saveyourassetsfirst3 |
- 3 ETFs For A Nuclear Power Renaissance
- Warren Buffett Right To Slam Treasury Bonds
- Will 'Incredible India' Be Incredible Again In 2012?
- Greece Sends Gold Investors An Early Valentine
- Freeport's 30% Upside Bests Goldcorp, Newmont
- First Solar A Long Term Play
- 2 Stocks To Cash In On The 'Unbanked'
- The Gospel of Gold According to Peter: Peter Grandich
- Asia Buying Gold On Dips - “Empires May Fall, Currencies May Change…
- Moolman: Analysis of the Long-term Silver Chart
- Two Short-Term Scenarios for the S&P 500 Index
- Silver Price Forecast: Analysis of the Long-term Silver Chart
- Dollar Weakness "Creating" Gold Demand
- Asia Buying Gold on Dips
- Platinum price gaining ground relative to gold
- Is Silver Outperforming The Gold Fractal?
- Links 2/13/12
- How to Find the Best Junior Gold Stocks
- Vietnam Has Written The Book On Gold
- Felix Zulauf: Why You Need to Own Physical Gold
- BrotherJohnF: Silver For The People (Explained)
- Gold Posts Most Rapid Advance Since Last Fall
- In the Bullring with Bullion
- The Global Minotaur: An Interview with Yanis Varoufakis
- Trading Comments, 13 February 2012 (posted 08h30 CET):
- Atm for diamonds gold has been launched in india
- China Gold: More than Meets the Eye
- Uncle Sam crying “Uncle”
- Marshall Auerback: Greece – A Default is Better Than the Deal on Offer
- Governments Will Want Much Higher Gold Prices Soon
| 3 ETFs For A Nuclear Power Renaissance Posted: 13 Feb 2012 06:29 AM PST By Zacks Investment Research: After last year's disaster at Fukushima, many forecast the death of the nuclear power industry as countries jumped out of this potent fuel for other alternatives. Some looked for fossil fuels to play a bigger role in electricity production while others predicted greater dependence on clean tech products such as wind and solar instead. While both of these types have increased somewhat in importance, nuclear power doesn't appear to be going away anytime soon, at least in some markets. Here in the U.S., nuclear power accounts for roughly 20% of total electricity production a figure that has roughly held steady over the past few decades. This is because there hasn't been much in terms of new infrastructure in the nuclear space in the United States since Three Mile Island in 1979. This partial meltdown put a screeching halt to the nuclear industry as not a single new plant has gone Complete Story » |
| Warren Buffett Right To Slam Treasury Bonds Posted: 13 Feb 2012 06:22 AM PST By Nicholas Pardini: Warren Buffett has recently been criticizing the bullish case for safe haven investments such as gold and Treasuries. I have tended to disagree with Warren Buffet about other trades, but he is spot on when it comes to his warning about the dangers of Treasury bonds. The reason I agree with Buffett's outlook in the long run is pretty clear. With the five year yield under 1%, the ten year yield under 2%, and the thirty year yield just above 3%, U.S. government bonds are at post WWII highs. They are pricing in several years of an economic deflationary depression (which even permabears say is unlikely). Whether the economy continues to recover or falls back into recession, the outlook is still bleak for Treasuries. With a debt to GDP level 100% and annual one trillion dollar deficits that add at least another 10% to that ratio each year, the U.S. Complete Story » |
| Will 'Incredible India' Be Incredible Again In 2012? Posted: 13 Feb 2012 06:12 AM PST By CFA Institute: By Padma Venkat, CFA To say that last year was annus horribilis for the Indian economy is an understatement. With inflation above 9%, the Reserve Bank of India raised key interest rates several times only to see GDP growth projections drop to the 6%–7% range. Meanwhile, the benchmark Sensex index fell 20%, the Indian rupee depreciated more than 18% against the U.S. dollar, and politicians were engulfed in corruption scandals. High oil prices, coal shortages, and the European banking crisis were no help, adding to the bleak economic picture. Against this difficult backdrop, a panel of financial executives gathered in Mumbai last month — on the occasion of the second annual CFA Institute India Investment Conference — to discuss the outlook for the world's second most populous country. Moderated by Bloomberg UTV's Vivek Law, participants included Abheek Barua, chief economist and senior vice president of HDFC Bank; Ashutosh Bishnoi, acting Complete Story » |
| Greece Sends Gold Investors An Early Valentine Posted: 13 Feb 2012 05:47 AM PST By Christian Magoon: The news Sunday from Greece of the vote in favor of additional austerity measures is an early Valentine's Day gift for investors in gold. Why? Simply put, a disorderly default by Greece would have significantly strengthened the U.S. dollar and hit gold prices hard. Let's review the charts. Gold, denominated in U.S. dollars, had already been affected by the ramp up in Greek drama late this past week. As concerns mounted that Greece would not be able to commit to further austerity measures required by European officials, the U.S. dollar began to gain steam and gold plummeted. The chart below displays this dynamic using GLD, the largest gold ETF, as a proxy for gold versus the U.S. dollar. Note the spike in GLD as news broke mid week that Greece would initially receive the bailout. Then witness the subsequent decline in GLD and rise in the U.S. dollar as concerns Complete Story » |
| Freeport's 30% Upside Bests Goldcorp, Newmont Posted: 13 Feb 2012 05:37 AM PST By Takeover Analyst: From the Fed targeting low interest rates at least through 2014 to lack of action over runaway entitlement spending, basic materials provide an ideal hedge against inflation. The Street currently prefers Freeport McMoRan Copper & Gold (FCX), which it rates a "strong buy." Based on its low multiples and greater earnings visibility, I similarly expect it to outperform Goldcorp (GG) and Newmont Mining (NEM), barring accretive takeover activity. From a multiples perspective, Freeport is the cheapest of the three. It trades at a respective 9.4x and 8.1x past and forward earnings while Newmont and Goldcorp trade at 12.6x and 20.3x past earnings. In addition, the firm also offers the highest free cash flow yield at 6.3%. In this instance, the fact that Freeport has a higher beta is viewed as a plus since it will help drive multiples expansion and close the value gap. The conclusion of the Grasberg strike Complete Story » |
| Posted: 13 Feb 2012 05:31 AM PST By Dana Blankenhorn: Contrary to what the fossil fuel fans think, First Solar (FSLR) is not going anywhere. FSLR was a very popular short last year and, after making up some ground early in this year, it has again fallen hard, with a major project threatened, shuttered capacity in Germany, a decision to abandon CIGS technology, risks to federal subsidies, and troubles finding a CEO based on its poor investment outlook. All that bad news should be in today's stock price. But First Solar has legs. Its cadmium telluride CdTe technology is proven, and it's in mass production. The company continues to reduce manufacturing costs while it increases yield, both in the labs and on the shop floor. Regardless of what happens to U.S. grid energy prices, there are enormous opportunities in creating energy off-the-grid and thin film technologies like CdTe are well-adapted to them. For every cloud there is a silver lining. Complete Story » |
| 2 Stocks To Cash In On The 'Unbanked' Posted: 13 Feb 2012 05:24 AM PST By Bret Jensen: Recent job numbers are a welcome respite from the dismal economic growth and climate of the last few years. Although I would love to be optimistic that we will soon see robust growth, a quick decline in the unemployment rate and less income inequality, I don't see it in the cards, for myriad reasons that are more suited for a political forum or the like. That being said, that doesn't mean an investor can't make money from the circumstances of a substantial proportion of Americans -- the "unbanked," those unserved or underserved by traditional consumer banking. Here are two stocks I think will continue to do well in our current economic situation and have very reasonable valuations. "DFC Global Corp (DLLR) provides retail financial services to unbanked and under-banked consumers, and small businesses. Its primary products and services include short-term consumer loans, single-payment consumer loans, check cashing services, secured pawn Complete Story » |
| The Gospel of Gold According to Peter: Peter Grandich Posted: 13 Feb 2012 03:25 AM PST |
| Asia Buying Gold On Dips - “Empires May Fall, Currencies May Change… Posted: 13 Feb 2012 03:15 AM PST |
| Moolman: Analysis of the Long-term Silver Chart Posted: 13 Feb 2012 12:56 AM PST from hubertmoolman: ~TVR |
| Two Short-Term Scenarios for the S&P 500 Index Posted: 13 Feb 2012 12:19 AM PST For the first time since the last week of December of 2011, the S&P 500 Index closed lower on the weekly chart. Recently I have been discussing the overbought nature of stocks based on a variety of indicators. However, the real question that should be asked is whether last week was just a short term event or if we see sustained selling in coming weeks.
The issues occurring in Greece spooked the markets somewhat on Friday as Eurozone fears continue to permeate in the mindset of traders. The U.S. Dollar Index is the real driver regarding risk in the near and intermediate term future. If the Dollar is strong, market participants will likely reduce risk. However a weakening Dollar will be a risk-on type of trading event which could lead to an extended rally in equities, precious metals, and oil.
Friday marked an important day for the U.S. Dollar Index futures as for the first time in several weeks the Dollar held higher prices into a daily close. The U.S. Dollar appears to have carved out a daily swing low on the daily chart from Friday. Furthermore, the potential for a weekly swing low at the end of this week remains quite possible. The chart below illustrates how the 100 period simple moving average has offered short term support for the past few weeks.
U.S. Dollar Index Futures Daily Chart
I would also point out that the MACD is starting to converge which is a bullish signal and the full stochastics are also demonstrating a cross on the daily time frame. As long as the 100 period moving average holds price, a rally is likely in the U.S. Dollar Index in coming weeks.
Should that rally play out, it will likely push risk assets lower. My primary target for the S&P 500 would be around the 1,300 – 1,310 price range if the selloff transpires. It is important to note that headlines coming out of Europe could derail this analysis in short order.
Assuming that a selloff in the S&P 500 occurs it will present a difficult trading environment for market participants. Market participants are going to be in a tough position around the 1,300 price level. A rally from 1,300 could serve to test the 2011 highs. In contrast, a confirmed breakdown of the 1,300 price level could initiate a more significant selloff towards the 1,250 area.
Should price move towards the 1,300 price level the bulls and bears will be battling it out for intermediate control of price action. This is my preferred scenario for the short-term time frame, but I would only give it about a 60% chance of success at this point in time. We simply need more time to see how price action behaves the first few session of the forthcoming week.
S&P 500 Index Bearish Scenario
The alternate scenario which has about a 40% chance of success would be a sharp rally higher which likely would be produced by news coming out of Greece and/or the Eurozone that pushes the Euro higher. Right now risk is high due to the sensitivity of price to headline risk. With that said, the bullish alternative scenario is shown below.
S&P 500 Index Bullish Scenario
At this point we just do not have enough price information to give us clarity regarding the most probable outcome. The price action in the Euro is going to drive price action for the S&P 500 and other risk assets in weeks ahead.
Anything is possible in the short-term, but I have to give a slight edge to the bears simply based on the price action Friday and the fact that almost every indicator I follow is screaming that the equities market is severely overbought. The price action this week should be telling. Headline risk is excruciatingly high, trade safely in the coming week! By: Chris Vermeulen – Free Weekly ETF Reports & Analysis: www.GoldAndOilGuy.com This material should not be considered investment advice. J.W. Jones is not a registered investment advisor. Under no circumstances should any content from this article or the OptionsTradingSignals.com website be used or interpreted as a recommendation to buy or sell any type of security or commodity contract. This material is not a solicitation for a trading approach to financial markets. Any investment decisions must in all cases be made by the reader or by his or her registered investment advisor. This information is for educational purposes only. |
| Silver Price Forecast: Analysis of the Long-term Silver Chart Posted: 13 Feb 2012 12:14 AM PST Silver Price Forecast: Analysis of the Long-term Silver Chart For more of this kind of analysis on silver and gold, you are welcome to subscribe to my free silver and gold newsletter or premium service. I have also recently completed a Long-term Silver Fractal Analysis Report . Hubert http://hubertmoolman.wordpress.com hubert@hgmandassociates.co.za "And it shall come [...]  This posting includes an audio/video/photo media file: Download Now |
| Dollar Weakness "Creating" Gold Demand Posted: 13 Feb 2012 12:13 AM PST Spot gold prices touched $1733 per ounce this morning, up 0.5% on last week's close, as stock markets, commodities and the Euro all rallied following Greece's vote in favor of new austerity measures. |
| Posted: 12 Feb 2012 11:14 PM PST Traders in Hong Kong say that the Chinese continue to buy gold on any weakness. Bullion buying from China and the rest of Asia (more below) may have led to the spike higher at the open in Asia. |
| Platinum price gaining ground relative to gold Posted: 12 Feb 2012 10:15 PM PST In recent weeks the platinum price has been benefiting from growing Asian demand and continuous power supply problems at South African mines. Since September 2011 gold has become more expensive than ... |
| Is Silver Outperforming The Gold Fractal? Posted: 12 Feb 2012 10:06 PM PST The silver chart has been following the patterns, which can be seen by reviewing an updated version of the gold versus silver fractal. It seems that silver has broken out. But we could still wait a long time before the $50 per ounce level is challenged. |
| Posted: 12 Feb 2012 09:50 PM PST The Chart Is a Lonely Hunter: The Narrative Eros of the Infographic. Novel illness name of the week Language Log. There's gold in them thar codes. Occupy Movement Regroups, Preparing for Its Next Phase Truthout. Concerning violence advocates and the Black Bloc in Occupy. Athens passes demanded austerity bill FT. Banks firebombed. Images of Athens posted at Occupy London. These give a better idea of scale than mainstream tight close-ups. Live Blog on Greek Crisis Toronto Globe and Mail. Florida Homeowners Find Little to Cheer in Deal With "Gangsters" Bloomberg. Too Many Unanswered Questions, and Too Little Relief (Times editorial). "[U]nsparing follow-on investigation" needed. [Reach me that bucket, wouldja hon?] Manufacturing rebounds, but is it a renaissance? McClatchy. Next up on Obama's agenda for settlement: BP Southern Studies. Gulf oil spill trial to begin 2/27/2012 in NOLA unless a settlement is reached. In The Know Panel Analyzes Obama's Furious, Profanity-Filled Rant At Nation America's Finest News Source. Congress nearly eliminates funds for lead poisoning Alternet. Saddling hundreds of thousands of urban children with persistent cognitive damage and elevated blood pressure for life. Frozen to death as fuel bills soar Daily Mail. The End of Wall Street As They Knew It New York Magazine. The End of DSK As We Knew Him? "See Something Say Something" Campaign Reminiscent of the Stasi. Trader Joe's Signs Fair Food Agreement On Tomatoes With Immokalee Workers HuffPo. Federal Circuit upholds $371 million patent award McClatchy (Buzz Potamkin). 38 years… "Dereliction of Duty II: Senior Military Leader's Loss of Integrity Wounds Afghan War Effort" Rolling Stone. Lt. Colonel's bombshell report [PDF]. In Syria, Why Are We Fighting On the Same Side with Al Qaeda? How the Iraqi electrical grid works McClatchy. People have their very own electric cables. Libertarian paradise! Nuke dangers nowhere near resolved says PM's Fukushima crisis adviser Japan Times (MS). Electric bike sales soar in China Economist (MS). Thousands in Hong Kong vow protest over mainland cars South China Morning Post. Water is being turned into a global commodity Truthout. What could go wrong? (MS) British court decides that Nathaniel Rothschild is indeed Peter Mandelson's "puppet master" Independent. Shocker. Having an easy-to-say name will help you get promoted Telegraph (Valissa). Bosses react negatively to names that are hard to pronounce. Aaron Swartz on the Attention Economy Technology Review. Of course, anybody who's contributed so much so young is facing jail. Antidote of the day from Steven V: Hoople.
NOTE For readers who sent in pictures: I'm sure you'll be the first to understand that if your cat was not selected, that is due to a failure of cuteness recognition on my part, rather than any "cuteness deficit" suffered by your cat.
|
| How to Find the Best Junior Gold Stocks Posted: 12 Feb 2012 09:11 PM PST Speculating and investing in this sector is difficult. Gold mining companies continue to struggle and fail despite high metals prices. But there are ways to uncover the juniors that will deliver outstanding returns that are greater then those of mutual funds or ETFs. |
| Vietnam Has Written The Book On Gold Posted: 12 Feb 2012 08:59 PM PST
by Chris Powell, GATA: Dear Friend of GATA and Gold: The Agence France-Presse story from Hanoi appended here demonstrates a few things not plainly understood by the financial news media and even economists in the West: 1) Gold is money, and sometimes much better money than governments offer. 2) Because of that, governments seek to control gold and its price. 3) A negative real rate of interest — what in the West is starting to be called "financial repression" — pushes people out of government currencies and into gold. 4) The gold price is much higher when people take delivery of the gold they purchase and don't have access to or participate in sophisticated gold derivative markets, such as the derivative markets in the West. Read More @ GATA.org |
| Felix Zulauf: Why You Need to Own Physical Gold Posted: 12 Feb 2012 08:50 PM PST
Felix Zulauf: Global stock markets look good in first half of 2012 In part two of Jim's interview with Felix Zulauf the discussion turns to the stock markets and gold. Felix believes gold will eventually rise two to three times in price and stresses the difference between paper and physical gold. He also sees the stock markets performing well in the first half of 2012, but believes things could turn around in the second half of this year. Much More @ FinancialSense.com
|
| BrotherJohnF: Silver For The People (Explained) Posted: 12 Feb 2012 08:42 PM PST from BrotherJohnF: ~TVR |
| Gold Posts Most Rapid Advance Since Last Fall Posted: 12 Feb 2012 07:58 PM PST When Funds Buy In, Prices Really Move On Millions of New Purchases. Hedge Funds Lift Commodities Bets And It's Not Just Gold Either. "Hedge funds increased wagers on rising commodity prices to the most in two months and a rally in raw materials accelerated as the Federal Reserve pledged to keep borrowing costs low for three more years." "Money managers raised combined bullish positions across 18 U.S. futures and options by +13% to 742,902 contracts in the week ended January 24, Commodity Futures Trading Commission data show. The so-called, net-long position in copper jumped +53% to the highest since August and in silver by +22% to the most since September. Speculators also expanded bullish bets in sugar, soybeans, cotton, gold, gasoline and crude oil." "Fed policy makers said January 25 they will keep their target interest rate for overnight loans between banks near zero at least until late 2014 and didn't rule out buying more bonds. The Fed first pushed rates to a record low in December, 2008 and has since purchased $2.3 trillion of debt in two rounds of so-called quantitative easing that ended in June, 2011. During that period, commodities rose more than +80%. The Standard & Poor's GSCI Spot Index of 24 raw materials jumped +2.2% last week, after a +0.1% gain a week earlier, as the dollar depreciated to a seven-week low." "Every time the Fed sends the signal to the markets that there's going to be a continued easy monetary stance, through time, you tend to see more interest in real assets," said Osvaldo Canavosio, at Man Investments' fund of funds division, which manages about $11.2 billion of assets. "Pretty much everything across the board denominated in dollars is going-up in price because the dollar is coming down." "Twenty-one of the 24 raw materials tracked by S&P climbed last week, led by a +14% rally in natural gas. Copper rose +3.8% for a third weekly gain; the longest stretch since July. Gold advanced +4.3%, the most since late October, and cattle futures touched a record on January 25. The S&P GSCI surged +91% since the start of 2009 as mounting concern that low U.S. borrowing costs would stoke inflation drove investors to buy commodities as a hedge. Raw-material prices measured on a total return basis fell for the first time in three years in 2011 on signs that inflation was being contained as the expansion weakened. "Cautious bullishness is the best phrase I could use to describe the commodity market," said Jeffrey Sherman, who helps manage about $24 billion of assets for DoubleLine Capital in Los Angeles."
        This posting includes an audio/video/photo media file: Download Now |
| Posted: 12 Feb 2012 06:43 PM PST After prices fell 10% in December, many investors wondered if the bull market in gold was running out of steam. That was before Federal Reserve Chairman Ben Bernanke swooped in with a "red cape" and fired the bulls back up. |
| The Global Minotaur: An Interview with Yanis Varoufakis Posted: 12 Feb 2012 05:57 PM PST Yves here. I hate to throw a spanner in the works, but as much as Varoufakis' view may sound persuasive, I strongly suggest you read Andrew Dittmer's translation of a very important paper by Claudio Borio and Piti Disyatat of the Bank of International Settlements, "Global imbalances and the financial crisis: Link or no link?" Yanis Varoufakis is a Greek economist who currently heads the Department of Economic Policy at the University of Athens. From 2004 to 2007 he served as an economic advisor to former Greek Prime Minister George Papandreou. Yanis writes a popular blog which can be found here. His latest book 'The Global Minotaur: America, the True Origins of the Financial Crisis and the Future of the World Economy' is available from Amazon. Interview conducted by Philip Pilkington Philip Pilkington: In your book The Global Minotaur: America, The True Origins of the Financial Crisis and the Future of the World Economy you lay out the case that this ongoing economic crisis has very deep roots. You claim that while many popular accounts – from greed run rampant to regulatory capture – do explain certain features of the current crisis, they do not deal with the real underlying issue, which is the way in which the current global economy is structured. Could you briefly explain why these popular accounts come up short? Yanis Varoufakis: It is true that, in the decades preceding the Crash of 2008, greed had become the new creed; that banks and hedge funds were bending the regulatory authorities to their iron will; that financiers believed their own rhetoric and were, thus, convinced that their financial products represented 'riskless risk'. However, this roll call of pre-2008 era's phenomena leaves us with the nagging feeling that we are missing something important; that, all these separate truths were mere symptoms, rather than causes, of the juggernaut that was speeding headlong to the 2008 Crash. Greed has been around since time immemorial. Bankers have always tried to bend the rules. Financiers were on the lookout for new forms of deceptive debt since the time of the Pharaohs. Why did the post-1971 era allow greed to dominate and the financial sector to dictate its terms and conditions on the rest of the global social economy? My book begins with an intention to home in on the deeper cause behind all these distinct but intertwined phenomena. PP: Right, these trends need to be contextalised. What, then, do you find the roots of the crisis to be? YV: They are to be found in the main ingredients of the second post-war phase that began in 1971 and the way in which these 'ingredients' created a major growth drive based on what Paul Volcker had described, shortly after becoming the President of the Federal Reserve, as the 'controlled disintegration of the world economy'. It all began when postwar US hegemony could no longer be based on America's deft recycling of its surpluses to Europe and Asia. Why couldn't it? Because its surpluses, by the end of the 1960s, had turned into deficits; the famous twin deficits (budget and balance of trade deficits). Around 1971, US authorities were drawn to an audacious strategic move: instead of tackling the nation's burgeoning twin deficits, America's top policy makers decided to do the opposite: to boost deficits. And who would pay for them? The rest of the world! How? By means of a permanent transfer of capital that rushed ceaselessly across the two great oceans to finance America's twin deficits. The twin deficits of the US economy, thus, operated for decades like a giant vacuum cleaner, absorbing other people's surplus goods and capital. While that 'arrangement' was the embodiment of the grossest imbalance imaginable at a planetary scale (recall Paul Volcker's apt expression), nonetheless, it did give rise to something resembling global balance; an international system of rapidly accelerating asymmetrical financial and trade flows capable of putting on a semblance of stability and steady growth. Powered by America's twin deficits, the world's leading surplus economies (e.g. Germany, Japan and, later, China) kept churning out the goods while America absorbed them. Almost 70% of the profits made globally by these countries were then transferred back to the United States, in the form of capital flows to Wall Street. And what did Wall Street do with it? It turned these capital inflows into direct investments, shares, new financial instruments, new and old forms of loans etc. It is through this prism that we can contextualise the rise of financialisation, the triumph of greed, the retreat of regulators, the domination of the Anglo-Celtic growth model; all these phenomena that typified the era suddenly appear as mere by-products of the massive capital flows necessary to feed the twin deficits of the United States. PP: You seem to locate the turning point here at the moment when Richard Nixon took the US off the gold standard and dissolved the Bretton Woods system. Why is this to be seen as the turning point? What effect did de-pegging the dollar to gold have? YV: It was a symbolic moment; the official announcement that the Global Plan of the New Dealers was dead and buried. At the same time it was a highly pragmatic move. For, unlike our European leaders today, who have spectacularly failed to see the writing on the wall (i.e. that the euro-system, as designed in the 1990s, has no future in the post-2008 world), the Nixon administration had the sense to recognise immediately that a Global Plan was history. Why? Because it was predicated upon the simple idea that the world economy would be governed by (a) fixed exchange rates, and (b) a Global Surplus Recycling Mechanism (GSRM) to be administered by Washington and which would be recycling to Europe and Asia the surpluses of the United States. What Nixon and his administration recognised was that, once the US had become a deficit country, this GSRM could no longer function as designed. Paul Volcker, who was Henry Kissinger's under-study at the time (before the latter moved to the State Department), had identified with immense clarity America's new, stark choice: either it would have to shrink its economic and geopolitical reach (by adopting austerity measures for the purpose of reigning in the US trade deficit) or it would seek to maintain, indeed to expand, its hegemony by expanding its deficits and, at once, creating the circumstances that would allow the United States to remain the West's Surplus Recycler, only this time it would be recycling the surpluses of the rest of the world (Germany, Japan, the oil producing states and, later, China). The grand declaration of 15th August 1971, by President Nixon, and the message that US Treasury Secretary John Connally was soon to deliver to European leaders ("It's our currency but it is your problem.") was not an admission of failure. Rather, it was the foreshadowing of a new era of US hegemony, based on the reversal of trade and capital surpluses. It is for this reason that I think the Nixon declaration symbolises an important moment in postwar capitalist history. PP: The old banking proverb: "If you owe a bank thousands, you have a problem; owe a bank millions, the bank has a problem" comes to mind. Was this, then, the end of the hegemony of the US as lender and the beginning of the hegemony of the US as borrower? And if so, does this provide us with any insights into the financial crisis of 2008? YV: I suppose that Connally's "It's our currency but it is your problem" turned out to be the new version of the old banking adage that you mention. Only there is an important twist here: in the case of the banks, when they fail, there is always the Fed or some other Central Bank to stand behind them. In the case of Europe and Japan in 1971, no such support was at hand. The IMF was, let's not forget, an organisation whose purpose was to fund countries (of the periphery mostly) that faced balance of payments deficits. Connally's phrase was aimed at countries that had a balance of payments surplus in relation to the United States. Additionally, when a heavily indebted person or entity tells the bank that it is the one with the problem, and not the indebted, this is usually a bargaining ploy by which to secure better terms from the bank, a partial write down on the debt etc. In the case of Connally's trip to Europe, shortly after the Nixon announcement, the United States was not asking anything from Europeans. It was simply announcing that the game had changed: energy prices would rise faster in Europe and in Japan than in America, and relative nominal interest rates would play a major role in helping shape capital flows toward the United States. The new hegemony was thus beginning. The hegemon would, henceforth, be recycling other people's capital. It would expand its trade deficit and pay for it via the voluntary flows of capital into New York; flows that began in earnest especially after Paul Volcker pushed US interest rates through the roof. PP: And this new hegemony grew almost organically out of the preeminence of the dollar as a world reserve currency that had grown up in the post-war years, right? Could you say something about this? YV: The 'exorbitant privilege' of the dollar, courtesy of its reserve currency status, was one of the factors that allowed the United States to become the recycler of other people's capital (while America was busily expanding its trade deficit). While crucial it was not the only factor. Another was the United States' dominance of the energy sector and its geostrategic might. To attract wave upon wave of capital from Europe, Japan and the oil producing nations, the US had to ensure that the returns to capital moving to New York were superior to capital moving into Frankfurt, Paris or Tokyo. This required a few prerequisites: A lower US inflation rate, lower US price volatility, relatively lower US energy costs and lower remuneration for American workers. The fact that the dollar was the reserve currency meant that, in a time of crisis, capital flew into Wall Street anyway (as it was to do again years later when, despite Wall Street's collapse, foreign capital rushed into Wall Street in the Fall of 2008). However, the volume of capital flows that had to flood Wall Street (in order to keep the US trade deficit financed) would not have materialised had it not been for the capacity of the United States to precipitate a surge in the price of oil at a time when (a) US dependence on oil was lower than Japan's or Germany's, (b) most oil trades were channeled via US multinationals, (c) the US could suppress inflation by raising interest rates to levels that would destroy German and Japanese industries (without totally killing American companies) and (d) trades unions and social norms that prevented a ruthless suppression of real wages were far 'softer' in the US than in Germany or Japan. PP: You write in the book that US officials were actually not that concerned about the rising oil prices in the 1970s, why do you say this? And do you think that the recent speculative pressures on oil and food prices – emanating from Wall Street itself – have been largely tolerated by US officials for similar reasons? YV: The reason is in the old joke that has one economics professor asking another "How is your wife?" and receives the reply: "Relative to what?" The whole point about attracting capital and gaining competitiveness over another company or, indeed, another country, is that what matters is not absolute but relative costs and prices. Yes, the US authorities were concerned about inflation and oil prices. They did not like their increases, especially when they could not control them fully. But there was one thing that they feared more: An incapacity to finance the growing US trade deficit (that would result if the returns to capital were not improving relative to similar returns elsewhere). It was in this context that their considered opinion was that a hike in energy prices, to the extent that it boosted German and Japanese costs more than it did US costs, was their optimal choice. As for the comparison with the recent rise in oil and, primarily, food prices, I think this is quite different. For one, I do not see what US interests are being served by the ways in which derivatives in the Chicago marker are pushing food prices to a level that threaten the Fed's quantitative easing strategy courtesy of the inflationary pressures they are causing. Additionally, back in the early 1970s, the US government was far more in control of financial flows and speculative drives than it is today. Having allowed the genie of financialisation out of the bottle, US authorities are watching it wreak havoc almost helplessly – especially given the inherent ungovernability of the United States, with Congress and the Administration locked into mortal combat with one another. In sharp contrast, back in 1971-73, the US government had a great deal more authority over the markets now. PP: I'd like to move on to what I think is the key point of your book: namely, that the rest of the world is funding the US's twin deficits – that is, the rest of the world is funding both the US trade deficit and the US government deficit. When the twin deficits began to open up in the US there was a fundamental change in the nature of the US economy. Could you talk about this a little? YV: The change was earth-shattering for America's social economy. The strategy of allowing the deficits to expand inexorably came hand-in-hand with a series of strategies whose purpose was, quite simply, to draw into the United States the capital flows, from the rest of the world that would finance these growing deficits. In my book I tried to detail four major strategies that proved crucial in generating the capital tsunami which kept America's deficits satiated: (1) a global boost in energy prices that would affect disproportionately Japanese and German industries (relatively to US firms), (2) a hike in America's real interest rate (so as to make New York a more attractive destination for foreign capital), (3) a much cheapened American labour that is, at once, greatly more productive, and (4) a drive toward Wall Street financialisation that created even greater returns for anyone sending capital to New York. These strategies had a profound effect on American society for a variety of reasons: To keep real interest rates high, the nominal interest rate was pushed upwards at a time that the administration, and the Fed, engineered a reduction in wages. The increasing interest rates shifted capital from local industry to foreign direct investment and transferred income from workers to rentiers. The cheapening of labour, which also necessitated a wholesale attack against the trades unions, meant that American families had to work longer days for less money; a new reality that led to the breakdown of the family unit in ways which had never been experienced before. The more family values were becoming the emerging Right's mantle, the greater their destruction at the hands of the Global Minotaur that the Right was keenly nourishing. The loss of wage share meant, moreover, that families had to rely more greatly on their home as a cash cow (using it as collateral in order to secure more loans) thus turning a whole generation away from savings and towards house-bound leverage. A new form of global corporation was created (the Wal-Mart model) which imported everything from abroad, used cheap labour domestically for manning the warehouse like outlets, and propagated a new ideology of cheapness. Meanwhile, Wall Street was using the capital inflows from abroad to go on a frenzy of lucrative take-over and merger activity which was the breeding ground for the financialisation which followed. By combining the domestic hunger for credit (as the working class struggled to make ends meet, even though they worked longer hours and much more productively than before), a link was created between financial flows built upon (i) the humble home of the bottom 60% of society and (ii) the financial inflows of foreign capital into Wall Street. As these two torrents of capital merged, Wall Street's power over Main Street rose exponentially. With labour losing its value as fast as regulatory authorities were losing their control over the financial sector, the United States was changing fast, losing all the values and ditching all the social conventions that had evolved out of the New Deal. The world's greatest nation was ready for the Fall. PP: You mentioned the Wal-Mart model just now. In the book you make a good deal out of this model. Could you explain to the readers why you do and what the significance of it is for the broader economy? YV: Wal-Mart symbolises a significant change in the nature of oligopolistic capital. Unlike the first large corporations that created wholly new sectors by means of some invention (e.g. Edison with the light bulb, Microsoft with its Windows software, Sony with the Walkman, or Apple with the iPod/iPhone/iTunes package), or other companies that focused on building a particular brand (e.g. Coca Cola or Marlboro), Wal-Mart did something no one had ever thought of before: It packaged a new Ideology of Cheapness into a brand that was meant to appeal to the financially stressed American working and lower-middle classes. In conjunction with its fierce proscription of trades unions, it became a bulwark of keeping prices low and of extending to its long suffering working class customers a sense of satisfaction for having shared in the exploitation of the (mostly foreign) producers of the goods in their shopping basket. In this sense, the significance of Wal-Mart for the broader economy is that it represents a new type of corporation which evolved in response to the circumstances brought on by the Global Minotaur. It reified cheapness and profited from amplifying the feedback between falling prices and falling purchasing power on the part of the American working class. It imported the Third World into American towns and regions and exported jobs to the Third World (through outsourcing). Wherever we look, even in the most technologically advanced US corporations (e.g. Apple), we cannot fail to recognise the influence of the Wal-Mart model. PP: Finally, where do you see us headed now as we emerge from the shadow of the Global Minotaur? YV: The Minotaur is, of course, a metaphor for the strange Global Surplus Recycling Mechanism (GSRM) that emerged in the 1970s from the ashes of Bretton Woods and succeeded in keeping global capitalism in a rapturous élan; until it broke down in 2008, under the weight of its (and especially Wall Street's) hubris. Post-2008, the world economy is stumbling around, rudderless, in the absence of a GSRM to replace the Minotaur. The Crisis that began in 2008 mutates and migrates from one sector to another, from one continent to the next. Its legacy is generalised uncertainty, a dearth of aggregate demand, an inability to shift savings into productive investment, a failure of coordination at all levels of socio-economic life. A world without the Minotaur, without a functioning GSRM, but one that is ruled by the Beast's handmaidens, is an illogical, absurd place. And who are the Minotaur's surviving handmaidens? They are Wall Street, Walmart, Germany's provincial mercantilism, the European Union's absurd pretence that a currency union can prosper without a surplus recycling mechanism, the growing inequities within the United States, within Europe, within China, etc., etc. The best example of our world's inability to come to terms with its conundrum is the way in which public debate deals with the so-called global imbalances: the systematically increasing trade surplus of some countries (Germany and China are good examples), which are mirrored in increasing trade deficits in others. All commentators are now in agreement that increasing global imbalances are a terrible thing. One would, consequently, be excused for imagining that a reduction in global imbalances would have been welcomed. But alas, the opposite is the case. When the imbalances shrink (e.g. China's trade surplus declines) this is a sign of trouble, rather than an improvement. The reason is that the cause of the imbalance's shrinkage is not a better, a more productive recycling of surpluses, but rather a deepening recession in the countries that used to provide the demand for someone else's net exports. So we are in the weird situation of exorcising global imbalances, while at the same time suffering when they diminish. The West, caught in Bankruptocracy's poisonous web, unable to rise to the challenges of the post-2008 world, will keep stagnating, losing its grip on reality, failing to match its outcomes to its capacities or to create new 'realities'. As for the emerging economies, bristling with people ready to transcend constraints, to spawn new 'realities', to expand existing horizons, they will be caught in a trap of low overall demand for their wares. Unless a new GSRM materialises soon, the future of the global economy will remain bleak. What will it take to fashion a GSRM from scratch? One thing is certain: markets will not spontaneously generate one. A new GSRM must be the result of concerted political action. Just like Bretton Woods once was.
|
| Trading Comments, 13 February 2012 (posted 08h30 CET): Posted: 12 Feb 2012 05:30 PM PST Gold and silver are still consolidating their gains from the January low. The upside fireworks I am expecting should start soon. Gold 1) The position bought at $1,728.00 on February 3, |
| Atm for diamonds gold has been launched in india Posted: 12 Feb 2012 05:00 PM PST |
| China Gold: More than Meets the Eye Posted: 12 Feb 2012 04:22 PM PST China's total gold supply from domestic mine production and other sources is, without a doubt, much higher than reported or discussed by analysts and observers of the Chinese gold scene. |
| Posted: 12 Feb 2012 04:00 PM PST Gold University |
| Marshall Auerback: Greece – A Default is Better Than the Deal on Offer Posted: 12 Feb 2012 03:20 PM PST By Marshall Auerback, a portfolio strategist and hedge fund manager Pick your poison. In the words of Greek Finance Minister Evangelos Venizelos, the choice facing Greece today in the wake of its deal with the so-called "Troika" (the ECB, IMF, and EU) is "to choose between difficult decisions and decisions even more difficult. We unfortunately have to choose between sacrifice and even greater sacrifices in incomparably more dearly." Of course, Venizelos implied that failure to accept the latest offer by the Troika is the lesser of two sacrifices. And the markets appeared to agree, selling off on news that the deal struck between the two parties was coming unstuck after weeks of building up expectations of an imminent conclusion. In our view, the market's judgment is wrong: an outright default might ultimately prove the better tonic for both Greece and the euro zone. The only questions that remain to be resolved are these: have all of the parties begun preparations to mitigate the ultimate impact of an outright default by Athens? And will the ECB be sufficiently aggressive in combating the inevitable speculative attacks on the other members of the euro zone periphery, which are almost certain to ensue, once Greece is "resolved" one way or the other. Within the Troika, the Germans in particular have been the champions of taking the toughest line possible against the Greeks and other "Mediterranean profligates". But however stubborn Berlin appears to be, the Merkel Administration is certainly not stupid. At this juncture, it seems more rational to view their ongoing promotion of fiscal austerity as a political smokescreen: In reality, what Germany likely wants to do in the case of Greece is trigger is an involuntary default so that the other PIIGS don't get the wrong idea and ask for a similarly large haircut on their debts. They realize the consequences that might follow, as the others gear up for similar treatment. Far easier were Greece to move toward involuntary default, in the eyes of Berlin. Politically, of course, the Merkel government can't actually come out and advocate a Greek default or, indeed, outright expulsion from the euro zone. Far more politically astute to promote fiscal austerity on top of yet more fiscal austerity, (even though that is certainly not winning Mrs. Merkel any popularity points in Greece), until the Greeks themselves scream "Uncle!" and default outright. It helps domestically as well. According to polls, Angela Merkel is now the most popular politician in Germany, which is why she persists with this pernicious narrative that the problems of Greece all stem from fiscal profligacy and laziness, in contrast to the responsible and hard-working German people. Ultimately, though an involuntary default carries risks for the stability of the euro payments system, a deal, per the terms outlined in the press, is bad for Greece. And probably even worse for global markets, especially the bond markets. Either eventuality creates problems but default is probably the less bad option longer term. Let me elaborate: Greece is a hopelessly uncompetitive economy that probably shouldn't be in the euro zone. But can you surgically detach Greece if it defaults, without some sort of impact on the entire euro payments system? And what will the impact be on Greece itself? The country currently runs a primary budget deficit (excluding interest payments on debt) of around 5% of GDP. Were it to default, Athens would be forced to go cold turkey ("cold Greece"?) until the primary fiscal deficit (now around 5% of GDP) is balanced. Maybe the government could suspend all military expenditures as a first pass? At the very least, they can stop buying German military equipment! No question, that under a default, a lot of public sector employees will be sacked, pensions will be at risk, and unemployment will almost certainly go higher. However, were the country to revert to the drachma, they would likely be left with a substantially weaker currency, which could ultimately provide the country with the wherewithal to compete in the global economy. With a super-cheap exchange rate, Greece would be a Mecca for retirement homes, research hospitals, trans-European liberal arts colleges, and maybe low-overhead software startups. Plus, a permanent home for the Olympics. It could live happily ever after, as Florida does, on the pension income of the elderly and the beer money of the young. This would be the source of the foreign transfers that the private banking sector won't make anymore. In Greece's case that credit went to the public sector and a lot of it built useful infrastructure, so it's not a waste, but the first step is surely to cancel the debts and stop the illusion that they can be paid. And it would end the "death by 1000 cuts" currently being imposed on the Troika, which will serve no useful economic, political or social purpose. Of course, there will be a slew of defaults and an endless series of court cases, litigation, etc., much as there was when Argentina defaulted in 2001. But it would force the issue of debt restructuring on the table in a meaningful way and at least provide Greece with light at the end of the tunnel. To ensure some sort of viability of the drachma, the Greek government would have to find a more credible means of ensuring tax compliance. Most Greeks with money have presumably already moved it beyond the reach of the Greek banking system, so that savings would not be wiped out. As the tide of repossessions begins, many of these oligarchs would likely start to buy back the Greek assets on the cheap, as it is doubtful that the euro banks will want anything to with them. Beyond that, it would be important for Athens to establish a new tax system that minimises tax evasion, so as to create demand for the new drachma immediately, and mitigate the formation of an extensive parallel transactions currency. After all, it is possible that many Greeks might prefer to use the existing stock of euros in the country and there is very little the EU authorities could do to stop this (much as the US government could not prevent Panama from dollarising its economy). But in order to establish a long-lasting demand for drachmas, two things would have to happen:
Given the country's history of tax evasion on income tax, a national real estate tax would likely work better than a new income tax. On the other hand, the challenge for the European Union authorities is to ensure that speculative capital is not unleashed on the next weakest link in the chain – say, Portugal – to ensure that there is an adequate firewall established and to minimise disruptions to the entire euro payments system. It's unclear to me whether the euro zone authorities have truly thought this aspect through and considered the best means to prevent a major disruption of the EMU payments system. Then again, perhaps this is what the ECB's new programs are really all about. On the other hand, I happen to think a rescue of the sort that is now being publicly mooted is worse for both sides. The imposition of yet more fiscal austerity on Greece will exacerbate the debt deflation dynamics which are destroying the country and will provide Greece with ZERO means of servicing even the reduced levels of debt. The country will still remain uncompetitive and depression like conditions will continue, with the ongoing burden of more euro denominated debt servicing. More dangerous is the risk that comes if there is a "successful" deal: It come with the pending question- 'if Greece doesn't have to pay, why do I'- The Irish are asking that question already, and I'm sure the Portuguese and Spanish will soon be asking the same thing. As my friend Warren Mosler has noted:
Longer term, a Greek default could well provoke the question, "What on earth do governments issue bonds for anyway?" That might well provoke a far more provocative debate on the nature of modern money and the self-imposed legal constraints with which sovereign governments bind themselves in their conduct of fiscal policy. But that's probably best left to the pages of another blog post!
|
| Governments Will Want Much Higher Gold Prices Soon Posted: 12 Feb 2012 10:35 AM PST That governments will want – and will need – much, much higher gold and silver prices in the future is counter-intuitive, given that they have done everything within their power till now to throttle back and to keep a lid on bullion prices. |
| You are subscribed to email updates from Gold World News Flash 2 To stop receiving these emails, you may unsubscribe now. | Email delivery powered by Google |
| Google Inc., 20 West Kinzie, Chicago IL USA 60610 | |
No comments:
Post a Comment