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- Precious Metals Benefit From Continued Dollar Weakness
- "Stolen" $9m Jewels Found In Drawer
- Robbery likely motive in brutal Ascension slaying
- Oil and Gold Surge 1% on Open in Asia - Iran "Military Action Likely"
- Monday Monetary Madness - This Is What The Yield's Like When Fed Doves Cry
- 5 ETFs George Washington Probably Would Have Liked
- Bringing Bullion-Buying To The 21st Century
- 9 Stocks To Take Advantage Of The Market's Misuse Of Discount Rates
- Japanese Yen Likely To Lose Value Faster Than The Dollar
- The Long Case For Barrick Gold Corporation In 2012
- The race to debase proceeds apace
- Gold & Silver Market Morning, February 20 2012
- Dubai explores new ways of selling gold
- Silver and Opium
- The Gold Standard Theory and Myth (J.T. Salerno)
- Greek Default Therapy
- The Trouble With Paradise…
- Democracy In-action
- An Orderly Greek Default
- Why Iran Oil Works in China’s Favour
- Hedging Non-Gold Investments With Gold
- Navigating Global Prosperity: An Interview with Paul Davidson
- LISTEN: BrotherJohnF talks Triple Digit Silver
- Elliott wave predits $32659 gold on 16 Jan 2015
- Chris Martenson: Hoarding Gold, Food, & Friendship
- Buy Gold as an insurance policy not as an investment
| Precious Metals Benefit From Continued Dollar Weakness Posted: 20 Feb 2012 06:12 AM PST The dramatic rise in the price of silver in January was due in some part to the weakness in the U.S. Dollar. |
| "Stolen" $9m Jewels Found In Drawer Posted: 20 Feb 2012 02:27 AM PST Would you have turned these jewels in to the authorities if you knew what they were and had acquired them as abandoned property? http://www.bbc.co.uk/news/16970470 9 February 2012 Last updated at 12:10 ET 'Stolen' $9m jewels found in drawer Five years after their disappearance, jewels thought stolen from the wife of the US ambassador to the Netherlands in 2006 have been found in the Hague. Dawn Arnall realised her 7m euro (£5.9m; $9.3m) gems were missing months after staying in a Dutch hotel. Unknown to her, the jewellery had been found and was held for safekeeping by the hotel, AFP reports, before being given to an employee as unclaimed. The employee, assuming the items were costume jewellery, forgot about them. Only after she recently found them in a drawer and took them to a jeweller for valuation did their true worth emerge. They were then handed in to police and have since been returned to the US. Mrs Arnall, whose husband Roland was the US ambassador to the country prior to his death in 2008, had received an insurance payout for her loss. It is not known if the Dutch hotel employee can expect a finder's reward from the insurance company for returning the jewellery. |
| Robbery likely motive in brutal Ascension slaying Posted: 20 Feb 2012 02:22 AM PST http://theadvocate.com/home/2108736-...in-brutal.html Robbery likely motive in brutal Ascension slaying BY NAOMI MARTIN Advocate staff writer February 20, 2012 Robbery of a gold coin collection worth an estimated half-million dollars was the apparent motive when intruders slit the throats of three people, killing two men and critically wounding a woman in their Gonzales home over the weekend, the Ascension Parish Sheriff said Sunday. Businessman Robert Irwin Marchand, 74, and his stepson Douglas Dooley, 50, were killed in their home at 39122 Babin Road, said Ascension Parish Sheriff Jeff Wiley. Marchand's wife and Dooley's mother, Shirley Marchand, 72, was "clinging to life" Sunday as she underwent emergency surgery at a local hospital, Wiley said. The brutal slayings probably occurred between 12 a.m. and 10 a.m. Saturday, Wiley said. Sheriff's deputies went to the home about 10 p.m. Saturday to check on the Marchands after Dooley's wife, who lives in Tennessee and speaks daily with Dooley, had been unable to reach him for more than 12 hours, Wiley said. When deputies received no response at the door, they peered through the windows, Wiley said, noting nothing out of the ordinary — and no signs of a break-in — until they came to an office on the far left side of the house where they saw three bodies covered in blood. Deputies forced open the door and realized Shirley Marchand was still alive, Wiley said. All three victims were fully clothed, and each had signs of trauma on their bodies, indicating the intruders used a "blunt object" as well as a knife, he said. "This department is working non-stop to identify and capture the killers," Wiley said. Though Marchand's critical condition prevented her from being able to speak with police, investigators are reviewing footage from three surveillance videos in the area, Wiley said. "We're not at a standstill by any means," Wiley said of the investigation. There are a few clues that lead police to think the intruders may have known the victims, he said. One clue is that the house had no signs of forced entry, which could either indicate the door was left unlocked, or that the victims had willingly let the intruders in, Wiley said. The sheriff said that detectives believe there was more than one attacker, particularly because Dooley was a large man and would not have been easily subdued. But the primary clue, Wiley said, was that the intruders had known to take Robert Marchand's safe, which contained hundreds of thousands of dollars' worth of gold coins, while a desktop computer, laptops and cellphones in the house were left untouched. Robert Marchand's gold coin collection, which included coins that dated back to the 1800s, was divided into five "groups," Wiley said. One of the groups was known to be worth $104,000, he said. An outsider would have never known that the Marchands' modest home contained an estimated $500,000 in gold coins, he said. "It was clearly not random," Wiley said. "We think it had to be planned." Wiley said that any pawn shop dealer, gold-buyer, or jeweler in the greater Baton Rouge area should call Crime Stoppers to report anyone trying to sell rare gold coins. "A gold vendor would not see these types of coins on a regular basis," Wiley said. "A responsible vendor needs to come forward." The grisly slayings, which were the first to occur in Gonzales this year, "sent shock waves through the community," Wiley said. A relatively sleepy town, Gonzales had seven homicides in 2011 and one in 2010. Wiley said the victims are well known and well respected residents of the community who were "viciously attacked in their own home." Robert Marchand was a businessman and lifelong resident of Gonzales who was active in his church, Wiley said. His wife worked at a local funeral home, which Wiley did not identify, and attended the same church as her husband. "These were people in their home who were law-abiding citizens," the sheriff said. "Ain't nothing like this ever happened around here," neighbor Jeff Burns said. "This is a nice little community where nobody bothers anybody." Burns said the officer who knocked on his door about 11:30 p.m. Saturday to ask if he'd seen anything appeared to be very disturbed, having apparently just seen the gruesome crime scene across the street. "I asked him, 'What's going on, do I need to arm myself?' and he said, 'No, that's not necessary,'" Burns said. Echoing other neighbors, Burns said he prayed the murderers would be caught. "I hope somebody gets to talking and they catch those animals," he said. Anyone with information should call the Ascension Parish Sheriff's Office at (225) 621-4636, or Crime Stoppers at (225) 344-7867. |
| Oil and Gold Surge 1% on Open in Asia - Iran "Military Action Likely" Posted: 20 Feb 2012 02:03 AM PST |
| Monday Monetary Madness - This Is What The Yield's Like When Fed Doves Cry Posted: 20 Feb 2012 12:58 AM PST  By Phil Davis:
It's no coincidence that this week we will be hearing from Fed Governors Kocherllakota (1pm Tues), Hoenig (12:30 Weds), Plosser (1:30 Weds), and Bullard (9:15 Thurs) ahead of our 2-Year Note Auction (1pm Tues), 5-Year Note Auction (1pm Weds) and 7-Year Note Auction (1pm Thursday) as the Fed needs to bring out 4 of its 5 most hawkish members to talk up the dollar (by talking down QE3) to keep those rates paid as low as possible for Treasury. Once the Hawks drive the rates down and the notes are sold, the Doves will once again be released to talk them back up by extolling the glories of QE3 - completely reversing whatever was said before just as the Hawks will once again be called upon to reverse what the Doves say Complete Story » |
| 5 ETFs George Washington Probably Would Have Liked Posted: 20 Feb 2012 12:51 AM PST By Michael Johnston: After a strong close to last week–the Dow jumped by more than 150 points in the last two sessions–U.S. stock markets will have to wait until Tuesday to try to continue the positive momentum. Major exchanges are closed on Monday in observance of President's Day, which this year falls two days before the anniversary of George Washington's birthday. In a tribute to our first president, below we examine five ETFs that may have been appealing to the founding father: PowerShares DB USD Index Bullish (UUP)This ETF offers exposure to the U.S. dollar, allowing investors to bet on an increase in the greenback relative to a basket of developed market currencies. UUP is linked to an index comprised of USDX futures contracts, meaning that UUP essentially is a bet against the euro, yen, British pound, Canadian dollar, Swedish krona, and Swiss franc. Given the dollar's safe haven appeal, this ETF Complete Story » |
| Bringing Bullion-Buying To The 21st Century Posted: 20 Feb 2012 12:43 AM PST As the 20th century drew to a close, gold was regarded as a "barbarous relic", while most of the world's silver had literally disappeared from the face of the Earth. With the dawn of the 21st century, all that suddenly changed. Now gold and silver are highly in demand, at least across Asia and among the tiny pockets of investors in Europe and North America who have rediscovered the world's oldest and truest "safe havens". Even the world's central banks, the creators of all of our fiat currencies have suddenly become net-buyers of gold – and net-sellers of their own, paper currencies. Yet while the climate for gold and silver had changed at the beginning of a new century, and the markets were rapidly changing as well, little had changed for the average retail investor. Options for purchasing gold and silver were limited. Premiums were high, and "convenience" was not considered a necessary part of doing business. One bullion company is now seeking to change that: SilverGoldBull.com. SGB sought to distinguish itself from its competitors initially in two ways: through a greater emphasis on customer service, and more effective use of 21st century technology. With respect to the first commitment, SilverGoldBull offers far more (and far more convenient) payment options than any of its major on-line competitors in Canada.
The major drawback with purchasing bullion on line is shipping (and the necessary insurance which is required with those orders), as shipping bullion means mailing relatively heavy parcels to its customers. SilverGoldBull has sought to "simplify" things here for its bullion clients: orders over $5,000 are now shipped for free (including insurance), or as SGB likes to say "the price you see is the price you pay." With respect to making better use of technology, SGB has enhanced its service/speed/convenience through: 1) Eliminating lag-times in shipping 2) Expedited on-line check-out process 3) A new website featuring: a) A more user-friendly format with greater ease of navigation b) Clearer labeling/icons for product identification c) Improved bullion charts to guide buyers |
| 9 Stocks To Take Advantage Of The Market's Misuse Of Discount Rates Posted: 20 Feb 2012 12:33 AM PST By Andrew Noland: Discount rates are an elegant way to whittle a three dimensional concept down to one dimension. But they are inexact. For starters, a brief definition of a discount rate: My definition
Pretty good definition. Ok. So which would you rather have - one dollar today, or one dollar and ten cents next year? Discount rates attempt to tackle that problem. In terms of an investment, your cash and assets today is the "first dimension." There are two risks that discount rates account for. 1. The risk Complete Story » |
| Japanese Yen Likely To Lose Value Faster Than The Dollar Posted: 20 Feb 2012 12:04 AM PST By StreetCoup: The Japanese Yen has been arguably considered the safe haven for offering a steady appreciation despite the preceding years of crises. Such strength is commonly ascribed to the U.S. dollar, but the Dollar failed to offer the lasting performance you would expect during times of uncertainty. Standard Chartered's Global Head of FX Research, Callum Henderson, is still convinced that the Dollar and Yen are the only safe haven currencies at this moment. A frequently repeated argument in favor of the Yen is that their government was able to sell bonds to their own people instead of collecting money from investors abroad, thanks to the disciplined saving rates of the Japanese. A giant myth from the 90s; their saving rate is already at 3.2% as of 2011. Considering this, Japan is not in such a strong position it is assumed to be. Other factors must have supported the Yen's strength (I'm Complete Story » |
| The Long Case For Barrick Gold Corporation In 2012 Posted: 19 Feb 2012 10:47 PM PST By Del Bosque: So far this year gold´s price has climbed over 10%. And given market circumstances (the sheer number of recession-ravaged countries, continued crisis for the euro and industrialization from China in particular), it is set to rise further in 2012. This article scrutinizes the recent performance and future predictions for the largest cap gold company in the industry, Barrick Gold Corporation (ABX). Barrick Gold Corporation Common in 2012 Since the start of February, Barrick's share price has fallen from $49.26 to $47.03 at the time of writing, though this figure is still higher than end of December 2011 figures, when Barrick's stock price closed the year at $45.25. The world´s biggest gold company announced that it would be issuing a quarterly dividend of US15 cents, payable on March 15. Barrick just announced its Q4 financial results with net earnings growing 15%. The company is tipped by many analysts for further growth Complete Story » |
| The race to debase proceeds apace Posted: 19 Feb 2012 09:45 PM PST Gold and silver have opened today on a strong note - silver in particular buoyed by signs that at long last, we may be reaching a definitive deal on a euro130 billion bailout that will allow ... |
| Gold & Silver Market Morning, February 20 2012 Posted: 19 Feb 2012 09:00 PM PST |
| Dubai explores new ways of selling gold Posted: 19 Feb 2012 05:00 PM PST Goldmoney |
| Posted: 19 Feb 2012 05:00 PM PST |
| The Gold Standard Theory and Myth (J.T. Salerno) Posted: 19 Feb 2012 04:45 PM PST Mises.org |
| Posted: 19 Feb 2012 04:36 PM PST The Greek crisis has been solved...again. Let's see...that's probably about 24 "solutions" during the last 24 months. But since these solutions never seem to solve anything, Europe's central bankers, technocrats and politicians get to huddle together every few weeks and solve the crisis over and over again. It's kind of like Disneyland for euro-meddlers. They get to keep going on their favourite ride over and over again. Sure, they have to wait in line for a while each time, but the ride is so worth it! Lots of meddling, lots of intervening, lots of "tough negotiations," lots of prescribing what's best for others, while spending lots of money that belongs to someone else. If that's not an "E-Ticket," what is? The newest Greek solution - approved by the fully employed politicians in the Greek Parliament - will hack 150,000 workers from the government payroll, while also slashing the minimum wage in the private sector by a whopping 22%! Thus, after days of "tense negotiations," the ECB and the Greek leadership finally hammered out a deal to save the troubled nation from default. The folks on Wall Street were riotously happy; the Greeks were merely rioting...and it is not difficult to see why. The newest austerity deal is not a rescue plan; it is a captivity plan. It provides the same kind of "rescue" that a circus provides an elephant: dance on a stool under the Big Top twice a day and we won't forget to toss some hay into your cage. To change metaphors, the newest austerity plan is an imprisonment pan: it straps leg-irons onto a nation that is already shackled to a monstrous debt load and a deeply depressed economy. The country's GDP is tumbling faster than Icarus into the Aegean Sea. "Anyone who thinks austerity is a way to fix a debt crisis should consider how this 'medicine' has worked on the Greek patient," observes Chris Hunter, our colleague over at the Bonner Family Office. "Athens adopted strict budget targets in May 2010 in return for a €110 billion rescue. Last year the Greek economy shrank by 6% and the country's budget deficit is still close to 10% of GDP. Meanwhile, unemployment has risen to a depression-level 18%. And over half of young Greeks are out of work. Hence the riots against austerity - against more-of-what-has-failed-miserably-several-times-already. And these are real rioters - not like those touchy-feely, iPad-toting Occupy Wall Street folks - with real grievances. Their main gripe: why should I pay someone else's debts? Why should I suffer because a prior generation spent much more than it earned, while also awarding itself retirement benefits the country cannot afford? And yet, the solution to Greece's fiscal squeeze may not be as elusive as the euro-meddlers and rescue-package architects make it seem. In lieu of extreme austerity measures, bond-restructuring deals and tranches of billion-dollar bailouts, the answer may simply be one little word: default. It's so simple the Greeks could do it all by themselves, without any help at all from the ECB, the Federal Reserve or any of their friends in Germany. Even so, most financial pundits use words like "unthinkable" or "disastrous" to describe the prospect of a Greek default. But history testifies to the contrary. Default is actually quite "thinkable" and rarely as disastrous as the "solution" the Greeks are now receiving. As the nearby chart shows, default is hardly a foreign concept on the European continent.  Greece, itself, has defaulted or restructured its debt five different times since the country declared its independence in 1821. Over those 193 years, the country has spent about half of its time in default or restructuring. And yet, Greece still managed to scrape together enough cash along the way to build a few train lines, repair a few roads and host the 2004 Olympic Games. So why change tactics now? Why not let an insolvent debtor default and invite capitalism to do its work? That's the process an Austro-Hungarian economist by the name of Joseph Schumpeter used to call "creative destruction"...and it has worked pretty well over the years, believe it or not. When nations let failing ventures fail, viable ventures usually rise up to take their place. Over the long term, this process nurtures economic growth. Remember, not every venture fails, only the failing ones. The Europeans have forgotten the ideas that their favorite son, Schumpeter, promoted. But then, so have we Americans. And so have most of the other Developed Nations of the world - the so-called Welfare States. Consider the divergent fates of two countries that came face-to-face with a financial crisis in 1990. One of these countries is still merely muddling along...20 years later! The other country is flourishing. That's because one of these countries, Japan, responded to its crisis by coddling its crippled corporations and by throwing monumental sums of taxpayer dollars at failing financial institutions. The other country, Brazil, responded to its crisis with relatively savage measures. It defaulted on its debts, devalued its currency (more than once) and did not stand in the way of corporate failure. Brazil's responses were far from perfect, but they were much less imperfect than were Japan's. The origins and structures of their respective crises were very different from one another. But those differences were not as significant as their differing responses. Japan has spent 20 years coddling its insolvent banks and corporations. Brazil has spent 20 years moving in the opposite direction...more or less. Brazil tolerated a dose of creative destruction. Japan did not. It still doesn't. Brazil's central planners abandoned much of their central planning, not because the planners wanted to, but because they lacked the resources to do otherwise. Japan, on the other hand, possessed the national wealth and resources to continue rescuing and meddling. Too bad for Japan. Its economy has muddled along for two decades, while its stock market has produced a loss of 2% per year across that entire 20-year timeframe. By contrast, the Brazilian economy and stock market have both boomed during the last two decades, despite some very serious bumps along the way.  Brazil's resurgence is typical of countries that allow some measure of creative destruction to operate within their borders. Economies are able to endure a crisis and then resume growing, as long as governments are willing to "rip off the Band-Aid" rather than dosing themselves with morphine. During the last 20 years, many countries have defaulted and/or devalued, then resumed growing rapidly. Russia, Chile, and Indonesia are a few prominent examples. More recently, Iceland's default and devaluation provides a textbook example of "default therapy"... or what Nobel laureate, Paul Krugman, termed "bankrupting yourself to recovery." In late 2008, Iceland's economy hit an iceberg. Although the country never reneged on any sovereign debt, its banks defaulted on $85 billion of foreign debt - more than double the $40 billion Russia defaulted on in 1998. Not surprisingly, the Icelandic krona collapsed and the economy plunged into a deep recession. Icelanders suffered an 18 percent slump in their disposable incomes and unemployment approached 10 percent, compared with one percent before the crisis. But the country's pain and suffering did not last very long. The krona's 80 percent slump against the euro and the US dollar sent the trade deficit into surplus within months. Today, the Icelandic economy is growing once again and the country is already able to borrow money again from the international capital markets. "Iceland didn't have the ability to save the banks," Finance Minister, Steingrimur Sigfusson, explained recently, when discussing Iceland's decision to let its banks default. "This wasn't our free choice." Hmmm...Sounds like a recurring theme... Just maybe, a country with "no choice" is better off than a country with access to hundred-billion-dollar "rescue plans." Just maybe, defaulting is less disastrous than borrowing money to defer a default. Certainly, the divergent paths of the Icelandic and Greek economies testify to the generative powers of "default therapy." Iceland's GDP is on the upswing already, while Greece's GDP is sliding ever lower. Reflecting these trends, the Icelandic stock market is up 60% over the last three years, while the Greek stock market is down 60%. Apparently, economies function best when failure actually fails - clearing the way for new successes.  So just maybe, default is a better course of action for Greece than indentured servitude to the ECB. A couple of Icelandic tourists told us exactly that in Zermatt, Switzerland last fall when we were conducting our Farewell Euro Tour. A few European politicians are beginning to express a similar point of view. The Dutch representative of the European Commission, Neelie Kroes, suggested that one man overboard would not sink the ship. "It's always said," Kroes remarked, "that if you let one country get out, or ask it to get out, then the whole structure collapses. But that's simply not true." Godfrey Bloom, a British Member of the European Parliament from the UK Independence Party, applauded Kroes' remark. "Finally reality is beginning to dawn in Brussels and across Europe," said Bloom. "One of the most senior European Commissioners has announced that 'it is simply not true' that if Greece were to leave the euro there would be disaster across the European financial system. This is what we in the UKIP have been saying for months, years even. "The best way to help Greece, and by extension ourselves," Bloom continued, "is if we give them a helping hand down and out from the eurozone, rather than spending billions of pounds of taxpayer's money building a golden prison. Our Government has been playing along to the doomster dialogue in order to justify its throwing money at the lost cause... No more British money should be spent making a bad situation worse." Amen...and no more European money either...or American money...or Swiss money...or Japanese money. Greece will never agree to stay put inside its "Golden prison." It will break out eventually...but probably not before the wardens at the ECB and IMF waste another hundred billion dollars reinforcing the prison's locks and walls. This latest Greek bailout will fail just as decisively as all the bailouts that have preceded it. Regards, Eric Fry Eric Fry is the Editorial Director of Agora Financial. This article originally appeared in The Daily Reckoning USA. Similar Posts: |
| The Trouble With Paradise… Posted: 19 Feb 2012 04:35 PM PST We spent a week at our place in Nicaragua...and we wonder why we don't spend more time here. "Who would have thought," said a colleague yesterday. "We got here, what, 15 years ago, there was nothing...nothing." "Nothing...but paradise," we replied. "Well, now it's even better. You're never satisfied. Now we have a paradise with houses...swimming pools...and even a convention centre. It's a paradise that people can enjoy." "I enjoyed it more when we had it all to ourselves," we countered. "...Because life is a struggle," said our friend. "Here, there's nothing to struggle against...except your worst enemy, yourself." Hmmm... The climate is benign. No need to fight against the elements. The views are the best in the world. Nature has made this coast her chef d'oeuvre; it would be a sin to complain, ingratitude to ask for more. But more is just what we can't help asking for... The food is delicious. The pace is relaxed. We wake up...the sun shines in the window... Outside, the surf pounds the sand. We take a walk along the beach...often seeing no other human being...splashing our bare feet in the warm water. Returning up the steps to the house, Tere, our housekeeper has already put breakfast on the table...fresh fruit, coffee, eggs... Later, we sit on the porch...overlooking the ocean...and do our work. No commuting. No traffic. No parking. No snow. No ice. Nothing disturbs our work...or our thoughts... What's not to like? "Well...you can't sit still and enjoy things. You need to look for challenges. And if you can't get mad at other drivers or God, you'll have to get mad at yourself." Hmmm... What kind of world is this? We work to make it better...and then, when it is nearly perfect, we can't resist improving it. ...Or making it worse. Regards, Bill Bonner |
| Posted: 19 Feb 2012 04:34 PM PST Hillary Clinton calls up Egypt, Syria, Libya, and China to "democratize." But democracy, as practiced by the US and other developed countries, is a fraud. It is just a way for the insiders to scam money and power from the outsiders, by pretending that the voters are in charge. Just ask how many taxpayers would vote to spend about $10,000 each on the war against Iraq? How many would vote to spend $1.60 cents for every dollar in tax revenue? How many would vote for the latest mortgage deal...where homeowners who saved their money and paid their mortgages are forced to make up for those who bought houses recklessly...and then couldn't make their payments? How many would vote to bail out Goldman Sachs...Bank of America...or Citigroup? But voters never get a chance to vote on the issues. They vote for candidates...financed by insiders, with agendas the outsiders cannot even imagine. The word 'democracy' arose in small, Greek city states, where the voters actually voted on the concrete issues, not just the slippery candidates. Citizens voted to go to war...knowing not only that they would have to pay for it...but that they could be killed in the battles themselves. War was a matter of life and death, not just a campaign slogan of a chubby, middle-aged draft-dodger. The Italian city states practiced real democracy too. In 15th century Florence, for example, citizens voted on whether or not to build a cathedral... Then, they voted on what shape it should take. A scale model was built. Citizens knew what it would look like. They understood how it was built and how much it would cost them. They cast their ballots and took responsibility for the outcome. American democracy, circa 2012, has no more in common with real democracy than American capitalism has in common with real capitalism. Both are degenerate...corrupt...and geriatric. Regards, Bill Bonner |
| Posted: 19 Feb 2012 04:33 PM PST Reckoning from Rancho Santana, Nicaragua Learning from the Prudent Farmer… First, let us cast our eyes over the world of finance. The headlines still focus on Greece. It is broke. Here is Lucas Papademos, describing what an orderly default would mean. In the Telegraph:
"The savings of the citizens would be at risk. The state would be unable to pay salaries, pensions, and cover basic functions, such as hospitals and schools, and...the country - public and private sector alike - would lose all access to borrowing and liquidity would shrink. Sounds good to us! The Greeks have been living beyond their means. Living standards must fall. Best to get on with it. But the efforts of a whole class of over-paid meddlers have been directed at trying to avoid this outcome. They've hesitated...prevaricated...vacillated...and generally fornicated up the situation. They've swept so much dirt under the rug that there's now an Everest in the middle of the room... It can no longer be ignored. But Greece isn't the only country to live beyond its means. And the Greeks aren't the only ones to suffer. In Britain, the economy is holding its own...but only by loading the young with debt in order to continue supporting the old in the style to which they've become accustomed. Here, The New York Times reports:
Perhaps the most debilitating consequence of the euro zone's economic downturn and its debt-driven austerity crusade has been the soaring rate of youth unemployment. Spain's jobless rate for people ages 16 to 24 is approaching 50 percent. Greece's is 48 percent, and Portugal's and Italy's, 30 percent. Here in Britain, the rate is 22.3 percent, the highest since such data began being collected in 1992. (The comparable rate for Americans is 18 percent.) Lower incomes...unemployment...fewer benefits... Get used to it. There have always been booms and busts. There were years of good harvests...and years of bad ones. The prudent farmer saved some grain...just in case. But in the 20th century real money - gold - was replaced by paper money and 'just in case' became 'just in time.' Even John Maynard Keynes, the architect of modern government meddling in the economy, suggested that governments should save money so they would have something to spend when the private sector cut back. But the feds didn't save. They spent. And when times got tough, they spent even more money. Trouble is, without savings, they had to borrow the money to spend...which means taking it out of the very economy that is short on money already. The only other option is to print up extra money - in effect, creating it 'out of thin air.' But if you could just print 'money' and make yourself better off, everyone would do it. People are not made richer just by printing up pieces of paper with green ink on them. They get richer by having real purchasing power...and real resources at their command...and by being able to produce goods and services that people want. Regards, Bill Bonner |
| Why Iran Oil Works in China’s Favour Posted: 19 Feb 2012 04:33 PM PST Speaking of which, Europe's finance ministers are meeting AGAIN this week to try and finalise a Greek rescue package. Between the last one and the new one, the Greeks need around €170 billion. Remember, Greece has €14 billion in bonds maturing on March 20th. Elections are in April. Poor old democracy! Greek leaders are obliged to do the bidding of the European Central Bank (ECB) and the International Monetary Fund (IMF). You wonder if any deal in March will be undone by the elections in April. In the end, default still seems like the best option for Greece and the most likely scenario. For Aussie investors, the important question is whether a Greek default is a deflationary event or an inflationary one. That is, will commodities get smashed again like they did when Lehman Brothers collapsed in 2008? Or will there be exceptions to the rule, like higher oil and gold prices? Oil is doing just fine at the moment, even with the drag of Europe and exports contracting in Japan. Brent crude crested $120 per barrel on Friday. One factor keeping oil prices high is the situation with Iran. The European Union has agreed to stop buying Iranian oil. But the EU gave member states until July 1st to stockpile inventories before cutting Iran off. Iran had enough of that this weekend. The country's oil ministry announced that it would cut off oil sales to French and British companies. News reports suggested the French and British had already stopped buying. If that's the case, Iran's announcement is more of a verbal shot than a real one. But this brings us to an obvious observation: strategic assets like oil are only valuable if you can sell them. The Iranians must sell oil in order to bring in foreign currency to the economy. The sanctions theoretically free up Iran to sell another 500,000 barrels of oil per day to customers in China and India. China is already the number one destination for Iranian oil exports. You'd have to think the Chinese are pleased with the situation. Western nations willingly remove themselves as buyers for Iranian oil. China gets more oil and probably more leverage over the price, given that so few other countries are willing to do business with Iran. China doesn't care. It is the honey badger of nations on the global scene. It will pursue its interests and studiously ignore the internal politics of its trading partners. None of this clarifies how oil prices would behave if Greece defaults on its debts. Whether oil rises or falls on a Greek default depends on two things. First, if there is a lot of investment demand baked into the oil price and a Greek default triggers a flight to liquidity (the US dollar and US government bonds), the oil price will correct (and probably quite severely). That's what happened in 2008. The difference between now and 2008 is that a war between Iran and Israel looks a lot more possible. That possibility underpins the oil price. It's also what's contributing to soaring share prices for long-term unconventional alternatives to Middle East oil...like shale gas or oil from shale formations. More on energy and credit tomorrow. Regards, Dan Denning |
| Hedging Non-Gold Investments With Gold Posted: 19 Feb 2012 04:00 PM PST |
| Navigating Global Prosperity: An Interview with Paul Davidson Posted: 19 Feb 2012 03:15 PM PST Paul Davidson is America's foremost post-Keynesian economist. Davidson is currently the Holly Professor of Excellence, Emeritus at the University of Tennessee in Knoxville. In 1978 Davidson and Sydney Weintraub founded the Journal for Post-Keynesian Economics. Davidson is the author of numerous books, the most recent of which is an introduction to a post-Keynesian perspective on the recent crisis entitled 'The Keynes Solution: The Path to Global Prosperity'. Interview conducted by Philip Pilkington Philip Pilkington: Keynes famously claimed that the ideas of economists are extremely powerful and have huge influence on the way policymakers think. What struck me about your book The Keynes Solution was how well you related Keynes' theoretical ideas to the problems the world is currently facing – and the proposed solutions. Before we talk in any detail about these ideas let me ask you this: to what extent do you think that Keynes was right about the ideas of economists? Paul Davidson: He was absolutely right. All you need to do is look at the history of the US (and other developed countries) since World War II. For the first 27 post war years, Paul Samuelson's mistaken view of Keynes' analysis reigned supreme as the Keynesian economic solution to all economic problems – and all politicians, whether Republican or Democrat, thought of fiscal stimulus as the correct response to recession. The Republicans via tax cuts and military spending, while the Democrats by more public spending. The problem, as I indicate in my new book, was Samuelson got Keynes' theory all wrong. Thus when inflation reared its ugly head in the early 1970s Samuelson had no idea as to Keynes' solution to what Keynes called incomes inflation. Instead Samuelson invoked the Phillips curve – which was not part of the Keynes analytical structure and was actually incompatible with Keynes' General Theory – to advocate a trade-off between the rate of inflation and the rate of unemployment. When inflation rates increased as unemployment rates increased in the mid 1970s, i.e., stagflation – Samuelson's Keynesianism was proved wrong and the door was open for Milton Friedman's solution to all our economic problems; that is, the free market in goods and services, labor market free , and unregulated financial markets. Mrs. Thatcher and Ronald Reagan relied on this free market philosophy – as did to a large extent Clinton under the influence of Alan Greenspan and Robert Rubin. As a result government regulations were reduced, labor unions were emasculated (remember Reagan and the air traffic controllers) the Federal Reserve aimed at targeting the rate of inflation (as Friedman's quantity theory of money explained how the money supply did not affect real output and employment but merely affected the price level). Milton Friedman and I had a debate about his theory vs. my view of Keynes in the Journal for Post-Keynesian Economics in the early 1970s which was then published as part of a book Milton Friedman's Monetary Framework. So we have two now defunct economists having the power to affect policies for more than 60 years through their academic scribbling – Samuelson for the first three decades after World War II and Friedman for the next three decades. Clearly this evidence of the power of economists – who Keynes claimed should be as humble as dentists. PP: In the book you trace a lot of mainstream economics faith in markets back to what you call the 'ergodic assumption'. Could you say something about the relevance of this concept to understanding mainstream theory – and why if this assumption is thrown out much of said theory has to go with it? PD: Time is a device that prevents everything from happening at once. Economic decisions made today will have payoffs in days, weeks, months and/or years in the future. Mainstream economic theory presumes that decision makers can make optimal decisions regarding allocation of income and capital where the outcomes (payoffs) of such decisions are in the future. In order to make optimal decisions, these decision makers must 'know' future outcomes of all alternatives that they have to choose from. How do they 'know' these future outcomes? To make statistically reliable estimates about future outcomes, the decision maker, following good statistical methodology, should draw a sample from the future and then calculate statistically reliable estimates about future probability of outcomes. Since drawing a sample from the future is impossible, mainstream economists impose the ergodic axiom as a foundation of MAINSTREAM theory. This ergodic axiom states that the past, present and future economic events are all determined by a pre-existing and unchanging probability distribution. Therefore if one calculates probabilities on the basis of existing past market data, then , assuming the economic system is an ergodic system, this calculated probability distribution is the same as one would get if it calculated a probability distribution from a sample drawn from the future. In other words, the mainstream ergodic axiom presumes that data samples from the past are equivalent to drawing data samples from the future. Consequently the future is readily 'knowable' and decision makers will not make any mistakes. Given this ergodic presumption individuals make the best choice possible to maximize their income and profits in markets free from government regulations and interference. This results in the rhetorical question that Ronald Reagan would often ask: "Why should bureaucrats in Washington know better than you do in how to spend your money?" The ergodic axiom is the basis of the laissez-faire philosophy that underlies mainstream economics. [Note the risk management computer models used by large financial institutions such as Citibank, Lehman Brothers, etc. involved calculations of risk probabilities based on past financial market data to warn management about the future risks of any decision regarding future portfolio changes. These models, however, failed to warn these large financial institutions of the financial crash of 2007-2008. The result was that government had to bail out these large financial institutions in order to prevent a bigger economic disaster from occurring.] On the other hand, if the future is uncertain as Keynes insisted is the case – i.e. the system is nonergodic – then there is a positive active role for government to produce market rules and regulations that prevent individuals from taking decisions that can cause markets to crash! [Similar to the government enforcing traffic rules to prevent auto accidents.] There is also a role for government to clean up the mess if the system does crash – via fiscal 'stimulus' policies and easy monetary policies!! Accordingly, if one rejects the ergodic axiom as not relevant to our money using capitalist system, then all of mainstream theory is mere fiction. [Note George Soros has argued that mainstream financial market theory is not applicable to real world financial markets because actions taken by market participants today can change the future outcomes in ways that are not predictable today – Soros calls this his 'reflexivity' concept. Thus Soros is in essence rejecting the ergodic axiom of mainstream theory.] PP: Together with the ergodic axiom there is another key tenet of mainstream economics that you highlight in your book The Keynes Solution and that is the 'neutral money argument'. Could you briefly explain this concept and why it is so important for mainstream economic theory? PD: A second fundamental axiom of new and old classical mainstream economics is that "money is neutral". For example, Milton Friedman asserted that money was always neutral – at least in the long run. This neutral money presupposition of mainstream economics assumes that increases in the supply of money will affect neither the volume of goods produced nor the level of employment in the economy – even if there is significant unemployment and excess capacity to produce goods in the economy. In other words, the mainstream axiom of neutral money asserts as a universal truth that does not have to be proven that any monetary policy that increases the quantity of money available in the economy in order to increase market demand for the products of industry will have absolutely no effect on employment and production. Consequently, the neutral money axiom is a presumption that any easy monetary policy is always inflationary. Thus when the Federal Reserve invoked what was called a 'quantitative easing' [often called QE policy] where the Central bank 'printed' money to finance an increase in market demand for goods, believers in mainstream classical economics insisted that the result of quantitative easing will be only to increase the inflation rate dramatically. When inflation did not increase after QE and QE2 in 2010 and 2011 respectively, logically consistent mainstream economists said that the inflation rate increase was just around the corner and we will see it soon. For Keynes and his Post Keynesian followers, inflation is not a matter of increasing the money supply. Inflation is the result of either speculation regarding stocks of existing commodities – what we call 'Commodities Inflation' and/or increases in profit margins and increases in wages relative to productivity increments – what we call 'incomes inflation'. Consequently, anti-inflationary policies, as I explain in my book The Keynes Solution, involves a buffer stock policy for commodity inflation and an incomes policy for incomes inflation Blind adherence to the neutral money axiom prevents mainstream theorists from recognizing that if there significant unemployment and idle capacity then additional government and private spending financed by the quantitative easing of the central bank will create profit opportunities for entrepreneurs to expand output and employment – and, of course, will not necessarily be inflationary if the government has a buffer stock policy and an incomes policy in action. PP: Yet, Bernanke et al seem to be mainstream economists. Why is it that they occasionally advocate expansionary policies and yet continue to believe in their doctrines rather than scrutinising them in light of both their prescriptions and the evidence that emerges as a result of thee prescriptions? PD: A sage once said: "Consistency is the mark of a small mind". Nobody ever called Bernanke et al 'small minded'. Yet there often appears to be an inconsistency with the policies Bernanke et al advocate and their logical theory. Most mainstream economists such as Bernanke et al who call themselves [New] Keynesians never read Keynes' General Theory. [Someone once said a 'classic' is defined as a book everyone cites but no one reads. For mainstream Keynesians Keynes's book The General Theory of Employment, Interest and Money is definitely a classic.] Most post-WWII 'Keynesians' learned their views of Keynes – not from reading Keynes – but from what Nobel Prize winner Paul Samuelson said Keynes' theory was. As I indicate in my book The Keynes Solution, in an interview in 1986 Samuelson specifically stated he found Keynes' analysis 'unpalatable' and not comprehensible. Samuelson therefore stated "I finally convinced myself to stop worrying about it… I was content to assume that there was enough rigidity in relative prices and wages to make the Keynesian alternative to Walras operative." In other words, Samuelson merely assumed the system was a classical model but with [in the short run] rigidity in money wages – so that the classical market 'solution' only came about in the long run. This despite Keynes having an entire chapter in the General Theory entitled 'Changes in Money Wages' which analyzed how flexible wages (and prices) still did not automatically restore full employment in Keynes' general theory. [Did Samuelson ever read Keynes' 'classic'?] Of course, 19th century economists already knew that if wages and prices were not flexible, unemployment could occur – so if Samuelson was correct in his interpretation of Keynes, then Keynes had nothing new to add to already well established classical theory! Consequently, if Samuelson was right, Keynes was a charlatan when he claimed to having provided a revolutionary new general theory. Since the 'master' American post-war Keynesian, Paul Samuelson, was inconsistent between his short-run analysis and the long run, it is no wonder that his 'Keynesian' students and followers such as Bernanke, Krugman, Stiglitz, etc. are also inconsistent. As John Williamson [the originator of the so called 'Washington Consensus'] once wrote to me: his view was that American Keynesians are too impatient to wait for the long run to solve the recession and unemployment problems. This 'impatience' is, I think, why Bernanke et al demand active government policies even though in the long run – according to their doctrine – no government intervention is better. I believe that is why Bernanke et al are inconsistent between their short run policy desires and the long run logical conclusion of their theoretical doctrine. PP: Yes, that would explain it perfectly. While they find such solutions theoretically unpalatable, they nevertheless think them eminently practical. Interesting. Moving on. You talk a bit in the book about commodity price inflations. What do you have to say about these and is there a Keynesian solution? PD: Commodity inflation is identified with rising market prices of durable standardized commodities such as agricultural products, crude oil, minerals, etc. Typically these commodities are traded in public markets similar to the liquid asset security markets. These commodity markets tend to have prices associated with a specific date of delivery – either delivery today or at a specific date in the future. Markets for a future date delivery are limited to only a few months in the future. Since most commodities tend to take a significant length of time to produce, the supply of commodities for any future date in these markets are fixed by already existing stocks plus any semi-finished product that are currently in the pipeline and are expected to be finished by the date of delivery. Accordingly, if there is any expectation of an increase in market demand for these commodities in the future, then people can speculate on these markets that the prices will rise. Accordingly by buying a purchase contract in a market for future delivery the purchaser (speculator) believes he/she will make a large capital gain when he/she sells the product at the future delivery date in the spot market at a higher market price. In sum, any expected increase market demand will only inflate the price of these commodities today. To prevent commodity price inflation requires the government to maintain an inventory of the commodity as a 'buffer stock' to prevent changes in demand and/or supply from inducing significant commodity price movements. A buffer stock is nothing more than some commodity shelf-inventory that can be moved into and out of the market to buffer the market from disorderly price disruptions by offsetting the previously unforeseen changes in demand or supply as they occur. For example, since the oil price shocks of the 1970′s, the United States has developed a 'strategic petroleum reserve' where crude oil is stored in underground salt domes on the coast of the Gulf of Mexico. These oil reserves are designed to provide emergency market supplies to buffer the market price of domestic oil if there is a sudden decrease in oil supplies from the politically unstable Middle East. The strategic use of such a petroleum reserve means that the price of oil will not increase as much as it otherwise would if, for example, a political crisis broke out in the Middle East. In other words, oil price inflation could be avoided as long as the buffer stock remained available to offset any immediately available commodity shortage. Thus, during the short Desert Storm war against Iraq in 1991, U.S. government officials made strategic petroleum reserves available to the market to offset the possibility of disruptions (actual or expected) from affecting the market price of crude oil. The Department of Energy estimated that this use of a buffer stock prevented the price of gasoline at the pump from rising about 30 cents per gallon during the brief Desert Storm period. Use of buffer stocks as a public policy solution to commodity price inflation is as old as the biblical story of Joseph and the Pharaoh's dream of seven fat cows followed by seven lean cows. Joseph – the economic forecaster of his day – interpreted the Pharaoh's dream as portending seven good harvests where production (supply) would be much above normal causing prices (and farmers' incomes) to be below normal. This would be followed by seven lean harvests where annual production would not provide enough food to go around while prices farmers received would be exorbitantly high. Joseph's civilized policy proposal was for the government to store up a buffer stock of grain during the good years and release the grain to market, without profit, during the bad years. This would maintain a stable price over the fourteen harvests and avoiding inflation in the bad years while protecting farmer's incomes in the good harvest years. The Bible records that this civilized buffer stock policy was a resounding economic success. PP: There is a concern that, should governments pursue full employment policies we might see inflation arise due to wage-bargaining by workers. What do you think of this argument and how would you suggest dealing with this problem should it arise? PD: Full employment might strengthen the bargaining power of labor sufficiently so that workers demand money wage increases which exceed the increase in the rate of productivity increase of labor, This will result in higher labor costs of production and therefore higher prices of products produced in firms throughout the economy. This increase in money wage rates that exceeds productivity increase is what Keynes called 'incomes inflation'. Accordingly the government will have to institute some form of an 'incomes policy' to limit wage increases to not exceed productivity increases. A so called tax-based incomes policy or TIP policy would prevent this incomes inflation. TIP would use the corporate income tax structure to penalize the largest domestic firms in the economy if they agreed to such inflationary wage demands. If money wage increases could be limited to overall labor productivity increases, then workers end all other owners of inputs to the domestic production processes might willingly accept noninflationary money income increases. PP: In your book you are sceptical about using a devaluation of the US dollar to decrease the trade deficit and raise employment. Yet many economists think that this would be a good strategy. Could you explain your scepticism and lay out briefly an alternative arrangement? PD: There are several reasons for my scepticism that devaluing the US dollar is a desirable policy for reducing the US trade deficit by making imports sufficiently more expensive and making US exports cheaper to foreigners so that Americans reduce their total US spending on imports and foreigners increase their total US spending on US exports, until spending on imports equals what foreigners spend to buy US exports. The first reason this is not a desirable plan is based on a technical condition called the 'Marshall-Lerner condition'. Basically this condition says if the sum of the price elasticities for imports and exports is less than unity, then devaluation will increase the trade deficit. One need only note that in the 1980s when the US dollar exchange rate tended to decline rapidly, the US trade deficit increased! Consequently, from an empirical point of view, the Marshall-Lerner condition seems relevant to the USA trade balance problem then and therefore devaluation could worsen the US trade deficit, as it did in the 1980s. A sage once said: "those who do not study history are bound to repeat its errors". The many economists you cite as thinking devaluation is a good strategy, obviously want the US to repeat the errors of the 1980s. Secondly, those who argue that devaluation would end the US trade deficit are essentially arguing that if US exports become cheap enough to foreigners then US made products and their labor input would become 'competitive' with foreign produced goods' labor costs. Since labor productivity in most manufactured goods is the same whether produced in the USA or in China, this means that the US labor costs per unit of output when measured in a single currency must be competitive with the labor costs , say, in China in order for US produced goods to be able to compete in the global marketplace. In other words for US goods to be competitive, devaluation must reduce the value of labor income in the in the US to the equivalent of what is earned in China (where a recent New York Times article indicated workers in a Chinese factory were paid $15 a day for a 12 hour work day and 6 day work week). But do we really want a policy which reduces the average American worker's annual income to less than $5000 per year? (The economists who say 'yes' really mean as long as we don't reduce economists incomes!) I should think that we don't want to advocate a policy that reduces American workers income to the level of a Chinese 'coolie'. Especially when there is a simpler way to correct the US trade deficit. This alternative is what I have called the International Monetary Clearing Union [IMCU] where the trading nations would essentially enter into an agreement to spend all their income earned on exports on the purchase of imports from foreigners. [The details of my IMCU plan can be read in my book The Keynes Solution]. Accordingly no nation could run a persistent trade imbalance. While at the same time no nation need depress their workers income.
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| Elliott wave predits $32659 gold on 16 Jan 2015 Posted: 19 Feb 2012 01:43 PM PST Nick from Sharelynx with help from Geoff S has put together an Elliott Wave theory prediction using 'The Golden Mean' & 'Fibonacci Sequences' to arrive at the future price of gold. Click here for the chart. It predicts the next peak as $3,559 in Jan 2013 with an eventual peak of $32,659 gold on 16 Jan 2015. Nick's comments: The first two uplegs (blue line) generate (through the formulas) the future uplegs (red line) as the price heads to it's peak at W5(5). The Time, Price and Percentage of each leg up & down are shown on the edge of the chart. So having left W4(A) behind the next 16 months we are heading up to W4(B). Presumptions are that the blue line (actual gold price) will stay above the red line for the first 1/2 of the next upleg falling to below the red line for the second half of the upleg and rising steeply into the peak of W4(B) as gold likes to do. Perhaps gold's final top is W4(D) or W5(1) or higher and perhaps the timing doesn't play out right but this presumably will be something close to the shape of gold's rise over the next few years. A nice speculation and one to dream about. I'm certainly going to be bookmarking this chart and checking back from time to time. If it works out with reasonable give and take then I think Nick will achieve Guru status within the precious metals internet community.  |
| Chris Martenson: Hoarding Gold, Food, & Friendship Posted: 19 Feb 2012 12:17 PM PST from freedomainradio: ~TVR |
| Buy Gold as an insurance policy not as an investment Posted: 19 Feb 2012 05:36 AM PST Bob Chapman - Erskine Overnight 18 Feb 2012 : buy Gold as an insurance policy... [[ This is a content summary only. Visit my blog http://www.bobchapman.blogspot.com for the full Story ]] This posting includes an audio/video/photo media file: Download Now |
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