saveyourassetsfirst3

In 1920, an ounce of gold would buy how many men's suits
Silver Producers Soar As Precious Metals Go Vertical
Silver About to Roar Through $50 All-Time High: John Embry
Nervous investors go for gold as panic grips stock markets
Interactive Brokers Warns Gold Margin Hike Imminent, CME Next?
David Rosenberg's 12 Bullet Points Confirming The Double Dip Is Here
The Great Gold Robbery of 1933
Links 8/20/11
The Muribeca gold Mines
Guest Post: Innovate or Die
Currencies Waver, Stocks Go Back-and-forth – What Will Be the Outcome for Gold?
Gold Hitting Record Highs: Time to Buy The Undervalued Gold Miners
Gene Arensberg: Silver close to a short-murdering rocket launch
Gold Overbought
Gold closes at another record level/silver regains former strength rising to$ 42.43
Will Gold Continue to Shine?
Of Treason and Free Markets
Bottoms up… Or Tops down?
Gold closes at $ 1.852,20, a new record, up $ 30.20. Silver up 4.3%
Russia adds 100.000 ounces of Gold to its Gold reserves in July
Whats Pushing Gold to New Highs
Want to Smack Down the Criminal Global Banking Cartel? Here’s How to Use Gold & Silver to Do It
Silver Update, Friday late day strength
Gold Seeker Weekly Wrap-Up: Gold and Silver Gain Over 6% and 8% on the Week
Gone Fishin’, We Stand Pat for Now
COT Silver Report - August 19, 2011
Resource guru Eric Sprott is selling gold and buying silver
U.S. homes have never been more affordable
John Embry-$50 silver will be taken out soon

In 1920, an ounce of gold would buy how many men's suits

Posted: 20 Aug 2011 01:24 AM PDT

Remember a few year's ago when all the gold commercials spewed this nuggets of financial wisdom that an ounce of gold in the 1920s would buy a nice men's suit, and with gold today at $600, it will still buy a nice men's suit? When gold hit $1,200, the ads got changed to say that in the 1920s an ounce of gold would buy two men's suits, and today it will still buy two men's suits?

I guess we should be on the look out for the updated ad that will claim that in the 1920s an ounce of gold would buy three men's suits, . . . . :bear_cool:

More likely they will drop the ruse, knowing that it only proves that gold has more purchasing power today than it did in the 1920s. :bear_unsure: Not sure that is the best argument for jumping on the band wagon at these prices, buy it makes you think.

Silver Producers Soar As Precious Metals Go Vertical

Posted: 20 Aug 2011 12:38 AM PDT

Silver Producers Soar As Precious Metals Go Vertical

I think the headline is overdoing it a bit considering the recent action of the silver shares, but at least the word is getting out there.

Silver isn't gold, but it's the next best thing, even if it is more volatile, metal watchers say.

With silver prices more than doubling from a year ago, silver producers like Coeur D'Alene are enjoying triple-digit profit growth.

"They're making free cash hand over fist," said Adam Graf, analyst with Dahlman Rose & Co. "The returns have never looked more attractive."

Silver About to Roar Through $50 All-Time High: John Embry

Posted: 20 Aug 2011 12:38 AM PDT

Silver About to Roar Through $50 All-Time High: John Embry

Eric King over at King World News interviewed John Embry yesterday about the future price of silver. The link to the blog is here.

Nervous investors go for gold as panic grips stock markets

Posted: 20 Aug 2011 12:38 AM PDT

Nervous investors go for gold as panic grips stock markets

Fresh turmoil on the world's financial markets on Friday saw gold rise to record levels, the dollar sink to its lowest-ever level against the Japanese yen, and share prices gyrate wildly in Europe and North America.

The jittery atmosphere sent investors heading once again to the safe havens of the Swiss franc, the Japanese yen and gold. Bullion rose as high as $1,881 an ounce, with some dealers expecting it to test the $2,000 an ounce level over the coming weeks.

Interactive Brokers Warns Gold Margin Hike Imminent, CME Next?

Posted: 20 Aug 2011 12:38 AM PDT

Interactive Brokers Warns Gold Margin Hike Imminent, CME Next?

The first shot was just fired in today's battle with daily record gold prices. I.B. always tends to be a few minutes ahead of the CME. And following last week's 22% margin hike in gold, we are confident the CME will do everything in its power to pull a "silver" on gold. Are we about to experience a barrage of margin hikes in gold? Stay tuned and find out.

Increased margin requirements in a bull market in any commodity is perfectly normal...and the CME would be derelict in its duties if it didn't do that...but the above comment about "pulling a 'silver' on gold" should be duly note.

David Rosenberg's 12 Bullet Points Confirming The Double Dip Is Here

Posted: 20 Aug 2011 12:38 AM PDT

David Rosenberg's 12 Bullet Points Confirming The Double Dip Is Here

Oddly enough there are still those who believe that a double dip [or, more accurately, a waterfall in the current great depressionary collapse accompanied by violent bear market rallies] is avoidable. Well, here, in 12 bullet points is Rosie doing the closest we have seen him come to gloating...and proving the double dip or whatever you want to call it, is here.

I consider this zerohedge.com piece a must read...and I thank Nitin Agrawal for sending it along. The link is here.

The Great Gold Robbery of 1933

Posted: 19 Aug 2011 10:00 PM PDT

Mises.org

Links 8/20/11

Posted: 19 Aug 2011 06:43 PM PDT

We are hosting the Book Salon for Gretchen Morgenson's and Josh Rosner's Reckless Endangerment today at FireDogLake from 5-7 PM EDT. Be there or be square!

How the kangaroo got its bounce BBC

Study shows dogs can sniff out lung cancer Giznag

Watergate's 'Deep Throat' garage gets historical marker USA Today

Strauss-Kahn accuser might drop case for cash payment Raw Story

Trouble in Paradise Wall Street Journal. These deals are Europe's analogues to the Jefferson County sewer financing. Why do municipalities allow themselves to be talked into complicated deals with hidden risks to save (probably) 50 basis points?

Tabloid's Pursuit of Missing Girl Led to Its Own Demise Wall Street Journal. This is what you get when the Journal has to report on its parent. The story isn't terrible as far as it goes, but it is framed incredibly narrowly and (amusingly) underplays the public's reaction to the Miller Dowler story and the other legs of the scandal.

Glenn Mulcaire ordered to reveal who told him to hack phones Guardian

Hershey walkout: Foreign students nix firms' offer Christian Science Monitor

President Fuck You: Raising Medicare eligibility to 67 is a "modest reduction" Lambert Strether

Who said this: Obama or Hoover? Ed Harrison

Whatever Rick Perry's Record Is, It's Not Conservative The New Republic (hat tip reader furzy mouse)

How Does Bank Of America Plan To 'Help Out' Rick Perry? Dealbreaker

US debate intensifies over taxes on the rich Financial Times. This is a little misleading. It's a debate only among the rich themselves (well, and their operatives).

Tax the super-rich or riots will rage in 2012 MarketWatch (hat tip reader May S)

Moody's lowers rating on Lender Processing Associated Press

Treasury Rally Pushes Yields to Record Lows Bloomberg

Bond markets signal 'Japanese' slump for US and Europe Ambrose Evans-Pritchard, Telegraph. Ahem, yours truly made the deflation call as soon as it was clear the US would be cutting the Federal deficit. Deflationary policies were already in place in the Eurozone, they are also operative at the state level and will now be compounded by Federal policy. But this article has more grim tales re Eurobank liquidity. The dollar funding gap is back to $1 trillion, which if I recall correctly is about where it was on the eve of the crisis (I though I had read reassurances that things were safer now because the dollar funding gap was down to $500 billion. So much for that sighting).

Global Bank Capital Regime at Risk as Regulators Spar Over Rules Bloomberg

Antidote du jour:

The Muribeca gold Mines

Posted: 19 Aug 2011 06:41 PM PDT

RickRichard

Guest Post: Innovate or Die

Posted: 19 Aug 2011 05:51 PM PDT

By Sell on News, a macro equities analyst. Cross posted from MacroBusiness

I have been reliably informed by Houses & Holes that we are "all going to die", and rather sooner than we all imagined. Something to do with the economic meltdown in Europe and America, I believe. While I have no reason to doubt such potent insight — after all, death is the best one way bet available — I think it could do with a little refining. What is dying is the industrial era in the developed world, a trend that is obscured by the fact that the developing world is industrialising at an accelerating pace. Australia is caught in the middle. It provides the raw materials to rapidly industrialising nations, but is itself entering a post-industrial era. So the nation both is, and is not, in a mess, buffeted by contrary forces.

Over the last 15-20 years we have witnessed many symptoms of this death in developed nations. There was the death of Japanese mercantilism, which began on the dot of the 1990s and has worsened ever since. It is only because Japan is hermetically sealed, owes all its money to itself, that it has not spread further.

The dot.com boom, which was largely about monetising existing forms of commerce or creating transactions from what had previously been non-economic behaviour (social networking, for instance) rose and fell. Then we have had the mother of all death throes in the bizarre financialisation of Western economies, a debt driven exercise in making money out of air or algorithms. The latest iteration is high frequency trading, and, like derivatives such as CDOs and CDSs it, too, shall fail. To think it is alright to make finance into an infinite regress is so irresponsible it can only be because there are no other, normal ways of creating wealth. A death throe, in other words.

The same applies to Europe's stagnation and hopelessly high unemployment. It is a society that has run out of ideas. Meanwhile, America seems to have only one idea: reward the fabulously wealthy at the expense of the middle class. In other words, fight over the deck chairs as the Titanic dies.

This is why "politics" is starting to assume centre stage in investment analysis. For some reason, governments, which have been demonised as useless for a quarter of a century, are now expected to fix things. They will not, because the problem is about a lack of creating the new, something governments have little or no influence over. About four fifths of so called "new products" are refinements of old products. Tyler Cowan is calling it the "great stagnation". Yes, there is growth in areas like health care, but that hardly parallels the invention of the car, or fridges or any of the other big changes of the first half of the twentieth century. Most things that are new are just refinements – a mobile phone is just a phone made mobile, a microwave oven is just a quicker oven — or an enablement of something old: the digital revolution is mostly an enabler of existing, non digital forms of commerce or functions.

The most telling sign of death is the loss of a cost of capital in the developed world, which kills investment. American companies in particular are sitting on piles of cash, but they do not want to invest because they do not see the growth in developed markets (especially as the middle classes are being eviscerated). They can see hope in the emerging markets, but the middle classes are still emerging there.

It all adds up to gloom. Or does it? I do not believe so. Growth, it must be remembered, is transactions, not necessarily consumption of resources (something the Greens, with their Arcadian dreams do not understand). There is no doubt at all that what needs to be the defining characteristic of post-industrial society is a reduction of both the consumption of finite resources and a reduction of pollution. This can, and should, lead to initiatives as profound as the invention of the mass produced automobile or the aeroplane. Which in turn will lead to new growth.

There are many potential technologies; there is no lack of invention. But there is a lack of capital, because capital mostly prefers the industrial and the familiar. Capital is losing all those certainties. The catch is that the changes need to be system wide, and that is where governments will really matter. Given that governments have concentrated on getting elected by creating fear, shifting to showing vision will be an enormous challenge. But in the end, investing in the post-industrial world is the only way to go. As Michael Spence pointed out in the Financial Review this week, what is happening is the end of a cycle that is about a century old:

In the 100-year view of Nobel laureate economist Michael Spence, the current global economic woes are linked to the slow and painful adaptation of the developed world to the growing economic clout of China, India, Brazil and other developing economies.

Spence says it has not yet been fully recognised that the economic malaise is not just a cyclical downturn caused by excess debt, over-consumption, low interest rates and lax regulation, but part of a long-term structural change brought about by globalisation and technology, which are shifting the comparative advantage in a range of industries and services towards the developing world.

Europe, the US and other advanced economies must make long-term reforms to labour markets and boost productivity as well as encourage public and private sector investment in infrastructure, education, skills and training to remove growth constraints. Short-term fixes, such as Europe's bailout packages and the US Federal Reserve's promises of low interest rates for longer, can do little more than "kick the can down the road", he says.

As chairman of the World Bank Commission on Growth and Development since 2006, Spence is uniquely informed on the subject of growth. In his new book The Next Convergence, he judges that it will take until mid-century for developing economies, which represent 60 per cent of the world's population, to reach advanced status.

Further growth of developing economies could bring about more unemployment in developed economies unless they restructure, he says, citing Germany as a model between 2000 and 2005 when it loosened labour markets, committed to high-value manufacturing and accepted the trade-off between high income and employment. The weakness in global economic and political leadership in the developed world is "a real puzzle".

In the US "people want things they aren't prepared to pay for. There's a fair amount of ideology – maybe people think those are real solutions when they are not".

In contrast, Spence says, developing countries in general have "evolved a kind of pragmatic, persistent, problem-solving model. They've got some reasonable balance between government on the one hand and the private sector on the other".

But, he says, we've entered a "high risk mode". If the advanced countries can keep growing and avoid another recession, China and the developing world can keep expanding apace.

"But they can't sustain enough demand to withstand a [US and European] downturn" he says. That would slow everyone, including China, Brazil, India and Australia.

Australia must remember "that natural resource wealth is volatile and impermanent", Spence says. We should be investing "a fair amount" of the income from natural resources wealth abroad – thus mitigating the effects of the Dutch disease where a high exchange rate hollows out the rest of the economy.

Currencies Waver, Stocks Go Back-and-forth – What Will Be the Outcome for Gold?

Posted: 19 Aug 2011 05:17 PM PDT

Based on the August 19th, 2011 Premium Update. Visit our archives for more gold & silver analysis.

We are marking a dubious 40-year anniversary this week. It was on August 15, 1971 that President Richard Nixon unilaterally "closed the gold window," severing the dollar's ties to gold forever, possibly one of the most significant policy decisions in modern economic history. It was a part of dramatic measures meant to deal with the nation's huge balance of payments deficit, its weak growth, and inflation. Speculative attacks on the dollar had begun in the late 1960s as concerns mounted over cost of the Vietnam War and America's rising trade deficit. Other countries were increasingly reluctant to take dollars in payment and demanded gold instead.

It's very possible, looking back in hindsight, that Nixon had no choice. There was panic in the markets and Great Britain had tried to redeem $3 billion for American gold. The official dollar debts in the hands of foreign authorities were so large that America's gold stock would be insufficient to meet the swelling official demand for American gold at the convertibility price of $35 per ounce. It's seems reasonable to think that America had no interest in giving away the contents of Fort Knox to foreign governments.

And so, Nixon ended the greenback's precious-metal guarantee thus creating the current floating exchange monetary system in which currencies are backed by fiat, or trust. In other words, the currency has value because the government says so. No longer would the U.S. permit other countries to exchange their dollars for gold. (Under the agreement only the U.S. dollar was required to be convertible to gold.) At 40 years of age fiat currency is looking frayed and worn at the edges. At the time of the making of the Bretton Woods agreement, the U.S. was the world's largest creditor. Now it is the world's largest debtor. At that time people took it for granted that each generation would have a better life than the last. That is no longer true.

Having looked back at history, now it's time to look at the future. To see how the precious metals will behave let's begin the technical part of this essay with the analysis of the Euro Index. We will start with the long-term chart (charts courtesy by http://stockcharts.com).

In the long-term Euro Index chart this week, we see yet another attempt for the index to move above the short-term declining resistance line. The previous move above it was not verified and has since been invalidated. It's unclear whether this will be seen once again.

The most recent move above the resistance line was followed by a move back to it. If the breakout does hold and is verified, a rally in the Euro Index will likely follow. This would almost certainly result in lower values for the dollar and perhaps higher precious metals prices. A breakdown however, will clearly be bearish and likely lead to further declines for this index and may have a negative impact on gold and silver prices as well.

In the long-term USD Index chart, we do not really see any reflection of the recent moves in the Euro Index. The situation is very tense here and the index has been moving back and forth between an important support level and an equally important resistance level. It is now within a tight trading range and it is probable that a breakout or a breakdown will be seen soon. The direction of this move will likely determine the direction of the next significant move for the dollar.

Whatever happens in the USD Index will likely have a big impact on gold and the rest of the precious metals sector. Based on the recent correlation between the dollar and gold, a significant move for the dollar will probably result in the classic impact where the exact opposite is seen in the price of gold. That is to say that a significant rally in the USD Index will likely be accompanied by much lower price levels for gold. Conversely, a large decline will likely lead to much higher prices for gold.

In the long-term S&P 500 Index chart, this week's price action is quite similar to what was seen last summer. A sharp and significant decline was followed by a period of back-and-forth price action for the next several months. Because of the important recent signals from the 30-year bond market, it is even possible that the stocks could rally before any consolidation is seen. Long-term yields have plunged and this has historically resulted in a rally for stocks.

What we wrote on August 12th in our essay on the possible top in gold is very much up-to-date:

(…) the situation for stocks in general looks bullish in the short term. With the general stock market having significant negative correlation with gold, this implies lower prices of the yellow metal and analysis of gold itself confirms that. Based on the points made above, it does appear that we are quite close to a local top and long positions in gold at this point seem very risky, at least for the short term.

To confirm that the basic correlations remain pretty much the same, let's take a look at this week's Correlation Matrix.

As we may see, gold continues to be negatively correlated with the general stock market in the short term (30-day column). This means that if stocks rally, lower gold prices are likely even though gold is currently close to its all-time high price.

The long-term coefficients between gold and the dollar are also negative and the implication here is that if a significant rally is seen in the USD Index, gold's price will probably move lower. The effect will also likely be negative upon silver and gold and silver mining stocks. The exact opposite (i.e. a move higher in gold, silver and mining stocks) is likely to happen in case the USD Index declines sharply.

Summing up, the situation is very tense and unclear in the currency markets. A breakout and a confirmation of it are about the only way the picture will be clarified for the euro and the dollar. Each index is presently at a crossroads and whichever breaks out and significant rallies will determine whether the impact upon gold prices and the precious metals sector overall will be positive or negative. As far as the general stock market is concerned, Thursday's decline in stocks was quite volatile but did not necessarily change the overall outlook. It still seems that the weeks ahead could very well be bullish for stocks although this upturn may not be seen immediately. At this point it seems extremely important to keep track of the general stock market as it's significantly correlated with precious metals. Any rally in stocks or in the USD Index (only significant ones matter in case of the latter) would most likely result in lower prices for gold, silver and mining stocks.

To make sure that you are notified once the new features are implemented, and get immediate access to my free thoughts on the market, including information not available publicly, we urge you to sign up for our free e-mail list. Gold & Silver Investors should definitely join us today and additionally get free, 7-day access to the Premium Sections on our website, including valuable tools and unique charts. It's free and you may unsubscribe at any time.

Thank you for reading. Have a great and profitable week!

P. Radomski
Editor
www.SunshineProfits.com

* * * * *

Interested in increasing your profits in the PM sector? Want to know which stocks to buy? Would you like to improve your risk/reward ratio?

Sunshine Profits provides professional support for

Gold & Silver Investors and Traders.

Apart from weekly Premium Updates and quick Market Alerts, members of the Sunshine Profits' Premium Service gain access to Gold Charts, Gold Investment Tools and Analysis of Gold & Silver Prices Naturally, you may browse the sample version and easily sign-up for a free weekly trial to see if the Premium Service meets your expectations.

All essays, research and information found above represent analyses and opinions of Mr. Radomski and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Mr. Radomski and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above belong to Mr. Radomski or respective associates and are neither an offer nor a recommendation to purchase or sell securities. Mr. Radomski is not a Registered Securities Advisor. Mr. Radomski does not recommend services, products, business or investment in any company mentioned in any of his essays or reports. Materials published above have been prepared for your private use and their sole purpose is to educate readers about various investments.

By reading Mr. Radomski's essays or reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these essays or reports. Investing, trading and speculation in any financial markets may involve high risk of loss. We strongly advise that you consult a certified investment advisor and we encourage you to do your own research before making any investment decision. Mr. Radomski, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Gold Hitting Record Highs: Time to Buy The Undervalued Gold Miners

Posted: 19 Aug 2011 05:13 PM PDT

Uncertainty and fear are the mother's milk of the metal's market. Our pundits, politicians and professors have given us plenty of reasons to question whether these supposed savants are steering with a working compass. One day headlines proclaim, "Bernanke Ready To Do More If Needed". Then we later read that the Professor is playing down the possibility of additional quantitative easing due to internal dissent. This cold water is being doused on the markets after evoking these hopes.
How can the bourses be anything but unsettled by such erratic behavior emanating from Washington's mavens and Europe's Pundits? An old blues song keeps playing in the subconscious-
"First You Say You Do and Then You Don't,
Then You Say You Will and Then You Won't.
You're Undecided Now, So What Are You Going To Do?
Now you wanna play, and then it's no,
And when you say you'll stay, that's when you go,
You're undecided now So what are you gonna do?
If you're kind, make up your mind
You're undecided now…So what are you gonna do?"

Precious metals thrive on equivocation in high places. Ergo volatility and obfuscation. There are plenty of exogenous factors that are present in the market mix such as the debt ceiling, downgrades from the S&P, the persistent Euro-Zone travails and not to forget the constant rumblings from the Middle East cauldron. A sector of the world although presently unnoticed may soon resume its position on the global market stage. We intend to write more about this particular area as we expect it to exert a profound impact on the financial markets going into the second half of 2011.
Gold Stock Trades has alerted its subscribers to the breakout in precious metals and critical pivot point of $52.50 on the Gold Miners(GDX). This move may encounter ebbs and flows on its way to its destined heights. Constant vigilance for possible entry points on the way up are advised. Let's look at the record. Our technical studies reveal an upward arc despite the diversions of day to day turbulence. Volume on the pullbacks are only merely above average. These volumes were significantly less than recorded by recent breakouts indicating institutions may be adding miners as a safe haven.

For many weeks $52.50 was our line in the sand. That has held and I would like to review this chart as a precaution to those who panic out at exactly the wrong times. Notice on the chart the weekly inverted hammer which occurred at that critical area, the second week of June. Weekly inverted hammers are common around bottoms of corrections as it indicates a large number of speculators who began shorting as GDX tested and made a fake breakdown penetrating momentarily 2011 lows.
At that time many were calling an end to the precious metals market and began shorting as it momentarily broke support. However, we saw a trap…many were caught. Short covering rallies morph into authentic breakouts as the long term trend followers return after the 200 day is regained on excellent volume. Some of the major miners such as Goldcorp (GG), Newmont (NEM) and Barrick(ABX) exhibit the powerful technical and fundamental characteristics of potential precious metal leaders.
The weekly long term downtrend in the U.S. dollar (UUP) is intact as it threatens reaching new lows. Through the first half of 2010, we were dealing with Euro Debt concerns and the run up last summer in the U.S. dollar showed it still maintained a safe haven status. Conversely in 2011, we have had a confluence of black swans globally especially with the Euro (FXE) and the U.S. dollar is not catching a bid and is still hovering around record lows.
We are seeing parabolic moves in gold (GLD) and silver (SLV) in 2011 as more investors realize the validity of precious metals as a safe haven. Soon investors will realize miners are sitting on assets increasing in value, which have not yet been reflected in their share price. Stay tuned to my daily bulletin for timely updates.
Disclosure: Long GLD,SLV,GDXRos

Gene Arensberg: Silver close to a short-murdering rocket launch

Posted: 19 Aug 2011 05:00 PM PDT

Gold Overbought

Posted: 19 Aug 2011 04:38 PM PDT

Gold closes at another record level/silver regains former strength rising to$ 42.43

Posted: 19 Aug 2011 03:32 PM PDT

Will Gold Continue to Shine?

Posted: 19 Aug 2011 09:57 AM PDT

By Eric Parnell:

Gold is skyrocketing. Since the end of QE2 on June 30, the yellow metal has gained more than 23% to cross the $1,800 level for the first time in history. While the chart on gold may be starting to look a bit parabolic, this recent rise is a bit more reasonable when put into a broader context.

I have been bullish on gold for some time. And my primary thesis for owning gold remains in tact, which is a secularly weak dollar policy in the United States dating back to 2002 coupled with global currency debasement and competitive currency devaluation in the wake of the financial crisis. But a recent look at the gold price chart is a bit dizzying. The slope of the gold price line has increased dramatically since the beginning of July and it appears that gold is overdue for a correction based on a variety of

Complete Story »

Of Treason and Free Markets

Posted: 19 Aug 2011 09:35 AM PDT

GOP Presidential candidate and Texas Governor Rick Perry certainly kicked up a lot of dust the other day by calling out U.S. Federal Reserve Chair Ben Bernanke's monetary policies as "treasonous," to say nothing of his hints of violence should Bernanke ever set foot in the Lone Star State.

Time.com blogger Roya Wolverson, while calling for cooler heads and more civil language, nevertheless pointed out in her article (Is Rick Perry Right About a Runaway Fed?) that Perry is not by a long shot the only one concerned with the Fed's runaway money-printing tendencies. Many rational thinkers, as they watch the dollar and the rest of the world's fiat currencies bleed value day by day (see Wednesday's feature article, One Big, Bad Apple, for more on this), might echo Perry's sentiment, if not his means of expressing it.

Description:

The free market always finds a way to reinstate true value into the economic system despite our extreme debt levels.

Bottoms up… Or Tops down?

Posted: 19 Aug 2011 09:30 AM PDT

It's not a market most of us love. But Murray isn't most of us. The Slipstream Trader editor stayed back at the office Thursday afternoon while the rest of the office went on a long anticipated bowling excursion. At 3:39 he sent out an update to his subscribers. He issued another warning of an imminent market call and made some short recommendations.

Murray's been killing it lately (in a good way) for his readers. If you're not sure what all the fuss is about, you can go have a look at this latest free weekly update. This one's a bit unusual. He takes a very long-term look at the markets and reaches a very specific conclusion.

We realise charting and technical analysis may seem like a foreign language to a lot of readers. But based on the comments and feedback Murray's been getting on his videos, he's making it a lot easier for Australians to use technical analysis to inform their investment strategies. That's pretty handy.

Meanwhile, both inflation and joblessness increased in the US – something that is impossible in textbook economics. In the world of models, graphs, twisted logic and econometrics, there is a trade-off between employment and inflation. When more people get jobs, that creates inflation. Fewer jobs means less inflation. The relationship is known as the Phillips Curve. And it's rubbish.

To repeat, inflation, joblessness and other economic ills are on the rise. Many economists are out predicting a recession already.

Dan Denning pointed out on Monday that only Harry Potter and the Communists can save us now. (Presumably not at the same time.)

This editor prefers the helpless resignation of Willy Wonka singing in Charlie and the Chocolate Factory. He doesn't try and save anyone as the boat goes down a psychedelic gurgler:

There's no earthly way of knowing which direction we are going.
There's no knowing where we're rowing, or which way the river's flowing.
Is it raining? is it snowing? is a hurricane a-blowing?
Ahh!
Not a speck of light is showing, so the danger must be growing.
Are the fires of hell a-glowing? Is the grisly reaper mowing?
YES! THE DANGER MUST BE GROWING, FOR THE ROWERS KEEP ON ROWING
AND THEY'RE CERTAINLY NOT SHOWING ANY SIGNS THAT THEY ARE SLOWING!
BUUUYYYYY GOOOOLLLLD!

We added the last line. But it fits in well. And everyone who knows what's going on is buying gold, which just hit another record high. In fact, look at it this way: Find out who is buying gold to figure out who knows what is going on.

The likes of Marc Faber, Peter Schiff and Jim Rogers have been buying gold all along. Many of them buy the same amount of gold each month, no matter the price or the news hype. That's because their knowledge, outlook and forecast hasn't really had to change. It's been confirmed at every turn.

Then there are the recently enlightened gold buyers. They are moving increasingly into gold as the economic news gets worse (and the price goes up).

Most important are the 'uh oh, we were wrong, better buy some gold' bunch, which consists largely of central bankers, including those from Mauritius, China and India. They have been stocking up for a few years now.

It's interesting to see the differences in why these three groups are buying gold. The first, consisting of the long-term steady buyers, see gold as insurance. It's real money, outside the banking system, nobody's liability and all that. The second group of buyers still think of their portfolios in terms of Dollars, Pounds or Euros. They hope to sell their gold once it has gone up a lot to buy something with the profit they made. The fact that the prices of all goods will have risen with gold (probably to a lesser extent) escapes them. And after tax, well...

It's the third group that is really interesting. Will the monetary meddle-o-maniacs turn to gold when paper money turns out to be nothing but paper? After all, paper is no more money than a menu is a meal. They will only figure that out after exhausting all other options, is our guess.

That's what the Europeans are up to (exhausting all options). Instead of sharing in the liability of all Euro nations by issuing Eurobonds, the German Chancellor apparently agreed to an EU-wide government.

This is like sinking Australia to stop the boat people.

That's probably what the Greens will accuse Tony Abbott of next: A secret strategy to pollute carbon until Australia is under water (from melting glaciers), thereby 'stopping the boats'.

Polluting the politicians into submission is what the 'Convoys of No Confidence' are all about. It's essentially a bunch of truckies and other anti-government enthusiasts hitting the road at once. By driving to pristine Canberra they hope to make their 'real voices heard'. Probably in the following way: 'Honk! Honk!'

Hopefully it works.

But in an odd twist, it seems the Greens are the ones standing up for basic property rights. (This is getting really confusing.) The Australian reports:

The bill, to be brought into the Senate in the next fortnight by Greens Queensland senator Larissa Waters, would require the written permission of landholders be obtained before companies could explore for, or extract, coal-seam gas.... [the] bill will... require coal-seam gas corporations to get written permission before entering a farmer's land.'

We're not familiar with the current legal state of affairs on this, but it seems The Australian is suggesting that, under current law, coal-seam gas companies can drive their drills through a farmer's gate and stick a hole in their ground without so much as a 'by your leave' from the farmer. As long as they get permission from the government, that is.

That is outrageous.

This would never happen under a truly capitalist system. Property rights are the foundation of capitalism. (Including the fact that you own yourself.)

If you'd like to learn more about how a truly capitalist system works from one of the best in the business at explaining it, why not attend the Sydney Mises Seminar in November?

Special guest Hans Herman Hoppe will be there to tell you all about this type of thing. And do a much better job than your editor at it. That's why we'll be in the audience.

To find out more, visit https://mises.org.au/

Then again, you might agree with this plonker at The Age:

Now, the Austrian school of economic ideas is rising. Rightly enough, its notions of creative destruction, capital misallocation and purging the system of excesses each business cycle suddenly makes sense. Except for one small problem: it's too late.

Better late than never doesn't apply to economics...

The author seems to misunderstand that Austrian economists explain, they don't do. At least when it comes to government policy. They certainly keep busy outside of government. That's why you'll find very few Austrian Economist politicians (one by our count) and a large number of Austrian enthusiasts in the private sector.

In the same sense, the solutions Austrians advocate are 'bottom up', not 'top down'. As Austrian economist Hayek says in this economics rap song, 'I don't wanna do nuthin, there's plenty to do. The question I ponder is who plans for who? Should I plan for myself, or leave it to you? I want plans by the many, not by the few.'

That would mean government getting out of the way in favour of the private sector. As Martin Hutchinson of Prudentbear.com points out, the private sector is doing rather well in the face of the US government's withdrawal. He cleverly explains that GDP is a poor measure of prosperity, as it encompasses government and private sector spending. Falling government spending obviously reduces GDP, as it is a component of GDP. But if you separate the two, Gross Private Product (GPP) and Gross Government Product (GGP), you get a different conclusion. GPP has been doing well, while Gross Government Product (GGP) has been stalling.

By the GPP measure, 2011's economy is not so bad, with steady growth in the first two quarters at 1.9%, compared with official GDP growth of 0.8%. Notably, government has been shrinking during this period, with both federal spending and total spending down at a 3.5% annual rate. That suggests that the current economic position is not in fact dire; it also suggests that continuing government shrinkage may encourage further growth.

This is exactly what you want to happen to get out of obscene amounts of public debt. Private sector growth, government sector withdrawal. But the change doesn't come without turbulence. Whether it's on the streets of London, or north-east Arnhem Land, people are getting angry about the changing relationship between individual initiative and collectivism. They all seem to have completely opposite opinions and conclusions about exactly the same events.

Some say it was the withdrawal of welfare that caused the London riots. Some blame too much welfare. Others think it was simply opportunism on the back of anti-police sentiment that built up over a very long time.

There's nothing to argue about though. They are all right. It's not like every rioter had the same reason...

As always, though, the government is at fault too.

When your editor was in Vancouver, he told newsletter readers from indebted nations around the world that their governments' stimulus efforts might have been bad, but the Australian stimulus effort killed people. We were referring to the house insulation debacle, where government funding went to burning peoples' houses down. And sometimes burning the people themselves. So we Aussies may have escaped much of the crippling debt that comes with government stimulus efforts, but the costs remained high.

The right wing argument explaining the London riots blames excessive welfare. If you agree, take a look closer to home. Just ask Galarrwuy Yunupingu who was interviewed by The Australian:

With his heartfelt plea for an end to welfare handouts in the remote indigenous domain, Galarrwuy Yunupingu has thrown down the gauntlet.

The northeast Arnhem Land clan leader is insisting that the entire political and bureaucratic class confront the failure of the passive welfare paradigm in remote Australia.

He wants no more tinkering around the fringes of the vast network of social support projects now in place but instead the abolition of welfare payments to his people -- and for the simplest of reasons: "It's a killer."

After subsidised insulation killed people, Australian politicians decided to subsidise solar power panels. A large proportion of those turned out to be dangerously installed too. Based on this, you can expect more welfare for Aboriginal Australians.

On a slightly more positive note, the younger politicians seem to be catching on. The Australian representative at the Girls 20 summit in Paris, a mock G20 meeting for young women that focuses on women's issues, sounds promising: 'I think far too often people try and make policy for people they don't understand,' she said.

If only someone had pointed that out to everyone discussed above. The monetary meddle-o-maniacs, the EU politicians, the carbon taxers, the climate changers, the detention centre builders, the coal-seam gas trespassers, the stimulators, the statist-ticians, the welfarists, the counterfeiters and many more that didn't make it into today's Daily Reckoning (notably the war mongers).

We have a message for all of them:

You kill people.

In London, Arnhem Land, detention centres, foreign countries and in newly insulated homes, you kill people.

And telling us we were right in our warnings, but 'it's too late' to see the errors of your ways isn't good enough.

Give the politicians in Canberra a 'Honk! Honk!' for me.

Until next week,

Nick Hubble
Daily Reckoning Australia Weekend