daily Snapshot for
Friday, April 1, 2011

West Wing Week: "Under the Big Blue Whale"

This week, President Obama focused on the situation in Libya, monitoring conditions on the ground and keeping Congress and the American people informed as the mission transitions from U.S. to NATO command. Education month also continued, with the President making stops at a multicultural high school in Washington, D.C., and dropping in on a science fair in New York City. In the latest installment of Advise the Advisor, Secretary of Energy Steven Chu asks for your feedback on meeting President Obama’s goal of reducing our oil imports by one-third in a little over a decade.

Watch the Video.

Seth's Blog : Introducing white space links

Introducing white space links

The challenge of monetizing the web is a tricky one, but a new venture launched right here and right now is out to solve that problem.

YOU FOUND ONE. CALL US TO BUY THIS SPACE!

It's called whItespAcelInks.

VISIT OUR SNACKBAR.ORG PLEASE

There's all this unused white space on the web. Spaces in between paragraphs or links. Wasted.

ARE YOU THIRSTY? TIME FOR A SOFT DRINK.

Consumers are tired of being overwhelmed by ads and by pages that are stuffed to the gills with ads. What if the ads were invisible? What if we could insert links into the white spaces, links you didn't have to see but could still be clicked on? What if those ads were carefully targeted, location-based and mobile?

IT WORKS FOR LINKS, TOO: http://www.squidoo.com/seth

This is even better than permission marketing. It's invisible marketing.

PLEASE DON'T TELL ANYONE

In one fell swoop (does anything ever happen in two fell swoops?) we can double or triple the ad inventory of any website! And there's no need for complicated creative, because, after all, the links are invisible.

Some highlights from the funding plan:

We will track every user, protecting privacy by never talking about the fact that we're doing it.
We will create persistent browser tools that permit us to generate whItespAcelInks revenue even when you're not online.
There will be no push back from regulators because the links are invisible.
Will there be Android? Yes. There will.
An iPad app? I can't believe you even need to ask. In fact, the iPad app will be so appy that people will pay for it by subscription.

HAVE A GOOD APRIL. DON'T TAKE ANYTHING AT FACE VALUE.

First round funding, announced today, is $11 million. We wanted to keep it modest and prove ourselves in the marketplace. The biggest challenge for us going forward is that the service only runs one day a year.

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joi, 31 martie 2011

Mish's Global Economic Trend Analysis

Popeye Comments on Events in Japan
Fed Releases 895 PDFs in Response to Court Order; Fed Does Not Disclose Collateral for Loans; Why Secrecy is a Problem; FDIC's Role in the Mess
Geithner's Blatant Lies at the G20 Meeting; Four-Pronged Solution

Popeye Comments on Events in Japan

Posted: 31 Mar 2011 04:14 PM PDT

I just received an email from Popeye regarding the nuclear crisis in Japan. It was a short message: "That's all I can stands and I can't stands no more." Popeye was upset over all the hype.

Yes, there is a catastrophe in Japan. Yes, the reactors are going to be unusable. And yes there is a huge problem regarding radioactive water.

Yet, any rational person could figure all of that out weeks ago.

So with each passing minute, someone, somewhere has to trump up something regarding the nuclear crisis in Japan to absurd levels.

As a prime example, please consider Who Are the Liquidators?

The prime minister of Japan has said that his government is "not in a position where we can be optimistic" about the Fukushima Daiichi Nuclear Power Plant.

Is there any logical conclusion to draw from that statement other than that a large chunk of Japan is going to be uninhabitable?

Blue Ribbon For Hype Award

There is no point in reading an article beyond such absurd hype. There are hundreds of logical possibilities and conclusions one might draw.

The first thing on my mind certainly would not have been that a "huge chunk of Japan was about to become uninhabitable".

I would have thought something along the lines "the Fukushima Daiichi Nuclear Power Plant is totally destroyed". However, I assumed that well over a week ago.

Note that the author did not even phrase his opinion as a "possibility" but rather as an inevitable "logical conclusion".

When you hit a sentence like that, you know the author is in competition for the blue ribbon for hype award. There is no point in reading further because the author has already completely discredited himself.

However, I do point out the site trumping up that "logical conclusion" has an appropriate name This Can't Be Happening.

Presenting hype as a forgone logical conclusion needs to stop.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Fed Releases 895 PDFs in Response to Court Order; Fed Does Not Disclose Collateral for Loans; Why Secrecy is a Problem; FDIC's Role in the Mess

Posted: 31 Mar 2011 10:06 AM PDT

At long last the Fed has responded to court pressure and the freedom of information act to release the names of banks receiving funds during the height of the crisis. The Fed packaged information into 895 individual PDFs and no doubt someone will compile a list soon.

Unfortunately, no one can really say what risks the Fed took because the Fed does not disclose what collateral it accepted for the loans.

Please consider Fed Releases Discount-Window Loan Records Under Order

The Federal Reserve released thousands of pages of secret loan documents under court order, almost three years after Bloomberg LP first requested details of the central bank's unprecedented support to banks during the financial crisis.

The records -- 894 files in PDF form that must be individually opened and read -- reveal for the first time the names of financial institutions that borrowed directly from the central bank through the so-called discount window. The Fed provided the documents after the U.S. Supreme Court this month rejected a banking industry group's attempt to shield them from public view.

"This is an enormous breakthrough in the public interest," said Walker Todd, a former Cleveland Fed attorney who has written research on the Fed lending facility. "They have long wanted to keep the discount window confidential. They have always felt strongly about this. They don't want to tell the public who they are lending to."

The central bank has never revealed identities of borrowers since the discount window began lending in 1914. The Dodd-Frank law exempted the facility last year when it required the Fed to release details of emergency programs that extended $3.3 trillion to financial institutions to stem the credit crisis. While Congress mandated disclosure of discount-window loans made after July 21, 2010 with a two-year delay, the records released today represent the only public source of details on discount- window lending during the crisis.

"It is in the interest of a central bank to put a premium on protecting its reputation, and, in the modern world, that means it should do everything to be as transparent as possible," said Marvin Goodfriend, an economist at Carnegie Mellon University in Pittsburgh who has been researching central bank disclosure since the 1980s.

"I see no reason why a central bank should not be willing to release with a lag most of what it is doing," said Goodfriend, who is a former policy adviser at the Richmond Fed.

The Fed documents released today show the central bank providing credit to borrowers large and small. A page described as "Primary Credit Originations, February 5, 2008" lists the New York branch of Deutsche Bank AG with a loan of $455 million from the New York Fed. On the same day, Macon Bank is listed with a $1,000 loan from the Richmond Fed.

Lending through the discount window soared to a peak of $111 billion on Oct. 29, 2008, as credit markets nearly froze in the wake of the bankruptcy on Sept. 15, 2008, of Lehman Brothers Holdings Inc. While the loans provided banks with backstop cash, the public has never known which banks borrowed or why. Fed officials say all the loans made through the program during the crisis have been repaid with interest.

The Fed was forced to make the disclosures after the U.S. Supreme Court rejected an appeal by the Clearing House Association LLC, a group of the nation's largest commercial banks.

Discount-window lending was not the largest source of the Fed's backstop aid during the crisis. Bernanke also devised programs to loan to U.S. government bond dealers, and to support the short-term debt financing of U.S. corporations.

Also consider Bernanke's Fed Responds to Pressure for More Transparency

For most of its 98-year history, the Federal Reserve has operated with all the transparency and enthusiasm for change of the Vatican. Now the ultra-secretive Fed is starting to change its ways, if somewhat grudgingly. Some of the new openness, such as Chairman Ben S. Bernanke's plan for quarterly press briefings, is the central bank's idea. Much of it comes under duress.

"The free-market system only works if it's fully informed," says Lynn E. Turner, who battled the Fed over disclosure issues while serving as the Securities and Exchange Commission's chief accountant from 1998 to 2001. "There's a lot of similarity between the Fed and an SUV with blacked-out windows."

The Fed says such calls threaten its core function: preserving market confidence by acting as a lender of last resort. Publicizing the names of discount-window borrowers could spark bank runs or discourage sick banks from seeking help until they are fatally compromised. "The full monty may not be a good thing," says Frederic Mishkin, a former Fed governor.

For the Fed, keeping information from investors is nothing new. Congress last year had to pry loose the details of $3.3 trillion worth of crisis-fighting programs that relied on the central bank's vault. In the late 1990s, the Fed successfully resisted the SEC's attempt to require banks to stop using hidden funds, or "cookie jar reserves," to smooth quarterly earnings, says Turner.

Some former Fed insiders say the public should routinely be clued in when private institutions tap the public purse, in the same way the SEC requires companies to inform investors of major financial events. "This should be material information. Investors should have the right to know," says Roberto Perli, a former Fed board economist who is managing director of International Strategy & Investment in Washington.

So what did we find out?

Not much, because the Fed did not disclose collateral.

Notice the misguided policies of the Fed and FDIC though. By preventing all bank runs for decades, the Fed instilled an artificial and undeserved confidence in banks.

It would be far better to disclose banks in trouble, let them go under one at a time quickly, rather than have a gigantic systemic mess at one time.

Secrecy, in conjunction with fractional reserve lending is an exceptionally toxic brew. Overnight trust can change on a dime, system-wide, and it did.

Moreover, by keeping poor banks alive (and my poster-boy for this is Chicago-based Corus Bank for making massive amounts of construction loans to build Florida condos), more money pours into failed institutions further increasing toxic loans.

Failure of FDIC

FDIC is a part of the problem. When the government guarantees deposits, everyone believes in every bank no matter how poorly they are run or what risks those banks poses. No one has any incentive to seek a bank with good lending practices. Instead they seek a bank that pays the highest yield because it is guaranteed.

Driving deposits to banks that take the most risk is no way to run a system. Yet, that is precisely what the FDIC does, up to the FDIC limit of course.

People look at FDIC as a big success because there was no crisis for decades. Instead, we had one gigantic crisis culminate at once, hardly a fair tradeoff for periods of artificially low problems.

FDIC is Fraudulent

No only is FDIC a problem, it is outright fraudulent to guarantee deposits that cannot possibly be guaranteed in a fractional reserve Ponzi-scheme system.

For further discussion of the problems with fractional reserve lending please see Central Bank Authorized Fraud; Fractional Reserve Lending Problems Go Far Beyond "Duration Mismatch"

Also see an excellent discussion on the Acting Man blog: Fractional Reserve Banking Revisited

Ending the secrecy is easy. Simply abolish the Fed. However, that not the only thing that needs to happen. For a look at solutions, please consider Geithner's Blatant Lies at the G20 Meeting; Four-Pronged Solution

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

Geithner's Blatant Lies at the G20 Meeting; Four-Pronged Solution

Posted: 31 Mar 2011 01:52 AM PDT

Proving that he cannot find his ass with two hands and a road map, Treasury secretary Tim Geithner says inflexible currencies are biggest monetary problem.

Tightly controlled exchange rate regimes are the main flaw in the international monetary system and the solution is simple, U.S. Treasury Secretary Timothy Geithner told a G20 meeting on Thursday.

In a thinly veiled swipe at the Chinese hosts of the seminar of the Group of 20 wealthy and developing economies, Geithner said that countries should have flexible exchange rates and permit free flows of capital to be major players in the global currency order.

Both French President Nicolas Sarkozy and Chinese officials have said it is time to consider bringing the yuan into the basket of currencies that constitutes the SDR, which is currently restricted to the dollar, euro, yen and pound. Geithner suggested that certain conditions should be met first.

"We believe that currencies of large economies heavily used in international trade and financial transactions should become part of the SDR basket, and that to achieve this objective, the concerned countries should have flexible exchange rate systems, independent central banks, and permit the free movement of capital flows," he said.

Emphasizing that solutions to the global monetary system's problems rest at the national level, Geithner said the United States had made progress in fixing the policy mistakes that caused damage in the global financial crisis but still had work to do.

"We are committed to ... fiscal reforms that will reduce deficits as a share of the economy to three percent over the next several years so that we stabilize the ratio of debt to GDP at a level that will not threaten future economic growth," he said.

Lies, Lies, and More Lies

It is hard to know where to start disputing the lies. Clearly the US has shown no interest in fixing the budget deficit. Republican and Democrats are locked in a battle over $30 billion, an amount less than 1% of the budget, and a mere 1.875% of the $1.6 trillion deficit.

For more on the battle, please see Pissing and Moaning Over 1.875% of the Budget

More importantly, does anyone in their right mind think that had China floated the Yuan, we would not have had this global crisis?

Rampant credit expansion, unbridled central bank stimulus, deficit spending, and interest rates held too low too long is what created the crisis.

China still suffers from rampant credit expansion, and unbridled central bank stimulus, and interest rates held too low too long. The US and EU suffer from two of those. In addition, the EU has a myriad of problems stemming from a currency union but no fiscal union.

Japan has a debt to GDP ratio of 200% and growing and Keynesian clowns think the solution for Japan is to go deeper in debt. For that discussion, please see Window for More Idiocy is Always Open

Four-Pronged Problem

Central banks micromanaging interest rates
Factional reserve lending
No enforcement mechanism to solve trade imbalances
Rampant deficit spending in country after country

For a discussion of the problems with fractional reserve lending please see Central Bank Authorized Fraud; Fractional Reserve Lending Problems Go Far Beyond "Duration Mismatch"

Also see an excellent discussion on the Acting Man blog: Fractional Reserve Banking Revisited

When Nixon closed the gold window, the enforcement mechanism (settling trade deficits in gold) went out the window with it. That was the last check on fiscal sanity everywhere, and created a license for governments to spend, central banks to print, and trade imbalances to soar.

IMF SDR Non-Solution

Buffoons will be all over Geithner's and Sarkozy's statements predicting the end of the dollar and the beginning of the Yuan as a reserve currency. Forget about it.

Look at the four problems above. Does the IMF wet dream of SDRs (special drawing rights) fix anything? What backs SDRs? What is the enforcement mechanism for curing trade imbalances? Is the Yuan going to be a major reserve currency?

The answers are No, Nothing, None, No.

And "No Timmy Boy", tightly controlled exchange rate regimes are not "the" problem but rather an obscure symptom of the problem.

Giethner said the solution was not complicated. That depends on the meaning of "complicated".

Four-Pronged Solution

Institute a 100% gold-backed dollar
Kill fractional reserve banking
Abolish the Fed (Central banks in general)
Balanced Budget Amendments

Do those things and problems will go away. China will not be able to fix its currency, print like mad, and waste money on enormous property bubbles. Nor will any government be able to print like mad and get away with it.

Blaming the Yuan is like blaming pimples instead of blaming oily skin that causes pimples. China is nothing more than a convenient scapegoat for failed policies of the Fed, the Bush administration, and the Obama administration.

Unfortunately, governments do not want to fix the problems because they all want to print like mad and they all want to do what they want, when they want. Eventually however, the market takes matters into its own hands like it did with Greece.

Bear in mind I do not think it would be possible to implement my Four-Pronged solution big bang, but it certainly could be phased in over a number of years.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com
Click Here To Scroll Thru My Recent Post List

vineri, 1 aprilie 2011

SEOmoz Daily SEO Blog

SEOmoz Daily SEO Blog

The accuracy depends on one big assumption