Gold World News Flash |
- Times That Try Our Souls
- Canadian Mining Stock Warrants, T+3, And Your Money
- Inflation vs. Deflation: Elevating the Debate
- Daily Dispatch: Talk vs. Action on Rare Earths
- John Williams: Times That Try Our Souls
- Arizona, Borderlands and U.S.-Mexican Relations
- Hourly Action In Gold From Trader Dan
- Jim?s Mailbox
- Don't Bet On It (Mass Forgiveness)
- China Fires Another Warning Shot
- Balance Sheet Lies, Bond Bubbles, Misuse of Debt and Hidden Risks
- China – The Reality of the Bubble... Iran War to Advance Global Currency?
- Gold
- Same Old, Same Old
- The Bullion Banks Go Short Another 24.3 Million Ounces of Silver - Mar 13, 2010
- Crude Oil Holdings Steady Despite Elevated Inventories, Gold Win Streak Reaches Six
- Hedging Chaos with Gold
- Yellow & Black Gold Shine Compared to the SP500
- The US Government's Secret Plan to Destroy the Dollar
- International Savings Rates Bode Ill for US Markets
- Gold Seeker Closing Report: Gold and Silver End Slightly Higher
- Gold Leader Board July 2010
- Silver and Gold Prices Appear to be Completing Shallow Corrections of Their First Rise Up Off the Lows Last Week
- Agflation fears grow as Russia halts grain exports
- A Cruel Summer for Hedge Funds?
- Christopher Barker: China opens the floodgates for gold and silver
- Real gold or paper gold -- which do you own?
- Dysfunctional Price Signals are Distorting the Housing Market
- Premium Update #33.4 Junior Gold Stocks & New JR Index
- If you can fractionally reserve gold,1 ounce is worth 40, 50, or 100
- If you can fractionally reserve gold,1 ounce is worth 40, 50, or 100
- You've seen my videos on gold and silver bullion. Take a look at 1 kilo silver coin
- US Treasury Secretary a True Believer in Economic Recovery
- And Then There Were Two: Rumor Romer Resigning From Obama Economic Think Tank
- Guest Post: Fuck The Deficit (Or Will The Deficit End Up Fucking Us?)
- Emerging Markets Shed the Skin of US Consumers
- Looking Beyond Tomorrow's Non-Farm Payroll Number To Spot A Negative Shift In Structural Unemployment
- Next Up: A Spot Gold ETF With Storage in Singapore
- Money & Markets Charts ~ 8.05.10
| Posted: 05 Aug 2010 06:07 PM PDT When Fed Chairman Ben Bernanke admits to seeing an "unusually uncertain" economy ahead, it's pretty terrifying to imagine what he's really thinking. What John Williams envisions—and he's by no means looking to the far horizon—is a systemic collapse, a hyperinflationary great depression and the cessation of normal commerce. Despite that bleak outlook, however, when the economist and editor of ShadowStats.com sat down for this exclusive Energy Report interview, he also had some good news.
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| Canadian Mining Stock Warrants, T+3, And Your Money Posted: 05 Aug 2010 06:05 PM PDT Although the precious metals market is taking a breather, a number of U.S. investors remain fired up with enthusiasm for trading Canadian mining stock warrants. This is not surprising when you consider that these warrants are so loaded with leverage to the market that their returns sometimes rocket up into the 1,000% range.
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| Inflation vs. Deflation: Elevating the Debate Posted: 05 Aug 2010 06:02 PM PDT
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| Daily Dispatch: Talk vs. Action on Rare Earths Posted: 05 Aug 2010 06:00 PM PDT August 05, 2010 | www.CaseyResearch.com Talk vs. Action on Rare Earths Dear Reader, We’ve got a great Daily Dispatch for you today. We’ll start things off with a Casey’s Chart on housing, then Chief Metals Strategist Louis James stops by to talk about rare earth elements, and we’ll finish things off with Chief Energy Strategist Marin Katusa’s article on China and a new age in energy. Please enjoy. New Home Sales Lowest in Decades As we predicted, new home sales tumbled in May to a revised seasonally adjusted annual rate of 267,000, the slowest pace on record dating back to 1963. New home sales rose to a seasonally adjusted annual sales pace of 330,000 in June – but don’t be surprised if this figure is revised downward next month as has been standard practice the past few months. Even with the rosy figure for June, it’s still 16.7% below the same month of last year and the sec...
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| John Williams: Times That Try Our Souls Posted: 05 Aug 2010 06:00 PM PDT Source: Karen Roche of The Energy Report 08/05/2010 When Fed Chairman Ben Bernanke admits to seeing an "unusually uncertain" economy ahead, it's pretty terrifying to imagine what he's really thinking. What John Williams envisions—and he's by no means looking to the far horizon—is a systemic collapse, a hyperinflationary great depression and the cessation of normal commerce. Despite that bleak outlook, however, when the economist and editor of ShadowStats.com sat down for this exclusive Energy Report interview, he also had some good news. The Energy Report: A few months back, John, you said, "if you strangle liquidity you always contract an economy and deliberately or not, liquidity is being strangled, resulting in sharp declines in consumer credit, commercial and industrial loans." Does this mean it would spur more economic growth if banks actually started lending? John Williams: It sure wouldn't hurt. We're still seeing contractions in liquidity, and th...
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| Arizona, Borderlands and U.S.-Mexican Relations Posted: 05 Aug 2010 06:00 PM PDT The immigration issue and Arizona’s controversial new law provokes passions on all sides. But too often the debate doesn’t reflect the complex history and geopolitics that inform the issue. Today I'm sending you an article from George Friedman, expert on geopolitics & founder of STRATFOR. Dr. Friedman presents his unique perspective on the immigration issue by touching on everything from the geography of the borderlands to Andrew Jackson and the importance of New Orleans. It is a prime example of how putting an issue like immigration in a geopolitical perspective gives you context for understanding how events are related and what the future may hold. Be sure to sign up for STRATFOR's free mailing list for weekly analyses like this one. John Mauldin, Editor Outside the Box Arizona, Borderlands and U.S.-Mexican Relations By George Friedman Arizona’s new law on illegal immigration went into effect last week, albeit severely limited by a f...
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| Hourly Action In Gold From Trader Dan Posted: 05 Aug 2010 05:59 PM PDT View the original post at jsmineset.com... August 05, 2010 09:54 AM Dear CIGAs, Click chart to enlarge today's hourly action in Gold in PDF format with commentary from Trader Dan Norcini ...
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| Posted: 05 Aug 2010 05:59 PM PDT View the original post at jsmineset.com... August 05, 2010 01:25 PM Jim Sinclair’s Commentary Oh my God! Notes From Underground: Markets awash with a rumor about an Obama August surprise Yra | August 5, 2010 at 9:19 am There is a Reuters blog making the rounds that the Obama administration is planning a surprise for the 15 million homeowners who are undergoing severe stress on their mortgages. It is surmised that Fannie and Freddie are going to absorb the mortgage losses by writing new mortgages based on the depreciated value of the homes [...] More… Dear CIGAs, When hearing the daily MOPE about recoveries and gold, think about Eric’s comments below where the laws of chemistry have been changed for political expediency. Regards, Jim UPDATE 4-US says most BP spill oil is gone or degrading CIGA Eric At least 50 percent of the oil that was released is now completely gone from the system, and most of the remainder is degrading rapi...
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| Don't Bet On It (Mass Forgiveness) Posted: 05 Aug 2010 05:59 PM PDT Market Ticker - Karl Denninger View original article August 05, 2010 10:09 AM I ain't taking this bet... [INDENT]Rumors are running wild from Washington to Wall Street that the Obama administration is about to order government-controlled lenders Fannie Mae and Freddie Mac to forgive a portion of the mortgage debt of millions of Americans who owe more than what their homes are worth. An estimated 15 million U.S. mortgages – one in five – are underwater with negative equity of some $800 billion. [/INDENT] Uh huh. Ok, let's do a bit of thought on this. First, 30% of the people in this country own their homes outright - no mortgage at all. Of the remaining homes, about 30% are underwater. So that's 30% of 70%, or 21% of the total. Now subtract all those who are not paying (maybe half of the underwater loans?) and you get somewhere around 10% - perhaps 15% at best - of the homeowners. The other 85% won't get "helped". Politically, this is suicidal. I...
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| China Fires Another Warning Shot Posted: 05 Aug 2010 05:59 PM PDT The tiny bit of excitement that occurred in Far East trading in gold on Wednesday didn't amount to much. The rally [such as it was] did continue through London trading... and took a bit of a pop shortly after the Comex opened... and the high for the day [$1,204.20 spot] was about fifteen minutes before the London p.m. gold fix. However, gold wasn't above the $1,200 mark for very long... and by the time that New York floor trading closed for the day, the gold price was down to $1,195 spot the ounce... and stayed there for the rest of the electronic trading session. Silver ran up about fifteen cents in early Wednesday morning trading in the Far East. From there it flat-lined into the New York open... and hit its high of the day [$18.73 spot] at the London p.m. gold fix. From that point... well... we've seen it all before, dear reader. By the end of Comex trading silver JPMorgan et al had silver back below $17.30 spot... and it closed there. It's obv...
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| Balance Sheet Lies, Bond Bubbles, Misuse of Debt and Hidden Risks Posted: 05 Aug 2010 05:59 PM PDT I apologize for the lengthy title. Brett Arends a started my thought process going and I ended up covering a lot of bases. Brett Arends has an excellent article at Market Watch concerning many widely quoted and generally believed statements about the soundness of U.S. companies which are actually misleading. You've heard of the famous $1.8 trillion in cash that corporations are sitting on? Well, I bet you haven't heard about the $7.2 trillion in debt for these same companies, an all-time record. And we are not talking about the infamous Wall Street ogres here - these numbers are for U.S. nonfinancial companies. Arends reports that a record has also been set for the ratio of debt to net worth, as shown in the following graph It is clear that U.S. corporations are not trying to correct a credit bubble; they are just blowing it bigger than ever. Picture may be Distorted The Smithers & Company graph above may be distorted by a decline in the net worth denominator. ...
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| China – The Reality of the Bubble... Iran War to Advance Global Currency? Posted: 05 Aug 2010 05:59 PM PDT China – The Reality of the Bubble Thursday, August 05, 2010 – by Staff Report China's Real Estate Bubble Threatens to Burst ... Two years after the US subprime crisis, China is seeing its own real estate bubble as a result of massive state stimulus programs. Many economists are warning it could burst soon, with unpredictable results for the global economy. ... In an air-conditioned showroom, salespeople in yellow uniforms take potential buyers on tours of the facility. "In one year, we already sold 90 percent of North America, Asia and Europe," customer consultant Qi Yunbu says proudly. "Now we're preparing Africa, Oceania and South America for sale." "Xingyao Wuzhou," loosely translated as "Shining Star over Five Continents," is the name of this Chinese blend of Dubai and Disneyland, a €2.3 billion ($3 billion) development designed to imitate the world map. The gigantic residential and leisure complex is being built around and within an ...
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| Posted: 05 Aug 2010 05:59 PM PDT courtesy of DailyFX.com August 05, 2010 07:17 AM 240 Minute Bars Prepared by Jamie Saettele Gold has topped. Please see the latest special report for details. Gold is making its way lower in an impulsive fashion. The short term count has changed slightly. It seems as though the first 5 wave decline ended following a terminal thrust from a triangle. A 3 wave correction is either complete now or will be following one more push to 1217/22. Jamie Saettele publishes Daily Technicals every weekday morning, COT analysis (published Monday evenings), technical analysis of currency crosseson Wednesday and Friday (Euro and Yen crosses), and intraday trading strategy as market action dictates at the DailyFX Forum. He is the author of Sentiment in the Forex Market. Follow his intraday market commentary and trades at DailyFX Forex Stream. Send requests to receive his reports via email to [EMAIL="jsaettele@dailyfx.com"]jsaettele@dailyfx.com[/EMAIL]....
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| Posted: 05 Aug 2010 05:59 PM PDT The following is automatically syndicated from Grandich's blog. You can view the original post here. Stay up to date on his model portfolio! August 05, 2010 07:12 AM I was exchanging emails yesterday and this morning with some friends including Bill Murphy and Chris Powell of GATA. I said to them I fully expect “you know who” to sell aggressively and get gold below $1,200 and then sell it today so we have the “A-typical” sell off around monthly employment numbers. While this is “you know who’s” favorite clip, I believe awesome physical demand has already won the war and will eventually be their undoing. Stay tuned. [url]http://www.grandich.com/[/url] grandich.com...
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| The Bullion Banks Go Short Another 24.3 Million Ounces of Silver - Mar 13, 2010 Posted: 05 Aug 2010 05:59 PM PDT The Bullion Banks Go Short Another 24.3 Million Ounces of Silver Well, as I mentioned in my closing comments in my column yesterday, the gold price rolled over the moment that the London a.m. gold fix was in at 5:30 Eastern time on Friday morning... 10:30 a.m. in London. From there it didn't do much until exactly 8:30 a.m. in New York when the selling pressure resumed. The low of the day was about 12:40 p.m. at $1097.70 spot. From that point, gold traded sideways for the rest of the New York trading session. The high price of the day was at the London a.m. gold fix... around $1,119 spot. The price action for silver was the same as for gold... although the high price for day looked like a tie, as the silver price hit $17.35 the ounce at the London a.m. gold fix... and at 8:30 a.m. in New York... just moments before the bullion banks began selling off both metals in earnest. Silver's low price was at the same time as gold's... with the low price of the da...
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| Crude Oil Holdings Steady Despite Elevated Inventories, Gold Win Streak Reaches Six Posted: 05 Aug 2010 05:59 PM PDT courtesy of DailyFX.com August 04, 2010 10:51 PM Petroleum inventories in the U.S. are now at 10-year highs, while gasoline and distillate inventories are at record seasonal levels. Nevertheless, crude oil continues to hold firm on optimism regarding emerging market growth and the consequent impact on oil demand. Gold tested $1200, but backed down. Commodities – Energy Crude Oil Holds Steady Despite Elevated Inventories Crude Oil (WTI) $82.19 -$0.28 -0.34% Commentary: Crude oil was close to unchanged in Wednesday’s session, despite surging U.S. inventories. The Department of Energy reported that in the week ending July 23, 2010, US crude oil inventories decreased by 2.8 million barrels, gasoline inventories increased by 0.7 million barrels, distillate inventories increased by 2.1 million barrels, and total petroleum inventories increased 6.1 million barrels. Total petroleum inventories are now above the year ago level and at 10-year highs, while gasoline and ...
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| Posted: 05 Aug 2010 05:37 PM PDT
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| Yellow & Black Gold Shine Compared to the SP500 Posted: 05 Aug 2010 05:31 PM PDT
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| The US Government's Secret Plan to Destroy the Dollar Posted: 05 Aug 2010 05:18 PM PDT Alright then. So yesterday we made a claim that the Fed has ways of causing inflation in the same way that the Gestapo has ways of making you talk. But it was merely a claim. We didn't prove it. Today, we offer incontrovertible proof that the Federal government of the United States intends to inject money directly into U.S. households using an obscure provision of the recently passed Dodd-Frank shemozzle (only click on that link if you are masochist...it is a PDF of the entire Bill as passed by the thieves and rent-seekers currently passing themselves off as servants of the public in the U.S. Congress). But first! The Reserve Bank of Australia published its latest Statement on Monetary Policy today and the good news is that, well, it's all good, Australia. In the introduction to its report the RBA said that, "Over the period ahead, strong growth in resource exports and a gradual pick-up in business investment is expected to offset the scaling back in public demand as stimulus-related projects are completed." So that's good news. Generally, the professional forecasting class of central bankers and economists has been lousy over the last few years. They keep telling us things are contained and fine. They get more wrong each time. That's not to say the RBA is wrong again, even though it didn't see any trouble coming down the road last time around. And the Bank did go to great lengths to outline the risks to its bullish forecast. Emphasis added is ours:
Basically the RBA reckons the mining boom is being counter-balanced by recalcitrant consumers who refuse to borrow and spend at pre-boom levels. Net net, it's all good baby! For sure, the chance that China could pop its property bubble might cause commodity prices to fall. But that's no biggie either, apparently. Speaking of which, yesterday we mentioned Chinese stress tests modelled a 50-60% fall in house prices and what that would mean for banks. Today, Bloomberg reports that, "Chinese regulators have demanded stress tests on a wide range of industries, including cement and steel, whose fortunes are closely tied to the property market, the official Shanghai Securities News reported on Friday." Right then. The steel bone is connected to the cement bone. The cement bone is connected to the coal bone. The housing bone is connected to the economic bone. And all dem bones could be brittle. That is a casual way of saying China has had an investment-led fixed asset boom in infrastructure and real estate. Much of the boom was financed with borrowed money. If it turns out this was a massive mis-allocation of capital, it will have created a bogus price signal for Australian commodities. That always leads to bad decisions and a lot of people losing a lot of money. The RBA, by the way, went to the trouble of elaborating on one of the big risks it cited in the introduction, namely Australia's reliance on off-shore funding to power domestic lending. This funding is a combination of long-term and short-term funding, with the short-term funding being the most interest rate sensitive and therefore a big risk. In a true credit crisis, you might be able to borrow off-shore to lend on-shore. But it will surely cost you more. That's exactly what Graph "B1" shows below. When the average cost of borrowing overseas went up, so did interest rates here. The spread looks pretty fixed, if stable at the moment.  On this issue the RBA said, "Banks source the remainder of their funding largely from the wholesale short-term money markets. While spreads in these markets rose during the turbulence in May and June, they have since fallen back and remain around the average seen over the past year." That's all well and good, provided there isn't another credit crisis. But if there is - and there are lots of things that could provoke such a crisis - then you'd expect both rates to move up again, tightening credit in Australia. And if you think we're making it up there's this from today's Age, "The heavy reliance of big Australian banks on overseas borrowings to fund their lending has left them vulnerable to shocks in the global credit markets, says a senior executive at HSBC, one of the world's biggest banks." As any good student of the Great Depression knows, nervous and failing banks make bad lenders. New money created by bank lending off savings deposits has traditionally been the largest creator of credit in the economy, although non-bank lenders who fund themselves through securistisation are in vogue in the last ten years. But if, in a renewed credit crisis, banks fail or lending dries up, don't we have the perfect storm for a great deflation? Pimco's Mohamed El-Arian thinks so. He says there's a 25% chance of deflation in the US as corporations hoard cash and households increase savings rates. This general decline in real economic activity would lead to the liquidation of excess capacity in the economy and falling asset values (those boosted the most by credit creation in the boom). How bad could it get for asset prices? We read Dr. Marc Faber's latest Gloom, Boom, and Doom Report last night while dining at Barney Allen's and nearly choked on our roasted chicken. Faber relayed the astonishing "Dow 1,000" prediction of Elliott Wave analyst Bob Prechter. Prechter argues the current bear market is a "supercycle" bear market and will be the biggest in 300 years, taking most indices back to levels where the bull market started. Since the supercycle in fiat money started in about 1974 - around the time the world went exclusively to a dollar standard - Prechter argues for the Dow to make a low at least below its 1982 low at 777 and possibly its 1974 low at 572. Needless to say, that's low. It's all worth pointing out that an asset market crash of that size - greater than 90% - while not unprecedented (see also Great Depression) - would be massively socially disruptive. Frankly, it would be the end of the civilised world as we know it and a long, miserable descent into poverty, violence, lawlessness, and death. That's why, in today's day and age, a printing press armed by Depression student Ben Bernanke will crank into action well in advance of a prolonged deflation. We'll leave aside the issue of what the best investment strategy is for such a scenario today. Instead, we want to take on the point that the Fed can't actually cause inflation. Not yet, that's true. Banks must lend and borrowers must borrow for the velocity of money to increase, as well as the quantity. But as we live in extraordinary times, massively destructive monetary policy measures call for extraordinary measures. And in Title XII of the new "Wall Street Reform and Consumer Protection Act" we think we've found a smoking gun that reveals how the Feds will shoot up the economy with more junk credit: by funneling Federal grant money through FDIC-regulate banks upon pain of death. You can read all of Title XII in its glory here. You should be tipped off by its title: Improving Access to Mainstream Financial Institutions. It's no coincidence that in defining a "community development financial institution" the Title references the Community Development Banking and Financial Institutions Act of 1994. That was an amendment to the Community Reinvestment Act passed by Congress in 1977. The 1994 legislation opened the flood gates for Federally-backed mortgage lending to high-risk minority borrowers. It's where the seeds of the bad lending that led to the American housing bubble were planted. Here's what part of Section 1204 looks like:  And here's the key language in section B that shows how the Fed's plan to encourage the banks to dispense Federal grants to low and moderate income individuals:  But wait. There's more! Under section 1205, the Treasury Secretary is authorised, via eligible entities (like government owned, regulated, or brow-beaten banks) to apparently make loans to consumers directly.  Hmm. Sounds like just the sort of thing a community organiser would love! Access to Federal funds to dole out to consumers of your choosing. Hmmn. Of course we may have read the law incorrectly. The whole purpose of the law is to provide an alternative t "pay day" loans which are viewed as predatory and extortionate. But just what the government means by "access" to financial institutions. It sounds to us like government-regulated lenders (and they are all) will be forced to loan government grant money to distressed Americans who can't pay their mortgage or find a job. The upside for the banks is that they won't have to lend their own money. The downside, if you're an American taxpayer, is that they'll be lending your money, or money the Treasury has borrowed that you will have to repay. Worst case is that it's money the Fed has created to "inject" into the comatose economy. That money will destroy your purchasing power and lead to price inflation. How do we know? Because the mechanics of this community lending scheme look exactly the same as the whole policy-driven boondoggle that lead to the housing bubble...more assclowns in government who believe you can get something for nothing and use the law to plunder the economy. So we've got that to look forward to. But at least it's Friday! Next week, more on how inflation will be unleashed in an otherwise deflationary world. Until then! Dan Denning
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| International Savings Rates Bode Ill for US Markets Posted: 05 Aug 2010 04:31 PM PDT
Often while searching for a piece of data through Google (see above) I stumble across something else which is far more interesting. That is how I found the table below of international savings rates. Why should you care? Because countries with high savings rates tend to have strong economies and great stock markets, since there is plenty of excess cash available to pour into investments. Those with low savings rates suffer from weak economies and poor stock markets, because of a shortage of available capital. When the American savings rate dropped below zero in the latter part of the last decade, it set off emergency alarms for me that a collapse of the financial markets was on the horizon. During the last four decades, I have watched Japan’s savings rates plunge from 16% to 2.8%, and you know the result for markets there. When it approaches zero, that will be the time to short the JGB’s, the yen, and the Nikkei stock index. The only country that doesn’t fit this analysis is Australia, with a mere 2.5% savings rate, but boasts a positively virile stock market and currency. Perhaps the resource boom there is skewing things? Perhaps the end is near? By the way, the outlook for the US, with its still miserable 3.9% savings rate, does not look great when considering this benchmark. Don’t expect a runaway bull market anywhere savings rates are low and rising. What are savings rates telling us are the best countries in which to invest? China, 38% (click here for my last China interview at http://www.madhedgefundtrader.com/july-19-2010-jim-trippon.html ), India, 34.7%, and Turkey, 19.5% (click here for “Turkey is Popping Up on my Radar” at http://www.madhedgefundtrader.com/july-23-2010.html ).
To see the data, charts, and graphs that support this research piece, as well as more iconoclastic and out-of-consensus analysis, please visit me at www.madhedgefundtrader.com . There, you will find the conventional wisdom mercilessly flailed and tortured daily, and my last two years of research reports available for free. You can also listen to me on Hedge Fund Radio by clicking on “This Week on Hedge Fund Radio” in the upper right corner of my home page.
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| Gold Seeker Closing Report: Gold and Silver End Slightly Higher Posted: 05 Aug 2010 04:00 PM PDT Gold rose to see a $6.10 gain at $1199.75 by about 9AM EST before it fell to see a $3.75 loss at $1189.90 by late morning in New York, but it then rallied back higher in the last couple of hours of trade and ended with a gain of 0.26%. Silver climbed to $18.462 and dropped to $18.18 before it also rallied back higher and ended with a gain of 0.49%.
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| Posted: 05 Aug 2010 03:44 PM PDT |
| Posted: 05 Aug 2010 03:28 PM PDT Gold Price Close Today : 1197.20Change : 3.50 or 0.3%Silver Price Close Today : 18.308Change : 0.045 cents or 0.2%Platinum Price Close Today : 1572.70Change : -8.60 or -0.5%Palladium... This is a summary only. Visit GOLDPRICE.ORG for the full article, gold price charts in ounces grams and kilos in 23 national currencies, and more!
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| Agflation fears grow as Russia halts grain exports Posted: 05 Aug 2010 02:20 PM PDT By Ambrose Evans-Pritchard http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/792913... Russian premier Vladimir Putin has ordered a halt to all exports of wheat and other grains from August 15, raising the stakes dramatically in the crisis over wheat supplies. "This is very serious," said Abdolreza Abbassanian, chief grain economist at the UN Food and Agriculture Organization. "It's a desperate situation because it has caught everybody off guard. We're not facing the situation of two years ago but there is a risk of destabilising panic." The shortage may trigger a bout of "agflation," posing a quandary for central banks. Professor Charles Goodhart from the London School of Economics fears that rising food prices will add 0.5 percent to Britain's sticky inflation, already testing market tolerance. ... Dispatch continues below ... ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php Wheat prices surged by their maximum daily limit of 60 cents to $7.86 a bushel on Chicago's exchange, with knock-on effects across the nexus of tradable grains. Mr Putin said it was a temporary ban on wheat, corn, barley, rye, and grain products until the end of the year due to "abnormally high temperatures," adding that Russia needs to cap domestic food prices and build its own reserves. Wheat has surged 69 percent since June but is still far below its $13 peak in 2008. The spike guarantees a sharp rise in bread prices this Autumn. Premier Foods said a loaf of bread may go up to 10p. Mr Putin pressured Kazhakstan and Belarus to impose similar curbs as the worst drought in a century threatens to drag into late August. "It is unprecedented to ask neighbouring countries to do the same," said Mr Abbassanian. Ukraine insists that exports are safe, but analysts fear it may follow suit. The Black Sea belt and Eurasia's Steppes produce a quarter of global wheat exports. The saving grace is that stocks are 187 million tonnes against 124 million in 2008. Corn futures rose 5.8 percent, oats rose 4 percent, and rice rose 2.8 percent on the news. "Food markets are linked. This is going to put further strains on corn. Animal feed prices will go up, affecting meat," said Mr Abbassanian. Commodity spikes can be inflationary but also deflationary, depending on context. Central banks in Europe and the US misjudged events two years ago, mistaking oil and food rises for the start of a 1970s price spiral. In fact, it drained demand from economies already tipping into recession. "This is more deflationary than it looks," said Albert Edwards from Societe Generale. "The risk is that central banks will hold off from further easing that I think is needed, increasing the risk of a hard landing." Mr Putin acted after meteorological experts issued further drought warnings, raising fears that the ground would be too hard to seed the winter crop next month. The loss of both crops would force Russia to withdraw from export markets for two years. Rabobank expects Russia's wheat output this year to fall from 58 million to 45 million tonnes. Kirill Podolsky, head of Russia's grain group Valars, told Bloomberg that the ban had created havoc. "We have ships lined up for grain and no idea what to do. This will be a catastrophe for farmers and exporters alike," he said. The move will be welcomed by grain firms that fixed supply contracts in advance and are now caught short. Some may declare "force majeure," suspending contracts for reasons beyond their control. The FAO said low-income countries such as Egypt or Pakistan that depend on imports will be worst hit. The concern is that some countries will take emergency action to secure vital supplies. Join GATA here: New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth
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| A Cruel Summer for Hedge Funds? Posted: 05 Aug 2010 01:58 PM PDT
Wall Street Journal senior writer Gregory Zuckerman was interviewed on Yahoo Tech Ticker saying it's a cruel summer where hedge funds are struggling too:
So what's going on with hedge funds? Tyler Durden of Zero Hedge posted an interesting comment on the impact of the liquidity crisis on the hedge fund industry, citing a report from Citi Perspectives (click here to view report). Tyler ended on this note:
Clearly there was a 'Ponziesque mania' that surrounded hedge funds and other alternative investments, and global pension funds share a lot of the responsibility as they bought into the mania at the top of the market. But there is something else going on with hedge funds. Post-crisis, a lot of them have not adapted, and are not able to deal with the structural changes impacting their industry. The top hedge funds have adapted, but most are struggling in the new environment where investors demand a liquidity premium and a lot more transparency on the risks being taken. It's quite amazing that the 2 & 20 model still persists, but with pensions suffering record shortfalls, few are muscling hedge funds on fees. Not that I think they should. What pensions need is to start leveraging off all their external managers. They need to view external managers as a valuable source of ideas, and build on these ideas through internal strategies to add value to overall returns. (Easier said then done. To do this properly, you need excellent relationships and internal expertise to properly implement ideas). And in terms of investments, the easy money was made in 2009, but now that the big beta boost is over, the wheat will get separated from the chaff. I happen to disagree with both John Paulson and David Tepper. The rally in equities will go on as long as the Fed is allowing banks to borrow cheaply and invest in risk assets all around the world. But there are important structural forces weighing down long-term economic growth. From high unemployment to demographics, it's hard to see a significant pickup in inflation expectations anytime soon. Basically inflationary forces are still fighting deflationary forces, and with no clear winner, markets could be range-bound for a long period. There is a caveat to all this. Watch what is going on in emerging markets because if they start exporting inflation, it could be a structural shift that leads to global stagflation. In fact, Reuters reports that a food price crisis may be the next stumbling block for emerging economies, even as their bonds and stock markets rally in relief at an easing of the euro zone's debt crisis. So why are hedge funds still struggling? There are no shortage of themes to play. From traditional energy, to renewable energy, to agribusiness, to commodities, to technology, to medical devices, all the way to nanotechnology. But the reality is that a lot of managers remain very apprehensive, unwilling to commit significantly to any sector until they see clear signs that the economy is stabilizing and the forces of deflation/ deleveraging have subsided.
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| Christopher Barker: China opens the floodgates for gold and silver Posted: 05 Aug 2010 01:24 PM PDT 9:25p ET Thursday, August 5, 2010 Dear Friend of GATA and Gold (and Silver): Motley Fool contributor Christopher Barker today explains just how profound it is that China plans to finance the gold and silver mining industry on a worldwide basis. Barker's commentary is headlined "China Opens the Floodgates for Gold and Silver" and you can find it at Motley Fool here: http://www.fool.com/investing/international/2010/08/05/china-opens-the-f... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth Join GATA here: New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php
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| Real gold or paper gold -- which do you own? Posted: 05 Aug 2010 01:10 PM PDT 9p ET Thursday, August 5, 2010 Dear Friend of GATA and Gold: Zero Hedge today went after the gold price suppression scheme again, this time in commentary by Michael Kreiger. He wrote: "Anyone who doesn't understand that the Comex is a manipulated illusion isn't paying attention. More and more investors around the world are coming to understand this, which is why there is a movement into the physical. Real gold versus paper gold -- which do you own? "The article in the Financial Tiems the other day that seemed to uncover the mystery of the BIS gold swap is required reading: http://www.ft.com/cms/s/0/3e659ed0-9b39-11df-baaf-00144feab49a.html "Here is one excerpt: "'The gold used in the swaps came mainly from investors' deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called 'allocated accounts,' which restrict the custodian banks' ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper 'unallocated accounts,' which give banks access to their bullion for their day-to-day operations.'" "The banks identified in the swaps were HSBC, Societe Generale, and BNP Paribas. First of all I think it's insane for anyone to have gold within a bank. The entire purpose of gold is to escape the banking system once it becomes so big, complex, and fraudulent that there is no place to go but collapse upon its Ponzi scheme structure. "I smell a rat in this BIS deal. People are not going to be happy when they try to redeem their paper gold. I can't tell you how many people I know who are selling [exchange-traded fund] GLD (HSBC is the custodian!) and buying physical. Of great significance is also the fact that on every orchestrated Comex plunge physical buying accelerates. "As an example, the U.S. Mint reported selling only 85,000 coins in the first 21 days of July but then sold 57,000 in the last seven days of the month. This sort of behavior is what will limit the downside. There are enough smart people with lots of money who see the current system for the fraud that it is and are getting out while physical gold is still available." Krieger's commentary is headlined "Russia Bans Grain Exports as the End Game Trade Begins" and you can find it at Zero Hedge here: http://www.zerohedge.com/article/guest-post-russia-bans-grain-exports-en... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php Join GATA here: New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth
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| Dysfunctional Price Signals are Distorting the Housing Market Posted: 05 Aug 2010 12:20 PM PDT The price of anything, whether it is a cake of soap or a jumbo jet, is meant to convey a whole bunch of information to an investor, producer or consumer. Prices send signals up and down the supply chain and these signals determine the ultimate supply and demand of any product or service. If prices are meant to be the signal that helps smooth the supply and demand of a product or asset, just what is going on with the Australian property market? Recently released data reveal that new home sales fell for a second straight month in June to a 17-month low. This was followed by news that new home approvals fell by 3.3 percent in June, the third successive monthly drop. How can this be? We are constantly told that Australia has a chronic housing shortage, yet we are not building anywhere near enough new homes to satisfy this supposed demand. Shouldn't high prices be sending a message that more housing is required? It should, but the fact that it isn't goes to show the completely dysfunctional state of housing in this country. Here's the way I look at it. House prices are high not because rents are high and the income returns are healthy. They are high because the vast majority of new credit creation in our economy goes to people buying existing homes. Australian people and its banks are participating in a giant ponzi scheme and they don't even know it. High house prices and low rental yields (the reality for most capital city property) are not a signal for investors to come in and construct new homes. It is a deterrent. Who wants to risk building a new house and renting it out for less than the cost of finance, when the capital value is at risk from the ponzi scheme ending? If yields were more attractive, Australia would solve its so-called housing shortage. But it's not that easy. You also have layers of government involved, which add to the distortion. Local and State governments enjoy a healthy slice of the housing pie, which adds to the final cost. The Federal Government uses taxpayer funds to give to first homebuyers whenever the market looks shaky, which ironically adds much more to the cost. The recent phasing out of the latest government handouts is probably a major factor behind the construction slowdown. All we ever hear month after month is that Australia has a chronic housing shortage and because of this, house prices will remain high. I'm sorry, but if new homes sales are approaching 18 month lows, and construction remains in the doldrums, perhaps its time to think a little differently about the problem. Commentators and bureaucrats need to realise that it's the huge amount of credit being funnelled into existing housing that is pushing prices up and leading to weaker construction statistics. I'd be willing to bet a waterfront mansion (if I had one) that if house prices began to fall substantially, yields would increase and so would the incentive to build new houses. For centuries property has been an income-based investment. Only relatively recently has it become the focus for capital gains. Increase the yield to healthy levels and you increase the supply of housing, it's as simple as that. So it's time for the government to get out of the market, stop propping up prices for the sake of political gain and start releasing enough land to satisfy the demand that will flow from weaker prices. The chances of this happening are virtually zero, but we need to stop kidding ourselves that our housing shortage is keeping prices high. It's high prices that are leading to the shortage, if indeed there is one. Greg Canavan
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| Premium Update #33.4 Junior Gold Stocks & New JR Index Posted: 05 Aug 2010 12:07 PM PDT In today's 31 page premium update we unveiled our new JR Gold Index. It consists of 25 stocks which are equally weighted and most fit in our target range of $100 to $600 million in market cap. How a billion dollar company can be called a junior, is beyond me.
The second chart show the long-term look.
Finally, take a look at this chart which shows the index (blue) along with (in red) our Jr Index divided by the HUI. Is that ratio ready for a massive breakout?
Interested in our analysis of these three charts, recommended companies and technical outlook on numerous juniors? Then consider a free 14-day trail to our service. You are not billed until the 15th day and you get to look at a month's worth of material. We also have a junior silver index.
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| If you can fractionally reserve gold,1 ounce is worth 40, 50, or 100 Posted: 05 Aug 2010 12:07 PM PDT 8:09p ET Thursday, August 5, 2010 Dear Friend of GATA and Gold: A 1-ounce gold coin in your sock drawer may be worth $1,200 to you, blogster FOFOA notes this week, but it is worth many times that in the hands of central banks and bullion banks because of their fractional-reserve gold banking system. If, as CPM Group's Jeff Christian and GATA's Adrian Douglas maintain in cordially hateful agreement, every ounce of gold in the fractional reserve banking system can support claims to 40, 50, or 100 ounces of gold, then, FOFOA suggests, the real price of gold is at least 40 times $1,200. Or at least that's the real price until those who suppose themselves to be depositors in the fractional-reserve gold banking system start taking delivery of their metal, start taking it out of the fractional-reserve system, initiating a great short squeeze, in which case there may not be enough zeroes to put behind the real price of an ounce of gold. FOFOA's new commentary is headlined "Relativity: What is Physical Gold REALLY Worth?" and you can find it at his Internet site here: http://fofoa.blogspot.com/2010/08/relativity-what-is-physical-gold-reall... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth Join GATA here: New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php
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| If you can fractionally reserve gold,1 ounce is worth 40, 50, or 100 Posted: 05 Aug 2010 12:07 PM PDT 8:09p ET Thursday, August 5, 2010 Dear Friend of GATA and Gold: A 1-ounce gold coin in your sock drawer may be worth $1,200 to you, blogster FOFOA notes this week, but it is worth many times that in the hands of central banks and bullion banks because of their fractional-reserve gold banking system. If, as CPM Group's Jeff Christian and GATA's Adrian Douglas maintain in cordially hateful agreement, every ounce of gold in the fractional reserve banking system can support claims to 40, 50, or 100 ounces of gold, then, FOFOA suggests, the real price of gold is at least 40 times $1,200. Or at least that's the real price until those who suppose themselves to be depositors in the fractional-reserve gold banking system start taking delivery of their metal, start taking it out of the fractional-reserve system, initiating a great short squeeze, in which case there may not be enough zeroes to put behind the real price of an ounce of gold. FOFOA's new commentary is headlined "Relativity: What is Physical Gold REALLY Worth?" and you can find it at his Internet site here: http://fofoa.blogspot.com/2010/08/relativity-what-is-physical-gold-reall... CHRIS POWELL, Secretary/Treasurer ADVERTISEMENT Sona Resources Expects Positive Cash Flow from Blackdome, On May 18, 2010, Sona Resources Corp. (TSXV: SYS, Frankfurt: QS7) announced the release of a preliminary economic assessment for gold production at its flagship Blackdome and Elizabeth properties in British Columbia. Sona Executive Chairman Nick Ferris says: "We view this as a baseline scenario for gold production. The project is highly sensitive to the price of gold. A conservative valuation of gold at $1,093 per ounce would result in a pre-tax cash flow of $54 million. The assessment indicates that underground mining at the two sites would recover 183,600 ounces of gold and 62,500 ounces of silver. Permitting and infrastructure are already in place for processing ore at the Blackdome mill, with a 200-tonne per day throughput over an eight-year mine life. Our near-term goal is to continue aggressive exploration at Elizabeth and develop a million-plus-ounce gold resource, commencing production in 2013." For complete information on Sona Resources Corp. please visit: www.SonaResources.com A Canadian gold opportunity ready for growth Join GATA here: New Orleans Investment Conference * * * Support GATA by purchasing a colorful GATA T-shirt: Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009: http://gata.org/node/wallstreetjournal Or a video disc of GATA's 2005 Gold Rush 21 conference in the Yukon: * * * Help keep GATA going GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at: To contribute to GATA, please visit: ADVERTISEMENT Prophecy to Become Coal Producer This Year Prophecy Resource Corp. (TSX.V: PCY) announced on May 11 that it has entered into a mine services agreement with Leighton Asia Ltd. to begin coal production this year. Production will begin with a 250,000-tonne starter pit as planned in August, with production advancing to 2 million tonnes per year in 2011. Prophecy is fully funded to production and its management team includes John Morganti, Arnold Armstrong, and Rob McEwen. For Prophecy's complete press release about its production plans, please visit: http://www.prophecyresource.com/news_2010_may11.php
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| You've seen my videos on gold and silver bullion. Take a look at 1 kilo silver coin Posted: 05 Aug 2010 12:02 PM PDT I am sure you've seen 1 kilo silver coins. This one is the Year of the Tiger 2010 coin from the Perth mint.
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| US Treasury Secretary a True Believer in Economic Recovery Posted: 05 Aug 2010 11:59 AM PDT Welcome to the Recovery! Stocks rose 44 points on the Dow yesterday. Oil stuck at $82. Gold rose $8. No clear trend on Wall Street. "Welcome to the recovery," says the headline in The New York Times. What is this? Some kind of joke? No, it's America's Secretary of the Treasury, Mr. Timothy Geithner... When we first read the headline, we thought it was tongue-in-cheek...or outright sarcasm. But Mr. Geithner at least sets out on the right foot:
He's right about that. After all, nearly one out of every ten workers is officially out of work. Of them, 1.4 million have been out of work for 99 weeks or more. They are no longer eligible for unemployment benefits. And there are millions more who have simply given up altogether. They're no longer looking for jobs, says the Bureau of Labor Statistics, so you can't call them 'unemployed' even though they are the most unemployed people in the country. Not only that - they don't have jobs! And here's the lastest news report from Bloomberg:
Elsewhere in the news it is reported that more consumers than ever before are going bankrupt - as many as 1.6 million of them this year. Those who aren't going bankrupt are hastily building up their reserves. Another report in The New York Times tells the tale:
Mr. Bernanke made the same comment on Monday. Until people see real growth in their incomes they're not likely to spend more money. And if they don't spend more, it's hard to see where businesses will get more revenue. And if businesses don't have more revenue, how are they going to make more money and hire more people? Give it time. Eventually, prices fall to where there are bargains to be had. And eventually people pay down their debts. And eventually their autos wear out and their clothes go out of style. And then they go shopping. That is not a 'recovery' of the economy that existed in '05-'07. It's a new economy. It's a more careful economy. It's an older economy, bent over with a burden of debt it can barely carry. But the US Secretary of the Treasury is paid not to understand what is going on. He is a cheerleader for the losing team:
He then takes up an inventory of all the improvements that have come about since, including: You could argue with each of these points. The $20 billion in "profits," for example, came at a cost of $1.25 trillion in support from the Fed. And the banks are stronger because the Fed lends them money at 0.25% interest and then the federal government borrows it back at 3%. Good business for the banks. Bad business for the government, the taxpayers and the citizens. The arguments are phony. So is the recovery itself. They're welcome to it. And more thoughts... Want to know how to make money in this economy? You do it by selling things to markets that are growing. Exporting, in other words. China's growing. India's growing. Brazil is growing. Dozens of other countries are growing. Sales in the US aren't likely to go up. But sales to China? Sales to Brazil? That's where the money is. And here's something interesting - these growth economies are now largely 'de-coupled' from the US. They don't need us anymore. We've done our part. Thanks to clever management by the feds, Americans went deeply in debt so that these emerging market economies could grow. They put up factories. We bought their output. They logged a sale. We added a debt. And now, we can't continue. We've taken on all the debt we can handle. They've got their factories, their capital and their skilled labor. We've got debts, debts and more debts. And now they don't need us. Because they can sell to their own emerging middle classes. China can sell gizmos to Brazil's new consumers. Russia can sell energy to China's thriving cities. Brazil can sell soybeans to Indonesia's new factory workers. Emerging markets are growing fast. The US and the UK are barely growing at all. *** Our Internet connection failed. So we came into town and installed our mobile Daily Reckoning headquarters in a café with Wi-Fi. It is a small town...and not a particularly good area of the small town. The radio is playing some form of French rap music. At the bar is a young man in floral, rose-colored shorts...a tattoo on his arm...coffee in his hand. He is watching the TV monitor that announces the latest winning combinations in a lottery game of some sort. A couple came in a few minutes ago. He has a strange, wild-eyed look, like a man who was recently released from an insane asylum and who now marvels at being able to wander around at liberty. His eyes are alert. But confused. She looks remarkably like him. Same short hairstyle. Same button nose. Same short, hunched-over stature. She is holding a dog on her lap as she drinks her coffee. There's a boy in the bar too. He must be an alien...or a human-alien cross. His eyes are not normal. They narrow at the edges...giving him an extraterrestrial look. Meanwhile, at the table next to us is a very large gray-haired, middle- aged woman with a man in overalls who must be her husband. The bartender identifies each customer by name as he comes in. "Bonjour Hubert..." "Et, Eric... Bienvenue..." "Alors Robert... What will it be?" "Salut Gustave," said the bartender to the man in overalls. He is stout...with huge, muscular arms, one with a large tattoo on it. They are both drinking coffee. She could be anyone's grandmother. But he, bald, with a bushy mustache, looks like the sort of man who changes a tire without a jack ...and was once the strong man at the county fair. In and out people wander...buying a coffee...a newspaper...a lottery ticket. Some are retired. Others are half-wits, misfits and malcontents...and, occasionally, aging prostitutes with hearts of gold. They look at your editor warily...suspiciously. "Salut Alphonse..." "Good day, Nicole..." Life goes on. Regards, Bill Bonner
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| And Then There Were Two: Rumor Romer Resigning From Obama Economic Think Tank Posted: 05 Aug 2010 11:25 AM PDT
First Orszag, now Romer? If the latest rumor about the imminent defection of one of the three remaining policy stalwarts is true, it means the administration's economic policy is on the verge of collapse. Hotline Oncall reports: "Christina Romer, chairwoman of Pres. Obama's Council of Economic Advisers, has decided to resign, according to a source familiar with her plans. Romer, an economics professor at the University of California (Berkeley) before taking the key admin post, did not respond to repeated calls to her office." The sad reality is that Romer's (who has largely been a mere figurehead and staffed to provide soundbites to CNBCs how every worsening NFP report is in reality a dramatic improvement, a job which even Steve Liesman can do with a passing grade) departure will only make the remaining two people in Obama's economic circle, Tim Geithner and Larry Summers, even more powerful. Why couldn't those two leave? Surely both have by now earned their $2.5 million a year job at Goldman... We now anticipate the 8-K from Whitehouse Corp announcing the appointment of Paul Krugman and Mark Zandi to fill the newly vacant positions.
More from Hotline Oncall:
h/t Peter
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| Guest Post: Fuck The Deficit (Or Will The Deficit End Up Fucking Us?) Posted: 05 Aug 2010 11:06 AM PDT
Fuck The Deficit (Or Will The Deficit End Up Fucking Us?) Submitted by Gonzalo Lira Currently, the United States is conducting one of the most remarkable experiments in fiscal finances in world history. The American economy is in a severe recession. Coupled with that—as both partial cause and partial effect of the recession—the United States' banking system crashed in the Fall of '08, a crash which in many ways is still ongoing as I write this, nearly two years later. What the recession and the concomitant banking crisis have caused are, essentially, a fall in aggregate demand levels, as well as a fall in aggregate asset value. In other words, the population is spending less, and asset values have deteriorated, both nominally and as compared to any basket of hard commodities. These are the two metrics which the two principal camps of current American macroeconomic thought consider vital. “Saltwater” economists look to aggregate demand levels, while “freshwater” economists look to aggregate asset value—each of these camps view their fetish-object as the cornerstone for economic growth, development and prosperity. Naturally, when either of these camps see their juju slide, they freak out. They declare the economy to be “in crisis”—and further declare that “something must be done”. Something has been done: It's called The Deficit. To combat the fall in aggregate demand levels, the Federal Government has embarked on a massive spending program. This spending program has been financed by debt issued by the Treasury. The way things are looking, another big spending package is in the offing some time soon—that should keep the “saltwaters” happy. On the other hand, to combat the fall in aggregate asset value—and keep the “freshwaters” happy—the Federal Reserve Board has embarked on an asset purchase program that is also massive and unprecedented. Through a fairly complex scheme that seems to be deliberately opaque, the Fed has relieved the Too Big To Fail banks of their deteriorated assets, and given them cash, in an ongoing process. The Too Big To Fail banks have turned around and used that cash to purchase Treasury bonds—which are being used to finance this massive Federal Government spending. Whether there has been collusion between the Treasury, the Fed and the TBTF banks is for the courts and the historians to decide—but prima facie, it would certainly look so. This two-sided scheme—more Federal Government spending on the one hand, and more propping up of asset values on the other—adds up to The Deficit. When I refer to it as The Deficit (it is too majestic for the lowercase), I am not referring to a mere fiscal shortfall—I am referring to a policy mentality. This policy mentality—shared by both “saltwater” and “freshwater” economists—effectively amounts to a suspension of the notion of opportunity cost. In the realm of The Deficit, the macroeconomic policy questions cease to be “either/or”—they become “both/and”. All policy options can be achieved because—according to the macroeconomic policy known as The Deficit—the American fiscal shortfall can never bring the United States to bankruptcy. As Dick Cheney so memorably phrased it, deficits don’t matter—so The Deficit as a macroeconomic policy can continue indefinitely. In a historical sense, The Deficit is unprecedented: Never before in world history has a reserve currency provider gone into this much debt, with a currency that floats on nothing but air. This is the key issue: The dollar is a fiat currency. The Roman, French, British, Austro-Hungarian empires, all of them world-historical empires in their times, all might have gone way into the red on more than one occasion—but none has ever done it on a purely fiat currency before. America is the first to do so (“U!! S!! A!! WE’RE!! NUMBER!! ONE!!”). Hooray. The Deficit is the policy that the United States is implementing, and it has had several effects: 1. The most obvious, it has allowed the Federal Government to finance every last one of its spending programs, in an effort to boost aggregate demand levels. No need for Obama’s vaunted talk of “tough choices”—the Federal Government has officially been renamed the Great American Teet. 2. It has prevented the TBTF banks from acknowledging the plain fact that they are broke. Indeed, the Fed asset buy-back has effectively kept the banks solvent in a practical sense—they have money to pay off any of their liabilities. But more importantly from the Fed's point of view, it has sustained deteriorated aggregate asset values in the overall economy, at least on a nominal basis. 3. It has created a fiscal shortfall of staggering proportions—currently about 100% of GDP, and growing without end. 4. Finally—and most importantly—it has created the generalized impression among policy makers that fiscal shortfalls indeed do not matter, and that liquidity and stimulus simply mustbe provided whenever there is a crisis, the rationale being that the economy is too “fragile” to withstand the “shock”. This is a key effect of this policy, I would argue the most important of all of the effects: The fact that the fiscal shortfall has crossed the 100% of GDP mark, and nothing bad has happened has given everyone a false sense of security—the sky has not fallen, the world has not ended. Therefore, as a practical political matter, the people with decision-making authority in American public policy have effectively said, “Fuck The Deficit, let’s keep on truckin’.” But what if the sky does fall? What if we are simply living in the lull before the fall? I mean, it can't be that this enormous fiscal shortfall can continue growing indefinitely, can it? It has to lead to some kind of ruinous effect, right? Like drinking a bottle of scotch in a single sitting—you feel good while you're doing it, sure, but you know you’ll feel like death warmed over soon enough, right? I mean, The Deficit will eventually come back and bite us on the ass—right? Lately, there have been an awful lot of clever people explaining how, in fact, The Deficit will not harm us in the long term. Very sensible-sounding words, and seemingly-sophisticated arguments, are deployed to make precisely this point. Others further argue that The Deficit, because of its sheer size, will become its own growth engine, and hence will grow the economy to such a point that The Deficit will essentially pay for itself—a bit of financial magic that almost seems believable. And to any talk that The Deficit and the stealth-monetization going on might lead to hyperinflation, these clever people are scoffing and saying, in effect, “Haven’t you heard the news? We got deflation, pal—forget about inflation, let alone hyperinflation: We gotta spend-spend-spend, in order to whip that deflationary monkey. After that’s taken care of, and the economy’s growing again, that’s when we’ll be able to bring down The Deficit.” Recently, I had a private exchange with a financial blogger, about precisely this point. This blogger—who should have known better—argued that since we were in a deflationary environment, there were currently no inflationary pressures, and none in the forseeable future. Therefore, she argued, since the economy was experiencing a deflationary trough and inflation highly unlikely, then hyperinflation was an impossibility. Nay, an absurdity, or so she claimed. She's clever, but she made a common mistake—she confused inflation with hyperinflation. Granted, they do seem to look alike—both of them are essentially money losing value against wages, commodities and goods-and-services over time. Commonly—and mistakenly—hyperinflation is viewed as simply inflation-plus, inflation-XL. After all, the name seems to imply it: Hyper-inflation. Inflation’s big brother. Inflation with an extra bit of kick. This is a dangerous fallacy. Inflation is indeed the economy “over-heating”, in Neo-Keynesian parlance—wage pressures, say, dragging prices up across the economy, or perhaps raw commodity prices doing the same. Inflation can gallop up to 25% a year, but still remain a distinct animal from hyperinflation. Ordinarily, inflation is simply the economy eating up commodities—be it raw materials or labor—so as to meet demand. Hyperinflation, however, is the loss of faith in money. It is not that prices are rising because the economy is moving forward—it’s that prices are rising because nobody believes that money is worth a damn anymore. Hyperinflation is not simply money-printing: Rather, it is when no amount of money will get you what you want. Zimbabwe-style hyperinflation is an example of government money-printing run amok. The Zimbabwe example gives us the mistaken sense that hyperinflation only happens in “disorderly printing” regimes. But that’s not the case. Chilean hyperinflation in 1973 (which led to the September 11 coup), or Weimar style hyperinflation (which led to you-know-who), are more indicative of what I’d call “scarcity” hyperinflation: Both are examples of when the scarcity of basic commodities suddenly and abruptly leads to a complete loss of faith in money—the belief that no amount of money will get you what you want or need. That’s hyperinflation. 2008 Deflationists (of which I am a member) argued that after the credit crisis, there would be a deflationary trough. The reasoning of the 2008 Deflationists was, credit should be considered as part of the money supply—so when credit contracts sharply, as happened following the banking crisis in ’08, then that’s the same as if total money supply had contracted. A constriction in the money supply obviously leads to deflationary pressures: Less money is available for the same or more goods. Hence prices fall to meet lowered demand. Hence wages fall as business incomes fall. Hence less money. Hence downward spiral. As the 2008 Deflationists predicted, today the U.S. economy is in a deflationary trough—I am certainly not arguing otherwise: The evidence is all around, and too obvious. But what I am saying is, our current deflation can trip over into hyperinflation at a moment’s notice. The stumbling block—the thing that could trip us over from deflation to hyperinflation literally overnight—is The Deficit. Not just the Federal shortfall itself, but the policy implicitly embodied by The Deficit: The belief that all you need to do is throw money at the problem—open up as many liquidity windows as needed, or expand Federal spending as much as necessary, to prop up those twin aggregates I mentioned before, aggregate demand and aggregate asset value. The pernicious sense among American macroeconomic policy makers that fiscal shortfalls don’t matter—and don’t matter especially in a financial or economic crisis—is what I believe will lead to hyperinflation. Policy makers—who have lost any fear of providing as much liquidity and stimulus as necessary to steamroller any problem—will have no compunction about adding to The Deficit at the next crisis. That’s when hyperinflation will kick us in the teeth. If I had to make a prediction, I’d say that the immediate trigger for a hyperinflationary catastrophe will be a sudden and unexpected commodity spike. It won’t necessarily be big, but it’ll be flashy—enough to cause a panic. This will be the opening stages of hyperinflation: It will be a market panic, and it’ll be fast. At the next panic-inducing crisis, American public-policy makers will once again turn to The Deficit, providing more liquidity and more stimulus—and this will make the financial markets realize that the fiscal shortfall is unsustainable: It will be obvious that all those Treasuries cannot be repaid—or if they are ever to be repaid, it will be done by the Fed via surreptitious monetization. In other words, a dollar with lesser value. Thus, everyone will want to be the first to get out of the dollar—and everyone will want to be the first out the door all at once. Markets turn on a dime, and they are not rational in the short term—they’re rational like a herd of thundering buffaloes hopped up on crystal meth. As everyone gets out of the dollar in the financial markets, there’ll be a cascading effect, as everyone—both Wall Street sophisticates and Main Street naifs—try getting out of their dollars, and into hard assets: Gold, land, food, whatever. In other words, hyperinflation as I have described it above: A loss of faith in money. The belief that no amount of money will buy you what you want. The Deficit—that’s the demon’s name. The Deficit. Not, as I have argued, the fiscal shortfall, but the macroeconomic mentality that fiscal shortfalls in a reserve fiat currency do not matter. The sense that as much liquidity and stimulas must be and can be provided to maintain aggregate demand levels and aggregate asset value. Policy makers are not exactly known for being prescient timers of the markets—at the next market crisis/panic, they will without hesitation provide stimulus and liquidity, adding even more to the fiscal shortfall. But it will be the market’s and the public’s loss of faith that that fiscal shortfall will ever be repaid that will lead them to abandon the dollar. Once they lose faith in the dollar, hyperinflation will ensue, as public policy officials continue providing “stimulus” and “liquidity” which the market will interpret as nothing but worthless paper. Actions have effects—it is stupid to think that massive deficit spending of a fiat currency won’t have consequences. The policy embodied by The Deficit has brought the U.S. economy to the brink of oblivion—with no way to pull back from that brink. So at this point, the only question is, what will finally tip it over, and when will that tip-over happen, and what will the . So at this point, there are only two questions that need to be answered: One, when will the economy finally tip over the brink, and two, what will give us that final push.
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| Emerging Markets Shed the Skin of US Consumers Posted: 05 Aug 2010 11:00 AM PDT Want to know how to make money in this economy? You do it by selling things to markets that are growing. Exporting, in other words. China's growing. India's growing. Brazil is growing. Dozens of other countries are growing. Sales in the US aren't likely to go up. But sales to China? Sales to Brazil? That's where the money is. And here's something interesting – these growth economies are now largely 'de-coupled' from the US. They don't need us anymore. We've done our part. Thanks to clever management by the feds, Americans went deeply in debt so that these emerging market economies could grow. They put up factories. We bought their output. They logged a sale. We added a debt. And now, we can't continue. We've taken on all the debt we can handle. They've got their factories, their capital and their skilled labor. We've got debts, debts and more debts. And now they don't need us. Because they can sell to their own emerging middle classes. China can sell gizmos to Brazil's new consumers. Russia can sell energy to China's thriving cities. Brazil can sell soybeans to Indonesia's new factory workers. Emerging markets are growing fast. The US and the UK are barely growing at all. Bill Bonner Emerging Markets Shed the Skin of US Consumers originally appeared in the Daily Reckoning. The Daily Reckoning, offers a uniquely refreshing, perspective on the global economy, investing, gold, stocks and today's markets. Its been called "the most entertaining read of the day."
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| Posted: 05 Aug 2010 10:36 AM PDT
Goldman chief economist Jan Hatzius has created a useful preview of tomorrow's NFP number (consensus +90,000 private, -65,000 overall), explaining why Goldman has a more negative outlook on the number than most (+75k and -75K, respectively). Jan's conclusion on tomorrow's, and recent trending data :"Our view remains that the primary job market problem is a shortfall in labor demand." More relevantly, Hatzius does an extended analysis of the Beveridge curve (i.e., the relationship between unemployment and job vacancies) to determine if there has been a shift in the overall level of structural unemployment, as opposed to the more simple seasonal variety. Hatzius' modestly negative conclusion: "The answer is that the vacancy rate has not picked up by enough to push gross hiring sufficiently far above gross separations—i.e., layoffs plus quits—to create large numbers of net new jobs... Structural unemployment may well increase over time if large numbers of people remain without a job for long periods of time, and thus lose their skills and attachment to the labor force. But it is not clear that this process has started yet." Full note from Jan Hatzius: Jobs Preview, and Some Thoughts on Structural Unemployment We estimate that private payrolls in July rose 75,000, close to the average pace of the past two months but more slowly than earlier in the year. Overall payrolls probably declined by about 75,000 as a result of Census layoffs, and the unemployment rate probably edged up to 9.6%. On balance, our forecasts imply that job market conditions have not changed much in the last month.
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| Next Up: A Spot Gold ETF With Storage in Singapore Posted: 05 Aug 2010 10:20 AM PDT ETF Database submits: Over the past few years, the number of ETFs has grown exponentially; the industry now covers nearly every corner of the investable universe. The pace of innovation has been particularly impressive in the commodity space, which has seen interest surge as investors have become increasingly concerned over the health of the global economy and the ability of governments to pay back ballooning debt loads. Investors have especially flocked to gold ETFs, some of which are among the largest and most popular funds on the market. One of the newest issuers in the space is ETF Securities; the London-based company is a giant in the European ETF space but a relative newcomer in the U.S. ETFS currently offers four ETFs that individually hold all of the major precious metals, including gold, silver, platinum, and palladium. By far its most popular fund is the ETF Securities Physical Swiss Gold Shares (SGOL), which currently has over $600 million in assets and daily volume well over 100,000 shares. Unlike other physically-backed gold funds, SGOL holds all of its gold in a secure vault in Switzerland; holdings are audited twice a year and the company also publishes the gold bar numbers on its web site, giving investors further peace of mind with regards to the safety of their investments. Thanks to the success of this novel approach, the company has filed with the SEC in order to bring a similar product to market that keeps its bullion in a secure vault in the island nation of Singapore, an increasingly important financial center given the impressive Asian growth rates in recent years. Complete Story »
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| Money & Markets Charts ~ 8.05.10 Posted: 05 Aug 2010 10:20 AM PDT View this week's chart comparisons of gold against fiat currencies, oil and the Dow. Stay tuned for our next Money & Markets segment of The Solari Report tonight, Thursday, August 5, 2010. Click here to view all charts as a pdf file. See previous Money & Markets Charts blog posts here. Currency charts are from StockCharts.com. Gold vs Oil Gold [...]
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