Tuesday, August 31, 2010
He also hinted that the days of quantitative easing may not be over: "The deleveraging process is incomplete, the recovery remains fragile and a considerable margin of spare capacity is yet to be worked off," he said. "Further policy action may yet be necessary to keep the recovery on track."
He was speaking at the Jackson Hole Economic Policy Symposium in America the day after the Federal Reserve chairman, Ben Bernanke, buoyed the markets with an upbeat assessment of the US's growth prospects.
Mr Bernanke also hinted that he was prepared to employ more asset purchases if necessary.....read on
"Now a man can work a whole year and earn $40,000 (£25,000) and work hard for that. And now the government can in a millisecond print the same amount of money and that's what they do. So clearly paper money has now lost its function as a store of value."
- Egon von Greyerz
The intellectually bankrupt Tokyo Roses of the gold world would have us believe that some form of gold (and silver) standard is not possible because there is supposedly not enough to go around. So why hasn't the unlimited supply of paper money solved our problems? Why was mankind able to function for centuries with such "limited" quantities of precious metals? Maybe because the less debt there is and the less asset inflation there is, the less need for money there is.
As Egon von Greyerz says, they can print in a millisecond what takes others a year to earn. The reality is that they can print the whole GDP of the world in a millisecond. Once people fully comprehend this reality the fat lady will have well and truly sung. Unfortunately the paid mercenaries of the fiat machine are outdone by us greater fools who are willing to part with our goods and services in return for their counterfeit paper.....read on
It was only at the beginning of 2009 that all restrictions on bullion-buying by individuals in China were ended. From that time, it only took about one year for China's gold-buying to surge to a level where (depending on whose numbers you look at), China is either tied with India as the world's largest gold-consumer - or has already vaulted into top-spot.
Clearly, the single most-important driver for this demand was the lifting of prohibitions on bullion-buying, and yet that dominant factor has been almost completely overlooked by the precious metals community. Why do I continue to harp on this point?
Unlike the other drivers of demand mentioned (which are based upon current factors), the roughly 50-year ban on bullion-buying in China obviously created vast amounts of pent-up demand. Arguably, this pent-up demand must be satisfied first (since it predates those other drivers), before the Chinese market even begins to be driven by the other factors listed. However, even if you reject this "chronological" interpretation of Chinese demand, it clearly represents a major incremental addition to all the other demand-drivers.....read in full
Monday, August 30, 2010
Author: Charles Avery (The Beijing Axis)
Posted: Sunday , 29 Aug 2010
Bringing a populous and fast growing China up to the material living standards of the developed world has required the intake of mineral resources on a massive scale. Yet what exactly does China do with the millions of tons of natural resources such as coal, steel and copper?
China's citizens, at a fifth of the world's population, are rapidly progressing toward the material living standards enjoyed by developed nations and are consuming massive amounts of resources in doing so. China now intakes around half of all cement produced, as well as over 40% of the world's coal and tin and a comparable proportion of all aluminium and steel. Nearly 30% of all copper finds its way to the People's Republic, and it is the second largest oil consumer. These resources-increasingly imported from abroad-are destined for use in China's roads, railways, and power facilities for a rising urban population, and as inputs for manufacturing. The path of China's development-before each new residence is built, television manufactured, or shopping mall opened-begins with the most basic inputs: mineral resources.
Into larger cities, roads and rails
The movement of people from the countryside to the cities has been one of the most dramatic changes taking place within China. The country has 89 cities with a population greater than one million, despite the fact that only 46% live in urban areas. As many as 260 million citizens are expected to move to the cities if China is to emulate the same two-thirds plus urban-rural levels of most developed nations. Larger cities now even have considerable ‘floating populations', with that of Beijing estimated to be 7.6 million in 2009.....read on
From the UK Telegraph: American colonel sacked after Afghan rant. A senior American staff officer has been sacked after publishing a rant against the bureaucracy and endless PowerPoint briefings at Nato's Kabul headquarters.....read on
In other news, a man was bitten by a dog. And by that I mean: the reverse would actually be news.
Yes, Bernanke said the Fed would act if the economic outlook deteriorated further, or if there were signs of deflation. He doesn't appear to think that either of those events are likely to occur, especially the deflation, but if they do, the Fed will do stuff. Which is exactly what you'd expect a modern central bank governor to say....read on
Sunday, August 29, 2010
Saturday, August 28, 2010
You might ignore one Hindenburg warning but three? ArabianMoney announced the first on August 12th (click here). But we prefer to stick to fundamental analysis rather than look for zepplins crashing in the charts.
Here the picture is surely just as clear. The stock market continues to price in some kind of recovery while the economic indicators increasingly point to a double dip recession.
Remember the summer of 2008 and the way economists upped the ‘possibility’ of a recession to 30 per cent. They are at it again, apart from old Albert Edwards at Societe Generale whose bearish vision makes Marc Faber look an optimist.
Mr Bernanke’s touching commitment to save the US economy has also been with us for a long time, and it has not worked to date, although things might have been very much worse.
Bond yields are at record lows. Money is shifting into gold and silver with gold bullion purchases up 40 per cent this year. Share prices rose on thinner and thinner volumes this summer. The day of reckoning is coming. Indeed, the Hindenburg Omen suggests it is happening now.
TEHRAN – Iran imported over 22 tons of gold ingots worth over $855 million in the first four months of the current calendar year (started march 20, 2010).
The amount shows 85,000 percent increase in terms of volume and 81,000 percent rise in terms of value in comparison to the same period previous year, ISNA News Agency reported.
The figure accounts for 4.64 percent of Iran’s total value of imports during the mentioned period.
Turkey, Russia, and the United Arab Emirates were the main exporters of gold to Iran.
Iran imported $1 million worth of gold during the first four months of previous Iranian year
AFTER 10 years of comparative slumber, the sun is waking up - and it's got astronomers on full alert.
This week several US media outlets reported that NASA was warning the massive flare that caused spectacular light shows on Earth earlier this month was just a precursor to a massive solar storm building that had the potential to wipe out the entire planet's power grid...read on
Friday, August 27, 2010
Gold demand in Vietnam, which consumes more of the precious metal per head than India and China, is set to surge as the third devaluation in the past year and a stock-market slump combine to spur sales.
“People will switch to gold as a shelter,” said Le Xuan Nghia, vice chairman of the National Financial Supervision Commission, which advises Prime Minister Nguyen Tan Dung. “The current situation with the dong will spur people to increase their gold holdings.”The government devalued last week to boost exports and shore up the nation’s trade deficit, driving the dong to a record low.....read on
But I maintain that the truth will out, and that fiat paper is a fraud that will be found out. When that happens and people realize that they have been hoodwinked by their government, there will be such a rush (including both fear and greed) for gold that it will make the recent tech mania look like conservative investing.....read in full
Nowadays, the Bank of England (BoE), - also known as the "Old Lady" of Thread-needle Street, - has full control over the British money supply, with a monopoly on issuing banknotes in England and Wales. It also controls what's left of Britain's badly depleted gold reserves. In May 1997, the BoE was granted the autonomy to conduct monetary policy, and with it the power to set interest rates.....read on
Weird isn't it? The 2008 Autumn debacle happened less than two years ago. The policy response to it was to simply shift garbage debt from Wall Street to the Federal Reserve, suspend accounting standards, and pump the financial system with TRILLIONS of Dollars (NONE of which fundamentally addressed any of the problems causing the crisis) and yet grown adults with fancy titles and degrees actually believed that the issues were FIXED....read on
The central banks and government treasuries, particularly those of the US, Europe, and Japan, have been weakened and our trust in them eroded. For decades they assured us that only they and their paper currencies and fractional reserve banking systems can keep our economies growing forever. They are now failing for all to see. And before the ships of state sink and economies further submerge they bail out their banking friends.....read on
Thursday, August 26, 2010
August is usually a quiet month in the precious metals market but this month is different. Silver has started behaving 100 per cent like a precious metal and not as an industrial commodity, and while stocks and Dr Copper have been falling, silver has been outperforming gold which is also on the up.
What is going on here? This is actually fully consistent with the bullion market rumors about the bank cartel unwinding its silver futures positions in the quietest month of the year.
You would expect gold to be falling a little with stocks under pressure. It is not. And you would expect silver to be selling off even more strongly because it is an industrial commodity as well as a precious metal. But it is not.
Does that mean that the gold price is being set up for a serious spike, and that silver will not only follow but outperform in these fireworks? Without the ability to look under the hood of the silver market – and the suspicion is that the market supply is nothing like what the market supposes – we are still in the dark.
But spot the price breakout. Silver is above $19 this morning. Gold is closing on $1,250. If this trend continues then $1,650 gold by next February could well be accompanied by $30 silver.
Wednesday, August 25, 2010
By David Levenstein: A little over a week ago, U.S. Treasury Secretary Timothy Geithner wrote an article for the New York Times entitled Welcome To The Recovery in which he touted the great strides that the U.S. economy was making. But, with unemployment still dangerously high, foreclosures and personal bankruptcies continuing to set all-time records, shrinking manufacturing, burgeoning national debt, massive budget deficits, I can't see any recovery at all. Don't get me wrong, I am not attacking Geithner as I would not like his job for all the gold in Fort Knox, if indeed there is any really left, but, I think all the economic rescue package did was to save a few financial institutions from becoming extinct. "Panicked by the collapse in demand and financing and fearing a prolonged slump, the private sector cut payrolls and investment savagely. The rate of job loss worsened with time: by early last year, 750,000 jobs vanished every month. The economic collapse drove tax revenue down, pushing the annual deficit up to $1.3 trillion by last January. The economic rescue package that President Obama put in place was essential to turning the economy around. The combined effect of government actions taken over the past two years - the stimulus package, the stress tests and recapitalization of the banks, the restructuring of the American car industry and the many steps taken by the Federal Reserve - were extremely effective in stopping the freefall and restarting the economy," Geithner stated in his article....read on
Good rains have brought good tidings, especially for the silver market.
While demand for gold in India has picked up significantly over the last couple of days, it is the rising demand for silver that has tongues wagging.
Though India is generally believed to have a ravenous appetite for gold, it is also a major consumer of silver. Of the 4,000 tonnes that India used to import annually, around 2,600 tonnes was used to make jewelery and ornaments......read on
Tuesday, August 24, 2010
The New York Times' Nelson Schwartz recently lamented: "The new normal challenges the optimism that's been at the root of American success for decades, if not centuries." In turn the new normal has spawned a quantum change in the way Americans view the economy, their future prospects, and how they should employ their capital. The real question facing Americans -- public policy makers and citizens/investors alike -- is not what constitutes a positive attitude, but what constitutes a healthy attitude, one capable of guiding investors through the next, and perhaps even more dangerous, chapter of the financial crisis.
When the financial crisis began to take its toll on the United Kingdom in 2008, Queen Elizabeth at a meeting with financial analysts asked the logical question: "Why didn't anyone see this coming?" Though directed at the London financial community, it could have just as easily been put to the mainstream media, academia, the politicians or the regulatory apparatus of the government. The answer she received would soon become standard fare: "No one saw this coming." The implication, of course, was that if no one saw it coming, then no one reasonably could be held accountable.
For countless private investors on both sides of the Atlantic Ocean, Queen Elizabeth's question prompted a more personalized assessment: "Why," they asked their financial advisors, "wasn't I advised that this might be coming?" For those completely honest with themselves, the question reduced to "Why didn't I see this coming?" After all is said and done, each of us is responsible for the stewardship of our own portfolios, and to blame anyone else is pretty much an exercise in both futility and passing the buck.....read on
I explained that investing in bullion ("long") was a good "proxy" for shorting U.S. Treasuries, and concluded that this proxy was a safer, superior substitute for that short-position. In this instalment, I will apply that analysis to other U.S. asset-classes: the financial sector, and the U.S. dollar, itself.
When Wall Street's multi-trillion dollar Ponzi-schemes imploded (based upon the U.S. housing-bubble, which they also created), it was common knowledge that the entire U.S. financial sector was leveraged by an average of 30:1. It is a matter of simple arithmetic to observe that with such extreme leverage, it only takes a loss of a little over 3% on the underlying assets to take all "bets" at 30:1 leverage to zero.
Given that most of Wall Street's leverage was based upon the U.S. housing market, and given that the U.S. housing market plunged by roughly 30% (in its first collapse), you don't have to be a "mathematician" to figure out that this was ten times the decline necessary to take the entire, U.S. financial sector to zero....read on
Monday, August 23, 2010
Hey, I told you it was over the top. But bear with me for a minute.
Late last year the conventional wisdom on economic policy took a hard right turn. Even though the world’s major economies had barely begun to recover, even though unemployment remained disastrously high across much of America and Europe, creating jobs was no longer on the agenda. Instead, we were told, governments had to turn all their attention to reducing budget deficits....read on
The milestone, though anticipated, is the most striking evidence yet of China's ascendance and that the rest of the world will have to reckon with a new economic superpower.
The recognition came early on Monday, when Tokyo said that Japan's economy was valued at about $1.28 trillion in the second quarter, slightly below China's $1.33 trillion. Experts say unseating Japan — and in recent years passing Germany, France and Great Britain — underscores China's growing clout and bolsters forecasts that China will pass the US as the world's biggest economy as early as 2030. America's gross domestic product was about $14 trillion in 2009...read on
From the UK Telegraph: The Institute of Economic Affairs (IEA) has calculated that the national debt is £4.8 trillion once state and public sector pension liabilities are included, or £78,000 for every person in the UK....read on
Sunday, August 22, 2010
A case in point is large, mainly US, service companies offshorring jobs from higher cost, higher skilled locations to lower cost, lower skilled countries. What many of these companies have seem to have forgotten over the last 10yrs is that customers where first attracted to their offerings not because they were the cheapest in the market, but because they were American (or at least Western) and that gave those companies a veneer of quality, trust and reliability.
This race to the bottom of cost and quality is not only massacring western job markets it is occurring in the lower cost/skilled countries as well, with some US firms shifting work that had been previously offshorred to Brazil to China, not because the Brazilians did not have the skills or that the Chinese were superior - it was simply down to saving a 1 or 2 dollars per hour. The Chinese in most cases have no relevant skills and the Brazilians have to be sent to China to desperately train their replacements before they are sacked - can you imagine a scene where 2 people from radically different backgrounds try to communicate in their shared 2nd language (English) when one is going to be sacked when the training is complete (regardless of the quality of the training provided). Throw your typical Brazilian's outspoken nature and hatred of military dictatorships (as China is) and anyone can just see it is not going to work well.
But no matter the US is already thinking ahead, to when China's labour is no longer the cheapest and is setting up facilitates in Vietnam (this is why the US is conducting military exercises with Vietnam and supporting their claims to the Spratly Islands). I can't wait for the day when Chinese workers are sent to Vietnam to train the low skilled Vietnamese workers to take their jobs......then where do we go after Vietnam? Cambodia?, then Bangladesh?....maybe we should be investing in green fields sites in Chad in preparation for the end state.
"Never mind the quality Sir, feel the price" - Tears of the Moon c2003.
Saturday, August 21, 2010
"The Fed should, and probably will change its tune by the fall and fire up the printing presses. Its current stance of watchful waiting in the face of slowing economic growth, inflation cycling below its preferred target rate of 1.7% to 2% and naggingly elevated unemployment strikes some observers as nothing short of mind-boggling. With good reason, these critics are pushing the Fed to adopt the deflation-fighting strategy that Bernanke mentioned in 2002, when he was a newly minted Fed governor. He suggested that the Fed could always buy long-term government bonds and corporate debt to mainline more liquidity into the financial system to counteract incipient deflation."....read on
Experienced precious metals investors are familiar with the many "drivers" which have been identified for the precious metals market. However, this is simply another way of saying that bullion is a good proxy for many of the dynamics in markets (and the overall economy) today.
This is a concept which is especially useful with respect to investing in a "short" position (i.e. betting that a particular investment will go down rather than up). "Shorting" a market is inevitably a much more high-risk investment than going "long".
To begin with, there is the potential for infinite losses. Bet "long", and you can never lose more than 100% of your investment (assuming we avoid the insanity of "margin" in our accounts). Bet "short" however, and there is no limit to potential losses, since there is no (theoretical) limit on how high any particular investment could rise (except for bonds). Add to that the further risk of being forced-out of your short-position, and we can see that this is a particularly precarious form of investing, best left to trading experts.....read on
By David Levenstein: Much of what applies to gold also applies to silver. And, as I have mentioned in previous articles, silver is also a monetary metal whose price is influenced by similar factors that influence the gold price. Invariably, the price of silver mirrors that of gold and more often than not, its moves are greater in percentage terms than the moves in gold. So if the price of gold moves 1% silver can be expected to move between 2%-6%. With the price of silver being so undervalued at the moment, the percentage moves we can expect to see in the future are going to be quite spectacular.
According to World Silver Survey2010 released in May by The Silver Institute, silver has continued to make gains as the European sovereign debt crises continues. "Silver's status as a precious metal was unequivocally reaffirmed last year by investors who purchased it not only as a speculative commodity-play on economic recovery but also as a safe haven asset, particularly at a time when the global financial crisis was raging," the Survey noted....read on
Over the past decade Chinese manufacturing salaries have risen from $1,000 to $3,900, according to The Daily Telegraph yesterday. But a series of strikes at key factories have sent wage inflation soaring to 25-30 per cent this year.
The low cost of manufacturing in China has been the secret of low inflation in the West in the 2000s. That deflationary force is gone. This is inflation at a very basic level. Eventually manufacturers will have to pass this higher cost on with higher prices or inflation.
Now we hear the selling of gold by Chinese banks is being liberalized. The Chinese are not immune to inflation either and will want to buy protection in the form of gold, the one currency that cannot be printed...read on
Friday, August 20, 2010
The feast of the Assumption of Mary on Aug. 15 is the high point of summer in the Greek Orthodox world. Here in one of the country's many churches, believers pray to the Virgin for mercy, with many of them falling to their knees.
The newspaper Ta Nea has recommended that the Greek government adopt the very same approach -- the country's leaders have to hope that Mary comes up with a miracle to save Greece from a serious crisis, the paper writes. Without divine intervention, the newspaper suggested, it will be a difficult autumn for the Mediterranean state.....read on
Thursday, August 19, 2010
Indeed, EVERY single new bailout or stimulus or monetization should push Gold higher. In fact, we should be seeing a kind of gradual awakening for investors as they realize that each one of these bailouts brings us closer to the "end game" in which throwing money at the world's financial problems has failed......read on
Before that day, gold was the legal linchpin of the world monetary system. Although every currency was defined in terms of the US dollar, the dollar itself was legally defined as 1/35th of a troy ounce of gold.
Since then, there really has been no center to the international monetary system. The "reserve currency" continues to be the US dollar. But there is no official definition of what a dollar is. Like every other currency, its value changes every ten seconds as it is traded on the global currency markets. It is a promise to pay nothing. Its value has been devalued for years. On top of that, enormous effort has since been put into the global currency markets: buying, selling, manipulating...none of which has caused anything productive to the world economy. Oh, sure, currency investing has made some of us rich, but is it really the same kind of wealth that, say, Steve Jobs has created with Apple?......read on
Indeed, there have been reports ¬- all unconfirmed -¬ that Prince Bandar bin Sultan bin Abdel Aziz, a nephew of the king and former Saudi ambassador to Washington had attempted a coup and has since been under house arrest. Other sources said Bandar was detained in a Saudi prison. A Saudi official however told this reporter that the whole story was part of an Iranian disinformation campaign....read on
Wednesday, August 18, 2010
You will recognize itwhen it comes because there’sno fever like gold fever.
Well, maybe the tech fever in the late 1990s was close. Keep in mind though, the gold market is small compared to stocks and bonds, which means it could easily spike up once the fever hits.
The 1970s saw gold rise tenfold. Today gold has only risen about 400% in nine years. This good solid, steady and consistent growth provides a very bullish backdrop for a further rise in gold.
In fact, it’s been almost two years now since we’ve seen a decent downward correction in gold. The March to November 2008 decline, when gold lost almost 30%, was the last great buying opportunity.
Gold’s risen nearly 80% since that November low without more than a 14% decline. This super rise caused the bull market to move into a stronger phase last September when the gold price reached the first record high that was well above the $1000+ record highs of 2008-09....read in full