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Bonds Outperform Equities In 2011
Keiser Report: From Russian Oil with Love
$1000 Silver
Gold Holds Hands With Stocks
Silver In The Roaring 20′s & Great Depression
Tuesday Options Recap
SPDR DJIA ETF Offers Better Risk/Return Profile Than A 'Safe' 6% Yield Fixed Income Portfolio
Thailand's New Banking Policies
Risk To Hurt Record Long Dollar Positions?
You Cannot Make This Up: New Criterion Tells Us We Should Ditch Social Security Because All Minimum Wage Earners Can Become Millionaires
Corrections in the Gold Bull Market
This Gold Bull Market is Far From Over
New Year Buying Boosts Gold and Silver Prices
Morning Outlook from the Trade Desk - 01/03/12
Who Is Going To Buy All That Debt?
Morgan Stanley 2012 Forecast
Top economic forecaster: 2012 could mark the end of the euro
LISTEN: Dudley Baker on Gold
VB Update Notes for January - February 2012
2012 Outlook : Silver Should See Renewed Investor Interest On Global Finance Worries
2012 Will Be More Difficult Than 2011
Gold up $30 in early trading - the yanks are going to be pissed!
Philip Pilkington: Of Idiocy and Anomie – Ron Paul vs. the Nanny State Liberals
Criminals Determine Gold’s Future
Gold & Silver Market Morning, January 03, 2012
Sinclair on Gold Fundamentals
Silver Update: “Possible Bottom”
Trading Comments, 3 January 2012 (posted 10h30 CET):
The “Money Supply” with a Gold Standard
An Unhappy New Year

Bonds Outperform Equities In 2011

Posted: 03 Jan 2012 06:47 AM PST

By Joseph Poma:

Interest rates continued lower through 2011 and credit rating agencies went rampant downgrading the credit ratings of numerous countries, even placing several financial stalwarts on a negative outlook moving forward. Despite all of this, it was the bond indices that outperformed the majority of the market! Below is a table which gives a detailed performance for several asset classes.

Performance of Asset Classes

U.S. 10 Year Treasury	+16.7%
Brent Crude Oil (BNO)	+13.9%
Gold (GLD)	+8.9%
Barclays Capital U.S. Corporate Bonds	+8.15%
JPM Global Government Bonds	+6.34%
S&P 500 Index (SPY)	-1.12%
CRB Commodities Index (CRB)	-8.4%
MSCI Emerging Equities (EEM)	-18.3%

This brief sampling is indicative of the overal market performance, which is contrary to what many investors anticipated. Since the beginning of the year investment advisors were advising clients to diversify their portfolios to move away from bonds to protect from losses if interest rates were to increase.

Complete Story »

Keiser Report: From Russian Oil with Love

Posted: 03 Jan 2012 06:44 AM PST

This week Max Keiser and co-host Stacy Herbert present an Eastern European special looking at Swiss franc mortgages in Hungary, bank runs in Latvia and the wisdom of austerity. In the second half of the show, Max talks to economist, Professor Constantin Gurdgiev, about the outlook for the Russian economy and banking sector in the event of a Eurozone collapse and also about what austerity has done for Ireland.

~TVR

$1000 Silver

Posted: 03 Jan 2012 06:41 AM PST

The Possibility of $1000 Silver Before Hyperinflation

from Global Investments Ltd, via SilverSeek.com:

2011 was both an amazing and disappointing year for silver investors. The most disappointed of all are those who bought in during the April highs, when silver almost reached $50. However, what these investors need to remember is that not too long ago, people were fretting over changes in prices of ten cents or less. Not too far down the road, the difference between $29 silver and $50 silver will also seem rather minimal.

A look at some of the fundamentals which underpin the silver market will help remind our readers why G.I. Metals DMCC holds that silver will ultimately outperform gold, and what type of highs we might eventually see in an inflationary – and not hyperinflationary – environment. With current levels of central bank intervention to solve sovereign debt problems, we expect to see more economic contraction for the first part of 2012, followed by even more excessive money printing which will lead to inflationary, and eventually hyperinflationary, conditions. This only requires a greater level of velocity to occur, along with a loss of confidence in the world reserve currency, which we expect will begin to happen when bond speculators' attention is moved from Europe to America.

Sentiment

Stocks rallied around hopes for 2012 Tuesday. The focus after the New Year break was on economic data. One report showed Germany's unemployment rate unexpectedly falling in December. In the US, better-than-expected reads on manufacturing and construction spending helped set the table for a morning advance on Wall Street. Some of the commodities are also rallying. Crude bubbled more than $4 per barrel higher to $103. Gold gained $37 and recaptured $1606 an ounce. At the same time, falling yields in troubled nations across the Eurozone helped send the euro up .9 percent to 1.305 against the buck. At the end of the day, the news flow offered ample fodder for the bulls and the Dow Jones Industrial Average is up 219 points in the final hour. The NASDAQ rallied nearly 50. CBOE Volatility Index (.VIX) starts the year in the low 20s. The index is currently down .61

Complete Story »

SPDR DJIA ETF Offers Better Risk/Return Profile Than A 'Safe' 6% Yield Fixed Income Portfolio

Posted: 03 Jan 2012 06:19 AM PST

By Hao Jin:

2012 is going to be another choppy year. On one hand, investors are encouraged by the best holiday shopping season since the Great Recession, a potential turnaround in the housing market, increased gains in job markets, improved consumer confidence and rising corporate profits. On the other hand, investors are concerned about European problems, a potential collapse of the banking system, slowing growth in emerging markets, a potential war in Iran and natural disasters.

Given the uncertainties surrounding the global economy and roller coaster ride ahead, how do investors position themselves in 2012? Following are 2 sample portfolios: one is a fixed income portfolio constructed using 4 popular iShares ETFs; the other is Dow Jones 30 companies (DIA) with a 13% potential annual return.

A 6% Yield Fixed Income Portfolio

If you put money equally into the following 4 sample ETFs, the 12-month yield for this portfolio would be 6%:

Fund

Complete Story »

Thailand's New Banking Policies

Posted: 03 Jan 2012 06:19 AM PST

By Max G:

Thailand is currently experiencing the socioeconomic problem of a missing middle class. There is a great divide between the country's highest earning and lowest earning groups. The country's highest earning group is benefiting from increased connectivity through technology. Some members of the middle class have just emerged from poverty and are earning the majority of their income through labor. The lowest bracket in this group is feeling the most pressure about their future. In Thailand, the richest 20% make almost 60% of the income. The poorest 20% made only 4% of the income. This disparity has Thailand ranked last place amongst its neighbors. The disparity between the rich and the poor is similar to what was seen in Russia after the collapse of the Soviet Union. Slowly, Russia's middle class is gaining in members. Economic policy reform has been painstakingly slow in Russia, but progress has been made. Analysts feel

Complete Story »

Risk To Hurt Record Long Dollar Positions?

Posted: 03 Jan 2012 05:52 AM PST

By MarketPulse FX:

By Dean Popplewell

We are back. Back to half-truths, a little despair and hope. The Euro agenda has not changed, leaders are out to save their beleaguered union, their currency and years of hard grafting. The US will spend the next 10-months deciding who has the honor of leading their once proud economy. China, again, will have to charter its country towards a soft landing; the rest of us are relying on this! If either of the regional policy leaders do not get their objectives-in-tow, then the global house of cards is in danger of tumbling down.

Despite a shortened trading week, European leaders will return to work looking to buy time for the Spanish and Italian governments to take control over their debt and rescue the EUR from fragmentation. The highlight of the remaining four trading sessions will be the employment situation in North America, to be reported on

Complete Story »

You Cannot Make This Up: New Criterion Tells Us We Should Ditch Social Security Because All Minimum Wage Earners Can Become Millionaires

Posted: 03 Jan 2012 05:10 AM PST

People who write for right wing outlets live in an alternative reality. The piece that Michael Thomas pointed out to me from the New Criterion, "Future tense, V: Everybody gets rich," by Kevin D. Williamson, belongs in a special category of its own in terms of the degree of disconnect it exhibits.

As much as I enjoy shredding articles, this piece has so much wrongheadedness in a compressed space so as to make a full bore exercise of unpacking it a a major exercise. Let's deal with just this part, which is a neat one-two effort to tell us no one need safety nets like Social Security because even people making minimum wage can be rich (and not by creating a business on the side and going public at a big multiple….):

The welfare state isn't a very good buy. The average Social Security benefit runs just over $1,100 a month—peanuts, hardly enough to keep you in cut-rate butter once your median rent of more than $800 has been paid. For that, you're taxed 12 percent of your take-home pay. Compare that to this: A married couple, each earning the minimum wage, investing only 10 percent of their earnings at a modest 7 percent return, retires with an annual income of more than $100,000 a year—even if they never touch the $1.5 million principle they'll leave to their children. President George W. Bush was mocked for calling his proposal to cultivate such minimum-wage millionaires the "Ownership Society," but it was the most important initiative of his presidency.

Erm, the worst is I get the strong impression Williamson believes every bloomin' word he wrote. I gather no one told him the global financial crisis was the culmination of the ownership society, which was purchased with minimal equity and cheap leverage. It's a broader scale version of Josh Rosner's 2001 (!) comment on housing: a home without equity is just a rental with debt.

Let's start with the most obvious reason why Williamson's little tale of minimum wage people retiring as millionaires is observed about as often in the real world as unicorns: his ~~fantasy~~ expectation that they save 10% of their incomes. The savings rate for Americans as a whole hasn't been over 10% since 1984 (and it was only rarely above 10% from the beginning of the data series in 1959 through that date. With the exception of 1984, it was strictly a recession phenomenon). It is currently 3.5%.

How exactly do two people earning minimum wage save 10%? Kids are out of the question (although he refers to them), since two incomes and kids necessitates two cars, unless you live in a major city with excellent public transportation. Even if they do manage to save that much intermittently, has he not heard of how short job tenures are? Any job interruption at any income level leads to a depletion of savings. And minimum wage earners don't get meaningful benefits. How are they to pay for anything in the medical category over and above an annual checkup? The Grand Canyon sized hole in this logic is you have to have an entire working career of uninterrupted earnings and nothing bad happening (oh, including a divorce).

And that's before you get to the barmy investment return assumptions. Williamson is selling the Kool Aid that the crisis proved wrong and Beniot Mandelbrot debunked in his book written for the layperson, The (Mis)Behavior of Markets. In it, Mandelbrot describes how all the standard financial markets models greatly understate risk, leading both professionals and ordinary investors to take on far more risk than they can tolerate. This looked like a brilliant approach from the early 1990s through the early 2000s, since disinflation produced strongly rising asset values. That era is over. 7% returns? Sustained?

Williamson's mention of the Bush "Ownership Society" was a major tell. The push to privative SS to help Wall Street earn more fees is on. You can see how this works. Trying to hit return levels that aren't attainable with prudent risk assumption means more people will got into hedge funds. Maybe not minimum wage types, but certainly more of the middle class. And that means more fee extraction and more churning.

And to let readers in on the fun, let's try a "Where's Waldo?" exercise. Tell me everything you see wrong with this part of the article (hint: as a Manhattan resident, I can barely restrain myself from going after the car ownership part):

I noticed a fellow at the recent Occupy Wall Street protests carrying a sign reading: "They eat filet mignon. I eat the dollar menu." This of course says a great deal, and not at all what he meant for it to say. Here is an American man in apparently good health complaining that, while he can have a modest meal for 8 minutes and 30 seconds of work at the minimum wage in New York, (including the sales tax)—and have somebody else cook it for him, at that—he'd really rather have filet mignon, thanks very much.

I sympathize: Earning the New York minimum wage, he could report for work at 9 a.m. and by noon have earned enough to have a two-inch thick USDA prime twenty-one-day-aged filet mignon for lunch, providing he is willing to cook it himself. If he reports back to work at 1 p.m., he must then work until 3:15 p.m. to pay the rent on his modest New York City apartment ($500/month in the Bronx, via Craigslist, with hardwood floors, heat, and hot water included) and then until about 3:45 p.m. to pay for his monthly subway pass or to make the lease payment on his Kia—which, at $99 a month, is a bit less expensive than the subway pass, but then there's gasoline and insurance to think about. The money he earns between then and 6 p.m. ought to be sufficient to cover his other meals and incidentals, if he's thrifty, though he'll probably need to put in a few extra shifts a month or get some overtime to keep current on his taxes

Corrections in the Gold Bull Market

Posted: 03 Jan 2012 04:41 AM PST

Jesse's café

This Gold Bull Market is Far From Over

Posted: 03 Jan 2012 03:45 AM PST

Lassonde responded, "On the correction, I would say to people don't panic."

New Year Buying Boosts Gold and Silver Prices

Posted: 03 Jan 2012 03:15 AM PST

by Peter Cooper, Arabian Money via GoldSeek:

Sale prices for gold and silver brought out the bargain hunters with gold and silver both gaining more than two per cent in value, bringing to an end the sell-off that closed last year.

New Year cheer for bullion was predicted in the ArabianMoney newsletter with specific ideas for precious metal investments over the course of 2012 (sign-up here).

Prices Rebound
We see this far more as a rebound from oversold price levels with hedge funds keen to get back into this asset class than a response to some bellicose statements from Iran or for that matter the new leadership in North Korea.

Gold and silver's fundamental appeal has not lost its shine. Indeed, the money printing by global central banks is lining precious metals up for some huge advances in the near future.

Read More @ ZeroHedge.com

Top economic forecaster: 2012 could mark the end of the euro

Posted: 03 Jan 2012 12:58 AM PST

From Newsmax:

At least one country will pull out of the euro area this year as the breakup of the single currency begins, according to the Centre for Economics and Business Research (CEBR).

"It now looks as though 2012 will be the year when the euro starts to break up," the London-based CEBR said in a statement today.

"It is not a done deal yet...

Read full article...

More on the euro crisis:

Why gold selloffs could become much more frequent

Superinvestor Mark Mobius makes a bold new call: The euro crisis is almost over

It's official: European Central Bank agrees to massive bailout... Money-printing is sure to follow

LISTEN: Dudley Baker on Gold

Posted: 03 Jan 2012 12:40 AM PST

Ellis Martin and Dudley Baker of preciousmetalswarrants discuss a coming eventual rally in gold stocks and positioning in light of that with inexpensive buys of companies already held.

~TVR

VB Update Notes for January - February 2012

Posted: 03 Jan 2012 12:17 AM PST

HOUSTON – A quick look at the indexes that track the smaller, more speculative miners and explorers we like to game here at Got Gold Report seems as good a place to start as any. Just below is the Market Vectors Junior Gold Miners Index (GDXJ), which we chose as our Top Pick for 2012 following its 2011 hammering back to 2010 levels.

We are making the argument with this chart that the index has retreated to an area of probable support, provided the global wheels don't come off the proverbial carriage.

A roughly 44% correction for an index is a big number and that is how much the GDXJ has corrected from the April 40.29 pinnacle. The GDXJ is a new vehicle, so we don't have a great deal of data to work with, but we believe that the consolidation in 2010 established a congestion area on the chart that has the potential to turn into a bona fide support level just ahead.

GDXJ's Canadian counterpart is the S&P/TSX Canadian Venture Exchange Index (CDNX), which has been around for the entire bull market in precious metals and then some. In this two-year chart below, the second largest correction ever for the CDNX shows clearly enough. So far, the October panic spike lower remains the low for the index. Although it is still less than certain, we have the potential for the first higher turning low since January, 2011 (black circle).

The brutal buyer's strike and Negative Liquidity Event (NLE) which dominated 2011 looks formidable and scary to most participants. However, if that is the first higher turning low forming now (and not just a corrective bounce in a continuation of the buyer's strike) then it would be in the context of the next chart and therefore really quite bullish looking ahead. (Yes, we know it is an important "if," not to be spoken cavalierly.)

To continue reading, please log in or click here to subscribe to a Got Gold Report Membership.

2012 Outlook : Silver Should See Renewed Investor Interest On Global Finance Worries

Posted: 02 Jan 2012 10:46 PM PST

2012 Outlook : Silver Should See Renewed Investor Interest On Global Finance Worries
12/28/11 12:15 AM

(Kitco News) - Silver bulls should have cause to celebrate once again in 2012, even though supply/demand hangovers caused by an intoxicating run to early-year record highs actually has them swallowing small losses for 2011.

Many experts predict silver prices will end 2012 at double or triple their mid-December level of around $29 an ounce, although a few bearish holdouts believe the market could lose another $10 from here.

DEMAND

"I see $60 silver by the end of 2012," said David Morgan, independent precious metals analyst with Silver-Investor.com. "Demand from investors will pick up, as we see continued deterioration of the world financial system."

HSBC Securities also foresees renewed investor interest and a 7% expansion in global demand in 2012, to an unprecedented 968 million ounces. TD Securities looks for an even greater 9% gain, to 1.021 billion ounces.

"Demand for silver will be sustained by global concerns about fiscal profligacy, political gridlock on dealing with the U.S. budget deficit, long-term sustainability of the U.S. dollar, potential inflationary consequences of highly accommodative monetary polices, and economic uncertainty," HSBC said. "Coin and small-bar demand may moderate from current high levels, but remain strong, further contributing to silver price strength."

HSBC predicts possible spikes to $40/oz "or even higher," in 2012 and a season-average price of $34/oz.

"Silver acts like a precious metal on the way up and an industrial metal on the way down," said Gijsbert Groenewegen, managing partner of Silver Arrow Capital Management in New York. "Silver will move contrary to the trend of the U.S. (dollar)."

Several analysts believe collapse of the euro is now all but inevitable; a watershed event which will send EU investors fleeing to the relative safety and liquidity of the huge U.S. bond/dollar market.

"Metals have mutated from 'safe haven' assets to 'risk' assets," said Spencer Patton, founder of Steel Vine Investments, who predicts 2012 will end with silver quoted around $18. "I expect 2012 will present some major changes in the eurozone," that will lead to weaker silver prices.

Groenewegen concurred, but warns that strength in the dollar -- and accompanying weakness in demand for silver -- may be very short-lived, however.

"The financial situation in the U.S. is not much better than the EU. If politicians fail to reduce the U.S. debt, interest rates will skyrocket and paper money will lose all credibility," potentially sending silver spiking to stratospheric levels as high as $200-400.

SUPPLY

Several leading research firms and banks expect a 1% to 6% increase in the global silver supply during 2012, as scrap redemptions accelerate and mine production grows.

"Silver mine output has been rising notably for years. Silver prices are multiples above the costs of production," said HSBC. "The result has been an acceleration in silver output that would have been almost unimaginable, just a few years ago."

HSBC expects total world supply to exceed 1.1 billion ounces in 2012, representing a 24.4% increase over levels seen as recently as 2008.

"TDS models are suggesting that the silver market will be oversupplied this year and over the next two years, as production grows," said the Canadian-based firm, which predicts a 109 million ounce surplus for 2012.

"In the past, silver's industrial side has generated deep corrections for the white metal and we don't expect it will be much different this time around, with a correction to materially below $25/oz entirely possible," TDS said.

Still, Patton said that long-term supply/demand factors remain relatively positive for silver.

"Every cell phone in the world has a little bit of silver in it--and once silver is used, it is gone. We should see tremendous expansion in the handset world for the foreseeable future," he said. "Thus we are seeing an infinitely declining amount of silver on the planet...but in 2012 we may see more supply entering the market, as many silver speculators sell."

OVERVIEW

In summary, most analysts feel the strong underlying fundaments which lifted silver to new heights in 2011 have not changed, even though April's record has since been slashed by more than 40%, leaving values languishing $1.85 lower versus where 2010 ended, around $28.78/oz.

"We are still using fiat money and (sovereign) debt levels are still extremely high. The debts have to be paid or defaulted on. Either way, that means significantly reduced economic activity world-wide," said independent analyst Hubert Moolman. "That likely also means another big stock market crash. Before this happens, it would be foolish to talk about a top in precious metals," because these conditions are precisely what will drive silver prices significantly higher.

reporters@kitco.com
http://outlook2012.kitco.com/blog/-/..._col_count%3D7

2012 Will Be More Difficult Than 2011

Posted: 02 Jan 2012 10:24 PM PST

from The Economic Collapse Blog:

Do you believe that 2012 will be more difficult for the global economy than 2011 was? Well, that is what German Chancellor Angela Merkel believes. The woman that has become the most important politician in Europe recently declared that 2012 "will no doubt be more difficult than 2011″. The funny thing is that she has generally been one of the most optimistic public figures in Europe throughout this debt crisis. But now even Merkel is openly admitting that 2012 is going to be a really, really bad year. Sadly, most Americans simply do not understand how important Europe is or how interconnected the global financial system has become. The United States actually has a smaller population and a smaller economy than the EU does. In fact, the EU has an economy that is nearly as large as the economies of the United States and China combined. The EU also is home to more Fortune 500 companies that the U.S. is, and the European banking system is far larger than the U.S. banking system. Anyone that does not believe that a financial collapse in Europe will have a devastating impact on the U.S. economy is living in a fantasy world. Americans better start paying attention to what is going on over there, because we are about to be broadsided by a massive financial tsunami originating out of Europe.

Read More @ TheEconomicCollapseBlog.com

Gold up $30 in early trading - the yanks are going to be pissed!

Posted: 02 Jan 2012 09:54 PM PST

How sharp a fall will we see at 9 est?

Philip Pilkington: Of Idiocy and Anomie – Ron Paul vs. the Nanny State Liberals

Posted: 02 Jan 2012 09:45 PM PST

By Philip Pilkington, a journalist and writer living in Dublin, Ireland

Matt Stoller recently ran a thoughtful piece on this site about Ron Paul. Stoller's thesis is that Ron Paul confronts Big Government liberals (my term, not Stoller's) with the dark underbelly of their policy prescriptions. Stoller points out that Paul's ideology touches at least three very sensitive areas for the modern liberal: their ties between Big War and government spending; their ties to the Federal system and its related monetary apparatus; and their ties to Big Finance.

To deal exhaustively with any of these complex topics is a daunting task and one which I will not pursue here. But Stoller dropped a name when he invoked the contradictions of liberalism; one well worth bringing up: Christopher Lasch. Although Stoller didn't really go into the links between Lasch, liberalism and Paul, he was certainly on the right track.

Some background first.

The Culture of Narcissism and the Nanny State

Lasch was a complex figure. A cultural historian by trade, he wrote many fascinating books on topics as diverse as the idea of progress and the origins of cultural politics. His most outstanding work, however, was his critiques of the modern welfare state (most especially in The Culture of Narcissism and The Minimal Self). Yawn, right? Well don't switch off quite yet: Lasch was critiquing the modern welfare state from a left perspective.

Lasch claimed that as government intervention in the economy grew the state soon found itself mediating more and more social relationships. For example, as the welfare state flourished in the post-war era social workers soon became a significant social force. Lasch claimed that they would swoop in and destroy family ties, replacing these with artificial and technocratic relationships essentially ruled over by the state.

And it was not just in poor families that Lasch saw the creeping hand of the state. Middle class families too were coming to rely more and more on state institutions. From family planners to psychotherapists in public schools (guidance councillors) Lasch thought that many of our social relationships were gradually becoming mediated through a technocratic apparatus at the centre of which stood the modern state.

Lasch then went on to argue that such a shift was hollowing out everyday social relationships. As we came to increasingly rely on these supports our personal and family relationships became ever more distanced, ever more managed. Into this vacuum, Lasch claimed, swept celebrity and consumer culture. The state hollowed out our relationships – the market filled the void with tatty consumer goods and celebrity gossip. It is this mix that Lasch referred to as the 'Culture of Narcissism'.

Lasch's critiques struck a chord with many. The Culture of Narcissism became a bestseller and Lasch went on to advise speechwriters for President Jimmy Carter. To what extent Lasch's critiques are true and to what extent they are projections of personal anxieties is difficult to say – surely a Freudian of Lasch's eminence would smile at the term 'Nanny state'. However, they definitely touched a nerve – and when read today they remain as fresh as ever.

The yearning to wean ourselves off the teat of the Nanny state is as strong today as it was when Lasch first wrote his books back in the 70s and 80s. It is to this sensibility that Ron Paul, the libertarians and the Tea Party appeal to.

Big Government Must Be Stopped

At heart, Lasch's critiques had firm roots in the conservative tradition; this even though he considered himself a left-wing populist – indeed, he never tired of pointing out how the market buttressed the state by providing shallow imaginary relationships to people. And to a large extent it was conservatives like Ronald Reagan and Maggie Thatcher who appealed to peoples' desire to roll back the state while later conservatives would soon take a community-oriented line (David Cameron's 'Big Society' nonsense being a case in point).

The grandiose visions of these doyens of mainstream conservatism, however, failed spectacularly. Both came to see – whether directly or indirectly – that the state is embedded to such an extent in our modern social economies that to really try to remove it would mean the destruction of these social economies themselves. What we got instead of supposed liberation and a return to organic community relationships was a watered down, neoliberal state – what Jamie Galbraith came to call The Predator State.

This is a state that keeps investment through government spending at levels that allow the Western economies to tick over while at the same time allowing for unemployment, stagnation and the formation of private debt bubbles. In dealing with poverty and unemployment it prefers to place more layers bureaucracy around benefits while increasing investment in police forces and prisons. Investment is largely channeled into (a) dysfunctional bureaucracies and (b) the military-industrial-prison-security complex.

Mainstream conservatives have largely contented themselves with this Predator State – all the while congratulating themselves on their supposed championing of family values and free market policies. But some on the sidelines have expressed their serious discontent. Among these are the libertarian and Tea Party movements in the US. These groups insist that Big Government must truly be stopped and the simplest way of doing this is by cutting off its funding.

This is the main reason why the libertarians insist on a gold standard and the destruction of the Federal Reserve system. By doing this the politicians would lash financial constraints upon the US government from which it would have very little wriggle room. It would also, of course, plunge the US economy into a depression from which it would take decades to fully recover. And as the US economy plunged into the abyss it would probably take the rest of the world with it.

Nor is it likely that Big Government would go away. Under such circumstances of heavy 20-30% unemployment rates the crime rate – which is already remarkably high in the US – would go through the roof. The criminal and legal apparatus would be forced to expand, thus contracting other government sectors even more rapidly and further reinforcing the unemployment rate. If things got really bad one could imagine the military being given powers that would make libertarians squirm in their seats.

The libertarians answer to this? As is so often the case with the libertarians it is a Leap of Faith. They believe that if government gets off peoples' backs the economy will self-generate. Do they have any evidence of this? Certainly not. All evidence points firmly in the opposite direction (think: Yeltsin's Russia and the rise of gangster capitalism). But this is not an evidence-based belief. It is an impervious and inflexible religious-like belief. When challenged with empirical evidence excuses are devised and scapegoats are found.

In this the libertarians are dangerous – I would almost say: very dangerous. And yet they appeal to people at a very deep level. They appeal to a very real sense of longing for more substantial social relationships and less government meddling. They appeal to people who watch modern developments in Big Government with distrust and suspicion. Indeed, they appeal to many liberals.

It is to this that Big Government liberals have no answer. But there is an answer and it has been discussed on this site before. I refer to the Job Guarantee scheme as put forward by the Modern Monetary Theorists.

Job Guarantee as Rejuvenator of Community

Much of the debate surrounding the Jobs Guarantee program – that is, the proposal for governments to hire everyone willing and able to work in a minimum wage job – has focused on its macroeconomic effects. The potential for such a program to generate inflation is, of course, the key focus. In actual fact the Jobs Guarantee program is devised in such a way that it puts a cap on inflation, but there has been much work done on this already and I see no need to repeat it here.

Instead we should focus on what the Jobs Guarantee program might be like as an institution. And it is here that we find it to be an antidote to the anomie and alienation that Lasch and the libertarians bemoan.

The Jobs Guarantee program is first and foremost a decentralised community-based institution. This is summed up well in a policy brief that I will soon be presenting to the Irish government.

The national government could set budget constraints for the local governments based on either a per capita basis or in relation to local unemployment rates. The local governments could then channel funds to already existing organisations – such as NGOs, grassroots community groups or charities – who could in turn use the funds to start up much needed projects and employ workers. If these organisations sought to expand their operations and required additional management staff they could then apply to the local government for an increase in funding. Local governments could also encourage the unemployed to form new organisations.

As the reader can see the idea here is to take a 'hands off' approach. The government simply provides the funding and controls the program through the levels of funding allowed. The organisations present the local governments with their plans and the local governments negotiate an amount of monthly or annual funding with them based on these plans, together with a spatially oriented understanding of the rates of unemployment in a given geographical location. When these organisations receive funding they then go out and hire people. Minimal bureaucracy, minimal oversight, minimal mess.

This is absolutely an initiative aimed at strengthening community ties and weakening the hand of Big Government. Consider the fact that everyone who gets a job will be working for community improvement rather than filling out detailed and intrusive forms for some faceless bureaucrat in a social welfare office.

What's more, such a program has been tried before and it was remarkably successful. When a Jobs Guarantee program was set up in Argentina after their financial crisis the effects on community and popular organisation were palpable. Here's how Pavlina Tcherneva and Randall Wray, two economists who studied the Argentinian Jefes program, summed it up:

[O]ne of the most interesting results of the Jefes program is that it demonstrates that a decentralized program can be used to increase political participation and foster grass-roots democracy among groups that had traditionally been marginalized.

The point that needs to be pressed home to those who favour a reduction in the powers of Big Government and a return to some more tangible community-based organisation is that the key problem is that of funding. Simply put: people cannot organise healthy communities without access to sufficient resources and in modern advanced industrial societies resources are wholly governed by monetary relations. Communities can thus only organise and develop if monetary resources are made available for them at a local level by national governments.

Yes, Big Government is the only entity in a modern society that can issue sufficient money to ensure that resources are fully employed – and in this, if the faucet is turned off by a Ron Paul the results will be highly unpleasant – but it does not follow that Big Government then have to set up large, intrusive bureaucracies to distribute this money. Instead we can work to establish ways of distributing this money at a local level and aim to foster organic community ties where they are fragile or lacking. It is only through initiatives like these that all those who yearn for greater substance in their social lives can be brought away from the empty promises and dangerous rhetoric of people like Ron Paul.

Criminals Determine Gold’s Future

Posted: 02 Jan 2012 09:02 PM PST

by James West, MidasLetter.com:

According to faulty interpretations of Mayan calendars, 2012 is supposed to bring with it the demise of humanity. Fortunately for us, this apocalyptic myth, like so many, is based on a superficial interpretation of the Mayan calendar. Like many stories based on a lie, this one nonetheless gains traction in the popular imagination thanks to our fascination with anything apocalyptic.

Besides Mayan disinformation, there are many commentators who advise selling all gold, while acknowledging that gold is going higher in 2012. The lunacy of such advice is self-evident to me, and I presume, to the vast majority of readers. But lets not dwell on mainstream financial media: the credibility of that institution is non-existent going into 2012, and most intelligent people understand that story assignments originate in board room conversations and on golf courses, and filter down through editorial management. Thus, whose who sit on the boards of directors of banks and media conglomerates are easily able to transmit their requirement for negative sentiment towards easily and without public scrutiny.

Save Your ASSets First

Tuesday, January 3, 2012