Welcome to the United States of Austerity

From Leap2020:

As anticipated by LEAP/E2020 last February in the GEAB No. 42, the second half of 2010 is really characterized by a sudden worsening of the crisis marked by the end of the illusion of recovery maintained by Western leaders

(1) and the thousands of billions swallowed up by the banks and the economic « stimulation » plans of no lasting effect. The coming months will reveal a simple, yet especially painful reality: the Western economy, and in particular that of the United States

(2), never really came out of recession

(3). The startling statistics recorded since summer 2009 have only been the short-lived consequences of a massive injection of liquidity into a system which had essentially become insolvent just like the US consumer

(4). At the heart of the global systemic crisis since its inception, the United States is, in the coming months, going to demonstrate that it is, once again, in the process of leading the economy and global finances into the « heart of darkness »

(5) because it can’t get out of this « Very Great US Depression

(6) ». Thus, coming out of the political upheavals of the US elections next November, with growth once again negative, the world will have to face the « Very Serious Breakdown » of the global economic and financial system founded over 60 years ago on the absolute necessity of the US economy never being in a lasting recession. Now the first half of 2011 will dictate that the US economy take an unprecedented dose of austerity plunging the planet into new financial, monetary, economic and social chaos (7). ........read on

Americans Enjoying Final Days of Artificial Economy

From the NIA:

In recent days, Japan has intervened in the foreign currency market to artificially drive down the value of the yen. Japan's actions to weaken the yen have driven it from 83 to 85.73 against the U.S. dollar. Most analysts in the mainstream media are portraying this as Japan's attempt to "head off a deflation spiral". Almost everybody is applauding Japan's move, saying it was needed in order to "shore up its export-driven economy".

The truth is, although Japan claims to be helping Japanese citizens with this move, Japanese citizens are the ones who will actually suffer. Despite Japan's economy entering into recession last year, the Japanese were able to maintain their same standard of living because prices were falling due to their strong currency. Some of the largest Japanese exporters like Toyota and Sony saw their revenues decline last year by 20.8% and 12.9% respectively, but this was only bad for shareholders of these companies. Despite rapidly declining revenues for Japanese exporters, Japan's unemployment rate only reached a peak of 5.6% last year and is now down to 5.2%.

The Japanese should be happy and grateful for how strong their economy is compared to the U.S. economy. When it comes to exporters in Japan, their problem is not the strong yen, but the weak U.S. dollar. If Japanese exporters allow the U.S. dollar to collapse, their revenues will continue to decline substantially, but that is a healthy part of a free market economy. Within a year or two, a strengthening yen would allow the Japanese to spend more on their own goods, and revenues for Toyota and Sony would come back strong.

Japan's efforts to postpone a few Japanese corporations going through a brief but tough readjustment period are helping to artificially prop up the standard of living for Americans one last time. NIA believes that the Japanese better be careful what they wish for. Never before in world history has nearly every developed country been in battle with each other to have the weakest currency. Asian producing countries want their currencies to be the weakest so that they can have the honor of shipping their products to Americans who can't afford them......read on

That Rumbling Sound Is Dollar Giving Way

By Rick Ackerman:

For nearly twenty years, we haven't flinched from our prediction that the massive debt build-up of the last generation would precipitate out as a deflationary bust. That is what we still expect, although we now believe there is likely to be a hyperinflationary phase at some point as the financial system implodes. But the bottom line is that no matter how things play out, America 's standard of living will fall more steeply than at any other time since the Great Depression. As for the deflation-vs.-hyperinflation "debate," it is useful only to the extent it helps predict how mortgage debtors will fare as economic disaster unfolds. We seriously doubt they will be "saved" by the kind of hyperinflation that would put hundred-thousand-dollar bills in Joe Homeowner's wallet. Imagine how mortgage lenders would react if Joe could peel off three or four of those bills and say, "Okay, pal, we're square." This scenario will seem particularly unlikely to those who believe that these economic hard times have been engineered by Masters of the Universe intent on stealing our property. Trust us on this: If there's a hyperinflation, it is the rentiers who will get screwed most ruinously, not the little guys.

Even so, that doesn't rule out the prospect of a fleeting, hyperinflationary spike on the way down, since widespread notions concerning the dollar's true value could change precipitously overnight. We mention this because notions are already beginning to change in ways that leave the dollar increasingly vulnerable to a global run. The exploding caldera of fear that will eventually bring this about bubbled to the surface yesterday when the Fed made clear that it is absolutely clueless about how to get the economy moving. The central bankers' muddled talk of yet more "quantitative easing" (QE2) is about as reassuring as the promise of more sanctions against Paul Krugman may be the last person in America who still believes that additional heaps of "stimulus" will do the trick. On Wall Street, however, the belief is clearly ascendant that QE2 will only wreck the dollar without providing any lift to the economy. That could explain why stocks fell yesterday while gold and silver soared. Not that the yahoos on Wall Street exhibited perfect knowledge. To the contrary, the broad averages shot up initially, driven by headless-chicken panic; and T-bonds finished the day with anomalously big gains despite the louche tittering about further easing.

Schiff's Scenario

Peter Schiff has provided the most plausible scenario for a hyperinflation. He foresees a day when confidence in the dollar collapses, forcing the Fed to become the sole buyer of Treasury debt. When municipal and corporate bond traders realize on that same day that there is no official support for their markets, private debt will go into a death spiral, forcing the Fed to monetize all bonds. Under the circumstances, the Fed would not become merely domestic debt's buyer of last resort, but the only buyer. Voila! Hyperinflation.

It should be noted that it is not some certain quantity of money injected into the banking system that will cause hyperinflation; rather, it will be the repudiation of all dollars already in circulation. Holders of physical dollars will panic to exchange them for anything tangible, causing the dollar's value to fall to zero in mere days. Everything needed to trigger this collapse is already baked in the pie, and it is only the truly benighted, Nobelist Paul Krugman foremost among them, who cannot see the obvious. As for mortgage debt, you will still owe $250,000 on your home the Day After, except that your home will be much more deeply underwater than before - worth perhaps $20,000 instead of $180,000. Mortgage lenders will have to work with you - work with scores of millions of homeowners in the same boat - to bring about a reconciliation. No one can predict how already-unpayable mortgage debt will ultimately be paid, but it is almost certain to require a radical change in our laws in order to avoid the kind of social upheaval that could jeopardize the very rule of law.

Nationalisation of mines is on ANC agenda

Seems the Communist Govt. of South Africa is chaffing at the bit to Nationalise the country's mines. South Africa is currently the worlds leading supplier of Platinum and 4th largest for Gold. Of course any talk of nationalisation is going to scare off investment dollars for new mines and the expansion of existing mines - let alone the disaster that would occur if the Communists think they could actually run the mines themselves.





From Timeslive:

Nationalisation of South Africa's mines is on the agenda for this week's national general council of the ANC, but no final decision will be taken until 2012, says ANC secretary general Gwede Mantashe.

After a series of mixed signals, he told reporters: "The question of nationalisation is going to be debated, views are going to be expressed."

At the same time, however, Mantashe rapped the youth league over the knuckles for trying to force its proposal on the broader ANC.

"What we are raising is that if you table an issue for discussion in the ANC, never pretend to have a monopoly of wisdom on that issue. Open it up, allow different views to be expressed. Nobody must be supressed, nobody must be intimidated," he said.

Malema has repeatedly warned senior ANC leaders and the party's alliance partners, the SACP and Cosatu, that anyone who opposed nationalisation would be brought down by the youth.

Mantashe said the proposal was on the agenda for discussion in the commission on economic transformation, which would also look at the role of the state in the economy, the correct influence of the public sector and other aspects of a developmental economic strategy.

President Jacob Zuma was widely interpreted to have put a lid on the nationalisation debate when he said in a departure from the prepared text of his opening address yesterday that the NGC was a review meeting and not a place to introduce new policies.

Seen alongside his stinging rebuke for the Julius Malema's Youth League, Zuma appeared also to be stifling its flagship project.

But Mantashe praised the ANCYL for raising issues about economic policy that needed to be debated.

Does Silver's 'Smooth Ride' Lead Past $30?

By Jeff Nielson:

Regular readers will know that I shun short-term charts and "technical analysis". Such tools carry a low degree of reliability, since they are built upon numerous false assumptions (beginning with "free and open markets", and "perfect information"). I submit to readers that markets have never been less "free and open", and information has never been so far from "perfect".

Worse still, almost none of the people who engage in such analysis have any theoretical training in statistics. Lacking such education, they are simply oblivious to how much accuracy is lost with such tools - when we shorten the time-horizon.

Long-term charts, on the other hand are an entirely different matter. The much, much higher level of reliability which is provided by a longer time-horizon is a powerful compensating force versus the margin of error caused from using flawed assumptions. Relying upon superior tools inevitably means greater clarity when analyzing any particular market.

In the case of silver, when we begin looking at longer-term charts, there are a few obvious facts which leap out at viewers, and some which are perhaps not so obvious. To begin with, unlike almost any other market, silver never goes sideways. It is either moving strongly upward, or strongly downward - reflecting the "struggle" between market-rigging bankers looking to keep silver grossly under-valued, and the even more powerful force of supply-and-demand.......read on

Weekend Chill out

Australian Rock Legend Paul Kelly and Sultry Katy Steele of Little Birdie in the best matched duet on the TV quiz show Rockwiz

Wait honey, I need to fetch some gold

From DW World:

Want protection from paper currency devaluations? Or how about an unforgettable, quick gift? Consumers in Madrid can now use a unique automated teller machine to fetch gold bars of up to 10 grams and coins with custom designs in exchange for cash.

The ATM, known as "Gold to go," is the brainchild of Thomas Geissler. The German entrepreneur and CEO of Ex Oriente Lux in Reutlingen first tested his cash-for-gold vending machine in Germany before taking it to consumers with deep pockets and traditional ties to gold in Abu Dhabi in May......read on

Gold could rally to $1,400 in flight to safety

From the UK Telegraph:

Investors seeking a safe haven from current market turmoil could see the gold price rally to "at least" $1,400 an ounce next year, according to Capital Economics.

On Friday the gold price continued its record-breaking run – having hit a new high seven times in the past two weeks – briefly crossing the $1,300 level, hitting $1,300.07 in intraday trade. Silver prices are also at their highest level since 1980, climbing to $21.44 in intraday trade. Bullion traders expect prices to continue to rise next week.

Concerns that the Federal Reserve will have to embark on another round of quantitative easing after the US economic recovery stalled caused the dollar to fall against major currencies. Gold prices usually move inversely to the dollar.

"We now expect gold prices to stay high for several more years," Capital Economics said. "Fears of runaway inflation or a dollar collapse remain exaggerated," the economic consultancy added. Prices should continue to be supported by strong demand for a safe haven from other potential economic and financial shocks "such as a US-China trade war and the break-up of EMU," it said.

Gold prices have risen by 18pc this year, with silver rising 27pc. Both precious metals have outperformed shares, treasuries and most industrial metals. Gold is on track for its 10th consecutive yearly gain – its longest winning streak since before the Second World War.

The Search for Gold in Congo

With Gold becoming increasingly rare some are going to desperate lengths to acquire the money of Kings. In many places in Africa the grade has dropped below 5gm / tonne, meaning 6,000kg of rock, or in this case mud has to be processed to extract just 1oz of pure gold.

Pics from the New York Times

Jim Rickards interview on Gold, China and the US Mortgage Market

Jim Rickards interviewed by Eric King of King World News......listen here