saveyourassetsfirst3

HAS QE3 ALREADY BEGUN? GOLD & COMMODITIES MAY BE SAYING YES.
Silver 9-11: How can we profit by it?
An In-depth Interview with Frank Giustra
ECB: gold and gold receivables remain unchanged
Gold Mines In South Africa See Strikes As Industrial Unrest Spreads
Really going out on a limb there, CNBC: "Gold to break $1,700."
Earnings Preview: Dollar General Reports On September 5
Mario Draghi might not be too worried about disappointing investors this week
Bernanke raises hopes
Scotiabank Says: “No More Silver”
Gold and Silver Market morning, September 03 2012
Lynn Parramore: The Secret of the Sauce: What Democrats Need to Know About North Carolina’s Kick-Ass Populism
Links for 2012-09-02 [del.icio.us]
Iron Ore Prices Sink Like a Stone
Opening the mint to gold and silver - then and now
China, Germany to Settle More Trade in Yuan, Euros; What does That Mean for Gold, the Dollar ?
$32 Thirty Two $32
Bill Still: The Gold Solution is a Lie
S7: Silver Get Real
Why does the US Gov. still own gold?
Gold, Silver, and Debt
U.S. Dollar Entering Its Terminal Phase

HAS QE3 ALREADY BEGUN? GOLD & COMMODITIES MAY BE SAYING YES.

Posted: 03 Sep 2012 11:44 AM PDT

According to recent statements by Bernanke, the Fed stands ready to act with further easing of monetary policy (QE3) if economic conditions warrant it. But let's face it, because the Fed has never been audited we only receive the data they deem fit to publish. We know the government lies to us about inflation, unemployment, GDP, etc. Does anyone really believe the Fed is publishing true accounting numbers? I'm starting to suspect Bernanke has already begun the next round of quantitative easing.

Politically its a hot potato and impossible to publicly announce. But there have been enough hints (the last Fed minutes maybe the loudest) that it is clear that Bernanke intends to print. Hey, we are in a currency war and one can't win the war if you don't shoot your guns!

First case in point. The CRB exploded out of its three year cycle low in June just as I had predicted. Oil is already knocking on the door of $100 a barrel again. Grains in many cases have rallied 50% or more and show no signs of reversing. As a matter of fact, the CRB is showing no inclination to even retest the summer bottom. The complete failure up to this point of commodities to retest the three year cycle low is of itself a warning bell that something has changed. I think we can all agree that the global economy didn't all of a sudden ratchet into high gear, creating a surge in demand. Barring that, the only thing that would generate this kind of explosive move without even a hint of a correction would be another round of massive liquidity injections.

Another odd development is the action in bonds. A month and a half ago the bond market started to discount the inflationary surge as commodities launched out of their three year cycle low. Mysteriously, two weeks ago, interest rates started to tank.

One has to ask themselves, who in their right mind would be buying bonds with a negative yield in a rapidly accelerating inflationary environment?

This sudden reversal in interest rates is another warning bell, in my opinion, that QE3 may have already begun, and Bernanke is already buying bonds in the attempt to hold interest rates under 2%.

The next confirmation will come from the stock market. As we have seen in the past, the daily cycle in the stock market has tended to stretch far beyond its normal timing band (35-40 days) during periods of quantitative easing. The current cycle is due to bottom right around the next Fed meeting on September 13. If stocks are still rising with no clear decline into a cycle low by mid-September that would be a pretty clear sign in my opinion that Bernanke is lying to us and QE3 has already begun.

If I am correct then the penetration of the three year cycle trendline by the dollar index on Friday is going to be a harbinger of hard times ahead for the world's reserve currency.

As many of you may recall I've been expecting the three year cycle low in the CRB to correspond fairly closely to a top in the three year cycle on the dollar index. So far the rally out of the May 2011 three year cycle low has been very weak. The dollar still isn't close to moving above the 2008-2011 three year cycle high, and has now formed a monthly swing.

The dollars three year cycle is now at risk of having topped in only 14 months in a left translated manner. If so, this greatly increases the odds that we will see the dollar index fall below 72 and probably below 70 by the time the next three year cycle bottoms in mid-2014.

If the dollar's current daily cycle continues to drop all the way into the FOMC meeting on September 13, then it will be unlikely we see any significant corrective action in commodities or stocks for the next two weeks, and at that point I am going to seriously entertain the idea that the Fed is lying to us and has already begun the next round of bond purchases.

The big question though, is how do we invest based on this possibility?

First off one doesn't want to be short if there is even the slightest risk that the Fed has resumed bond purchases. Second, one has to ask themselves which sector stands to benefit the most from another massive increase in liquidity?

The obvious answer is commodities. But most commodities have already rallied quite significantly as we've seen with the grains and energy. That doesn't mean there isn't more upside, I'm sure there is. But I think much larger percentage gains are going to be made in the precious metals as price and breadth are still quite depressed in this sector.

The metals are now set to "catch up" as traders take profits on some of their other commodity positions that have already generated large gains, and look to put that capital back to work in undervalued areas with more upside potential (precious metals, especially miners).

It's been my theory for several months now that we saw a B-Wave bottom for gold back in May.

With the recent breakout of the frustrating consolidation zone that always follows a B-Wave bottom, I think gold is now ready to begin the initial phase of the next C-wave advance.

Gold is now entering the high demand fall season. It has been my expectation that gold will generate its first test of the all time highs sometime this fall. If my intermediate cycle count is correct (explained in depth in the nightly premium newsletter) we should see a move above the A-wave top of $1800 and a rally close to $1900 by late October or early November. At that point the intermediate cycle will enter the timing band for the next corrective move, which should prevent gold breaking out to new highs

Following an intermediate degree decline in late November to mid December the breakout to new highs should occur during the next intermediate cycle this spring, followed by a retest of that breakout at the next intermediate bottom.

Yes I know these daily and intermediate cycle counts are some what complicated and beyond the scope of this short article. I do cover them extensively in my premium newsletter. Suffice it to say that cycle analysis lays a general guideline for when to expect major bottoms, and to a lesser extent tops. I like to think of it as a tool that signals when to step on the gas and when to start tapping on the brakes.

While I don't think gold has much chance of moving above $1920 this year, conditions are definitely in place for a significant rally in the sector over the next couple of months. Miners, and silver in particular, have the potential to generate some pretty respectable gains over the next 2-3 months.

SMT premium newsletter.

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

Silver 9-11: How can we profit by it?

Posted: 03 Sep 2012 10:41 AM PDT

Silver 9-11, How can we profit by it ? If we have a major run up in the industrial precious metals it may be wise to sell a good portion before a major pullback occurs sometime in 2013.

from syyenergy7:

Numerology may play some role in coming events for the end of 2012. Major movers of the world believe in it and it may be that some planned events occur due to certain dates.

~TVR

An In-depth Interview with Frank Giustra

Posted: 03 Sep 2012 09:59 AM PDT

Mining magnate and film mogul Frank Giustra gives an in-depth interview to Cambridge House' Tommy Humphries in the video below.

Topics include gold, the Fed, structural problems in the U.S. political system, inflation, deflation, crisis investing, Europe, banks, attitudes of the people, key words in the public discourse, debt in the U.S., quantitative easing, moral hazard, important changes to come, political conflict of interest, resource stocks, commodity prices, China, market confidence, European money printing, junior exploration companies in particular and a lot more.

In the long run the people who get destroyed by the broken system we live under are the people who have savings, Giustra says. Since the system is inherently un-fixable, we might as well go along for the ride and profit on the inevitable inflation ahead.

Mr. Giustra says in the future the world is almost certainly heading for more money printing and more inflation. Avoiding cash, bonds and fixed income securities and focusing on gold and stocks is how one positions to benefit from that scenario. Currency debasement is the only choice left to the central planners and that is fertile ground for gold.

Not until everyone wants to own gold will it be time to sell it.

The resource market is in the worst state Giustra has ever seen it in 34 years of investing and trading stocks. "I think it will turn around. What people might be losing sight of is that people usually connect irrational and stupid market behavior with peaks of markets, but it takes place at the bottom of markets too. And, it's just as bad. When you think about it fear is a much greater, stronger emotion than greed. The sense of hopelessness that people have about the resource sector right now, is something that you know, if you are logical about it, it will change – it's not going to stay like this forever. So I think you have to sometimes – if you lose complete faith, you have to give your head a shake, … you realize that this is really, really bad, but guess what – it will change. And the other thing you have to understand is that there is a lot of cash out there in the world – a lot of cash sitting on the sidelines – trillions of dollars of cash and it eventually has to go somewhere and it will go somewhere, it can't stay in cash forever." Frank Giustra.

Giustra's criteria for picking juniors are simple. Great assets, great management, grossly undervalued and most importantly able to weather this storm without heavy dilution. "I've done my homework and chosen my companies and I've invested a significant amount in a number of these companies. … If I were an investor out there I would really start to think about the fact that this (bear market) will change. … Pick right and sit tight," Frank said, "but you might have to have a lot of patience."

Spend the better part of an hour with a very successful investor and deep thinker in the video below. We have a kinship with Mr. Giustra in the form of a particular book he mentions toward the end of the discussion.* For those who have not yet had the pleasure of reading it, we do indeed highly recommend making a note of it and ordering either the book itself or the book on tape version (for those with a reading aversion, but a hunger to hear great thoughts). We also highly recommend giving the book, as an important life-changing event to young people, especially those near the end of their collegiate experience.

Source: Cambridge House via YouTube
http://www.youtube.com/watch?feature=player_embedded&v=9o30gNfPq_k

Thanks to Joe Martin at Cambridge House for the link. Our complements to Tommy for a worthwhile interview. We want to see more of these, Mr. Humphreys.

*The book we are referring to is the first of the two books mentioned although both books are worthwhile.

ECB: gold and gold receivables remain unchanged

Posted: 03 Sep 2012 08:06 AM PDT

Gold Mines In South Africa See Strikes As Industrial Unrest Spreads

Posted: 03 Sep 2012 07:18 AM PDT

gold.ie

Really going out on a limb there, CNBC: "Gold to break $1,700."

Posted: 03 Sep 2012 06:53 AM PDT

$1,700 is all of $10 away.

Gold to Break $1,700/Ounce Level: Analysts

By Holly Ellyatt | CNBC – 2 hours 42 minutes ago
@cnbc on Twitter

Gold will break out of a narrow band of trading in which the precious metal has been stuck for 12 months and will head towards $1,700 an ounce or higher as central bank moves and production problems increase the demand for gold, analysts told CNBC.

Priced in euro terms, gold posted its highest close of 2012 on Friday after the Federal Reserve's Chairman Ben Bernanke left the door open for a further round of quantitative easing (explain this) in a highly-anticipated speech on Friday.

As investors pinned their hopes on hints of further QE, spot gold (Exchange:XAU=) rose nearly 5 percent over the past two weeks, hitting a five-month high of $1,692.71 on Friday, a rise of up to $40.
Gold has risen 70 percent between December 2008 and June 2011, after two rounds of QE by the Fed totaling $2.3 trillion, according to Reuters.

Phil Roberts, technical analyst at Barclays Capital told CNBC that while central banks in Europe and the U.S. don't act to further stimulate their economies, gold remained attractive as a safe haven.
After a 12-month consolidation phase, we should expect the gold price to continue on its upwards trend, he said.

"Last Friday, priced in euro terms, gold posted its highest close of the year," he told CNBC, emphasizing his point on an "Ichimoku Cloud", a chart used in technical analysis which identifies market trends and direction.

"What we're seeing now is gold pushing against the top of the cloud (above the middle of the range) pushing beyond $1,700 an ounce and there's another 100 dollars to the topside quite easily," Roberts said.

"This is a good time for gold," he added, agreeing with analysts' predictions that a breakout for precious metals was imminent.

"There is one more level to break out, a couple of retracement levels and the top of the weekly cloud [to break out], but once you get above that $1,700 level you've got a bit of clear water and there should be some follow-through."

Ned Naylor-Leyland, Investment Director at asset management firm Cheviot, told CNBC he was surprised at the rally, but believed it would continue.

"Personally, I was a little surprised at the size of the move but it's now in technical breakout mode."
Gold's rebound in the face of further monetary stimulus, still 20 percent off highs seen in 2011, has been forecast as short-lived, though Naylor-Leyland disagreed for several reasons.
"I'd say the rebound is just starting," he said. "If you look at the charts we're literally just back into a technical rally phase. In fact, we haven't been solidly for a year...so let's see where we go from here."
He added that the higher gold price would also be sustained by the rising costs facing mining companies in terms of extraction and wage labor costs.

"There's no doubt there's a big problem. Input costs have been rising [and] the gold price hasn't kept up with it...The marginal cost of production is not at all helpful for the major gold producers [as well as] wage input problems for the big companies."

Speaking about a potential return to a gold standard - to link the dollar (Exchange:.DXY) to gold - that the Republican party are making a part of their policy (a standard that was last axed by President Nixon (link)during the oil crisis in 1971) Naylor-Leyland said it would need serious consideration and could "open up a can of worms untouched for 40 years".

http://finance.yahoo.com/news/gold-b...3Rpb25z;_ylv=3

Earnings Preview: Dollar General Reports On September 5

Posted: 03 Sep 2012 06:11 AM PDT

By Vytautas Drumelis:

Dollar General Corporation (DG) is scheduled to report its Q2 2012 results on September 5, 2012, before market opens. The Street expects EPS and revenue of $0.60 and $3.82B, respectively.

In this article, I will recap the historical results of the company, its latest EPS estimates vs. surprises, the latest news from Dollar General Corporation and the news from its closest competitors.

Click to enlarge

Recent EPS Actuals vs. Estimates

The company has met or beaten analysts' estimates in the last three quarters. In the last quarter, it reported $0.87 EPS, beating analyst estimates of $0.82.

The consensus EPS estimate is $0.60 based on 23 analysts' estimates, up from $0.48 a year ago. Revenue estimates are $3.82B, up from $3.45B a year ago. The median target price by analysts for the stock is $60.00.

Average recommendation: Overweight

Source: Marketwatch

Analyst Upgrades and Downgrades

On June 28, 2012, Avondale reiterated Mkt

Complete Story »

Mario Draghi might not be too worried about disappointing investors this week

Posted: 03 Sep 2012 05:33 AM PDT

As markets look for the European Central Bank president to unveil details of his bond-purchase program on Sept. 6, Italy and Spain are showing little willingness to request aid from Europe's bailout fund -- a pre-condition for the ECB to start buying their debt. A jump in bond yields may remind governments that they need to act first...

Read

Bernanke raises hopes

Posted: 03 Sep 2012 04:15 AM PDT

Gold and silver prices surged on Friday, as Federal Reserve Chairman Ben Bernanke launched a spirited defence of the Fed's quantitative easing efforts at his Jackson Hole symposium speech. ...

Scotiabank Says: “No More Silver”

Posted: 03 Sep 2012 04:01 AM PDT

Scotiabank Tries to Talk SilverDoctors OUT of Buying Physical Silver!

Doc from SilverDoctors.com informs us that while trying to acquire enough physical silver to fill a 7-figure order, the Silver Doctors contacted Scotiabank in Canada and were promptly scolded for trying to get one of their well-heeled investors into the silver market.

from sgtbull07:

Scotiabank informed Doc that "the silver market is far too small" for wealthy investors and then tried to talk the Silver Doctors out of trying to fill their physical silver order. We also talk about silver's fast pace to $32, $35 and back to $40. "Anyone who gets in in the low $30′s will be very glad they did in a few years," Doc says, "We haven't seen anything yet."

~TVR

Gold and Silver Market morning, September 03 2012

Posted: 03 Sep 2012 03:00 AM PDT

Lynn Parramore: The Secret of the Sauce: What Democrats Need to Know About North Carolina’s Kick-Ass Populism

Posted: 03 Sep 2012 02:00 AM PDT

Lynn Parramore is an AlterNet contributing editor. She is cofounder of Recessionwire, founding editor of New Deal 2.0, and author of 'Reading the Sphinx: Ancient Egypt in Nineteenth-Century Literary Culture.' Follow her on Twitter @LynnParramore. Originally published at AlterNet.

A native explains how the people of North Carolina have been giving hell to fatcats for over 300 years.

Stretching past scrubby pines and open fields where tobacco once grew, Highway 70 East guides you to a low-slung, red-roofed building where the scent of smoldering oakwood hangs thickly in the air. You have reached Wilber's, the High Church of old-school barbecue, where whole hogs are slow-cooked over coals, doused with red-pepper vinegar and served to locals with tar-thick accents.

On the wall hangs a shrine to a beloved politician, whose death has erased neither his legacy nor the fond feelings of the octogenarian owner. The man remembered is not Jesse Helms, the segregationist right-winger who symbolized North Carolina to the rest of America for over a quarter of a century.

The face you see is Franklin Delano Roosevelt. Taxer of fatcats. Regulator of banks. Friend of the worker and the farmer. Checker of unchecked capitalism.

Proprietor Wilberdean Shirley is a diehard Democrat, and his love for FDR is not unusual in these parts, where old-timers remember how power lines dragged through swamps and rivers brought refrigerators, electric stoves, washing machines, and water pumps. They recall the radio crackles that wafted the outside world into farmhouse kitchens, drawing city and country values closer together. FDR's programs set the stage for military bases, public health triumphs, accelerated industrialization and desperately needed jobs.

My granddaddy, a tobacco farmer, particularly prized his "two seater" – a deluxe outhouse constructed courtesy of the Civilian Conservation Corps to combat the hookworm scourge.

The Jesse Helms cartoon of North Carolina is familiar: an anti-union, private enterprise-worshipping backwater where racism and religious bigotry run amok. And it has its truth, evidenced in last spring's vote in favor of a constitutional ban on gay marriage, punctuated by hate-bombs from preachers who suggested, among other things, that homosexuals be left to die behind electric fences.

But there's a special ingredient in Tar Heel politics that the state's establishment – first, wealthy planters, and later, industrialists and corporate titans of the New South – have repeatedly ignored at their peril.

Unique in Dixie, North Carolina has a populist tradition going back to the 1670s, when rebels led by John Culpeper reacted to the proprietary governor's attempt to enforce the restrictive British Navigation Acts by tossing him in prison and setting up their own legislature, which lasted two years. With a kick as potent as red-pepper vinegar, this insurgent current has risen up again and again to punish elites who overplay their hands. If your political coalition fails to reckon with its enduring power, you'll end up teetering between chronic instability and full-throated conservative reaction.

The Democrats may want to ponder this history to avoid repeating a very old mistake as they roll into Charlotte for September's nominating shindig.

Ornery, Radical Tarheels

Radicals found their way to the home state of Billy Graham and Jesse Helms from the very beginning. They set up camp mostly in the interior, where they vexed the Anglican aristocrats of the Tidewater region. Attracted by the colony's religious freedoms, Quakers preaching non-violence and spiritual equality between men and women quickly seized the political reins. Aghast, the Anglicans eventually wrestled them back, but until 1800 the Friends were pretty much the only organized religion around, with the exception of Moravian dissenters who shockingly practiced common ownership and profit-sharing.

The Anglicans eyed these and other backcountry "enthusiasts" with alarm. Might these nonconformists take to calling out abuses of power?

They might, and they did. The Occupiers of their day, Protestants of various "New Light" sects rebelled against the royal government's inequitable taxation in the War of Regulation. In the year 1770, in a dress rehearsal for the Revolution, a mob snatched a corrupt county officer by the heels and dragged him down the stairs, bouncing his head on every step. They chucked another from the window of his house.

The planter class kept the upper hand, but even its stars had to bow to the state's radically contrarian sentiments. The revolutionary hero Thomas Burke asserted both strong resistance to arbitrary power and ornery individualism when he insisted that the Articles of Confederation expressly recognize state's rights. Later, North Carolina's suspicions of manipulative elites helped make it the second last state to accept the Constitution.

Many a Tar Heel felt equally ambivalent about the Confederacy. The state was the last to secede, and western farmers, rightly suspecting that the conflict was a rich man's war and a poor man's fight, took to draft dodging, desertion, tax evasion, and even open support of the Union. In the east, Henry Berry Lowry, a Native American "free person of color," led an outlaw gang that raided plantations and launched guerilla attacks on the militia. The legendary "Robber Chief" continued to steal from the wealthy after the Civil War, concluding that the new Reconstruction Republican government could not be trusted any more than the one it replaced.

Insurgents v. the Establishment

During the Civil War, soldiers on both sides took turns looting John Green's little factory in Durham and got a taste for his "bright leaf" tobacco. In the decades after, Washington Duke and his son Buck blazed their way to a near worldwide monopoly of the tobacco business. Spreading out alongside the mighty "Tobacco Trust," a network of railroads linked the state to the rest of the nation. Commerce began to transform North Carolina's agricultural, rural profile into an industrial and urban one, with political power shifting from east to west as towns exploded along the tracks from Raleigh through Greensboro, Winston-Salem to Charlotte.

The high-handed rapacity of the corporate chieftains reminded many North Carolinians of the old slave owners. As farm prices buckled and industrial conflicts spread, the spirit of John Culpeper and the Regulators reawakened. First the Knights of Labor and then the Populist Party traumatized the state political establishment.

In the mid-1890s, a "fusion" ticket of populists and Republicans, with key support from black leaders, won the legislature and elected not only the governor, but both U.S. senators. Recoiling in horror, conservative Democrats rallied a vast umbrella coalition of planters and industrialists to crush the insurgency with a mix of violence and bile-spitting racist appeals in the election of 1898. The Republican Party was reduced to a pathetic shell as the winners disenfranchised nearly all blacks and most poor whites through poll taxes, grandfather clauses and bare-knuckles brutality. By 1924, voter turnout, which stood at 85.6 percent in 1896, had plummeted to 35.8 percent in the presidential elections. In state elections, the Republican Party all but vanished. Democratic primaries were the only real contests. [See: Walter Dean Burnham and Thomas Ferguson, Voting in American Elections: The Shape of the American Political Universe Since 1788 (Academica Press, 2009)].

But even this brutal regime could not survive without tolerating strident insurgent voices. The first wave of critics was heavily compromised by the Jim Crow system, but its searing indictments of the new corporate elites were often startlingly direct. State Supreme Court Chief Justice William Clark supported women's suffrage and – very cautiously — black economic empowerment; battling the railroads and the Dukes' tobacco trust as he issued pointed calls for "socialized democracy." Even Josephus Daniels, whose Raleigh News and Observer stoked the white supremacy that helped conservative Democrats beat back the Populists, filled his paper with reports of the Dukes' tax dodging and mistreatment of farmers.

Once again North Carolina politics began to resemble a clash of two powerful weather fronts. Progressives grew bolder in the twenties, at first in the enclaves of the state's colleges. At Wake Forest, liberal president William Louis Poteat mounted a vigorous defense of evolution. The University of North Carolina blossomed into a major intellectual center, as historian Frank Porter Graham and others encouraged the first stirrings of a revived labor movement. Fearful of another populist upsurge, major East Coast institutions like the Rockefeller Foundation lent support to these islands of enlightenment. Their graduates sprang onto the national literary scene heaping scorn on southern backwardness — Thomas Wolfe in Look Homeward Angel and Wilber J. Cash in his classic The Mind of the South.

Appeals to economic fairness and mistrust of moneymen were clearly appealing to ordinary North Carolinians. But the old order had a significant advantage: It was the old order. When country folk listened to radical speakers, they heard religion ridiculed, patriotism blasted and racial equality proclaimed. Talk of treason and atheism alienated people who lacked basic necessities and wanted to hear about how to improve their welfare.

In May of this year, when the 93-year-old Billy Graham declared from his mountaintop retreat near Asheville that God did not wish gays to marry, his call was duly heeded. So it went in the '20s, when evangelicals aligned with the conservative Democrats cautioned rural people to reject the "pinkos," organizers and evolutionists in favor of spiritual salvation.

In 1928 the Democratic Party monolith finally cracked when conservative leader Senator Furnifold Simmons backed Republican Herbert Hoover instead of the Catholic, anti-Prohibition Al Smith. His apostasy cost Simmons his iron grip on the party, and soon a Democratic faction led by textile magnate O. Max Gardner emerged to challenge the old guard. Political scientist V.O. Key described this new current as "Progressive Plutocracy." Some of its progressivism reflected business desires for cautious modernization, but much stemmed from the realization that power depended on at least lukewarm support from the real progressives.

The New Deal and Beyond

When the Great Depression struck, evangelical defenses of the old order palled in the face of farm bankruptcies and soaring unemployment. The Roosevelt administration's relief efforts and push to modernize the South during World War II galvanized more liberal Democrats like W. Kerr Scott, a pro-Truman New Dealer who defeated the Progressive Plutocrats in the 1948 governor's race. He appointed Frank Graham, by then the president of UNC, to fill the senate term left open by the death of the incumbent.

Graham narrowly lost his effort to win reelection in his own right in an epic red-baiting battle featuring a young Jesse Helms enlisted on the other side. Graham's defeat and the labor movement's failure to organize the South put the latter-day incarnations of the Progressive Plutocrats back in the saddle. But the Holy Grail of power was out of reach without genuine progressives. Garnering support from eastern liberal foundations, the more progressive parts of the national Democratic Party, and eventually key civil rights activists, these business Democrats pushed back against reactionary forces.

In the '50s and '60s, leaders like Luther Hodges and Terry Sanford championed industrial development and investments in education and various social projects. Their records, especially Hodges', were hardly stellar, but these men refused to stoke the racial violence breaking out in other parts of the South. The business moguls who supported them were shrewd enough to see that having North Carolina burn like Mississippi would be inconvenient for the bottom line.

Progressive Christians in the state following a social gospel tradition of inclusiveness and equality picked up the thread of religious dissent. In 1958, the liberal firebrand W.W. Finlator led Raleigh's Pullen Memorial Baptist to embrace all races. Over a tenure that stretched into the 1980s, he gave passionate sermons calling for racial equality, women's rights and relief for the poor that often landed on local editorial pages. The church's support for gay marriage appalled the Southern Baptist Assembly, which expelled it in 1992. But today a lesbian co-pastor leads Pullen, which defies the state's Billy Grahams from its post at the edge of North Carolina State University.

By the end of the '60s, Tar Heels seemed to be casting away the millstone of segregation. North Carolina became the poster-state of the modern South, bursting with pride in its desegregated schools, enviable higher education system and high-tech industries. The Research Triangle area, boasting more Ph.D.s, scientists and engineers than any comparable region in the country, became a kind of Cambridge-in-Tobaccoland. By the early '80s, the state's eighth-grade history textbook unabashedly embraced evolution and racial equality and had my class of 12-year-olds cheerfully pronouncing the word "ol-i-garch" as we read of the state's 300-year battle against backwardness.

But North Carolina's business-led Democratic Party was in deep trouble. Conventional wisdom ascribes this to the race issue. Race assuredly played a major role, but its workings were conditioned by a fundamental dilemma arising from tax policies favored by the wealthy. In a twist that would have made the Regulators reach for a pitchfork, business Democrats rapidly shifted state tax burdens from the rich to the poor between 1957 and 1977.

When expenditures were new and relatively small, the sheer novelty of decent education and other public goods attracted widespread cheering. But as mounting bills were handed to those who could least afford them, the Democrats realized too late that they had given the Republicans an opening. Trolling for white votes to build national Republican majorities, first Richard Nixon and then Ronald Reagan made common cause with Jesse Helms, who guided the new course of reactionary Republican politics with unflinching purpose.

The new climate made things much harder for liberal Democrats. In his losing 1984 senate race against Helms, Governor Jim Hunt feverishly courted bankers and multinationals, hoping that talk of economic growth would drown out the Republican conversation on abortion and homosexuality. That his "business-friendly" tax policies were hostile to struggling Tar Heels was plain, especially to the blacks and liberal whites who had helped his campaign. In the aftermath of the defeat of Hunt and other Democrats, pollster William Hamilton found that by a two-to-one margin, North Carolinians wanted to abolish the regressive sales taxes and keep taxes on corporations. Two years later, Democrats in the state legislature did just the opposite.

They quickly drowned in their own snake oil.

To Be, Rather Than to Seem

Which brings us to the present conundrum, reflected vividly in North Carolina's motto, Esse quam videri, which means, "To be, rather than to seem." It is a sentiment the Democrats might reflect upon as they study the electoral map.

Four years ago, reeling at the financial collapse, Tar Heels astounded the nation by electing Barack Obama, making him the first Democrat to carry the state in a presidential election since 1976 — and certainly the first black. For a moment, it seemed that the Democratic Party might reclaim its heritage as the party of egalitarian opportunity.

It was not to be. The Wall Street-friendly centrism of the current White House has rankled in a state where folks have little patience for the rich man's tricks.

North Carolina's per capita income has been falling steadily for the last decade relative to the rest of the country. 2008 accelerated the pace of the plunge and recovery has been lackluster. And how have North Carolina Democrats responded to evaporating manufacturing jobs and the crushing devastation of the Great Recession? With little more than policies of cutting taxes and budgets. Their champions (I'm looking at you, Erskine Bowles) rush to rip the social safety net. They refuse to admit that their favored trickle-down strategy in the face of globalization has left a desert of Walmart destitution.

True to the script of the state's history, deep-pocketed conservatives like the Koch brothers and Tar Heel tycoon Art Pope have capitalized on this mistake made by Democrats. They know that state legislatures can be bought on the cheap, and so they spurred the Tea Party movement that helped the GOP take control of the General Assembly in 2010, whence it set about reversing national healthcare reform, curtailing reproductive rights, restricting immigration, and shoving gays back into the closet. (The influence of the Kochs on state politics has been so pervasive it has just been satirized in the new Will Farrell movie, The Campaign.)

But the Republicans' hold on power is far from secure. The state's changing demographics, bringing in more people of color, bode ill for the GOP. Frustrated by economic stagnation, bank bailouts and political corruption, Tar Heel voters, like those elsewhere, eye both parties with disgust. The Democrats still hold a registration lead in this swing state, despite falloff in others.

Tar Heel populist voices have hardly fallen silent. In late spring, protesters greeted the state legislature banging pots to announce their fury at budget cuts and unemployment. But can the national Democrats hear them? The choice of a slick banking town known as the "Wall Street of the South" to host their convention certainly argues for deafness. The city has long been held in suspicion by the rest of the state. I grew up in Raleigh, the state capital, and considered Charlotte to be almost a foreign zone, filled with banksters and sterile office buildings and golf courses. "A tight, white world," as one friend put it recently.

Bank of America may be Charlotte's economic center, but the foreclosure-happy, price-gouging, job-slashing avatar of Too Big to Fail increasingly looks like a national dead-end to most people. Obama is scheduled to accept his party's nomination at Bank of America Stadium from the corporate-friendly centrist Bill Clinton as millionaires in skyboxes peer on. Such a scene could hardly be better suited to stir up John Culpeper's ghost. The Democrats are hoping that giving populist Elizabeth Warren a key speaking slot will help deflect some of the ire, but there are signs that Culpeper's ghost won't be so easily appeased. On May 9, Occupiers marched on BofA headquarters – and they promised to come back in September, despite frantic efforts by the city to curb demonstrations. Unions, outraged by the choice of a city lacking unionized hotel workers, are also threatening to hold protests.

The Democrats' faith in Mammon easily surpassed the intensity of their populist urges when, after proclaiming that their convention would eschew million-dollar donations, they allowed local organizers to do just that by forming the New American City fund to handle donations from the likes of Duke Energy and Bank of America to put on lavish and no doubt tax-deductible parties.

In a spirit of high pandering, the Democratic Party has selected three official barbecue sauces for its Charlotte extravaganza. Such ignorance of local tradition has already played to comic effect, beginning with Michelle Obama's praise of Charlotte as a place for "great barbecue," which is, of course, nonsense (the state's best 'cue is found elsewhere). North Carolinians recognize only two types of barbecue sauce: 1) the red-pepper vinegar dominant in the east (considered by many to be the only sauce; and 2) the sweeter, tomato-based variety favored in Lexington, in the west. To these two indigenous sauces the Democrats have added a third, "official" sauce, a mustard-based, South Carolina product that ranks just above radiator drippings in Tar Heel estimation.

You could argue that there is a third sauce in North Carolina, more to do with the stuff sold in bottles at the supermarket and labeled "Heinz" – a smooth, insipid, fake-tasting variety we might call "To Seem Rather Than To Be" sauce." Slathering on this particular condiment is likely to gain the Democrats little traction in the state where the tradition of popular rebellion is more than 300 years old.

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Posted: 03 Sep 2012 12:00 AM PDT

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Iron Ore Prices Sink Like a Stone

Posted: 02 Sep 2012 11:22 PM PDT

More liquidity will help everything from sinking. Got that? That's the logic behind what everyone now expects will be more quantitative easing (money printing) from the US Federal Reserve. But can the money printers of the world really fix a solvency problem with more liquidity?

Let's shove that question aside for just a moment and return to the urgent matter of the plummeting iron ore price. When last spotted, the spot iron ore price was busy falling below US$90. It's over 50% down from around this time last year. Many interested parties want to know how much further it will fall, or when it will rebound.

BHP Billiton and Rio Tinto are probably not that worried about the reversion to mean in iron ore prices. Both companies control high grade ore deposits AND the infrastructure to deliver ore to Port Headland for export to China. Low-cost producers with high ore grades can stand further price falls...all the way down to around $40 in fact.

But marginal producers with lower quality ore and higher costs are sweating it now. Gina Rinehart's $9.5 billion Roy Hill project needs $7 billion in financing, for example. And poor old Twiggy Forrest and Fortescue Metals Group CEO Nev Power are even considering selling off some assets to fund the North Star magnetite project. Meanwhile Moody's is reviewing Fortescue's credit rating.

You'd think Chinese iron ore producers would be hit the hardest by falling spot prices. Chinese ore grades are lower than the ore from the Pilbara. And with Chinese steel output falling (and Chinese manufacturing activity in contraction for the first time in nine months) you have yet another factor leading to lower ore prices in the spot market.

Now all things being equal, lower prices should force marginal producers to shut down capacity or even go out of business (assuming they can't raise money in the debt markets to keep going). Eventually, if you take enough supply off the market, what's left will more evenly match demand. Prices will stabilise. The freak out will be over.

In the meantime, the freak out is spreading. By 'freak out', we mean people who were counting on the iron ore price to stay high in order to deliver associated benefits. For example, Western Australia Premier Colin Barnett reckons falling iron ore prices will wipe out $1.5 billion in royalty revenue from the State budget. That's real money.

The Federal government is probably freaking out as well. The mining tax — remember it was on iron ore and coal, the two commodities falling most in price in the last six months — was supposed to deliver a small budget surplus of around $1.5 billion this year. If the tax fails to deliver the cash, more spending cuts will be required to keep the budget in surplus.

How Falling Iron Ore Prices Could Affect the Australian Dollar

If the budget isn't in surplus, it has to be in deficit. And a budget deficit is not the kind of fiscal factor you'd expect to be bullish for assets denominated in Australian dollars, including the Australian dollar itself. In other words, if the iron ore price doesn't find the floor, it could lead to money leaving Australia and a correction in the value of the Australian dollar.

One man who is not freaking out is Reserve Bank of Australia Governor Glenn Stevens. He asked in Canberra last week if the Australian dollar would remain a safe haven even as commodity prices fell. 'It is conceivable that you could get terms of trade falling but there is some event that causes safe-haven flow towards us...I do not actually think that will happen. You can imagine it, but most likely if the terms of trade fall a lot, then the currency will go down, I think,' he said.

A falling currency would save the RBA the trouble of cutting interest rates. Exports might pick up as Australian goods become cheaper globally. And if China's manufacturing blues are bad news for base metals and bulk commodities producers, they are good news for gold, silver, and palladium. The whole precious metals complex (in both Aussie and US dollars) is moving on up in expectation of a paper money infusion from the Fed.

Which brings us back to the Fed. Does Ben Bernanke really believe long-term asset purchases eventually lead to higher employment and economic growth? He must, or he's a very good liar. As far as we can tell, Wall Street investment banks benefit the most from QE because they can borrow from the Fed, buy government bonds and capture the spread.

The only other interest group on the planet that's a clear winner from QE is the United States government. It's been able to grow total US debt from $10.6 trillion in 2008 to $15.9 trillion today — and pay lower rates to borrow the whole time! Yet unemployment in the US is higher than it was four years ago and median incomes are lower.

Just who exactly is Bernanke still fooling?

But maybe the alternative appears worse to the Fed heads. The alternative is that assets prices will fall much further if liquidity disappears from the system. The system is the Fed's system. It's the dollar system. And the Fed must reckon survival is better than death. For the rest of us, we're not so sure.

From the Archives...

The Pin-Up Stock of the Iron Ore Boom
31-08-2012 - Greg Canavan

How Australia Grew Fat and Lazy Off the China Boom
30-08-2012 - Greg Canavan

Why You'll Never Change Our Mind About Inflation
29-08-2012 - Nick Hubble

The Make Believe World of Economists, Continued...
28-08-2012 - Bill Bonner

Iron Ore, a Love Story
27-08-2012 - Dan Denning

Regards,

Dan Denning
for The Daily Reckoning Australia