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Sunday, March 25, 2012

Gold World News Flash

Gold World News Flash

GoldSeek.com Radio Gold Nugget Interview: CEO of Arian Silver Corp. Mr. Jim Williams

Posted: 25 Mar 2012 01:00 PM PDT

London-based Arian Silver Corporation (London: AGQ | TSX-V: AGQ | Frankfurt: I3A) is focused in Mexico's Zacatecas State, one of the richest known silver-bearing districts in the world. The Company began trial production on its 100% owned San José property in October 2010 with the first batch of concentrate produced and shipped to the smelter in December 2010.


Calling Another Bottom in the Precious Metals Sector

Posted: 25 Mar 2012 03:12 AM PDT

The last time I called an important bottom in the precious metals sector was on December 29, 2011 (as documented here). Well, it's time for another important bottom. I believe the late December lows in the precious metals (PM) sector were THE lows for the metals, for the GDXJ ETF (a rough representation of the junior Gold mining sector) and for silver stocks (as represented by the SIL ETF). The current bottom is much more important for those seemingly perpetual laggards, the senior Gold mining stocks.


What Does Mali's Coup Mean for Miners?

Posted: 25 Mar 2012 02:00 AM PDT

Investors are holding their breath after a military mutiny and coup March 22 in Mali, one of West Africa's most established democracies. This Gold Report exclusive delves behind the headlines to analyze the coup's impact on miners.


The Government Spends Trillions On Unlikely Threats … But Won’t Spend a Billion Dollars to Prevent the Very Real Possibility of

Posted: 24 Mar 2012 05:36 PM PDT

Studies show that people are worry about the wrong things.

We are terrified of things that will probably never happen, and underestimate the real dangers which face us.

As we noted last year, the extreme vulnerability of nuclear power plants to solar flares is a very real threat which we must address:

Nasa scientists are predicting that a solar storm will knock out most of the electrical power grid in many countries worldwide, perhaps for months. See this, this, this, this, this, this and this.

 

Indeed, the Earth’s magnetic field protects us from the sun’s most violent radiation, and yet the magnetic field fluctuates over time. As the Telegraph reported in 2008:

Large hole in magnetic field that protects Earth from sun’s rays … Recent satellite observations have revealed the largest breach yet seen in the magnetic field that protects Earth from most of the sun’s violent blasts.

I’m not predicting some 2012 Mayan catastrophe. [Indeed, I think the whole Mayan 2012 thing is fake.] I am simply warning that a large solar storm – as Nasa is predicting – could knock out power throughout much of the world, especially if the earth’s magnetic field happens to be weak at the time.

 

What would happen to nuclear power plants world wide if their power – and most of the surrounding modern infrastructure – is knocked out?

 

Nuclear power companies are notoriously cheap in trying to cut costs. If they are failing to harden their electrical components to protect against the predicted solar storm, they are asking for trouble … perhaps on a scale that dwarfs Fukushima. Because while Fukushima is the first nuclear accident to involve multiple reactors within the same complex, a large solar storm could cause accidents at multiple complexes in numerous countries.

 

If the nuclear power companies and governments continue to cut costs and take large gambles, the next nuclear accident could make Fukushima look tame.

 

I’m not saying this will happen in 2012, or 2013 (although Nasa appears to be hinting at this). But a large solar storm which knocks out electrical grids over wide portions of the planet will happen at some point in the future.

 

Don’t pretend it is unforeseeable. The nuclear power industry is on notice that it must spend the relatively small amounts of money

necessary to prevent a widespread meltdown from the loss of power due to a solar storm.

 

***

 

Most current reactors are of a similarly outdated design as the Fukushima reactors, where the cooling systems require electricity to operate, and huge amounts of spent radioactive fuel are housed on-site, requiring continuous cooling to prevent radioactive release. [Designs which would automatically shut down - and cool down - in the event of an accident are ignored for  political reasons.]

The head of the leading consulting firm on the effect of electromagnetic disruptions on our power grid – which was commissioned to study the issue by the U.S. federal government – stated that it would be relatively inexpensive to reduce the vulnerability of our power grid:

What we’re proposing is to add some fairly small and inexpensive resistors in the transformers’ ground connections. The addition of that little bit of resistance would significantly reduce the amount of the geomagnetically induced currents that flow into the grid.

 

***

 

We think it’s do-able for $40,000 or less per resistor. That’s less than what you pay for insurance for a transformer.

 

***

 

If you’re talking about the United States, there are about 5,000 transformers to consider this for. The Electromagnetic Pulse Commission recommended it in a report they sent to Congress last year. We’re talking about $150 million or so. It’s pretty small in the grand scheme of things.

Mechanical engineer Matthew Stein does a good job of reporting on this issue today:

There are nearly 450 nuclear reactors in the world, with hundreds more being planned or under construction…. Imagine what havoc it would wreak on our civilization and the planet’s ecosystems if we were to suddenly witness not just one or two nuclear meltdowns, but 400 or more! How likely is it that our world might experience an event that could ultimately cause hundreds of reactors to fail and melt down at approximately the same time? I venture to say that, unless we take significant protective measures, this apocalyptic scenario is not only possible, but probable.

 

***

 

In the past 152 years, Earth has been struck by roughly 100 solar storms, causing significant geomagnetic disturbances (GMD), two of which were powerful enough to rank as “extreme GMDs.” If an extreme GMD of such magnitude were to occur today, in all likelihood, it would initiate a chain of events leading to catastrophic failures at the vast majority of our world’s nuclear reactors, similar to but over 100 times worse than, the disasters at both Chernobyl and Fukushima.

 

***

 

The good news is that relatively affordable equipment and processes could be installed to protect critical components in the electric power grid and its nuclear reactors, thereby averting this “end-of-the-world-as-we-know-it” scenario. The bad news is that even though panels of scientists and engineers have studied the problem, and the bipartisan Congressional electromagnetic pulse (EMP) commission has presented a list of specific recommendations to Congress, our leaders have yet to approve and implement any significant preventative measures.

 

***

 

Unfortunately, the world’s nuclear power plants, as they are currently designed, are critically dependent upon maintaining connection to a functioning electrical grid, for all but relatively short periods of electrical blackouts, in order to keep their reactor cores continuously cooled so as to avoid catastrophic reactor core meltdowns and fires in storage ponds for spent fuel rods.

 

If an extreme GMD were to cause widespread grid collapse (which it most certainly will), in as little as one or two hours after each nuclear reactor facility’s backup generators either fail to start, or run out of fuel, the reactor cores will start to melt down. After a few days without electricity to run the cooling system pumps, the water bath covering the spent fuel rods stored in “spent-fuel ponds” will boil away, allowing the stored fuel rods to melt down and burn [2]. Since the Nuclear Regulatory Commission (NRC) currently mandates that only one week’s supply of backup generator fuel needs to be stored at each reactor site, it is likely that, after we witness the spectacular nighttime celestial light show from the next extreme GMD, we will have about one week in which to prepare ourselves for Armageddon.

 

To do nothing is to behave like ostriches with our heads in the sand, blindly believing that “everything will be okay” as our world drifts towards the next natural, inevitable super solar storm and resultant extreme GMD. Such a storm would end the industrialized world as we know it, creating almost incalculable suffering, death and environmental destruction on a scale not seen since the extinction of the dinosaurs some 65 million years ago.

 

***

 

There are records from the 1850s to today of roughly 100 significant geomagnetic solar storms, two of which, in the last 25 years, were strong enough to cause millions of dollars worth of damage to key components that keep our modern grid powered.

 

***

 

“The Carrington Event,” raged from August 28 to September 4, 1859. This extreme GMD induced currents so powerful that telegraph lines, towers and stations caught on fire at a number of locations around the world. Best estimates are that the Carrington Event was approximately 50 percent stronger than the 1921 storm.[5] Since we are headed into an active solar period much like the one preceding the Carrington Event, scientists are concerned that conditions could be ripe for the next extreme GMD.[6]

 

***

 

The federal government recently sponsored a detailed scientific study to better understand how much critical components of our national electrical power grid might be affected by either a naturally occurring GMD or a man-made EMP. Under the auspices of the EMP Commission and the Federal Emergency Management Agency (FEMA), and reviewed in depth by the Oak Ridge National Laboratory and the National Academy of Sciences, Metatech Corporation undertook extensive modeling and analysis of the potential effects of extreme geomagnetic storms on the US electrical power grid. Based upon a storm as intense as the 1921 storm, Metatech estimated that within the United States, induced voltage and current spikes, combined with harmonic anomalies, would severely damage or destroy over 350 EHV power transformers critical to the functioning of the US grid and possibly impact well over 2000

 

EHV transformers worldwide.[7]

EHV transformers are made to order and custom-designed for each installation, each weighing as much as 300 tons and costing well over $1 million. Given that there is currently a three-year waiting list for a single EHV transformer (due to recent demand from China and India, lead times grew from one to three years), and that the total global manufacturing capacity is roughly 100 EHV transformers per year when the world’s manufacturing centers are functioning properly, you can begin to grasp the implications of widespread transformer losses.

 

The loss of thousands of EHV transformers worldwide would cause a catastrophic grid collapse across much of the industrialized world. It will take years, at best, for the industrialized world to put itself back together after such an event, especially considering the fact that most of the manufacturing centers that make this equipment will also be grappling with widespread grid failure.

 

***

 

In the event of an extreme GMD-induced long-term grid collapse covering much of the globe, if just half of the world’s spent fuel ponds were to boil off their water and become radioactive, zirconium-fed infernos, the ensuing contamination could far exceed the cumulative effect of 400 Chernobyls.

 

***

 

The Congressionally mandated EMP Commission has studied the threat of both EMP [i.e. an electromagnetic pulse set of by terrorists or adversaries in war] and extreme GMD events and made recommendations to the US Congress to implement protective devices and procedures to ensure the survival of the grid and other critical infrastructures in either event. John Kappenman, author of the Metatech study, estimates that it would cost about $1 billion to build special protective devices into the US grid to protect its EHV transformers from EMP or extreme GMD damage and to build stores of critical replacement parts should some of these items be damaged or destroyed. Kappenman estimates that it would cost significantly less than $1 billion to store at least a year’s worth of diesel fuel for backup generators at each US nuclear facility and to store sets of critical spare parts, such as backup generators, inside EMP-hardened steel containers to be available for quick change-out in the event that any of these items were damaged by an EMP or GMD.[12]

 

For the cost of a single B-2 bomber or a tiny fraction of the Troubled Asset Relief Program (TARP) bank bailout, we could invest in preventative measures to avert what might well become the end of life as we know it. There is no way to protect against all possible effects from an extreme GMD or an EMP attack, but we could implement measures to protect against the worst effects. Since 2008, Congress has narrowly failed to pass legislation that would implement at least some of the EMP Commission’s recommendations.[13]

 

***

 

Citizens can do their part to push for legislation to move toward this goal and work inside our homes and communities to develop local resilience and self reliance, so that in the event of a long-term grid-down scenario, we might make the most of a bad situation. The same tools that are espoused by the Transition movement for developing local self-reliance and resilience to help cope with the twin effects of climate change and peak oil could also serve communities well in the event of an EMP attack or extreme GMD. If our country were to implement safeguards to protect our grid and nuclear power plants from EMP, it would also eliminate the primary incentive for a terrorist to launch an EMP attack. The sooner we take these actions, the less chance that an EMP attack will occur.

And see this.


CAN BERNANKE BREAK THE DOLLAR RALLY?

Posted: 24 Mar 2012 02:36 PM PDT

In response to a bursting real estate and credit bubble in 2007 Bernanke's solution was to crank up the printing press and flood the world with dollar bills. Unfortunately it didn't solve our problems, it only made them worse. The real estate and credit bubbles stayed busted, but that liquidity had to land somewhere. In 2008 it went straight into the energy and agricultural markets spiking the price of crude, gasoline and food. This in turn collapsed a fragile global economy that was already reeling from the real estate implosion. The end result was the exact opposite of what Benjamin intended. Instead of halting the real estate collapse he just magnified the severity of the recession.

Unfortunately Bernanke has not learned from his past mistakes. The wicked sell off in 2010 was met with QE2. The even more severe decline in 2011, which should have initiated the next bear market and started the move down into the next four year cycle low, due in 2012, was aborted with additional money printing disguised as Operation Twist and the European version LTRO.

On the surface it looks like Bernanke has been successful. The economy has rebounded from near recession in 2011 but the unintended consequences are already in play as oil is now back above $100 a barrel and gasoline over $4 a gallon. Bernanke has steered the Titanic straight into the iceberg and now there's no turning back. If Ben doesn't raise rates and drain excess liquidity oil is going to continue to rise until it destroys the global economy again.

The dollar is at a very important juncture. The current daily cycle topped on day 11 which is right in the middle of being left or right translated. Left translated cycles are the hallmark of a declining market (lower lows and lower highs). 


Right translated cycles are associated with rising markets (higher highs and higher lows).


How this cycle plays out is going to determine the path for all other assets. The current daily cycle topped right in the middle of being right or left translated. As long as the impending cycle low holds above the February intermediate degree bottom then the pattern of higher highs and higher lows will still be intact and the dollar will still be on the upside of an intermediate cycle.


In this scenario I would expect the stock market to roll over soon and begin moving down into an intermediate cycle low in late April or early May. Gold's B-wave would resume after a short counter trend bounce and continue down to test the December lows.
 
If however, the dollar were to penetrate the February low it would signal that the intermediate cycle has already topped and the pattern has reversed to lower lows and lower highs. In that scenario we should see the dollar moving generally lower for the next 15-20 weeks.


In this scenario the runaway move in the stock market could continue for another 10-15 weeks, and gold's B-wave probably bottomed on Thursday as another shortened intermediate cycle.



This scenario would also trigger another leg higher for oil which will eventually poison the economic recovery. 

The next couple of weeks are going to be important. I'm expecting the first scenario where the dollar continues to make higher highs and higher lows, but I'm prepared to reverse course 180 degrees if Bernanke can break the rally and push the dollar through the February 29 low.


This posting includes an audio/video/photo media file: Download Now

Saturday Gold and Silver Summary

Posted: 24 Mar 2012 02:17 PM PDT

from TF Metals Report:

I've found a couple of things for your weekend, so I thought it best to start this new thread. Mainly, I had to make sure that everyone saw the latest OI numbers and CoT report.

First of all, you don't have to wait for me. If you want to get this info for yourself, just save these links to your "favorites". The daily OI numbers are usually released by about 2:30 p.m. EDT and the CoTs come out every Friday at around 3:00 p.m. EDT.

Read More @ TFMetalsReport.com

Tungsten-Filled 1 Kilo Gold Bar Found In The UK

Posted: 24 Mar 2012 02:14 PM PDT

from Zero Hedge:

The last time a story of Tungsten-filled gold appeared on the scene was just two years ago, and involved a 500 gram bar of gold full of tungsten, at the W.C. Heraeus foundry, the world's largest metal refiner and fabricator. It also became known that said "gold" bar originated from an unnamed bank. It is now time to rekindle the Tungsten Spirits with a report from ABC Bullion of Australia, which provides photographic evidence of a new gold bar that has been drilled out and filled with tungsten rods, this time not in Germany but in an unnamed city in the UK, where it was intercepted by a scrap metals dealer, and was supplied with its original certificate. The reason the bar attracted attention is that it was 2 grams underweight. Upon cropping it was uncovered that about 30-40% of the bar weight was tungsten. So two documented incidents in two years: isolated? Or indication of the same phenomonenon of precious metal debasement that marked the declining phase of the Roman empire. Only then it was relatively public for anyone who cared to find out on their own. Now, with the bulk of popular physical gold held in top secret, private warehouses around the world, where it allegedly backs the balance sheets of the world's central banks, yet nobody can confirm its existence, nor audit the actual gold content, it is understandable why increasingly more are wondering: just how much gold is there? And alongside that – while gold, (or is it GLD?), can be rehypothecated, can one do the same with tungsten?

Read More @ ZeroHedge.com

Mr. Bernanke Goes to College

Posted: 24 Mar 2012 02:11 PM PDT

by James Turk, FGMR:

March 21, 2012 – Earlier this week Federal Reserve chairman Ben Bernanke gave a lecture to students at George Washington University. It was the first of a four-part series in a course entitled "The Federal Reserve and Its Role in Today's Economy." Interestingly, ZeroHedge notes that in his lecture: "The words Gold and Standard appear more times than Central and Bank".

The text of the speech is not yet available on the Fed's website, but Business Insider provides a summary of it. Not mincing any words, and with its extreme religious devotion to today's fiat currencies all too apparent, Business Insider enthusiastically exclaimed that Mr. Bernanke "just murdered the gold standard".

Given that sensational headline, I thought it might be useful to present the other side of the story. Here are Business Insider's comments (in italics) meant to disparage gold, followed by my observations.

Read More @ FGMR.com

Zero Hedge: Can gold-plated tungsten be rehypothecated too?

Posted: 24 Mar 2012 02:01 PM PDT

10p ET Saturday, March 24, 2012

Dear Friend of GATA and Gold:

Zero Hedge tonight reports on another documented case of a tungsten-loaded gold bar and, unlike mainstream gold market analysts, grasps the crucial underlying point:

"Now, with the bulk of popular physical gold held in top-secret, private warehouses around the world, where it allegedly backs the balance sheets of the world's central banks, yet nobody can confirm its existence, nor audit the actual gold content, it is understandable why increasingly more are wondering: Just how much gold is there? And alongside that -- while gold (or is it GLD?) can be rehypothecated, can one do the same with tungsten?"

The Zero Hedge commentary is headlined "Tungsten-Filled 1-Kilo Gold Bar Found in the UK" and it's posted here:

http://www.zerohedge.com/news/tungsten-filled-1-kilo-gold-bar-found-uk

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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Golden Phoenix Discusses Royalty Mining Growth Strategy
on '21st Century Business' on Fox Business Network

Golden Phoenix Minerals Inc. has discussed its royalty mining growth strategy on the Fox Business Network program "21st Century Business" with host Jackie Bales. Golden Phoenix's director of corporate communications, Robert Ian, told how the company narrows its focus to project generation and future royalty streams. He explained why Golden Phoenix believes it's better to own joint-venture interests in several producing mines instead of full exposure to just one project.

"21st Century Business" has been airing for 15 years. Previous hosts have included Gen. Alexander Haig, Gen.l Norman Schwarzkopf, and Secretary of Defense Caspar Weinberger. Golden Phoenix appeared as paid programming on this broadcast.

To view the program with Golden Phoenix, please visit Golden Phoenix's Internet site here:

http://www.goldenphoenix.us/company-videos.html

HUI - deeply oversold and nearing support

Posted: 24 Mar 2012 12:35 PM PDT

[url]http://www.traderdannorcini.blogspot.com/[/url] [url]http://www.fortwealth.com/[/url] The mining shares have been absolutely obliterated over the course of the last couple of months as their longsuffering owners can all too sadly attest. The carnage however has dropped the index deeply into oversold territory on the weekly price chart. If you notice the chart carefully, this particular indicator which I have tweaked a bit to optimize it to the index, is now nearing levels seen only TWICE since the entire bull market began. Not only that, it is also nearing an important Fibonacci retracement level of the rally that began off the 2008 low before peaking last fall. Between the extreme undervaluation against the price of bullion and the broader S&P 500, we should be nearing a turning point on this sector within the not too distant future. They have not yet flashed a buy signal but are getting close. ...


Silver Update: 3/24/12 Tungsten Bars

Posted: 24 Mar 2012 11:54 AM PDT

Fitzwilson: A Sudden, Catastrophic Shift in Interest Rates and Gold/Energy Prices Possible! Here?s Why

Posted: 24 Mar 2012 11:32 AM PDT

Instead of a secular change in interest rates, gold and energy prices [like we experienced in the 1970's, this time round]*we could well see a sudden, catastrophic shift in these metrics as control is lost across a broad front. This is why it's so important for investors to be properly positioned ahead of that catastrophic shift. [Let me explain.] So said Robert Fitzwilson ([url]www.portolagroup.com[/url]) in edited excerpts from an interview with King World News which can be read in its entirety*here. [INDENT][COLOR=#ff0000]Home Delivery Available! If you enjoy this site and would like to have every article posted on www.munKNEE.com (approx. 3 per day of the most informative articles available) sent automatically to you then [COLOR=#ff0000]go HERE and sign up to receive Your Daily Intelligence Report[/COLOR]. We provide an easy “unsubscribe” feature should you decide to opt out at any time.[/COLOR] [/INDENT]Related Articles: 1. Ayurveda: The Cure for the Virus that Pla...


Pento - Ultimate Collapse & Real Reason Interest Rates Rising

Posted: 24 Mar 2012 09:16 AM PDT

Today Michael Pento accused the mainstream media of misleading the public once again. Pento, who founded Pento Portfolio Strategies, writes exclusively for King World News about the ultimate collapse and the real reason interest rates are rising: "The prevailing notion among the mainstream media and economists is that interest rates are rising because of improving economic growth. But like many of the readily accepted tenets of today's world of popular finance, this too has its basis in fallacy."


This posting includes an audio/video/photo media file: Download Now

Mike Maloney With Christian Garcia GoldSilver.Com – What'S Going On?

Posted: 24 Mar 2012 07:04 AM PDT

from whygoldandsilver:

In this report Mike Maloney discusses his view on this week's recent metal movements and projects he is working on for us.

Christian Garcia discusses:

* Chinese Slowdown
* Dollar Strength Hype
* Bank of America, from fraudster to slumlord
* Banks doing God's work

JP Morgan Finds Obama, And US Central Planning, Has Broken The Economic “Virtuous Cycle”

Posted: 24 Mar 2012 05:18 AM PDT

from Zero Hedge:

In the last few months we have presented various analyses, both ours and those of Goldman and even Jon Hilsenrath, on why one of the core economic empirical relationships: Okun's law, is now broken. Subsequently we presented another parallel line of inquiry – namely that in order to preserve the illusion of a recovery, the Obama administration (with help from the Fed) has engaged in a quality-for-quantity job transfer, where America is creating increasingly more jobs of lower quality (the bulk of which are part-time), which in turn is leading to less proportional personal income tax revenues, and thus to a secular shift in an indicator which is even more important for US economic growth than simply the number of jobs "gained" each month – labor productivity. Today, JPM's Michael Feroli ties these two perspectives together in an analysis that has extremely damning implications for the US, and global, economic growth prospects. In a nutshell, Feroli finds that "Productivity, which used to be procyclical, has now turned countercyclical" which in turn means that "if labor is no longer a quasi-fixed factor of production this may eliminate one type of non-convexity in production, thereby reducing the likelihood that the economy has multiple equilibria and is subject to self-fulfilling prophecies" or said somewhat simpler: "the conditions for self-fulfilling prophesies in the macroeconomy may no longer exist." Still confused: central planning, and the Obama vote grab has killed the "virtuous cycle"… Which in turn means that everything America is trying to accomplish is now a lost cause, as every incremental dollar spent, whether by fiscal and monetary policy, is pursuing an outcome that is now theoretically and practically impossible to achieve!

Read More @ ZeroHedge.com

The Petro Dollar Discussion

Posted: 24 Mar 2012 05:12 AM PDT

from TruthNeverTold:

Part 1:
Part 2:


JP Morgan Finds Obama, And US Central Planning, Has Broken The Economic "Virtuous Cycle"

Posted: 24 Mar 2012 05:07 AM PDT

In the last few months we have presented various analyses, both ours and those of Goldman and even Jon Hilsenrath, on why one of the core economic empirical relationships: Okun's law, is now broken. Subsequently we presented another parallel line of inquiry - namely that in order to preserve the illusion of a recovery, the Obama administration (with help from the Fed) has engaged in a quality-for-quantity job transfer, where America is creating increasingly more jobs of lower quality (the bulk of which are part-time), which in turn is leading to less proportional personal income tax revenues, and thus to a secular shift in an indicator which is even more important for US economic growth than simply the number of jobs "gained" each month - labor productivity. Today, JPM's Michael Feroli ties these two perspectives together in an analysis that has extremely damning implications for the US, and global, economic growth prospects. In a nutshell, Feroli finds that "Productivity, which used to be procyclical, has now turned countercyclical" which in turn means that "if labor is no longer a quasi-fixed factor of production this may eliminate one type of non-convexity in production, thereby reducing the likelihood that the economy has multiple equilibria and is subject to self-fulfilling prophecies" or said somewhat simpler: "the conditions for self-fulfilling prophesies in the macroeconomy may no longer exist." Still confused: central planning, and the Obama vote grab has killed the "virtuous cycle"... Which in turn means that everything America is trying to accomplish is now a lost cause, as every incremental dollar spent, whether by fiscal and monetary policy, is pursuing an outcome that is now theoretically and practically impossible to achieve!

Congratulations central planning - you have just blown your own head off in the latest epic Catch 22. Because this time is never different. 

Feroli lays out the Okun problem quite simply:

Not too long ago Okun's Law was somewhat obscure, familiar mostly only to economists. Recently, however, given the big move down in the unemployment rate, this empirical relationship has earned wider interest among financial and public policy audiences. The decline in the unemployment rate experienced over the past year is in apparent violation of Okun's Law, which links changes in the unemployment rate to changes in GDP. What is curious is that two years ago Okun's Law presented a similar puzzle but with the opposite sign: the rise in the unemployment rate experienced in 2008 and 2009 was in excess of what would have been expected by Okun's Law given the GDP growth shortfall.

 

Okun's Law holds that to reduce the unemployment rate down by one percentage point over the course of a year then GDP growth should be about 2%-pts faster than its long-run trend growth. With most estimates of trend growth in the neighborhood of 2.5%, this implies that it takes growth of about 4.5% for a year to lower the unemployment rate by one percentage point. In the year ending in December, the unemployment rate fell by almost a percentage point, a period in which growth was only 1.6%— not only not significantly above trend, but not above trend at all. To understand this violation of Okun's Law, we return to Okun's original analysis of the issue.

 

One of the bedrock relations of macroeconomics, even more fundamental than Okun's Law, is that aggregate GDP (which we label Y) can be represented as function of the amount of capital (K) and labor (L) used to produce output, along with the overall level of technical progress (A) made in using capital and labor. More specifically, the relation Y=A*K1/3*L2/3 seems to describe US production fairly well. This means that a 1% increase in labor input will raise GDP by 2/3%-pt. If the size of the labor force is constant then a 1%-pt drop in the unemployment rate should increase labor input used in aggregate production by 1/(1-u)%, where u is the unemployment rate. This implies that holding all else equal, a 1%-pt drop in the unemployment rate should increase GDP by about 1/(1-.083)*(2/3)=0.7%, a number well below the 2% boost implied by Okun's Law. The apparent disparity is resolved by the fact that all else is usually not equal: declines in the unemployment rate tend to be correlated with (1) increases in the average workweek, (2) increases in labor force participation rates, and (3) increases in average labor productivity.

Feroli on the labor force participation rate wildcard - nothing but an optical scam to fool the general peasantry into believing that the unemployment rate is dropping, when in reality we are having a historical economic transformation of unprecedented proportions. And call it lost productivity, or a quality outflow of jobs, end result is the same:

The breakdown of correlation (2) has received the most attention recently: instead of increasing, the labor force participation rate has declined even as the unemployment rate has declined. However, Okun himself realized that the correlation of labor usage and productivity was historically the most important reason that the Okun coefficient was so large. The fact that this correlation has gone the "wrong" way over the past few years can explain both why  unemployment increased more than Okun's Law would have predicted in 2008-2009 and why unemployment has come down so much recently. In fact, if the correlation between productivity growth and changes in the unemployment rate that prevailed between 1947 and 1984 held last year, then the decline in unemployment we have witnessed would have been accompanied by GDP growth of around 4.1%, and there would be little left to explain.

 

Output—GDP—equals productivity, or output per hour, times hours worked. As we noted above, growth in productivity, or correlation (3) listed above, has been weaker than what would have been expected given the decline in unemployment. However, the growth in hours worked has been only a little weaker than what would be expected. Although the labor force participation rate, correlation (2), is weaker than what one would have expected given the decline in unemployment, the average workweek, correlation (1), is stronger than what would have been expected. On net, hours worked have not behaved too abnormally given the decline in unemployment—productivity has.

A historic secular shift: productivity - a core component of GDP, is no longer procyclical.

For most of the postwar period productivity was significantly accelerating in booms and slowing in downturns. The most common explanation for this relates to labor market frictions that make labor a quasi-fixed factor of production. For example, if union contracts stipulate a certain level of employment, then in a downturn less output is spread over the same labor "overhead," reducing productivity; the opposite happens in a boom.

 

A variety of micro- and macroeconomic evidence suggests that labor market frictions have declined in recent decades, which can be seen less formally in the rise of temp help employment, the decline of unionization, the rise of internet job search, etc. These factors have made labor more of a variable factor of production, rather than a quas-fixed factor of production that is adjusted only occasionally. This trend has likely led to the end of procyclical productivity. Moreover, this trend is not going away, and so we should not expect the old macroeconomic regularities to reassert themselves.

The conclusion is staggering - everything we know about the economic virtuous cycle is now irrelevant!

The new pattern of productivity growth—no longer cyclical with respect to output and countercyclical with respect to employment—has several important implications. For one, we may continue to see the unemployment rate drop more than Okun's Law implies. Another implication is that the labor share is no longer countercyclical. This also means that profits will be less correlated with improvements in the labor market.

 

A final, somewhat technical, implication is that the conditions for self-fulfilling prophesies in the macroeconomy may no longer exist. The idea that there could exist virtuous/vicious circles between real economic outcomes and confidence (or asset prices, effectively the same thing) was first formally advanced by David Cass and Carl Shell. They referred to these virtuous/vicious circles as "sunspot equilibria;" George Soros dubbed the property "reflexivity." Subsequent applied macroeconomists appealed to the procyclicality of productivity as evidence of the type of increasing returns to production sufficient to generate confidence feedback loops. If labor is no longer a quasi-fixed factor of production this may eliminate one type of non-convexity in production, thereby reducing the likelihood that the economy has multiple equilibria and is subject to self-fulfilling prophecies. While it is hard to say much definitively, it is interesting to observe that over the last two years the economy has been subject to large swings in investor sentiment and asset prices, and yet actual growth outcomes have been remarkably stable.

And there are those who wonder why we detest "central planned" attempts to attain a fake equilibrium more than anything. Luckily, now that the core driver of economic growth has failed just so a centrally planned administration can get 4 more years of "hope and change" it won't be much longer until the wheels finally and terminaly fall off the centrally panned bus tour.


Max Keiser interviews Lars Schall on 9/11 insider trading, German gold reserve secrecy

Posted: 24 Mar 2012 05:03 AM PDT

1p ET Saturday, March 24, 2012

Dear Friend of GATA and Gold:

In his program on the Russia Today network this week, Max Keiser interviewed the German freelance journalist Lars Schall about his research into suspicious financial trading on the eve of the September 11, 2001, terrorist attacks and the secrecy around the location of Germany's gold reserves. The program segment is a little more than 12 minutes long and video of it is posted at Schall's Internet site here:

http://www.larsschall.com/2012/03/24/9-11-insider-trading-and-germanys-e...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


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A Rare Opportunity with Collectible Gold Coins
Whose Premiums Are Far Below Normal

Sovereign debt problems in the United States as well as Europe will worsen this year. The mainstream financial media may never report about the likely inflationary consequences of bailouts and "quantitative easing," nor are they likely ever to recommend tangible assets for financial protection. But at Swiss America Trading Corp. we believe that it is no longer a luxury to own gold and silver coins but rather a necessity.

At the moment the public is showing little interest in Double Eagle U.S. $20 gold coins, so the price premiums above the intrinsic melt values (.9675 ounce of gold in each coin) are historically low. The ratio of price to bullion content for these coins has been 2:1 but today it is only about 1.25:1.

This is a real opportunity. So give us a call or e-mail and we will be glad to discuss the potential of these coins and how to use a ratio strategy to increase your gold ounces without money out of pocket.

In the January edition of his Early Warning Report, Richard Maybury writes: "As they are inherently in very limited supply, I believe that high-quality numismatics will become tulips, eventually rising a thousand percent or more in real terms, when money velocity goes into mid-second stage. In late stage, who knows -- 2,000 percent? 3,000?"

All inquiries will receive without charge (while supplies last) our latest book, "The Inflation Deception," as well as our newsletter "Real Money Perspectives."

-- Tim Murphy, trmurphy@swissamerica.com

-- Fred Goldstein, figoldstein@swissamerica.com

Telephone: 1-800-289-2646

Swiss America Trading Corp., 15018 North Tatum Blvd., Phoenix, AZ 85032

Europe Is Heading For a Crisis in May-June

Posted: 24 Mar 2012 04:50 AM PDT

Since August I’ve been calling for a collapse in Europe. Obviously I’m way early here, largely due to the ECB’s intervention in the markets. I also underestimated the extent to which leaders would push to hold things together. After all, Greece had already received bailouts in excess of 150% of its GDP and still posted a GDP loss of 6.8% in 2011. It’s hard to believe they’d want to accept more austerity measures and more debt.

 

Moreover, political tensions between Greece and Germany had reached the point that Greeks were openly comparing German Chancellor Angela Merkel and Finance Minister Wolfgang Schauble as Nazis while the Germans referred to Greece as a “bottomless hole” into which money was being tossed.

 

Looking back on it, the clear reality was that Germany wanted to force Greece out of the EU but didn’t want to do it explicitly: instead they opted to offer Greece aid provided Greece accepted austerity measures so onerous that there was no chance Greece would go for it.

 

Well, Greece surprised many, including myself, and went for it. And so the EU experiment continues to exist today. However, before the end of this issue I will make it clear precisely why this will not be the case for much longer and why we are on the verge of a systemic collapse in Europe.

 

For starters, unemployment in Greece as a whole is now over 20%. For Greek youth (aged 15-24) it’s over 50%. The country is in nothing short of a Depression.

Indeed, Greece has now experienced five straight years of contraction bringing the total contraction of Greece’s GDP to 17%. To provide some historical perspective here, when Argentina collapsed in 2001 its total GDP collapse was 20% and this was accompanied by full-scale defaults as well as systemic collapse and open riots.

 

With new austerity measures now in place there is little doubt Greece will see a GDP contraction of 20%, if not more. I expect we’ll see other “Argentina-esque” developments in the country as well. Put mildly, the Greek issue is not resolved.

 

The one thing that would change my views here would be if Greece staged a full-scale default. While the political leaders and others view a total default as a nightmare (and it would be for Greek pensions, retirees, and many EU banks), it is only a total default that could possibly solve Greece’s debt problems and allow it to return to growth.

 

Defaults are akin to forest fires; they wipe out all the dead wood and set the stage for a new period of growth. We’ve just witnessed this in Iceland, which did the following between 2008 and 2011:

 

  1. Had its banks default on $85 billion in debt (the country’s GDP is just $13 billion).
  2. Jailed the bankers responsible for committing fraud during the bubble.
  3. Gave Icelandic citizens debt forgiveness equal to 13% of GD.

 

Today, just a few years later, Iceland is posting GDP growth of 2.9%: above that of both the EU and the developed world in general. In plain terms, the short-term pain combined with moves that reestablished trust in the financial system (holding those who broke the law accountable) created a solid foundation for Iceland’s recovery.

 

Now, compare this to Greece which has “kicked the can” i.e. put off a default, for two years now, dragging its economy into one of the worst Depressions of the last 20 years, while actually increasing its debt load (this latest bailout added €130 billion in debt in return for €100 billion in debt forgiveness).

 

Iceland staged a REAL default, and has returned to growth within 2-3 years. Greece and the Eurozone in general have done everything they can to put off a REAL default with miserable results. I’ll let the numbers talk for themselves:

 

Country

2011 GDP Growth

2012 GDP Growth Forecast

Iceland

2.9%

2.4%

EU (all 27 countries)

1.5%

0.0%

17 EU countries using Euro

1.4%

-0.3%

* Data from EuroStat

 

The point I’m trying to make here is that defaults can in fact be positive in the sense that they deleverage the system and set a sound foundation for growth. The short-term pain is acute (Iceland saw its economy collapse 6.7% in 2009 when it defaulted). However, a combination of defaulting and debt forgiveness (for households) can restructure an economy enough for it to begin growing again.

 

However, EU leaders refuse to accept this even though the facts are staring them right in the face. The reason is due to one of my old adages: politics drives Europe, NOT economics.

 

And thanks to the Second Greek Bailout (not to mention the talk of a potential Third Bailout which has already sprung up), we now know that EU leaders have chosen to go “all in” on the EU experiment.

 

Put another way, EU leaders will continue on their current path of more bailouts until one of two things happens:

 

  1. The political consequences of maintaining this strategy outweigh the benefits
  2. The European markets force EU leaders’ hands (hyper-inflation or widespread defaults and the break up the EU).

 

I firmly believe that we will see one of these happen in the May-June window of time. We have a confluence of political, fundamental, technical, and monetary factors occurring in that time period make the possibility of a banking Crisis in Europe higher than at any other point in the last three years.

 

If you’ve yet to take steps to prepare for this, I can show you how: my Surviving a Crisis Four Times Worse Than 2008 report is chock full of information on how to not only survive but thrive during the months to come.

Within its nine pages I explain precisely how the Second Round of the Crisis will unfold, where it will hit hardest, and the best means of profiting from it (the very investments my clients used to make triple digit returns in 2008).

Best of all, this report is 100% FREE. To pick up your copy today simply go to: http://www.gainspainscapital.com and click on the OUR FREE REPORTS tab.

Best Regards,

Graham Summers

 

 

 

 

 

This Past Week in Gold

Posted: 24 Mar 2012 04:39 AM PDT

Summary: Long term - on major buy signal. Short term - on sell signals. Only GLD and CEF are tradable upon new signals and set ups as long as their configs remain bullish. Read More...



Jim Rogers : Gold is taking a well deserved rest but is not in a Bubble

Posted: 24 Mar 2012 02:45 AM PDT

Jim Rogers : Gold is certainly not in a bubble ,...

[[ This is a content summary only. Visit my website http://goldbasics.blogspot.com for full Content ]]


This posting includes an audio/video/photo media file: Download Now

Biderman Montage - Still Bullish due to Government Rigging, But!

Posted: 24 Mar 2012 01:59 AM PDT

Trim Tabs chief Charles Biderman's message has not changed - yet. He more or less says that people have to stay bullish with stocks while the Federal Reserve and the U.S. government is "rigging the markets" with about $5 trillion in pump priming in order to insure an Obama reelection.  But he continues to sound a longer term warning – the markets are levitating only because of monetary stimulus and massive money printing. – It ain't real, folks; It's unreal.  ... Continued...


Below is a montage of messages from Mr. Biderman courtesy of the magic of YouTube. 


Charles Biderman March 9, Stock Markets Rigged by the Federal Reserve to assist Obama Reelection

 

Source: YouTube

http://www.youtube.com/watch?v=9u_v9bftQ2A&feature=player_detailpage 

March 20, Third Consecutive False Dawn for Stocks & Economy


Signals unfavorable, including insider selling spike higher. Remains bullish for now but not for long.  Don't get too far from the exit.  


 

Source: YouTube
http://www.youtube.com/watch?list=UU_FouojmbzN_jwBVkroDQBw&v=z79SLtijOQM&feature=player_detailpage


March 22 Rising Stock Prices & Investors Believing in Miracles

Markets totally dependent on Central Bank Manipulation and people continue to believe in miracles.  No worries this election year, but then what?  At some point, without a real economic recovery, even Wyle E Coyote has to fall back to earth.


 

Source:YouTube
http://www.youtube.com/watch?feature=player_detailpage&v=Xkm1ZUba7D8&list=UU_FouojmbzN_jwBVkroDQBw

Alasdair Macleod: Asia's golden future

Posted: 24 Mar 2012 01:56 AM PDT

9:55a ET Saturday, March 24, 2012

Dear Friend of GATA and Gold:

In his new essay at GoldMoney, economist and former banker Alasdair Macleod lays out "Asia's Golden Future," the development of a trade-settlement currency system allowing the continent to escape the West's system. It's posted here:

http://www.goldmoney.com/gold-research/alasdair-macleod/asias-golden-fut...

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.


ADVERTISEMENT

A Rare Opportunity with Collectible Gold Coins
Whose Premiums Are Far Below Normal

Sovereign debt problems in the United States as well as Europe will worsen this year. The mainstream financial media may never report about the likely inflationary consequences of bailouts and "quantitative easing," nor are they likely ever to recommend tangible assets for financial protection. But at Swiss America Trading Corp. we believe that it is no longer a luxury to own gold and silver coins but rather a necessity.

At the moment the public is showing little interest in Double Eagle U.S. $20 gold coins, so the price premiums above the intrinsic melt values (.9675 ounce of gold in each coin) are historically low. The ratio of price to bullion content for these coins has been 2:1 but today it is only about 1.25:1.

This is a real opportunity. So give us a call or e-mail and we will be glad to discuss the potential of these coins and how to use a ratio strategy to increase your gold ounces without money out of pocket.

In the January edition of his Early Warning Report, Richard Maybury writes: "As they are inherently in very limited supply, I believe that high-quality numismatics will become tulips, eventually rising a thousand percent or more in real terms, when money velocity goes into mid-second stage. In late stage, who knows -- 2,000 percent? 3,000?"

All inquiries will receive without charge (while supplies last) our latest book, "The Inflation Deception," as well as our newsletter "Real Money Perspectives."

-- Tim Murphy, trmurphy@swissamerica.com

-- Fred Goldstein, figoldstein@swissamerica.com

Telephone: 1-800-289-2646

Swiss America Trading Corp., 15018 North Tatum Blvd., Phoenix, AZ 85032

Support GATA by purchasing DVDs of our London conference in August 2011 or our Dawson City conference in August 2006:

http://www.goldrush21.com/order.html

Or by purchasing a colorful GATA T-shirt:

http://gata.org/tshirts

Or a colorful poster of GATA's full-page ad in The Wall Street Journal on January 31, 2009:

http://gata.org/node/wallstreetjournal

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16


ADVERTISEMENT

Free Month Subscription to Market Force Analysis for GATA Supporters

Market Force Analysis is a unique, patent-pending approach to commodity market analysis. An algorithm has been developed to extract supply and demand weightings from futures market data. The difference between supply and demand is the market imbalance that is called "market force," so named because it is what drives price. It brings clarity to past market action and predicts market trends. Because it is derived from accurate futures market data it is not subject to the errors inherent in macro-level estimates of supply and demand.

Learn more here:

https://marketforceanalysis.com/About_MFA.html

Market Force Analysis focuses on short-term (15 days) and medium-term price predictions to help both short-term traders and long-term investors understand market moves and benefit from the generated prediction of prices. To read subscriber comments that show how much the service is appreciated, visit:

https://marketforceanalysis.com/Testimonials.html

The MFA service has been pioneered by market analyst and Gold Anti-Trust Action board member and researcher Adrian Douglas.

The Market Force Analysis premium service provides:

-- A bi-weekly report.

-- Access to the MFA hot list of junior mining stocks derived from analysis of more than 800 mining stocks. The MFA hot list consistently outperforms well-known mining share indices like the HUI, GDX, and GDXJ.

-- E-mail alerts about actionable trades.

-- E-mail updates with important information.

To obtain your 1-month free trial subscription to the Market Force Analysis letter, e-mail info@marketforceanalysis.com and put "MFA Free Trial" in the subject field.

Triple Lutz Report--Is Justice Coming for Jon Corzine--Episode 175

Posted: 24 Mar 2012 01:46 AM PDT

Late Friday afternoon, the time when they love to release damaging news in the hope that it will get lost in the weekend spin cycle, a rehashed disclosure came out about "Knows Nothing" Jon Corzine. A memo had been located, which showed that Corzine had specifically directed that client funds be used to cover an MF Global bounced check to JP Morgan Chase. While this was a partial rehash, in light of recent findings, it adds clarity to Corzine's actions when MF hit the fan. An assistant treasurer Edith O'Brien of the MF sent the email as part of a CYA effort, to avoid being scapegoated by Corzine, for the theft.

She states that JC(Jon Corzine) directly ordered $200 million in "segregated" customer funds be used to pay the overdraft. Of course Corzine is saying that he had no idea client funds were used for this purpose. But one must doubt the veracity of this claim. Would a mid level employee take it upon herself to raid the customer's accounts, to stave off MF's collapse? A good question that needs to be answered before a grand jury. Perhaps an offer of immunity or a reduced sentence will help jar O'Brien's memory.

Go to KerryLutz.com and sign up to immediately receive your free Financial Survival Toolkit and the Weekly Newsletter.


This posting includes an audio/video/photo media file: Download Now

The Fed, Gold, Stock Market and the Retail Investor Mindset

Posted: 23 Mar 2012 10:17 PM PDT

The recent rally has been breathtaking, however the majority of investors have missed out on a large portion of these gains as significant levels of cash have been either moved to bond funds or taken out of equity markets consistently during this rally. Let’s face it, financial markets around the world are not what they once were. U.S. equity markets in particular are manipulated by high frequency trading which is wreaking havoc in the marketplace in terms of potential short term volatility expansions and “flash crashes” that can be isolated to one underlying stock.


Latest article posted at GoldMoney

Posted: 23 Mar 2012 09:50 PM PDT

The following article has been posted at GoldMoney, here.         

Asia’s golden future

2012-MAR-24

Image001
For most of the last century the default currency for international settlements has been the US dollar. This has given America ultimate power over international trade. In recent months, the US wielded this power against Iran, making life extremely difficult for all Iranians. Importantly it has interrupted oil trade with India, China and Japan. Furthermore SWIFT, the Belgian-based international banking settlement agency, has halted all Iranian interbank transfers.

The sharp lesson for nations in Asia is that their own trade security is best served by having an alternative settlement medium to the dollar and other Western currencies. This function historically belongs to gold, but that is a last resort for central banks, and besides, many Asian central banks are gold-poor. This plays into China’s hands.

China is increasingly keen to provide her own currency for trade settlement purposes. She sees the dollar-monopoly as an important security threat, which is why she has in the past sought alternatives. She is now cautiously promoting her own currency for this role and is developing an offshore renminbi capital market in Hong Kong. At the same time she is evolving from manufacturing consumer goods towards capital goods, for which Hong Kong is the natural financing centre.

Her targeted growth-markets are other rapidly developing economies, as well as the whole Asian continent, and no longer the US and Europe. One of her key strategies through the Shanghai Cooperation Organisation is to build a pan-Asian security and trade bloc in partnership with Russia, and the last element of this 10-year old plan is to settle cross-border trade without using the West’s financial system. China expects to play a major part with her currency, which explains why she is adding to her gold reserves. The relevance of gold is that China will have to show to the people of Asia that her currency has better long-term prospects than the dollar, which goes some way to explaining why so many of the countries associated with the SCO are now also accumulating the metal. This analysis is confirmed by a leaked cable from the US Embassy in Beijing as long ago as April 2009 that can be seen in GATA’s database. As Iran and India also have SCO Observer status they are part of China’s grand strategy, and they have also been buying gold.

At some stage China will need to restate her gold reserves, and given this has to be credible rather that actual, she will probably release a suitable figure showing her to be the second largest holder behind the US. However, she is treading carefully, because she has to extricate herself from monetary relationships with the West, which ideally should be a gradual process: a sudden withdrawal could lead to a global systemic collapse and undermine her own dollar investments.

The question now arises as to whether an escalation of US pressure on Iran and her oil-trading partners will provoke an announcement from China about her gold. In any event there is bound to be a growing realisation of why gold is central to the economic futures of China, Russia and the whole of Asia. China’s financial and economic objectives will completely wrong-foot the major central banks that are committed to the demonetisation of gold.

Tags: Asia, buy gold, China, dollar, USA

Author: Alasdair Macleod

Alasdair Macleod

macleod@financeandeconomics.org

www.financeandeconomics.org

Randgold Highlights Mining Risk as Turkey Seeks Gold Bullion

Posted: 23 Mar 2012 09:25 PM PDT

On Thursday, gold prices declined to $1,642.50 per ounce, while silver fell nearly 90 cents to settle at $31.35. Both precious metals have declined over the past few weeks. While short-term corrections in bullion prices can be frustrating for investors, the pullback in miners has been even more pronounced. In the past month, the Market Vectors Gold Miners index declined almost 11 percent, while the Market Vectors Jr. Gold Miners index has fallen 14 percent. However, both indices fail to compare to the steep sell-off seen in Randgold Resources.


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