Gold World News Flash |
- The BIG Move Is Still To Come!
- Policy Solutions, Part Two of Four
- GATA and Grandich in The Street Gold Article
- WARNING!!!! Like Cigarette Smoking, This Thinking Will Cause Cancer To Your Wealth!!
- Rush Out and Buy Some Gold! Russia is Buying Gold!
- Daily Dispatch: Regulation Run Amok
- Surviving the Fall of Entitlements
- Jim?s Mailbox
- Hourly Action In Gold From Trader Dan
- Gold Demand Up 36% in the Second Quarter: WGC
- How To Trade Gold and Silver’s Volatility
- A look at the upcoming 4-year cycle
- LGMR: Silver "Still Cheap" After "Dramatic Move"
- Things
- Crude Oil Gets a Reprieve, Gold Approaches the All-Time Highs
- In The News Today
- The Goldsmiths—Part CLVI
- Gold and silver versus market index bubbles
- How To Trade Gold and Silvers Volatility
- Chinas Gold Demand: Saving, Not Spending
- Gold demand seen soaring in Vietnam amid devaluations, stock slump
- Asian Metals Market Update
- On same day Nadler denies, admits central bank interest in suppressing gold
- Are We Really Witnessing a Bond Bubble in the Making?
- Long, Short and Uncorrelated
- Seasons Don't Fear the Reaper
- WARNING!!!! Like Cigarette Smoking, This Thinking Will Cause Cancer… To Your Wealth!!
- Deflation Delusion Continues as Economies Trend Towards High Inflation
- A Two-Tier Internet?
- Public Pensions and California's Fiscal Future
- Why Are Home Sales Plummeting?
- How Much Gold is Enough?
- Jim's Mailbox
- Fighting the Correction in the Worst Possible Way
- Gold Gave up $4.10 to Close at $1,235.40, Again, Strong in the Teeth of Options Expiry
- Social Security: The Futile Fight For What’s Been Promised
- Guy Who Explained How We "Ended The Great Recession" A Month Ago, Now Sees 1 In 3 Chance Of Double Dip, Calls For QE2
- Gold and Silver Charts
- Banks back switch to China's renminbi for trade
| The BIG Move Is Still To Come! Posted: 26 Aug 2010 07:00 PM PDT In the big picture we think the gold and silver bull market has just started to warm up. It is not that we believe the ten year bull market has not been underway for a significant amount of time, but rather we believe the majority of the ... Read More...
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| Policy Solutions, Part Two of Four Posted: 26 Aug 2010 06:35 PM PDT The early Romans honored familia, virtus, and dignitas, but the later citizens of the Empire exalted the machinery of the state and fell from excessive hubris. History has shown that the regressive tax scheme of ancient Rome wiped out its middle class. If America crafts a bipartisan solution to the financial crisis, it is sure to have an even more progressive tax scheme that would eviscerate the middle class of today. The über-rich can and will take care of themselves, for their influence has been unmistakably great, in ancient Rome as well as in modern America. Robert Schiller of Yale is one of our most credible observers of the financial situation, for his gift of insight that the Internet bubble and later the real estate bubble would end badly was remarkable. So what wisdom does he offer? He says our financial system failed to practice "enlightened risk management," encouraging people to borrow heavily against their life savings to buy houses. He therefore recommends giving different advice to people engaging in the mortgage process, and planning ahead with them through writing into their contracts how a loan would be modified in the event monthly payments could not be made. Such a mortgage would be called the "continuous workout mortgage," and it would not cost more than a regular one, because it would have reduced foreclosure costs, and it would benefit society through reducing the pain of "neighborhood effects." New and better government agencies would improve upon Great Depression solutions, offering insurance for default. In his words, his solution would, just like the innovation of moving from three- and five-year mortgages to 30-year loans, advance us out of the Stone Age of real estate finance. One would think that super-bright professors like Schiller would understand moral hazard. Surely he is familiar with the concept, but this solution brushes it aside in the most condescending terms. If he thought moral hazard were an important ingredient in the crisis, he would know it would never be the case that a speculating public could be met by bankers consistently counseling less usage of the commodity they sell. In every major up-cycle, willing lenders supplied other people's money — deposits — to willing borrowers. Animal spirits of bull markets run in herds. How would a "continuous workout mortgage" not invite default, and why would it ultimately not develop into a system where large financial institutions become REITs that rent real estate to tenants month after month — ultimately dooming the middle class to lose title to its lands through subtle changes in legal definition just as happened in ancient Rome? Schiller once had enormous vision to see that the great Internet craze was a giant bubble. But today he sees the financial mess too narrowly. It is a subprime problem. Like modern liberals who believe socialism failed in the past only because it had not yet been perfected or expanded adequately, Schiller's viewpoint of evolutionary finance believes the penetration of finance into the fabric of the economy is an advancement that failed because it was not innovated upon adequately. Instead, the financial calamity begun in 2008 is broader, an infection of both the monetary and the fiscal regimes; it is moral hazard. Still, you say I offer the reader no solution. But the sad truth is that asking what my solution is reveals a subconscious denial that the answer is everywhere in this book. If we continue to run with the herd and not demonstrate character or exercise self-discipline, we will prescribe more of the same medicine: higher taxes, bigger transfer payments, more crowding out of the private sector by government, more regulation, absorption of more lending risk, and big business favored over small business. How can we escape the conceit of thinking we can solve our own problems from the top down? What feeds character and self – discipline, our innate tools for doing the job right? Was not religion devised to remind us that we are weak and fall prey to our own desires? Does it not try to awaken us to a higher, more complex logic that by our nature we can never completely understand? If we reject humanism, relativism, and the urge to play God and arrange layer upon layer of intricate rules and laws that become our own undoing, then a simple gift results: The beauty of our condition is that once we submit ourselves to respect others and not envy them, there is a natural tendency for betterment and harmonious behavior. So now, with great humility, I offer some thoughts for solutions. I place these before you with sadness, because with our culture having decayed and hubris and condescension never having been so palpable, surely they are far less likely to be followed than the great ideas of the Schillers of the world. We need strong banks. Not behemoths that cannot be allowed to fail. Small ones, medium-sized ones, inevitably some large ones. If deposits are known to be at risk in banks generally, then bank managements will resume the role of safekeeping. Not to compete for depositors based upon safety would risk a migration of deposits to safer competitors. Stop encouraging large semi-weak banks to take over large weak banks, with the Fed providing a backstop for these transactions. Instead let these more poorly run banks fail. For a time, print money to make good on deposits and accounts held at these banks and brokers. It ' s only fair, because there have been no safe financial institutions for people to use, thanks to bad governmental policy. Eventually, close down the SIPC and the FDIC. Remove the tax loss carry forwards of the large banks, for with those in place along with refreshed balance sheets no small, sound bank could possibly compete against them. As bad banks fail, money will be printed in accommodation, lots of it. While this riles the libertarian sensibility, morally it is reprehensible that a populace trained for nearly 100 years to entrust deposits to banks should be impoverished as if they had been duped by Bernie Madoff. The taxpayer should never again be called upon to subsidize anything other than government ' s duty as originally enumerated in the Constitution: national defense, border security, yes; entitlements, no. Of course, those who are old and dependent should still be taken care of. But phase it out — all of it — according to a preannounced timetable. With a dramatically shrunken government, there will be less need for taxes. But there will still be an overhang from past debt and entitlements (even if they are reduced), which vastly exceeds the capability for their servicing by those in today's top brackets. Regards, Bill Baker, [Editor's note: This passage is reprinted from William W. Baker's book, Endless Money: The Moral Hazards of Socialism, with the permission of John Wiley & Sons, Inc (©2010). You can get your own copy of his book here.] Policy Solutions, Part Two of Four 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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| GATA and Grandich in The Street Gold Article Posted: 26 Aug 2010 06:22 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 26, 2010 06:41 PM read [url]http://www.grandich.com/[/url] grandich.com...
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| WARNING!!!! Like Cigarette Smoking, This Thinking Will Cause Cancer To Your Wealth!! Posted: 26 Aug 2010 06:22 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 26, 2010 06:37 PM While I thoroughly enjoy poking fun at Gold Perma-Bears, I never ever wish them personally any harm (don’t need to as their anti-gold position is causing them enough harm in their pockets), there’s one Pappa Perma Bear who has not only been wrong basically for an entire decade; but his arrogance towards those who have been right where he’s been wrong has only been matched by his idiotic and atrociously wrong thought process. The “Tokyo Rose” of the gold perma bear group was a guest on BNN Today. The anchor person who interviewed him openly declared his dislike and disbelief in gold, which could be suggested he was slanted in his objectiveness (but at least to his credit didn’t try to mask it like another couple of reporters on this usually reliable network do). Watching this anchorma...
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| Rush Out and Buy Some Gold! Russia is Buying Gold! Posted: 26 Aug 2010 06:22 PM PDT I remember the good old days of the Cold War when the Russians were humorless robots who could always manage to catch James Bond, a British secret agent better known by his "License to Kill" number: 007. But the clumsy, doltish Russians could never hold onto him, and in the process, a lot of Russian secret agents, soldiers, miscellaneous employees, assorted affiliates and innocent bystanders all died, usually in a blaze of gunfire or explosions of some kind. As a young man, I remember it especially well because I noticed that Really Hot Babes (RHB) were always practically throwing themselves into James Bonds' arms, talking in vague, strangely-forbidden double entendres, husky whispers promising pleasures a-plenty coming from Really Hot Babes (RHB) whose barely-parted, glistening red lips cried out to be kissed, hard, and your brawny arm roughly encircles her dainty waist, pulling her harder and harder against your manly chest as you kissed her, deeply, hungrily, dominating her with r...
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| Daily Dispatch: Regulation Run Amok Posted: 26 Aug 2010 06:22 PM PDT August 26, 2010 | www.CaseyResearch.com Regulation Run Amok Dear Reader, Chris here, filling in for David today. In the wake of some 1,500 or so salmonella cases from tainted eggs, more than 500 million eggs have been recalled and the FDA is calling for – you guessed it – more money, more power, and more regulation. Raise your hand if you think piling on even more regulations will prevent such events from happening again. If your hand is up, you should give me a call, I’ve got a bridge to sell you. Think of all the regulation that was in place to keep the financial markets in check and prevent a collapse of the system prior to 2008. Just a few of the agencies charged with regulation and protection were the Federal Reserve, the Treasury (including the Office of Thrift Supervision), the Comptroller of the Currency, the Securities and Exchange Commission, and the Federal Deposit Insurance Corporation. The ...
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| Surviving the Fall of Entitlements Posted: 26 Aug 2010 06:22 PM PDT The 5 min. Forecast August 26, 2010 11:18 AM by Addison Wiggin & Ian Mathias [LIST] [*] How the United States has defaulted before… and is on the verge of defaulting again [*] “A milk cow with 310 million tits”: a salty politico’s crusty comments and the serious issue they obscure [*] New bull market: Why lean hogs are fattening the wallets of traders in the know [*] Chris Mayer makes sense of China’s 62-mile traffic jam… Plus, the great chopstick crackdown! [*] Readers light us up on marijuana legalization [/LIST] “Governments will impose a loss on some of their stakeholders,” reads a new report from Morgan Stanley on sovereign debt. “The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take.” Of course, we’re talking only about “other” countries like Greece and Ireland, right? The...
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| Posted: 26 Aug 2010 06:22 PM PDT View the original post at jsmineset.com... August 26, 2010 06:54 AM Dear Eric, Recession risk or the bottom will drop out? You are being too gentlemanly. Regards, Jim U.S. Economy: Durables, Housing Signal Recession Risk CIGA Eric Both CPI and gold-adjusted business core spend (new orders of durable goods ex. defense and aircraft) time series are rolling over. Gold adjusted business core spending, a better reflection real of business activity, has not recorded positive year-over-year growth since 2007. This throws cold water on the heavily MOPE'd economic recovery of 2009-2010. Real Business Core Capital Spending: Real or CPI-Adjusted New Orders of Durable Goods ex. defense and aircraft (RBCCS) and YOY Change: Gold-Adjusted New Orders of Durable Goods ex. defense and aircraft (BCCSGLDR) and YOY Change: Orders for durable goods in the U.S. increased less than forecast in July and sales of new homes unexpectedly dropped, increasing the risk of a renewe...
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| Hourly Action In Gold From Trader Dan Posted: 26 Aug 2010 06:22 PM PDT View the original post at jsmineset.com... August 26, 2010 10:14 AM Dear CIGAs, It is generally not a good sign when a market moves lower after failing to sustain its gains on the release of "friendly" news. Such has been the case so far today with the S&P 500 as it popped higher when the unemployment numbers came in a bit less than the market had been anticipating. The bump higher attracted sellers instead which is most disconcerting if you happen to be a bull. It is early in the day yet as I write this so the longs can still turn it around but for now you can see the "risk" trades that were put on earlier coming right back off. The Euro has lost a half a cent against the Dollar as the equity markets have faded off their best levels with the Yen moving a tad higher as once again, both it and the Dollar receive money flows whenever investors become nervous. Speaking of nervous, Forex traders are becoming increasingly worried that the Bank of Japan is getting ready to foray forth a...
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| Gold Demand Up 36% in the Second Quarter: WGC Posted: 26 Aug 2010 06:22 PM PDT The gold price was pretty flat during Far East trading, but tacked on about five bucks shortly after London opened yesterday morning. Then it didn't do much until New York opened... and from that point, gold rose to around $1,241 spot... and bounced off that price ceiling for the rest of the day... before closing at $1,240.00 spot right on the button. Not exciting action, but still up about ten bucks on the day. Gold's high tick was $1,242.60 spot. Silver's price action was somewhat similar... almost ruler flat until about an hour after London opened. From that point it spiked up about twenty cents... and remained even more ruler flat until Comex trading began. Then, silver rose slowly but steadily all through floor trading... breaking through the $19 mark right at the Comex close... but traded flat after that. Silver was the star of the day... and its high price tick checked in at $19.07 spot at the Comex close. Without a doubt it would have p...
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| How To Trade Gold and Silver’s Volatility Posted: 26 Aug 2010 06:22 PM PDT Wed Aug 25th Understanding the key differences between both gold and silver’s risk/volatility levels plays a large part in how I choose a low risk trade setup. Those of you who follow me already know the GLD etf is my favorite trading vehicle as it provides me with low risk trading setups along with a very high win rate. Ok, let’s jump into to comparing gold and silver as trading instruments. I get the same questions from new traders all the time and I think these two questions will help clear them up. The questions are: 1. Why don’t you give silver (SLV) trading analysis/signals? 2. Why don’t you trade silver? My answer to the questions are simple and the chart below displays my view. The gold (GLD) signals I provide work with silver so you can just trade silver when I have gold long or short trade. This is the reason I don’t provide much silver analysis because it’s duplicate info. The chart below shows how gold and silver trade t...
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| A look at the upcoming 4-year cycle Posted: 26 Aug 2010 06:22 PM PDT Many observers have been wondering if the upcoming 4-year cycle bottom in a few weeks will exert a negative impact on stock prices when the previous 4-year cycle bottom in 2006 barely registered. You may recall that the period from August through December of 2006 saw a stellar performance from the market that left many market technicians perplexed as to why the 4-year cycle bottom left no discernible impact on stock prices at that time. Many of them tried to excuse the lack of downward bias in the broad market in the fall of ’06 by saying that the 4-year cycle would bottom later that year, despite the fact that the 4-year cycle is fixed and always bottoms around the end of the third quarter in late September/early October. This time around there are some market analysts who insist that downward pressure from the 4-year cycle need not be felt against stocks since the effect of this cycle was negligible in 2006. They also point to the improvement in corporate...
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| LGMR: Silver "Still Cheap" After "Dramatic Move" Posted: 26 Aug 2010 06:22 PM PDT London Gold Market Report from Adrian Ash BullionVault 08:50 ET, Thurs 26 August Silver "Still Cheap" After "Dramatic Move" as Gold/Silver Ratio Forms "Explosive" Pattern THE PRICE OF GOLD and silver touched new 8-week highs in London dealing on Thursday, while the Japanese Yen retreated further and developed-world stock markets extending yesterday's rally on Wall Street. G7 bonds slipped back, nudging yields higher from this week's record lows. Crude oil pushed higher again, unwinding a third of this month's 7% drop at $73 per barrel. "Base metals have [also] staged a rebound," notes Standard Bank's commodities team today, but "precious metals continue to push higher, adding weight to our assertion that equity markets and base metals are largely being driven by bargain-hunting rather than resurgent risk appetite." "Gold is now open to the next leg higher from $1256 to $1265," says Russell Browne at bullion bank Scotia Mocatta in his latest technical an...
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| Posted: 26 Aug 2010 06:21 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 26, 2010 04:59 AM [LIST] [*]Shrinkage [*]Nothing to show for it [*]Ugly [*]Talk is cheap [*]How’s this for demand Tokyo Rose? [*]Silver breakout [/LIST] [url]http://www.grandich.com/[/url] grandich.com...
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| Crude Oil Gets a Reprieve, Gold Approaches the All-Time Highs Posted: 26 Aug 2010 06:21 PM PDT courtesy of DailyFX.com August 25, 2010 10:51 PM Twenty year highs in U.S. inventories couldn’t stop crude oil from rallying on Wednesday, as oversold conditions ruled the day. Gold benefitted from the release of more poor economic data. Commodities – Energy Crude Oil Gets a Reprieve Crude Oil (WTI) - $72.92 // $0.40 // 0.55% Commentary: Despite a bearish DOE inventory report and another round of dismal economic data, crude oil managed to rally, adding $0.89, or 1.24% on Wednesday. Incidentally, U.S. equity markets also finished modestly higher, after spending the vast majority of the day in the red. Clearly, the catalyst for the latest advance was oversold conditions. Oil has fallen precipitously in recent weeks, thus a bounce is only natural. Nevertheless, the data remains bleak with U.S. Durable Goods Orders for July rising only 0.3% versus the 3.0% expectation. Excluding the volatile transportation segment, orders decreased 3.8% versus the 0.5%...
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| Posted: 26 Aug 2010 06:21 PM PDT View the original post at jsmineset.com... August 25, 2010 12:25 PM Jim Sinclair's Commentary Governments DO NOT default, they reschedule and declare that a solution. Problem solved. Of course that is BS, but it takes awhile for the market to figure it out. Morgan Stanley Says Government Defaults Inevitable By Matthew Brown – Aug 25, 2010 12:10 PM MT Investors face defaults on government bonds given the burden of aging populations and the difficulty of increasing tax revenue, according to a Morgan Stanley executive director. "Governments will impose a loss on some of their stakeholders," Arnaud Mares in the firm's London office wrote in a research report today. "The question is not whether they will renege on their promises, but rather upon which of their promises they will renege, and what form this default will take." The sovereign-debt crisis is global "and it is not over," he wrote. Rather than miss principal and interest payments, governments may choose a "soft" ...
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| Posted: 26 Aug 2010 06:04 PM PDT In the past two years of publishing, the Goldsmiths and news reports at www.analysis-news have discussed two of the major problems now facing the Obama Administration and the Rothschild banking Cabal which is using the US dollar to conquer and rule the world. First, there is the manifestly obvious looming possibility of a collapse of the dollar and the US debt structure now in hock for at least $14 trillion.
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| Gold and silver versus market index bubbles Posted: 26 Aug 2010 05:51 PM PDT Below is a chart Nick of Sharelynx has been working on to show how much of a bubble gold and silver are in (or not). Note that the x-axis does not have time on it because each bubble had a different timelength (some of the bubbles are 20 years, others 5 years). This does skew/stretch the time, but Nick's emphasis with this chart is more on the percentage growth factor rather than how long it took to get to those bubbles.  
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| How To Trade Gold and Silvers Volatility Posted: 26 Aug 2010 05:37 PM PDT
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| Chinas Gold Demand: Saving, Not Spending Posted: 26 Aug 2010 05:29 PM PDT
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| Gold demand seen soaring in Vietnam amid devaluations, stock slump Posted: 26 Aug 2010 05:15 PM PDT Coming soon to a Western country near you. * * * From Bloomberg News http://www.bloomberg.com/news/2010-08-27/gold-demand-to-soar-in-vietnam-... Gold demand in Vietnam, which consumes more of the precious metal per head than India and China, is set to surge as the third devaluation [of the dong] in the past year and a stock market slump combine to spur sales. "People will switch to gold as a shelter," said Le Xuan Nghia, vice chairman of the National Financial Supervision Commission, which advises Prime Minister Nguyen Tan Dung. "The current situation with the dong will spur people to increase their gold holdings." The government devalued last week to boost exports and shore up the nation's trade deficit, driving the dong to a record low. Vietnam's benchmark stock index has slumped into a so-called bear market, plunging by more than 20 percent from a May high. Gold priced in dollars reached a record in June on concern that the global recovery may falter. ... 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 "Gold and strong foreign currencies, like U.S. dollars, will draw investment from Vietnamese people, especially with the recent declines in the stock market and the devaluation of the dong," said Nguyen Hoang, an analyst at Vietnam Gold Business, which trades the metal for banks and companies. Immediate-delivery gold surged to an all-time high of $1,265.30 an ounce on June 21 on concern that the economic recoveries in the U.S. and Europe were losing momentum. The metal traded today at $1,234.85 an ounce and is set for a 10th annual gain this year, buoyed by central-bank purchases and increased investor holdings in exchange-traded funds. "The dong's depreciation, which has been about 5 percent already this year, plus declines in stocks and uncertainty in the property market, will prompt investors to put their money in gold," said Dinh Nho Bang, chairman of Vietnam Gold Traders' Association, which has more than 100 members. "We've seen some economic growth, but it's still not certain enough." Vietnam's central bank set the daily reference rate for the dong 2 percent lower at 18,932 per dollar on Aug. 18, citing the need to narrow the trade deficit. The currency traded at a low of 19,500 per dollar today, according to Bloomberg data. Local gold prices jumped to a record 29.95 million dong per tael on Aug. 25, the Thanh Nien newspaper reported yesterday, referring to the unit that is about 1.2 ounces. "The Vietnamese public will continue to conserve and protect their assets by hoarding gold tael bars," Albert Cheng, managing director for the Far East at the World Gold Council, wrote in an e-mail. "They've been hit by three devaluations in the last year and no one can be certain there won't be more," Tim Condon, Singapore-based chief Asian economist at ING Groep NV, said by phone. "Gold buying is an alternative to U.S. dollar buying." Vietnam's gold offtake last year was 73.3 metric tons, with per-capita consumption of 0.8544 gram and average income of $2,900, according to the Gold Council's Cheng, citing data from GFMS Ltd., the International Monetary Fund, and the World Bank. India, the world's biggest gold user, took 578.5 tons, or 0.4874 gram per head, and had average income of $3,100. China's figures were 457.8 tons, 0.3418 gram, and $6,600, Cheng wrote. For almost the same level of income per capita, Vietnam consumed almost twice as much gold as India, Cheng wrote in the e-mail. Compared with China, Vietnam's demand relative to income was about five times higher, he wrote. "People will increase their gold holdings, definitely," said Lam Minh Chanh, chief executive officer of Ho Chi Minh City-based Vang The Gioi (World Gold) Co. Ltd. "Gold prices will continue to rise in Vietnam." The VN Index, the benchmark equity index, has slumped more than 20 percent from this year's high on May 6, and Nguyen Duc Hai, head of research at Hanoi-based Vietcombank Securities, said on Aug. 24 that there was "no sign of a bottom." The trade deficit narrowed to $900 million in August from $978 million in July, according to preliminary figures from the General Statistics Office in Hanoi. The Southeast Asian nation's economy expanded 6.4 percent in the second quarter, after advancing 5.8 percent during the first three months. Inflation this month is 8.18 percent, in line with July's 8.19 percent. "I've seen more people selling than buying gold in the last few days to get some profit," said 47-year-old Nguyen Thi Hoa, owner of a gold shop and money changer in Ly Thuong Kiet Street in Hanoi, the capital. "However, talking about long-term prospects, the dong's been devalued twice this year, as well as its depreciation every year, and that will prompt people to switch their dong savings to gold or foreign currencies." Join GATA here: Toronto Resource Investment Conference The Silver Summit 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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| Posted: 26 Aug 2010 05:04 PM PDT The movement in commodities suggests month end position squaring and rebuilding. Markets expect more bad news from the global economic front which is preventing traders from going short in gold and other safe havens. Silver is trying to catch with gold and if it is able to do so then spot silver will rise to $21.00 soon. Base metals and energies rose on the back of better than expected US initial jobless claims.
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| On same day Nadler denies, admits central bank interest in suppressing gold Posted: 26 Aug 2010 04:45 PM PDT 1a ET Friday, August 27, 2010 Dear Friend of GATA and Gold: How does Kitco senior gold market analyst Jon Nadler get away with it? Interviewed Thursday morning by TheStreet.com's Alix Steel, Nadler dismissed complaints that central banks and their agents, bullion banks, collude to suppress the price of gold. As he did at the Vancouver resource investment conference in June (http://www.gata.org/node/8717), Nadler insisted, "There's no vested interest on anybody's part to suppress prices here." You can find Nadler's comment to TheStreet.com here: http://www.thestreet.com/story/10760375/1/top-5-reasons-gold-prices-move... But just a few hours later, interviewed about gold on the "Trading Day" program of Business News Network in Canada, Nadler remarked that a gold price of $5,000 would signify "disruptions on a major scale" and a price like that is "something that the central bankers of the world have decided probably not to allow to happen." You can find Nadler's interview with BNN here: http://watch.bnn.ca/#clip341191 So if central banks have no interest in suppressing the gold price, why should they decide not to allow gold to reach $5,000? Indeed, why should central banks care about the price of gold at all? Of course the answer is well documented in history. Indeed, the modern history of gold is almost entirely a matter of central bank price manipulation and suppression, because gold is a currency that competes with central bank currencies and profoundly influences interest rates and the price of government bonds. Much of the modern history of gold has been outlined well by Bill Buckler, publisher of The Privateer financial letter, particularly in regard to the London Gold Pool of the 1960s and the gold dishoarding by the International Monetary Fund and the U.S. Treasury Department in the 1970s, two acknowledged mechanisms of price suppression. You can find The Privateer's outline here: http://www.the-privateer.com/gold2.html And at least four chairmen of the Federal Reserve maintained or expressed interest in suppressing the gold price. -- William McChesney Martin Jr., the longest-serving Fed chairman, kept in his archive a detailed plan, dated April 1961, for surreptitious government intervention to rig the currency and gold markets to support the U.S. dollar and to conceal, obscure, or falsify U.S. government records and reports so that the rigging might not be discovered. This document remains on the Internet site of the Federal Reserve Bank of St. Louis. Along with some explanatory commentary it can be located here: -- In June 1975 Fed Chairman Arthur Burns wrote a seven-page memorandum to President Ford about controlling the gold price through foreign policy and defeating a free market in gold. That memorandum can be found here: http://www.gata.org/files/FedArthurBurnsOnGold-6-03-1975.pdf -- In November 2004 former Fed Chairman Paul Volcker published an excerpt from his memoirs in the Nikkei Weekly in Japan in which he regretted that central bank intervention was not undertaken to suppress the price of gold during a currency revaluation in 1973. Volcker wrote: "That day the U.S. announced that the dollar would be devalued by 10 percent. By switching the yen to a floating exchange rate, the Japanese currency appreciated, and a sufficient realignment in exchange rates was realized. Joint intervention in gold sales to prevent a steep rise in the price of gold, however, was not undertaken. That was a mistake." The excerpt from Volcker's memoirs can be found here: -- And former Fed Chairman Alan Greenspan has acknowledged or remarked favorably about central bank intervention to suppress the gold price a number of times, including during the May 1993 meeting of the Federal Open Market Committee. According to the minutes of the meeting, Greenspan said: "I have one other issue I'd like to throw on the table. I hesitate to do it, but let me tell you some of the issues that are involved here. If we are dealing with psychology, then the thermometers one uses to measure it have an effect. I was raising the question on the side with Governor Mullins of what would happen if the Treasury sold a little gold in this market. There's an interesting question here because if the gold price broke in that context, the thermometer would not be just a measuring tool. It would basically affect the underlying psychology." You can find the May 1993 minutes of the FOMC meeting here: GATA has compiled so much more evidence of central bank manipulation of the gold market here: http://www.gata.org/taxonomy/term/21 Given the U.S. government's fierce secrecy about gold -- GATA has had to sue the Fed in U.S. District Court for the District of Columbia for access to the Fed's gold records, including gold swap agreements the Fed acknowledges having with foreign banks -- we seldom can be sure of what central banks are doing in the gold market at any particular time. But central bank interest in controlling the gold price -- what Nadler keeps denying -- is the gold market's first and overwhelming fact. Any analysis that denies this is disinformation. And any analyst who denies and acknowledges it on the same day to different news organizations must be very confident that they're not paying attention and not inclined to do any research. Unfortunately Nadler probably has that much right. 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: Toronto Resource Investment Conference The Silver Summit 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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| Are We Really Witnessing a Bond Bubble in the Making? Posted: 26 Aug 2010 04:19 PM PDT Calafia Beach Pundit submits:  Like many others, I remain fascinated by the rally in bonds that has taken the 10-yr yield to 2.5%, only 50 bps above its all-time lows which first occurred when the economy was mired in a decade-long depression and deflation (click on chart to enlarge). Is that the fate—depression and deflation—that awaits us today? How can we have ultra-low yields at a time when the federal deficit is gigantic and federal debt/GDP ratios are soaring? I have some thoughts and speculations. One explanation would be that the market is simply priced to the expectation of deflation. But that hypothesis is not validated by TIPS spreads, because inflation expectations are still reasonably positive: a 1.4% CPI on average over the next 5 years, and 1.6% over the next 10 years (see next chart, click to enlarge). Deflation was our expected destination at the end of 2008—TIPS spreads were flat to negative, and TIPS yields soared because deflation fears were so strong that nobody had any interest in the securities. But things are very different today, with 10-yr TIPS real yields of 1% reflecting very strong demand for TIPS. Complete Story »
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| Posted: 26 Aug 2010 04:02 PM PDT This market is a god damn mine field, you better be wearing one of those bomb squad suits and have the agility of a ballerina if you wish to play. But, for those willing, there are some decent opportunities on both sides here. Over the past few days I have radically increased my overall exposure. My absolute exposure is 35% long, and total exposure is 50%, which leaves the short exposure at 15%. But the long short exposure really doesn’t tell the story of what’s going on in my book. Allow me to explain. On Tuesday morning at the open I began building positions in several miners. I started with a basket of Silver Wheaton (SLW), Eldorado Gold (EGO), Compania de Minas Buenaventura (BVN), and IAMGold (IAG) at 3% each. When it comes to materials, I like to go with the basket approach. I could have just bought a 15% position in one or the other, but I prefer to spread it around. I then increased SLW and BVN to 5% positions as they moved north. On Wednesday morning I bought a 5% position in SLV, the silver ETF. I like to trade the underlying commodities using a pretty simple trend following system. My long exposure to the miners and underlying asset silver is about 21%. Complete Story »
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| Posted: 26 Aug 2010 03:55 PM PDT "So how was it down there? Was it insane," a friend asked your editor on the phone this morning. "You mean here in Australia? Are you talking about the election?" "No you moron. I'm talking about the Deep End." "Huh?" "Your Daily Reckoning yesterday. You went off the deep end. Did someone slap you upside the head and get your mind right? What was that all about?" We probably could have saved a lot of trouble by just writing: people tend to overestimate what they think they know and underestimate what they don't know. It's best to be modest, work hard, and recognise that sometimes what you get in life is neither what you expect nor what you deserve. But let's talk about markets and cycles first today before we get on the crazy train. And since yesterday was all about words (even though words can change worlds), let's look at some pictures. First up is the proof that no matter how much you hate reading about it, what happens in the American market is usually what determines what happens in the Aussie market. The chart above shows that despite different economies, different key industries, and different names, the Dow and the All Ordinaries have pretty much moved in lock step with one another. So what does it mean that on Thursday the Dow closed below 10,000? Well, according to Dawes (a sample of whose work we're sending out this weekend) it means the Aussie indexes have entered the "sell zone." You can see from the chart that the July lows have yet to be taken out. But that's the level our friend Phil Anderson said to watch for earlier this week. If the markets don't take out the July lows, Phil reckons it would be "exceedingly bullish." We realise we pretty much butchered the explanation for what a Kondratieff cycle (or wave) is. So today we resort to a simpler explanation: a picture. In Phil's presentation the other night he concluded that rather than being in the middle of the Kondratieff "long winter" we're still on the upswing in the cycle. If true, this would be bullish for commodities. But let's look at the wave before we get to the metals and grains.  Full disclosure: your editor knows very little about this very exclusive domain of cycle theory. And this particular chart illustrating the waves a bit prejudiced in that it suggests we are closer to the top of the cycle than the bottom. But when you're talking long cycles, being "near" the top means that a powerful trend could have several years to run. That, in fact, is what Phil suggested the other night about commodity prices. It would mean that gold, oil, and some of the grains - all for their own reasons - would make higher highs in the coming years. But do other charts bear that prediction out? Doing a little research of our own this morning, you can see that commodities have yet to make a new high in U.S. dollar terms. But in terms of the British Pound and the Euro, commodities have in fact eclipsed their 2008 levels. Should you be bullish, or terrified?  The alluring way to look the charts above is that the huge sovereign debt problems in Europe, the UK, and America are again making tangible assets popular. In 2008, we recall a lot of people saying - ourselves included - that real assets would be a better hedge against inflation and/or a market crash than stock and bonds. The trouble is, there turned out to be just as much leverage in the commodities markets in 2008 as there was in stocks. When the credit crunch hit, commodities crashed hard. And commodity stocks crashed even harder. So now, are commodities again making a high as equity markets turn down? That's the $64 trillion question. The big deleveraging and asset deflation of 2008 was sparked by the failure of Lehman Brothers. That terrified plenty of people. Since then, the debt problem has migrated to the balance sheets of sovereign governments. That suggests the next failure - if one is required to kick off a big deflation - would have to be a sovereign one and not a corporate one. But we reckon that this time the trigger to a big move in the markets will by psychological and not mechanical. That is, investors in the Western world are already adapting to a world with lower corporate earnings and less private and household debt. It's the people running monetary and fiscal policy - central bankers and elected officials - that haven't adapted yet. And you know what happens to species incapable of adapting to new circumstances. In the meantime, it's wise to remember, as the great Blue Oyster Cult tells us, that the seasons don't fear the reaper. Cycles aren't anything to fear. It's just something we have to learn to live (and die) with. And economically speaking, we may just be in the middle of a cycle where wealth and power are migrating from the West to the East. It's an argument we began making in 2003. If you're in the West, the bad news is that it's probably winter time for asset markets. But the good news is that there's a place where honest-to-goodness green shoots may come again. We'll visit that place next week. Until then! Dan Denning
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| WARNING!!!! Like Cigarette Smoking, This Thinking Will Cause Cancer… To Your Wealth!! Posted: 26 Aug 2010 02:40 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 26, 2010 06:37 PM While I thoroughly enjoy poking fun at Gold Perma-Bears, I never ever wish them personally any harm (don’t need to as their anti-gold position is causing them enough harm in their pockets), there’s one Pappa Perma Bear who has not only been wrong basically for an entire decade; but his arrogance towards those who have been right where he’s been wrong has only been matched by his idiotic and atrociously wrong thought process. The “Tokyo Rose” of the gold perma bear group was a guest on BNN Today. The anchor person who interviewed him openly declared his dislike and disbelief in gold, which could be suggested he was slanted in his objectiveness (but at least to his credit didn’t try to mask it like another couple of reporters on this usually reliable network do). Watching this anchorma...
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| Deflation Delusion Continues as Economies Trend Towards High Inflation Posted: 26 Aug 2010 02:30 PM PDT |
Delusional deflationist right from the Bank of England MPC, to the mainstream press for well over a year have pushed the mantra of ongoing debt deleveraging deflation everywhere, everywhere that is than appears in where it counts i.e. the actual INFLATION indices, where inflation is on the rise right across the world as illustrated in the UK by the persistent failure of the Bank of England to control UK inflation that remains above the banks CPI 3% upper limit. Even Greece that really is in an depression is experiencing inflation at above 3%, whilst the US CPI continues to inflate at a more modest 1.2% as summarised below for key world economies.| India | 13.7% |
| Argentina | 11.2% |
| Russia | 5.5% |
| Brazil | 4.6% |
| China | 3.3% |
| UK | 3.1% |
| Australia | 3.1% |
| Euro zone | 1.7% |
| USA | 1.2% |
| Japan | -0.7% |
This is leaving aside the fact that the official inflation indices tend to under report real inflation rates as the methodologies have been manipulated LOWER over the decades so that governments can continue to stealth tax the population. For instance UK inflation as measured by the RPI which is the recognised measure for UK Inflation is at 4.8%, with my own real inflation rate measurement coming in at 6%. Whilst the U.S. CPI of 1.2% when measured on the basis of E.U. methodology that ignores Bush and Clinton tweaks comes in at 2.4% Then we have Mr Shadowstats who reports U.S. CPI inflation as being at 8.6% rather than the official 1.2%.
I warned of imminent UK and global inflation mega-trend way back in November 2009 (18 Nov 2009 – Deflationists Are WRONG, Prepare for the INFLATION Mega-Trend ), as deflationists fell into the trap the debt deleveraging deflation red herring, that completely missed the big picture that I attempted to elaborate upon in the 100 page Inflation megatrend ebook of January 2010 (FREE DOWNLOAD) that contained the specific trend forecast for UK CPI Inflation of Dec 09 (UK CPI Inflation Forecast 2010, Imminent and Sustained Spike Above 3%) as illustrated by the below graph against which the Bank of England has continually issued statements that high inflation was just temporary and would imminently fall throughout 2010, the reasons for which I touched on recently upon in the article The Real Reason for Bank of England's Worthless CPI Inflation Forecasts.
Debt deleveraging deflation completely ignores the fact that we are NOT living in the 1930's, but in a GLOBALISED world economy that is seeing the CONVERGENCE of REAL GDP's where the developing world is EATING up the worlds resources at a faster pace then the west is cutting back on consumption thus DRIVING INFLATION HIGHER whilst at the same time the west is engaged in COMPETITIVE CURRENCY DEVALUATIONS in an attempt to GENERATE NOMINAL GDP GROWTH which has highly inflationary implications.
Governments attempting to inflate nominal GDP's through printing money and near zero interest rates so as to push people towards consumption rather than savings because banks are paying LESS in interest than even the phony official inflation rates. Thus people increasingly seek to hold anything other than negative interest rate paying devaluing fiat currency that can be printed in the trillions at the press of a button. Savers in the UK are realising this as INFLATION EATS a life time of accumulated savings. Workers are realising this as the flow of paper currency raises prices in the shops far greater than the flow of paper into their pay packets that is coming in at an average of 2% against CPI of 3.1%. The paper currency is losing value at a much faster pace than the official inflation statistics, people are waking upto this and will increasingly demand payment in terms of ability to track the price of goods and services not official indices therefore demand wage rises above official inflation indices and thus triggering the dreaded wage price spiral, which as the trend for the convergence of GDP per capital analysis as illustrated by the below graph (Inflation Mega-Trend Ebook Page 54) shows for most people will only be a nominal phenomena i.e. they will not actually be able to purchase more as they will be fighting a losing battle against REAL INFLATION.
The threat of Debt debt deleveraging deflation has INFLATIONARY consequences because the governments will not ALLOW for actual Price DEFLATION because it would INCREASE the real value of government debt therefore increases the risk of governments going bankrupt as the debt interest rises, when the real intention is to INFLATE the real value of debt away. INFLATION is also one of the governments most important stealth taxes on the people whilst DEFLATION acts as a subsidy TO the people i.e. their standard of living INCREASES during DELFATION as prices fall whilst inflation gives the illusion of increasing standard of living as workers are stealthily forced to work harder for less real pay despite increasing productivity.
Debt Interest Spiral Inflationary Trend Towards Hyperinflation
As warned off in November 2008 (28 Nov 2008 – Bankrupt Britain Trending Towards Hyper-Inflation?), the consequences of ever increasing debt mountain is the risk of igniting the debt interest spiral (03 Dec 2009 – Britain's Inflationary Debt Spiral as Bank of England Keeps Expanding Quantitative Easing), since 2008 the Labour government had bent over backwards to ignite an election boom (03 Jun 2009 – UK Economy Set for Debt Fuelled Economic Recovery Into 2010 General Election), so as to maximise its chances of winning the next election. the New government is attempting to bring the debt interest spiral to an halt but as the recent debt interest analysis (29 Jun 2010 – UK ConLib Government to Use INFLATION Stealth Tax to Erode Value of Public Debt ) concluded the Government will not only not be able to halt the accumulation of total debt during the next 5 years but that official debt as a % of GDP is expected to continue to rise to 72% of GDP as illustrated by the below graph which suggests significantly higher debt interest payments i.e. a significant worsening of the governments fiscal position which means MORE money printing despite a economic growth as total public sector net debt rises by 50% to £1.26 trillion (2013-13) from £784 billion (2009-10).
The Inflation Mega-trends
The official CPI inflation indices illustrate the facts of what has actually transpired during the whole period of deflation mantra for the past 18 months.
The actual trend for the UK has been of one of continuing accelerating inflation, where the great deflationary recession of 2008-2009 even barely a year on has become only vaguely visible as an inconsequential blip along the path of the Inflation Mega-trend. Do you see that little dip right at the very end of the above graph ? Well that inconsequential non event is yet again being taken by the mainstream press and Deflationists to run and cry deflation, just as every single minor downward blip during the past 18 months has been followed by something similar, if this type of reaction is not delusional than what is it ?
Meanwhile, the United States has experienced mild inflation since the Great Recession of 2008-2009 began with little overall change but with a positive trend. However this is set against the mantra of deflation that implies the complete opposite of what actually has transpired despite the worst recession since the Great Depression. So all of the talk of the U.S. being in deflation for the past 18 months has been delusional which does not match the reality of what actually has taken place and given the ongoing multi-trillion dollar deficits look set to feed a trend for a stagflationary economy for the U.S. for many years.
Delusional Deflationists Ignore CPI
Having been wrong on deflation in even the officially doctored CPI for the past year, delusional deflationists IGNORE this and any other indicator that implies inflation by picking and choosing any obscure measurements that implies deflation is taking place such as pricing assets in terms of the gold price to imply deflation is taking place when peoples food baskets i.e. the REAL WORLD show INFLATION is accelerating away from them, or in some cases implying that inflation is really deflation in disguise because of loss of purchasing power, which is the whole point of what inflation IS ! Where prices rise to erode the purchasing power of your savings and earnings! I hear weak economies mean deflation looms, well try telling that to Zimbabweans!
Do a simple personal inflation test, dig out your credit card statements from 1,2,3 years ago and see how much your food and energy bills have gone up and then you will know how much inflation has taken place during a period of perma deflation mantra. Never mind the amount average food baskets are destined to rise in price going forward!
Quantitative Easing / Money Printing
During 2009, Central Banks detonated the nuclear option of quantitative easing, the Bank of England will under the new governments regime seek to continue QE as part of its monetary policy. Central banks also have the bigger nuclear option of starting to charge banks interest on holding reserves at the central bank which would be highly inflationary as it would force banks to lend.
In the United States the prospects for QE2 ahead of the November mid-terms is growing and coming as a surprise to many quarters when it has been obvious since the first print run that once started money printing cannot be stopped whilst large budget deficits exist, which where the U.S. is concerned probably means continuing for the next 10 years at least as the U.S. is going to milk its reserve currency advantage to the fullest. So all the talk by the press earlier in the year that Q.E. had come to an end and would be unwound has been found out to be completely WRONG. Again, as I mentioned right at the start of QE in March 2009, once started money printing cannot be stopped whilst huge budget deficits exist EVEN AFTER RECESSIONS END. Therefore rather than be withdrawn or unwound, given the poor deficits outlook for the UK and US, we can expect QE to morph into a permanent feature of monetary policy.
The bottom line is that the QE already has yet to feed through to the financial system, i.e. UK £200 billion of money printing as a consequence of the fractional reserve system ultimately resolves into total money supply expansion of between £1 trillion and £4 trillion, which is highly inflation and already manifesting in what the Bank of England calls surprisingly high inflation and in the U.S. the $2 trillion of money printing to date looks set to be followed by at least another $1 trillion this year. So the seeds of high inflation have already been sown that will be reaped during the coming years.
Given the structure of the western economies, all that quantitative easing will do is to boost asset prices and emerging market economic growth and give an extra lift towards feeding the inflation mega-trend for many years.
Negative Real Interest Rates
At the end of the day the current situation of negative real interest rates is NOT deflationary it is INFLATIONARY as witnessed by official inflation indices that range between +2% to +4% rather than -2% to -4%.
Why ?
Because negative real interest rates erodes the confidence of people to hold fiat currencies. Workers are more eager to spend, savers are definitely more eager to seek escape from an obvious theft of value when banks are paying 2% against CPI of 3.1% and RPI of 4.8%. They are more likely to SPEND and invest in assets other than fiat currencies which is defacto reduction in the confidence of a population in holding the countries currency.
That's the reason why Gold is above $1200 rather than $600 that prominent permanently deluded deflationists have been espousing these past few years as to what 'should' happen.
The Myth of Japanese Economic Depression and Deflation
Deflationists in the mainstream press and BlogosFear constantly perpetuate the myth that Japan has been in a Deflationary depression since the housing and stocks bubble burst in early 1990. One would imagine that the Japanese economy is perhaps 30% smaller with prices 30% cheaper given the repetitive mantra . But what about the facts ? The facts are that the Japanese economy has NOT crashed by 30% i.e. in depression during this time period but grown in virtually every year up until the 2008 global recession to stand at a GDP of some 20% higher than where it was when the bubble burst.
Price Deflation ? – Another myth. Despite the fact that innovation and increases in productivity should drive prices down, Japan's consumer prices have have not fallen but are in fact marginally higher than where they were in early 1990. Therefore what Japan has experienced is stable prices NOT DEFLATION.
Yes Japanese asset prices, namely stocks and real estate have suffered greatly, however this is as a consequence of the bursting of the bubbles that saw prices TRIPLE during the preceding 5 years that turned safe assets such as houses into over bid gambling casino chips that were priced to discount a perpetual never ending boom. Therefore prices fell to reflect reality such as that it was ridiculous for the city of Tokyo in 1990 to be priced to have a greater value then the whole of the United States!
So when you hear about the US following a Japanese style deflationary depression, what you really need to understand is that it is for one of low economic GROWTH with STABLE prices. However the USA is NOT going to follow that model as the USA does not have the demographics of a shrinking ageing Japanese population which really SHOULD result in DEFLATION and a contraction in GDP which Japan through continuous innovation has NOT suffered. If there are far less workers generating MORE economic output then is that really an economic depression?
Commentators have been pointing to Japanese Debt soaring to now stand at 200% of GDP as highly deflationary when the OPPOSITE is true, as when the japanese debt bubble bursts which it surely will, then it will be highly inflationary if not hyper inflationary as Japan is forced to wipe out the value of its debt
Japanese the Real Gold Bugs
Whilst in the west buying gold for wealth preservation has yet to impact on ordinary people to any significant degree, ordinary Japanese recognising their ever growing debt mountain would ultimately destroy the Japanese currency were buying gold nuggets from their local gold dealers in preparation for hyper inflation 5 years ago! Needless to say despite that not having happened to date, the Gold price rising to $1250 reflects the increased global risks of debt bubbles bursting into high inflation.
Bottom Line - There has been no Japanese Deflation or Economic Depression. Western countries such as the UK and the USA are NOT Destined to follow the Japanese experience as their demographics are primed both for greater nominal GDP growth and price inflation.
Delusional Deflationists Point to Treasury Bond Market to Illustrate Deflation
Deflationists point to imminent deflation and a double dip recession by pointing to the treasury bond market yields plunging towards the credit crisis lows whilst at the same time continuing an 18 month mantra of the stocks bear market rally whose end is always imminent with the most recent plethora of commentary concluding that it has ended (again) and the bear market has resumed.
However the facts are that it is bonds and not stocks are in a bull market that is coming to the end of its life and entering the final manic stage that tends to see markets go parabolic. I am sure in recent weeks you have heard at length as to why bond investors are smarter and thus why the bond rally will go on and on, to me that sounds a lot like the tek stock investors during 1999, they too saw themselves as very smart just as the bubble popped. Every bubble participant thinks its different for them than every other bubble that's popped before, however it NEVER IS! The bond market investors are in total denial of the fact that the U.S. is firmly on the path towards bankruptcy because the US has given NO SIGN that it intends on bridging the forecast $200 trillion fiscal gap between future revenues and liabilities, a gap that can ONLY be filled by printing huge amounts of money triggering very high INFLATION, which will DESTROY the real value of bonds as in purchasing power terms they will just become confetti paper. Against this stocks that consistently pay high dividends can be expected to retain much of their purchasing power, where my focus is on dividend paying stocks because it is more difficult to engage in corporate fraud Enron style if a company is actually making dividend payments.
The Global Bond Market Bubble
The key drivers for the global bond market over the past 20 years has been China and other emerging markets such as India exporting deflation abroad as they industrialised and produced ever cheaper goods and services to drive down costs thus enabling prices in the west to fall, this has now reversed where China is exporting inflation abroad as its workers now start to demand a higher standard of living and the country increasingly looks towards domestic consumption to generate economic growth. On top of this we have the ever expanding supply of bonds that no matter what the central bankers state is not going to diminish (pay down the debt) for either the UK, USA or most of the developed countries during the next 5 years at least.
The 30 year treasury bond market graph shows a clear long-term uptrend punctuated by several speculative spikes higher amidst's a so called dash for safety during 2008 and at the present time though there is no Lehman style crisis on the horizon, that just as 2008 resolved towards a swift plunge back towards the long-term trendline so will the current bond market rally just as the mainstream media becomes most vocal in its commentary for bonds being a safe haven destination for investors. If the 20 year bull market trend pattern persists then further upside is limited in favour of a trend that targets a move to $USB 120 to 115 over the next 9 months. So those that have bought during the past 6 months are going to be sitting on losses in about 6 months time.
The 20 year graph for US treasury bonds as a proxy for the Global Government Bond Market bubbles has investors drowning in delusional deflationist ideology that suggests bond prices can keep rising ever higher, when the actual fact is that the bond market is very close to a significant reversal point. This is a manifestation of the reinforcement of belief that this time it is different for this bubble, just as the housing market bubble participants thought that house prices would keep rising for ever because it was different, and before then the dot com bubble could not be priced on the basis of what had gone before because the Internet meant that this time it really was different – IT NEVER IS DIFFERENT!
Off course one of the best inflation mega-trend hedges are Index Linked Government Bonds, and up until recently NS&I Index Linked Certificates, as the new government pulled the plug on these inflation hedges due to the fact that they are paying out 6% per annum TAX FREE, RISK FREE to savers during 2010 and rising to 7% during 2011. Against which the bankrupt tax payer bailed out banks cannot compete that typically pay less than 2.5% that is TAXED at 20% or 40% depending on ones tax band. For 50 pages on how to protect your wealth Download the FREE Inflation Mega-Trend Ebook
The Bottom Line – The global economy is not contracting it is growing by a decent 4.1% this year with similar 4%+ growth for 2011, the emerging markets are more than picking up the slack for the weakly growing western economies as a consequence of high levels of debt AND converging GDP per capita. This ensures that upward pressure on inflation will remain for western economies despite the downward pressure on real wages as the living standards of the east and west converge. For the west this means high inflation as governments attempt to inflate nominal GDP and wages to give the illusion of growth whilst in the east there will be currency appreciation coupled with strong economic growth and higher inflation that will be exported to the west.
What Investors Should Do
The U.S. Fed and the Bank of England are going to keep printing money which is a big positive for asset prices such as stocks. For investors the strategy remains to invest in inflation wealth protection and growth such as agricultural commodities, gold, silver, metals and mining, TIPS, emerging economies such as China, India, Russia, Chile, Brazil, and developed economies such as Australia and Canada as their appreciating currencies will pro
Posted: 26 Aug 2010 02:30 PM PDT
The Internet as you know it is in serious, serious danger. Some of the most powerful communications companies in the world have been involved in negotiations and have been making agreements that would throw net neutrality out the window and would move us toward a two-tier Internet. So exactly what would that mean? It would mean that the big corporate giants that have a virtual monopoly on other forms of media and entertainment would be able to buy access to the blazing fast "next generation" Internet that communications companies are developing and the rest of us (like this site for example) would be stuck on the decaying "gravel roads" of the old Internet. The threat that this poses to freedom, liberty, Internet commerce and the free flow of information should not be underestimated.
I want you to take a few moments and imagine with me what the future of the Internet could look like if something is not done. Imagine a world in which your Internet service provider gives you more "choices" regarding your level of Internet access. For a "budget" price, you can get email and access to several hundred of the hottest and most popular websites (controlled by the big media conglomerates of course) on the incredibly fast "next generation" Internet. For a bit more, you can get access to thousands of websites (once again, controlled by the big media conglomerates) on the new blazing fast version of the Internet that has been developed. Or lastly, you can get the "premium package" which will give you access to the entire Internet, including the millions of websites that are still chugging along on the "old Internet".
Wouldn't that be great?
Of course not.
Isn't it obvious what would happen?
The millions of websites that are unwilling or unable to pay the exorbitant "tolls" to get on the new blazing fast version of the Internet would rapidly start losing traffic and would eventually fizzle out almost altogether.
After all, in this day and age who is going to stick with technology that is slow and outdated?
For example, how many people still use "dial-up" anymore? There are a few, but it is just not that many.
For years, the big Internet companies have been dreaming of getting permission to sell access to an Internet "fast lane" to the highest bidder. The potential profits to be had are staggering.
But right now there is one thing that stands in the way of those profits and that must be eliminated according to them.
Net neutrality.
Up until now, any information sent over the Internet has been treated more or less equally. When a data packet enters the Internet, it is directed to its destination regardless of the identity of the customer or the importance of the information.
But now some very powerful interests want to change all that. The idea is to have the Internet much more closely resemble cable television.
In particular, a recent agreement regarding net neutrality between Google and Verizon is causing alarm among Internet users.
The following is how The Daily Mail described the recent agreement between Google and Verizon....
Technology giants Google and Verizon have today paved the way for a future 'two-tier' internet in which companies can pay extra to make sure their services get through.
Whenever anyone starts using phrases like "pay extra" when it comes to access to the Internet, alarm bells should start going off in your head.
Once we start going down that road, the big media companies with the deep pockets will do all they can to gain a "competitive" advantage.
The future of the Internet is at stake. Are we going to continue to have a free and open Internet with millions of choices, or are we going to have an Internet dominated by "toll roads" where there are only a few thousand choices which are all tightly controlled by the giant media conglomerates?
Already, there is a lot of talk about the new "high bandwidth" Internet that is coming.
According to The Daily Mail, even Verizon's CEO admits that the agreement between his firm and Google would create a "separate" high bandwidth Internet....
The new high bandwidth internet would remain separate from the normal public internet and would probably include services such as healthcare and 3D video and gaming, according to Verizon's chief executive, Ivan Seidenberg.
So what do you think is eventually going to happen if a new "high bandwith Internet" is set up?
Well, everyone will want to move over to it of course.
And that is exactly the idea.
Over the past several years, the big media conglomerates that dominate television, newspapers, radio, movies and even video games have come to realize that they have completely and totally lost control over the Internet.
The Internet has given the common man a voice in the world, and it is probably the greatest breakthrough for the free flow of information since the printing press was invented.
But to the big media conglomerates there is a big problem.
They have lost their monopoly.
People are not forced to come to them for their news and entertainment anymore.
The rise of the alternative media has been one of the most incredible stories of this past decade, and today information flows more freely around the globe than ever before.
But now there are some very powerful corporate interests that would like to force alternative websites, radio programs and television shows to shut down for good.
They realize that they need to make their move quickly, because we are rapidly approaching a critical turning point for the Internet.
You see, the truth is that virtually all communications will eventually go through the Internet. Phone service, television service and Internet access are rapidly merging into one.
The battle for control over this media pipeline we call the Internet is only going to heat up even more. Literally trillions of dollars will be made or lost depending on the direction that the Internet takes in the years ahead.
So will we allow the Internet to become a network of private toll roads where the big media conglomerates control what we see and hear and think?
Or will we stand up and demand that the Internet remain a free and neutral platform where information flows freely and where we can all have our say?
As for me, I choose to stand on the side of Internet freedom.
What say you?
Public Pensions and California's Fiscal Future
Posted: 26 Aug 2010 01:44 PM PDT
Governor Schwarzenegger wrote an op-ed piece for the WSJ, Public Pensions and Our Fiscal Future:
Recently some critics have accused me of bullying state employees. Headlines in California papers this month have been screaming "Gov assails state workers" and "Schwarzenegger threatens state workers."
I'm doing no such thing. State employees are hard-working and valuable contributors to our society. But here's the plain truth: California simply cannot solve its budgetary problems without addressing government-employee compensation and benefits.
As former Speaker of the State Assembly and San Francisco Mayor Willie Brown pointed out earlier this year in the San Francisco Chronicle, roughly 80 cents of every government dollar in California goes to employee compensation and benefits. Those costs have been rising fast. Spending on California's state employees over the past decade rose at nearly three times the rate our revenues grew, crowding out programs of great importance to our citizens. Neglected priorities include higher education, environmental protection, parks and recreation, and more.
Much bigger increases in employee costs are on the horizon. Thanks to huge unfunded pension and retirement health-care promises granted by past governments, and also to deceptive accounting by state pension funds (such as unreasonable projections of investment returns), California is now saddled with $550 billion of retirement debt.
The cost of servicing that debt has grown at a rate of more than 15% annually over the last decade. This year, retirement benefits—more than $6 billion—will exceed what the state is spending on higher education. Next year, retirement costs will rise another 15%. In fact, they are destined to grow so much faster than state revenues that they threaten to suck up the money for every other program in the state budget. (See the nearby chart.)
I've held a stricter line on government employment and salary increases than any governor in the modern era (overall year-to-year spending has increased just 1.4% on my watch). Nevertheless, employee costs will keep marching upwards because of pension promises, and they will never stop doing so until we get reform.
At the same time that government-employee costs have been climbing, the private-sector workers whose taxes pay for them have been hurting. Since 2007, one million private jobs have been lost in California. Median incomes of workers in the state's private sector have stagnated for more than a decade. To make matters worse, the retirement accounts of those workers in California have declined. The average 401(k) is down nationally nearly 20% since 2007.
Meanwhile, the defined benefit retirement plans of government employees—for which private-sector workers are on the hook—have risen in value.
Few Californians in the private sector have $1 million in savings, but that's effectively the retirement account they guarantee to public employees who opt to retire at age 55 and are entitled to a monthly, inflation-protected check of $3,000 for the rest of their lives.
In 2003, just before I became governor, the state assembly even passed a law permitting government employees to purchase additional taxpayer-guaranteed, high-yielding retirement annuities at a discount—adding even more retirement debt. It's as if Sacramento legislators don't want a government of the people, by the people, and for the people, but a government of the employees, by the employees, and for the employees.
For years I've asked state legislators to stop adding to retirement debt. They have refused. Now the Democratic leadership of the assembly proposes to raise the tax and debt burdens on private employees in order to cover rising public-employee compensation.
But what will they do next year when those compensation costs grow 15% more? And the year after that when they've risen again? And 10 years from now, when retirement costs have reached nearly $30 billion per year? That's where government-employee retirement costs are headed even with the pension reforms I'm demanding. Imagine where they're headed without reform.
My view is different. We must not raise taxes or borrow money to cover up fundamental problems.
Much needs to be done. The assembly needs to reverse the massive increase in pension formulas to government workers (including already retired workers) that it enacted 11 years ago. It also needs to prohibit "spiking"—giving someone a big raise in his last year of work so his pension is boosted. Government employees must be required to increase their contributions to pensions. Public pension funds must make truthful financial disclosures to the public as to the size of their liabilities, and they must use reasonable projected rates of returns on their investments. The legislature could pass those reforms in five minutes, the same amount of time it took them to pass that massive pension boost 11 years ago that adds additional costs every single day they refuse to act.
And after they've finished passing those reforms, they could take another five minutes to pass legislation terminating the annuity give-away they passed in 2003 and ending the immoral practice of pension fund board members accepting gifts or even campaign contributions from lobbyists, salesmen, unions and other special interests.
Reforming government employee compensation and benefits won't close this year's deficit. It will, however, protect the next generation of Californians from overwhelming burdens. The same is true with respect to the other reform I'm demanding, including the establishment of a rainy-day fund so that legislators can't spend temporary revenue windfalls.
All of these reforms must be in place before I will sign a budget.
I am under no illusion about the difficulty of my task. Government-employee unions are the most powerful political forces in our state and largely control Democratic legislators. But for the future of our state, no task is more important.
Governor Schwarzenegger is in for the fight of his life. Reading the daily headlines on Jack Dean's Pension Tsunami gives you a flavor of just how dire the fiscal situation is. Without serious public pension reforms, California is heading towards fiscal hell.
And it's not just California. Other states will suffer the same fate if they refuse to reform public pensions. You simply can't promise more than you can afford to pay out. At one point, you have to address the problem or face much higher borrowing costs. Raising taxes is not a long-term solution to mounting pension costs. It's akin to placing a band-aid over a tumor.
With so much economic pain and uncertainty, it's irresponsible to ask more from the private sector to deal with public sector pension shortfalls. I sympathize with many hard working public sector employees who had nothing to do with the financial crisis, but I also realize that pension apartheid is not the solution. You can't expect people who lost considerable sums in their 401K plans to pay more in taxes to make up for public sector pension deficits.
Stakeholders need to sit down and figure out a way to reform their public pensions. And it's not just about cutting benefits, raising the contribution rate and retirement age. They need to introduce meaningful, comprehensive reforms which include world class governance standards so that the public and stakeholders are reassured that pension monies are being managed properly and in everyone's best interest.
Finally, listen to New Jersey's governor, Chris Christie, below on how he handled powerful public sector unions and introduced measures to address the state's fiscal woes. Nobody likes reforms, especially when it hits their pockets, but ignoring the problem is only delaying the day of reckoning.
Why Are Home Sales Plummeting?
Posted: 26 Aug 2010 12:36 PM PDT
Why are new home sales plummeting?
On the surface, it is because the government's tax-credit for first-time home buyers lapsed in April. It takes a couple of months lag-time between buyer purchase decisions and the actual close of escrow, and so the expiration of the tax-credit is just now hammering the market.
And there is a huge backlog of housing stock.
And sellers are holding out hope that they can get close to peak prices for their homes, while buyers believe that prices will fall further - and so are waiting until prices decline further.
But there is a more fundamental reason that home sales are plummeting.
Specifically, when housing crashed in 2007 and 2008, the government had two choices. It could have:
(1) Tried to artificially prop up housing prices;
or
(2) Created sustainable jobs (for example, by rebuilding America's manufacturing sector), broken up the big banks so that they stop driving our economy into a ditch, and restored honesty and trustworthiness to the economy and the financial system. All this would have meant that the economy would recover, and people would have enough money to afford to buy a new house. (See this).
The government opted to try to prop up prices.
Indeed, as I have repeatedly pointed out, the government's entire strategy has been to try to artificially prop up the prices of all types of assets.
For example, I noted in March:
The leading monetary economist told the Wall Street Journal that this was not a liquidity crisis, but an insolvency crisis. She said that Bernanke is fighting the last war, and is taking the wrong approach. Nobel economist Paul Krugman and leading economist James Galbraith agree. They say that the government's attempts to prop up the price of toxic assets no one wants is not helpful.
The Bank for International Settlements – often described as a central bank for central banks (BIS) – slammed the easy credit policy of the Fed and other central banks, the failure to regulate the shadow banking system, "the use of gimmicks and palliatives", and said that anything other than (1) letting asset prices fall to their true market value, (2) increasing savings rates, and (3) forcing companies to write off bad debts "will only make things worse".
***
David Rosenberg writes [Former chief economist for Merryl Lynch]:
Our advice to the Obama team would be to create and nurture a fiscal backdrop that tackles this jobs crisis with some permanent solutions rather than recurring populist short-term fiscal goodies that are only inducing households to add to their burdensome debt loads with no long-term multiplier impacts. The problem is not that we have an insufficient number of vehicles on the road or homes on the market; the problem is that we have insufficient labour demand.
Indeed, as I pointed out in April, unemployment is so bad that 1.2 million households have "disappeared", as people move out of their own houses and move in with friends or family.
BIS wrote in 2007:
Should governments feel it necessary to take direct actions to alleviate debt burdens, it is crucial that they understand one thing beforehand. If asset prices are unrealistically high, they must fall. If savings rates are unrealistically low, they must rise. If debts cannot be serviced, they must be written off.
I pointed out in March 2009:
Paul Krugman wrote a couple of weeks ago:
The truth is that the Bernanke-Geithner plan — the plan the administration keeps floating, in slightly different versions — isn’t going to fly ....Why won't it fly?
One reason is that economic psychologists tells us that consumer psychology has shifted for many years to come, and Americans are hunkering down and not buying anything other than the bare necessities. The Fed can try to play the part of all of the actors in the economy, but it won't work.
Today, Edward Harrison's must-read post explains provides additional reasons why the Geithner-Summers-Bernanke plan to prop up asset prices cannot succeed (if you don't read the whole post, at least read the following excerpts):
The U.S. government's efforts point in [only one direction]:
Increase asset prices. If the assets on the balance sheets of banks are falling, then why not buy them at higher prices and stop the bloodletting? This is the purpose of the TALF, Obama's mortgage relief program and the original purpose of the TARP.
***There is only one direction the government is headed: increase asset prices (or, at least keep them from falling). Read White House Economic Advisor Larry Summers' recent prepared remarks to see what I mean. (Summers on How to Deal With a ‘Rarer Kind of Recession’ - WSJ) ....
These plans are not going to work
As aggressive as this campaign by the U.S. government is, it will have limited effectiveness because the extent of the writedowns of assets already on the books is going to be too massive. ...
And Ryan Grim pointed out in April 2009:
Critics of Geithner, including Nobel Prize winning economist Paul Krugman, insist that the real problem is an asset collapse that led to a crisis of solvency in the banking system. In other words, Krugman argues that home values have come back to Earth, while Geithner hopes to solve the problem by pushing home values back to where they were. The conflict is a serious one because it dictates what response is appropriate.
***
At a closed-door meeting with House Democrats on Monday night, according two members of Congress who were in the meeting, Geithner repeated that he believed the problem with the financial system was a lack of liquidity and that if he could get credit flowing again, the problem would right itself. Key to this analysis is the question of whether one thinks the rise of housing prices was an artificial bubble or if the collapse is reversible and we can return to those highs. Policymakers have resisted labeling it as a bubble. [head of the president's Council of Economic Advisers Christina] Romer, on Monday, came close, referring to a "run-up in housing prices that sure looks like a bubble."...
If the crisis is understood as one of liquidity, then the appropriate response is to continue injecting capital into the banking system and fiscal stimulus into the general economy until asset prices return toward previous highs. Japanese policymakers initially understood their crisis to be one of liquidity and injected hundreds of billions during the 1990s, to little effect. But if the problem is something different -- a solvency crisis brought on by essentially permanent asset-price declines -- then the policy response needed is different.
So were housing prices in a bubble or not? And - if so - have housing prices now come back to earth?
Well, as liberal PhD economist Dean Baker points out:
Real [i.e. inflation-adjusted] house prices are still 15-20 percent above long-term trend.
In other words, housing was in a bubble, and still has a ways to go before it is back to normal.
As the Wall Street Journal wrote in January:
Housing economist Dean Baker, the co-director of the Center for Economic and Policy Research, laid out his case at a risk conference last week for why we still have a housing bubble. Adjusted for inflation, home prices are still 15-20% higher than they were in the mid-1990s. “There’s no plausible fundamental explanation for that,” he says.
Why? Simple, he says: Economic fundamentals are all going in the other direction. Rental apartment vacancies are reaching record highs. Many segments of the housing market are still oversupplied. And the core demographic in the country—the baby boomers—are reaching the age where they’re more likely to downsize, buying less house in the years to come.
Far from some rosy estimates that housing is going through a temporary, once in a lifetime downturn, and that once the market bottoms, homes will again appreciate well beyond the rate of inflation, Mr. Baker argues that home prices are far more likely to increase annually at the rate of inflation, at best.
“If anything, I expect housing to be weaker than normal rather than stronger over the next decade,” he says. “People who say this is a temporary story, there’s no real reason to believe anything like that.”
The recent burst of good housing news has been fueled by government stimulus, including the tax credit, low mortgage rates and easy financing from the Federal Housing Administration. Mr. Baker, who had been a skeptic of the tax credit, concedes that it has worked. So, too, he says, has the FHA effectively supplied credit to goose sales.
But that’s likely for the worse, he argues, taking the opposite view of policymakers at the FHA.
“As a matter of policy I can’t see that we want people to buy a house in 2009 that’s 10-20% higher than it would sell for in 2011,” he says. “In so far as the FHA was encouraging people to buy homes in bubble markets that were not deflated, that’s not good for the FHA and you didn’t help the homeowner. We didn’t do those people a favor.”
Indeed, Baker said last November that the government's hasn't really helped homeowners, but has really been helping out the big banks instead:
The big talk in Washington these days is "helping homeowners". Unfortunately, what passes for help to homeowners in the capitol might look more like handing out money to banks anywhere else.
***So, who benefits from "helping homeowners" in this story? Naturally the big beneficiaries are the banks. If the government pays for a mortgage modification where the homeowner is still paying more for the mortgage than they would for rent, then the bank gets a big gift from the government, but the homeowner is still coming out behind.
***
There are simple, low-cost ways to help homeowners who were victims of the housing bubble and lending sharks.... But this would mean hurting the banks rather than giving them taxpayer dollars, and we still don't talk about hurting banks in Washington DC.
Similarly, Zack Carter wrote yesterday:
The Treasury Dept.'s mortgage relief program isn't just failing, it's actively funneling money from homeowners to bankers, and Treasury likes it that way.
***
Economics whiz Steve Waldman [writes]:The program was successful in the sense that it kept the patient alive until it had begun to heal. And the patient of this metaphor was not a struggling homeowner, but the financial system, a.k.a. the banks. Policymakers openly judged HAMP to be a qualified success because it helped banks muddle through what might have been a fatal shock. I believe these policymakers conflate, in full sincerity, incumbent financial institutions with "the system," "the economy," and "ordinary Americans."
The bottom line is that home sales are plummeting because housing was in a bubble. While most assuming that Americans are being more frugal and deleveraging - so that we will soon "get thorough this" and home sales will finally bottom - that assumption might not be true.
Indeed, it is possible that they may never return to their peak bubble levels. See this, this and this
Instead of fixing the real problems with our economy or to even genuinely help the struggling homeowner, the government has made everything worse by trying to artificially prop up asset prices to help the big banks.
Posted: 26 Aug 2010 12:00 PM PDT
"Should I buy gold now, or wait for a pullback?"
I get that question a lot...and it's a valid question. For nearly two years, gold hasn't had a serious decline. There have been pullbacks, of course, but nothing assumption-challenging. In fact, since October 2008, gold's largest price drop is 10.6% (based on London PM fix prices), and yet the average of all declines since 2001 is 13% (of those greater than 5%). The biggest pullback we've seen this summer is 8.2%. Technically the summer's not over, but I'll admit I'm surprised we haven't had a better buying opportunity.
So, is now the time to buy? It depends on your honest answer to another question: "Do you own enough gold?" By "enough" I mean an amount that lends meaningful protection on your assets. By "meaningful" I mean that no matter what happens next - another financial blow-up, accelerating inflation, crushing deflation, war, a plummeting dollar, more reckless government spending - you won't worry about your investments.
Whether you should buy now is almost irrelevant if you don't already own a meaningful amount of gold. If you earn $50,000 a year, how is one gold Eagle coin going to protect you if the dollar plummets and sends inflation soaring? If your investable assets total $100,000, is your nest egg sufficiently protected owning two gold Maple Leafs? This is all akin to buying a $50,000 insurance policy for a $500,000 home.
Today we face the prospect of prolonged economic stagnation, and most governments are administering grossly abusive monetary policy as a remedy. While some of the consequences are already being felt, the full ramifications have not hit your wallet yet. But they will.
If you don't have at least 10% of your investable assets in physical gold, or at least two months of living expenses, you have your answer: Buy. Don't use leverage, don't borrow money, and don't buy with reckless abandon, but yes, get your asset insurance policy and tuck it away. And then start working toward 20% (we recommend a third of assets be in various forms of gold in Casey's Gold & Resource Report).
Back to the original question: should we buy now, or wait for a pullback?
The answer comes when you look at the big picture. If you pull up a 9- year chart of gold, what sticks out is that the price is near its all- time nominal high. One could be forgiven for thinking it looks toppy or at least ripe for a pullback. But I assert that the highs for gold have yet to be charted.
What will a gold chart look like after adding five years to it?
When projecting gold's potential price peak, there are many ways to measure it. Conservatively, gold reaching its inflation-adjusted 1980 high would have it topping around $2,400 an ounce. More radically, if the US tried to cover its cumulative foreign trade deficit with its current gold holdings, gold would need to hit about $32,000/oz.
Let's take something more middle of the road, and apply the same trough-to-peak percentage advance gold underwent in the 1970s. (I think there's a greater than 50/50 chance it does more than that, given the precarious nature of the US dollar). Gold rose from $35 in 1970 to $850 in 1980, a factor of 24.28. Our price bottomed in 2001 at $255.95; multiply that by 24.28 and you get a gold price of $6,214 per ounce.
Sound too high? Well, would it feel high if you had to pay $12.50 for a Big Mac? At $3.39 today at my local McDonald's, that's about what it would cost ten years from now if we get the same rate of inflation we had in the late 1970s.
So if gold hits $6,214, what might it look like on a chart if you bought today around $1,200?
I'm not saying there won't be pullbacks or that you shouldn't try to buy at lower prices. Just keep a big-picture perspective. Let's say gold falls to $1,100 and you're kicking yourself for having bought at $1,200...if gold reaches $6,200 an ounce, the profit difference between buying at $1,200 and buying at $1,100 is only 1.6%. If gold gets whacked to $1,000 (at which point I'll be buying with both hands) the difference is still only 3.2%.
Heck, even if gold peaks at $2,400, you still get a double from current levels. (But unless government monetary policies immediately reverse course, gold isn't stopping at $2,400.)
So there's my answer. Yes, you have to accept my projection of gold's ultimate price plateau. And you have to sell at some point to realize the profit. But if the final chapter of this bull market looks anything like the chart above, I don't think you'll be too upset having bought at $1,200.
Regards,
Jeff Clark
for The Daily Reckoning Australia
- Today's Current Gold Price
- Price of Gold Today is About Where it Was 26 Years Ago
- Exhausted Gold Shares
- How To Calculate Your Own Gold Price Projection
- Gold Price Outlook – the Long and Short of it
Posted: 26 Aug 2010 11:55 AM PDT
Dear Jim,
I still think the vast majority are in denial. There really does appear to be an engrained mindset that "it can't happen here." That no matter what, "the people in power are really smart and know these things so much better than I do so I am not worried about any sort of crisis developing." "They can fix it."
The problem is we have an entire generation that has no clue what "The Great Depression" was like, much less even know about it due to the pitiful amount and quality of the history classes taught today.
Most folks think that the Weimar Republic is a diner that serves hot dogs or weenies.
Heaven help us when they wake up and realize what is happening.
By the way, did you read about some of the small towns out that due to budget constraints told their citizens they will no longer be responding to burglary calls?
This is the sort of thing that concerns me where all this is headed.
Your pal,
Trader Dan
Cutbacks force police to curtail calls for some crimes
By Kevin Johnson, USA TODAY
Budget cuts are forcing police around the country to stop responding to fraud, burglary and theft calls as officers focus limited resources on violent crime.
Cutbacks in such places as Oakland, Tulsa and Norton, Mass. have forced police to tell residents to file their own reports — online or in writing — for break-ins and other lesser crimes.
"If you come home to find your house burglarized and you call, we're not coming," said Oakland Police spokeswoman Holly Joshi. The city laid off 80 officers from its force of 687 last month and the department can't respond to burglary, vandalism, and identity theft. "It's amazing. It's a big change for us."
Gold Stocks Trend Energy Increasing
CIGA Eric
REV(E) has breached its June high despite a lower price. This suggests that trend energy is increasing and retest of the June price high.
Gold Miners Index ETF (GDX): ![clip_image001[1]](https://blogger.googleusercontent.com/img/b/R29vZ2xl/AVvXsEgNg0XwNIf1W4jOY-M2VOzbAuLG1tt4HcSlFhovUy6OmB9O5xgtZMtGDvCyBFoWLg_Ey0EGSlZkvs2eUpTGyty-EXhv2FWoErtFs1Yt9GIDsrP-GE09eCsswFojthHKKftU6Nbmc0o5LZI/s1600/GDX.JPG "clip_image001[1]")
Dear Eric,
Greenspan when Chairman confirmed MOPE (Management of Perspective Economic) as the present school of economic thought and application. Now Bernanke is making the same confirmation.
There comes a time when smoke and mirrors fall flat on their ass. This is the time as we are headed to a double dip with the double being the dip of a lifetime.
The result will without any doubt be "Currency Induced Cost Push Inflation." The problem is that so very few have a clue what that is, yet the fate of nations hangs on the correct understanding.
Regards,
Jim
Bernanke's top tool now may be power of persuasion
CIGA Eric
The power of persuasion – spin, MOPE, propaganda, etc has been a critical tool since humans learned to talk within the context of centralized control. The fact that the media has chosen to recognize it at this point in the cycle reflects the growing fragility of the economic backdrop.
That's the test facing Fed Chairman Ben Bernanke as he addresses a conference Friday in Jackson Hole, Wyo. Without any easy options left, Bernanke must try to prevent another recession by persuading people and businesses to feel confident enough about the future to spend more today.
Source: finance.yahoo.com
Dear Eric,
Recession risk or the bottom will drop out? You are being too gentlemanly.
Regards,
Jim
U.S. Economy: Durables, Housing Signal Recession Risk
CIGA Eric
Both CPI and gold-adjusted business core spend (new orders of durable goods ex. defense and aircraft) time series are rolling over. Gold adjusted business core spending, a better reflection real of business activity, has not recorded positive year-over-year growth since 2007. This throws cold water on the heavily MOPE'd economic recovery of 2009-2010.
Real Business Core Capital Spending: Real or CPI-Adjusted New Orders of Durable Goods ex. defense and aircraft (RBCCS) and YOY Change: 
Gold-Adjusted New Orders of Durable Goods ex. defense and aircraft (BCCSGLDR) and YOY Change: 
Orders for durable goods in the U.S. increased less than forecast in July and sales of new homes unexpectedly dropped, increasing the risk of a renewed recession in the world's largest economy.
Bookings for goods made to last at least three years rose 0.3 percent, figures from the Commerce Department showed today in Washington. Excluding transportation equipment, demand fell by the most in more than a year. Purchases of new dwellings fell 12 percent to an annual pace of 276,000, the weakest since data began in 1963, figures from the same agency showed.
Source: businessweek.com
Fighting the Correction in the Worst Possible Way
Posted: 26 Aug 2010 11:46 AM PDT
Want to know what is really going on?
Investors are waking up. They are wiping the sleep from their eyes. Behold! No recovery.
Analysts and the commentariat are struggling to make sense of it. With record low mortgage rates, and after eight programs designed to boost up housing, for example, sales are still plummeting. July saw the biggest monthly drop in existing house sales since the Johnson Administration.
The supply of houses for sales is growing - thanks to record foreclosures. The demand is falling. Prices will come down too.
It's a Great Recession, say some.
It's not a recession, it's a depression, says David Rosenberg.
It's a "Contained Depression," says one headline at Seeking Alpha.
The recession never ended, says another headline.
Stocks will sink to 5,000, says a headline at CNBC.
Bloomberg takes a more moderate tone:
"Durables, Housing Signal Recession Risk."
But you, dear reader, you want to know what is really going on. So we will tell you.
We begin with a detail from yesterday's news: credit card debt has dropped to its lowest level in eight years. This tells us that the de- leveraging of the private sector is real...and on-going. And as long as it lasts, you can forget about a "recovery."
Instead, you should expect more on-again, off-again recession...with high unemployment, falling asset prices (stocks and real estate), weak sales and declining incomes.
This correction is a good thing. Consumers have too much debt. They'll be better off when they get rid of half of it. But the feds want to fight this correction in the worst possible way. What's the worst possible way? Adding more debt!
While the private sector de-leverages, the public sector leverages up. Eventually, this will have the result that everyone expects...bonds will crash, and the dollar will collapse...BUT PROBABLY ONLY AFTER PEOPLE STOP EXPECTING IT.
In the near term, the stock market is probably going down...it seems to be rolling over now. Yesterday, the Dow rose 19 points - a very weak bounce after so many down days.
When stocks go down, they will drag inflationary expectations. It will probably bring down stock markets in the emerging economies...possibly causing the Chinese economy to blow up...and bring falling commodities prices and deflation too. The idea of a "bond bubble" will disappear. People will see the "depression/Great Recession" as real...and permanent. They will try to protect themselves by buying US Treasury bonds. This will permit the feds to go further and further into debt.
Thus begins the world's long day's journey into night.
The US economy will become a Zombie Economy, with more and more activity dependent on government spending and government support. Banks are already Zombie Investors. Rather than lend to viable businesses that expand the world's wealth, they borrow from the feds and lend the money back to them. We'll see private investors become Zombie Investors too - putting nearly all their savings into US Treasury paper, just as the Japanese did.
The Dow will sink down towards 5,000. The feds will announce program after program to boost up the economy. Household savings rates will head to 10%. Unemployment will go to 12%...maybe 15%. Bond yields will collapse to new record lows. Ben Bernanke will threaten to drop money from helicopters...but as long as the US remains in an orderly decline, he will not dare to do it.
Eventually, the whole system will blow up in a spectacular fireball. But not until America's investors are fully committed to US paper. Then, after having suffered huge losses in stocks and real estate, they can be finally ruined in what they thought were the safest investments in the world - dollar-based US Treasury bonds.
And more thoughts...
No discussion of the upcoming collapse of the bond market would be complete without a mention of Social Security.
At least, after they've lost their money in stocks, real estate and bonds, Americans will at least have Social Security to live on, right? Wrong!
You know all that money you pay in Social Security taxes? Where do you think it goes? Into current expenses and US bonds!
That's right, the feds just use the money to finance whatever fool scheme they've got going at the moment...and give the Social Security Administration a bond in return. In theory, the SSA has assets. In practice, all they've got is the hope that the feds can squeeze enough money out of taxpayers to meet their obligations.
Can they?
Professor Laurence Kotlikoff:
Social Security has also played a central role in the massive, six- decade Ponzi scheme known as US fiscal policy, which transfers ever- larger sums from the young to the old.
In so doing, Uncle Sam has assured successive young contributors that they would have their turn, in retirement, to get back much more than they put in. But all chain letters end, and the US's is now collapsing.
The letter's last purchasers - today's and tomorrow's youngsters - face enormous increases in taxes and cuts in benefits. This fiscal child abuse, which will turn the American dream into a nightmare, is best summarized by the $202 trillion fiscal gap discussed in my last column.
The gap is the present value difference between future federal spending and revenue. Closing this gap via taxes requires doubling every tax we pay, starting now. Such a policy would hurt younger people much more than older ones because wages constitute most of the tax base.
What about cutting defense instead? Sadly, there's no room there. The defense budget's 5 percent share of gross domestic product is historically low and is projected to decline to 3 percent by 2020. And the $202 trillion figure already incorporates this huge defense cut.
Reducing current benefits, most of which go to the elderly, is another option. But such a policy is highly unlikely. The elderly vote and are well-organized, whereas 3-year-olds can neither vote, nor buy Congressmen.
In contrast, cutting future benefits is politically feasible because it hits the young. And that's where Congress is heading, starting with Social Security. The president's fiscal commission will probably recommend raising Social Security's full retirement age to 70 from 67, for those who are now younger than 45. This won't change the ages at which future retirees can start collecting benefits. It will simply cut by one-fifth what they get.
In other words, there is no question about whether the US government will default or not. It will default. The only question is how. Will it manage to slip out of its obligations by raising the inflation rate enough to slough them off? Or will it have to officially renounce them? Will it refuse to pay retirees? Or bondholders?
Any way you look at it, the situation is interesting. Retirees, employees, loafers and chiselers - all are stakeholders in the US government. They have something to lose and will fight to hold onto what they've been promised. Bondholders have something to lose too.
So far, the bondholders have been largely protected - even enriched. Stakeholders in Greece, Ireland and other countries have begun to feel the pain. In America, the class of stakeholders is actually increasing, as the public sector spends more and the private sector spends less.
Best guess: stakeholders, bondholders, placeholders, cupholders, napkin holders - they'll all take a loss.
Regards,
Bill Bonner
for The Daily Reckoning Australia
- Trust Funds Con
- The More Money in a Financial System the Less Each Unit is Worth
- Financial Difficulties Facing Social Security and Medicare Pose Serious Challenges
- The Country is Going into a Recession with its Finances in the Worst Shape Ever
- Can the U.S. Central Bank Really Begin Fighting Inflation in a Serious Way?
Gold Gave up $4.10 to Close at $1,235.40, Again, Strong in the Teeth of Options Expiry
Posted: 26 Aug 2010 11:24 AM PDT
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!
Social Security: The Futile Fight For What’s Been Promised
Posted: 26 Aug 2010 11:00 AM PDT
No discussion of the upcoming collapse of the bond market would be complete without a mention of Social Security.
At least, after they've lost their money in stocks, real estate and bonds, Americans will at least have Social Security to live on, right? Wrong!
You know all that money you pay in Social Security taxes? Where do you think it goes? Into current expenses and US bonds!
That's right, the feds just use the money to finance whatever fool scheme they've got going at the moment…and give the Social Security Administration a bond in return. In theory, the SSA has assets. In practice, all they've got is the hope that the feds can squeeze enough money out of taxpayers to meet their obligations.
Can they?
Professor Laurence Kotlikoff:
Social Security has also played a central role in the massive, six-decade Ponzi scheme known as US fiscal policy, which transfers ever-larger sums from the young to the old.
In so doing, Uncle Sam has assured successive young contributors that they would have their turn, in retirement, to get back much more than they put in. But all chain letters end, and the US's is now collapsing.
The letter's last purchasers – today's and tomorrow's youngsters – face enormous increases in taxes and cuts in benefits. This fiscal child abuse, which will turn the American dream into a nightmare, is best summarized by the $202 trillion fiscal gap discussed in my last column.
The gap is the present value difference between future federal spending and revenue. Closing this gap via taxes requires doubling every tax we pay, starting now. Such a policy would hurt younger people much more than older ones because wages constitute most of the tax base.
What about cutting defense instead? Sadly, there's no room there. The defense budget's 5 percent share of gross domestic product is historically low and is projected to decline to 3 percent by 2020. And the $202 trillion figure already incorporates this huge defense cut.
Reducing current benefits, most of which go to the elderly, is another option. But such a policy is highly unlikely. The elderly vote and are well-organized, whereas 3-year-olds can neither vote, nor buy Congressmen.
In contrast, cutting future benefits is politically feasible because it hits the young. And that's where Congress is heading, starting with Social Security. The president's fiscal commission will probably recommend raising Social Security's full retirement age to 70 from 67, for those who are now younger than 45. This won't change the ages at which future retirees can start collecting benefits. It will simply cut by one-fifth what they get.
In other words, there is no question about whether the US government will default or not. It will default. The only question is how. Will it manage to slip out of its obligations by raising the inflation rate enough to slough them off? Or will it have to officially renounce them? Will it refuse to pay retirees? Or bondholders?
Any way you look at it, the situation is interesting. Retirees, employees, loafers and chiselers – all are stakeholders in the US government. They have something to lose and will fight to hold onto what they've been promised. Bondholders have something to lose too.
So far, the bondholders have been largely protected – even enriched. Stakeholders in Greece, Ireland and other countries have begun to feel the pain. In America, the class of stakeholders is actually increasing, as the public sector spends more and the private sector spends less.
Best guess: stakeholders, bondholders, placeholders, cupholders, napkin holders – they'll all take a loss.
Regards,
Bill Bonner
for The Daily Reckoning
Social Security: The Futile Fight For What's Been Promised 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."
Posted: 26 Aug 2010 10:52 AM PDT
Arguably the one most definitive market top ticking activity of the past month, in addition of course to Tim Geithner's absolutely disastrous "Welcome to the Recovery Pamphlet" issued literally hours before the wave of economic downgrades of US GDP by Wall Street began in earnest, was Mark Zandi and Alan Blinder's even more laughable administrative job cover letter titled "How We Ended The Great Recession" (yes, gentlemen, we remember). Which is why we read with great fascination that not even a month after the paper was released, Alan Blinder told Bloomberg that "Things seem to be losing momentum. The lending part of the financial system doesn’t seem to be curing itself." Actually, Alan, if that is your justification for why the momentum is being lost, you are an idiot - the lending part, or the supply side, is perfectly cured: it is the demand aspect which proud Ph.D.-bearing economists such as yourself always ignore - yes, people, the medium and small businesses, and virtually everyone else, who makes the economy tick (not Wall Street), don't need the bank's steenking money - not at 20%, not at 0.002%, if they don't know whether they will have a job tomorrow, or if upon waking up their stocks and 401(k) won't be worth 50% what they were the night before. And not to be left alone, Mark Zandi, the other member of the permaclown duo, told Bloomberg TV that he now puts the chance of a double-dip recession at 1 in 3. "If you’d ask me 4-8 weeks ago, I would have said 1 in 4, 12 weeks ago, 1 in 5. So it is rising uncomfortably high." How about 15.8 weeks ago: was the chance 1 in 69? What is it with these economists who need to scientificate every bullshit concept of their worthless occupation? Why quantify the merely abstract? Do economists have such a great mathematician penis envy, that they have to cloak their infinite lack of understanding in irrelevant numbers? The fact that this man a month ago said things are all good, and never realized that America had never emerged from the recession, is all you need to know just how much credibility any and every person working for Moody's has. But we knew that already. And just because a Moody's economist sees the only hope left before the country as even more QE, it merely shows that when QE finally does strike (which it will) it will be the end game for America, and its currency. At least we now know that in the meantime Zandi has blown any chance he may have had getting a job with the administration.
More from Zandi's interview:
Zandi on his predictions re: double-dip recession:
“I put it that 1 in 3 right now. If you’d ask me 4-8 weeks ago, I would have said 1 in 4, 12 weeks ago, 1 and 5. So it is rising uncomfortably high. I am assuming that tax rates on upper income households will in fact occur on January 1st. If that doesn’t happen, it could reduce the odds back closer to 1 in 4. But 1 in 3, that is uncomfortably high. Particularly we’re at a 9.5% unemployment rate. If we go back into recession, it’s going to be very difficult to get out of it in any king graceful way.”
On QE:
“The economy will, at best, be very weak, so weak that unemployment will begin to rise again. I think that’ll be the signal for the Fed to resume quantitative easing.”
On whether the economy will backtrack into a recession:
“I do think that the Federal Reserve will restart quantitative easing over the next few months. I think the economy is going to be, at best, very weak, so weak that unemployment will begin to rise again and I think that will be a signal for the fed to resume quantitative easing.”
On whether he expects job growth in the current market:
“I do expect some job growth, yes, but not enough to forestall further increase in unemployment. Just to give you a number, we need approximately 150,000 jobs per month just for a stable rate of unemployment. Since the beginning of the year, we’ve been getting closer to 100K, subtracting the ups and downs of census hiring. Over the next few months, I would expect no more than 50K given the recent weakening in economic growth. And so that’s not enough to forestall further increases in unemployment.”
Zandi on expectations for Bernanke’s speech tomorrow at the Kansas City Fed:
“The first thing he needs to do is put the string of economic data we’ve been getting into some context. How weak does he think the recovery really is? Then I think he needs to explain more clearly the FOMC’s actions a few weeks ago. Why hold the balance sheet constant? What was the logic behind that? It would be helpful if he could then give as benchmarks for understanding when they possibly could resume quantitative easing, start buying more treasuries, securities and growing the balance sheet.”
On news today that U.S. mortgages with overdue payments have risen in Q2:
“That is a bit disconcerting. It is clear the foreclosure crisis continues on, by my data, we have 4.3 million first mortgage loans are in default or 90 days delinquent and thus headed to default. That is a lot of loans to work through and many will go into foreclosure sale. One more reason to believe that house prices will decline. One encouraging thing was the decline in early stage delinquency. The recent bump up is a bit disconcerting. I do not think it is the beginning of a trend. I am hopeful, that in the next few quarters, we’ll see that come back down again given the tightening in the underwriting and the view that we’ll get some job growth.”
On whether Congress should raise the tax rate for the top 2% in 2011:
“I think if we raise those tax rates, in all likelihood the recovery will still remain intact but I think that is a gamble that would be unnecessary. I do think it would prudent given how fragile the recovery is not to raise any more taxes in 2011. Now in 2012, 13, 14 when the economy is up and running, raising those tax rates in upper income households, I don’t think we’ll have any meaningful impact on their spending and saving on the broader economy and would help with respect to fiscal problems. But I just wouldn’t do it at 2011. It is one more thing for the economy to overcome when the economy has a lot to overcome.”
On what he thinks will tip us towards a second recession:
“It could be, for example, if angst about the European debt situation were to flare up again and we’d see the equity market, stock prices fall another 5% or 10%. I think that would certainly qualify and that could push us back into recession.”
On the European debt situation:
“We’re watching very carefully. The coast isn’t clear. The European economy is holding up better than I would have thought to this point. But it has a lot of headwinds, the fiscal austerity, the financial constraints given the problems in their own banking system, so there is a lot more work to be done. I don’t think they will work to the problem quite yet.”
On tomorrow’s GDP figure and whether he agrees with the consensus is 1.4%:
“I think that is about right. That would be reduction of about a percentage point in estimated growth. Most of that because of a wider trade deficit, some of it related to less inventory. But it clearly highlights the economy lost momentum in the Q2.
Posted: 26 Aug 2010 10:36 AM PDT
Banks back switch to China's renminbi for trade
Posted: 26 Aug 2010 09:51 AM PDT
By Robert Cookson
Financial Times, London
Thursday, August 26, 2010
http://www.ft.com/cms/s/0/182a2b70-b130-11df-b899-00144feabdc0.html
HONG KONG -- A number of the world's biggest banks have launched international roadshows promoting the use of the renminbi to corporate customers instead of the dollar for trade deals with China.
HSBC, which recently moved its chief executive from London to Hong Kong, and Standard Chartered are offering discounted transaction fees and other financial incentives to companies that choose to settle trade in the Chinese currency.
"We're now capable of doing renminbi settlement in many parts of the world," said Chris Lewis, HSBC's head of trade for greater China. "All the other major international banks are frantically trying to do the same thing."
... Dispatch continues below ...
Prophecy to Become Coal Producer This Year
with 1.5 Billion Tonnes of Resource
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
HSBC and StanChart are among a slew of global banks -- including Citigroup and JPMorgan -- holding roadshows across Asia, Europe, and the US to promote the renminbi to companies.
The move aligns the banks favourably with Beijing's policy priorities and positions them to profit from what is expected to be a rapidly growing line of business in the future.
The phenomenon will accelerate Beijing's drive to transform the renminbi from a domestic currency into a global medium of exchange like the dollar and euro.
Chinese central bank officials accompanied StanChart bankers on a roadshow to Korea and Japan in June. The bank held similar events in London, Frankfurt, and Paris.
Lisa Robins, JPMorgan's head of treasury and securities services for China, said there had been a "spike in interest" from international clients.
An increasing number of Chinese companies have been asking foreign trading partners to accept renminbi as payment, said Carmen Ling, Hong Kong head of global transaction services at Citi.
BBVA, Spain's second-biggest bank, is also drawing up plans for a global marketing campaign that will focus on Latin American companies that export to China.
Banks started establishing renminbi trade settlement operations in mid-2009, when Beijing introduced a pilot scheme allowing companies to use the renminbi for trade outside China.
The scramble has intensified in recent months as Beijing has substantially expanded the scheme -- from a handful of Asian countries to the whole world -- and introduced other liberalisations to its currency regime.
Cross-border trade in renminbi totalled Rmb70.6 billion ($10 billion) in the first half of the year -- about 20 times the Rmb3.6 billion recorded in the second half of 2009.
But those figures remain tiny compared to the $2,800 billion worth of goods and services that were traded across China's borders last year, most of which was settled in dollars or euros.
With renminbi trade settlement volumes expected to increase rapidly, banks are under pressure to establish a foothold in the nascent market and demonstrate to Chinese officials that they are committed to the scheme.
China has taken several steps in recent months to boost the international use of its currency and to establish Hong Kong, the special administrative region, as the global centre for offshore renminbi business.
McDonald's, the US burger chain and icon of globalisation, took advantage of the new rules this month when it became the first foreign multinational to issue renminbi-denominated bonds in Hong Kong.
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Thursday-Friday, October 21-22, 2010
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Sona Resources Expects Positive Cash Flow from Blackdome,
Plans Aggressive Exploration of Elizabeth Gold Property
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
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