Sunday, May 15, 2011

Greek Riots

From: RussiaToday | May 13, 2011

Demonstrators furious at the severe injury of a protester during an anti-austerity march clashed with riot police in central Athens on Thursday, the second day of violence in the Greek capital. Hooded youths used hammers to smash up marble and paving stones from building facades and pavements, hurling the jagged chunks and firebombs at police, who responded with volleys of tear gas and stun grenades. Running battles with police ensued through the streets of central Athens, with protesters setting rubbish bins on fire and one burning a Greek flag.

Gold and China, silver and volatility - Edel Tully, UBS

Mineweb's weekly precious metals report....listen here

Robin Griffiths - "The Gold:Silver ratio will fall to 10"

Robin Griffiths, Private Wealth Strategist for Cazenove Capital Management discusses Gold, Silver and bonds with Eric King of King World News.......listen here

Martin Armstrong - So you thought the Sovereign Debt Crisis was over?

The latest essay from Martin here

Jim Rickards - $5-6,000 Gold price would allow a 40% backed Gold Standard

Jim Rickards discusses a wide range of topics from bonds, to the $ and a gold standard with Eric King Of King World News......listen here

Ten Questions - Did Blair order that Kelly be "dealt with" ?

Brilliant article into the "Suicide" of weapons expert Dr David Kelly in 2003

50 Things Every American Should Know About The Collapse Of Their Economy

From The Economic Collapse:

Right now, we are witnessing a truly historic collapse of the economy, and yet most Americans do not understand what is going on. One of the biggest reasons why the American people do not understand what is happening to the economy is because our politicians and the mainstream media are not telling the truth. Barack Obama and Federal Reserve Chairman Ben Bernanke keep repeating the phrase "economic recovery" over and over, and this is really confusing for most Americans because things sure don't seem to be getting much better where they live.

There are millions upon millions of Americans that are sitting at home on their couches right now wondering why they lost their jobs and why nobody will hire them. Millions of others are wondering why the only jobs they can get are jobs that a high school student could do. Families all across America are wondering why it seems like their wages never go up but the price of food and the price of gas continue to skyrocket. We are facing some very serious long-term economic problems in this country, and we need to educate the American people about why the collapse of the economy is happening.

If the American people don't understand why they are losing their jobs, why they are losing their homes and why they are drowning in debt then they are going to keep on doing all of the same things that they have been doing. They will also keep sending the same idiot politicians back to Washington to represent us. There are some fundamental things about the economy that every American should know. The American people need to be shocked out of their entertainment-induced stupor long enough to understand what is really going on and what needs to be done to solve our nightmarish economic problems. If we do not wake up enough Americans in time, the economic collapse that is coming could tear this nation to shreds.

The U.S. economy was once the greatest economic machine in modern world history. It was truly a wonder to behold. It worked so well that entire generations of Americans came to believe that America would enjoy boundless prosperity indefinitely.

But sadly, prosperity is not guaranteed for any nation. Over the past several decades, some very alarming long-term economic trends have developed that are absolutely destroying the economy. If dramatic changes are not made soon, a complete and total economic collapse will be unavoidable.

Unfortunately, the American people will never agree to fundamental changes to our economic and financial systems unless they are fully educated about what is causing our problems. We have turned our backs on the principles of our forefathers and the principles of those that founded this nation. We have rejected the ancient wisdom that was handed down to us.

It has been said that those that sow the wind, shall reap the whirlwind.

We are about to experience the consequences of decades of really bad decisions.

Hopefully we can get the American people to wake up.

The following are 50 things that every American should know about the collapse of the economy....

#1 Do you remember how much was made of the "Misery Index" during the presidency of Jimmy Carter? At that time, the "Misery Index" was constantly making headlines in newspapers all across the country. Well, according to John Williams of Shadow Government Statistics, if we calculated unemployment and inflation the same way that we did back during the Carter administration, then the Misery Index today would actually be higher than at any point during the presidency of Jimmy Carter.

#2 According to the U.S. Bureau of Labor Statistics, an average of about 5 million Americans were being hired every single month during 2006. Today, an average of about 3.5 million Americans are being hired every single month.

#3 According to the Wall Street Journal, there are 5.5 million Americans that are currently unemployed and yet are not receiving unemployment benefits.

#4 All over America, state and local governments are selling off buildings just to pay the bills. Investors can now buy up government-owned power plants, prisons and municipal buildings from coast to coast. For example, the mayor of Newark, New Jersey recently sold off 16 government buildings (including the police and fire headquarters) just to pay some bills.

#5 When Americans think of "government debt", most of them only think of the federal government, but it is not just the federal government that has a massive debt problem. State and local government debt has reached an all-time high of 22 percent of U.S. GDP.

#6 If you can believe it, one out of every seven Americans has at least 10 credit cards.

#7 Credit card usage in the United States is on the increase once again. During the month of March, revolving consumer credit jumped 2.9%. Sadly, it looks like Americans have not learned their lessons about the dangers of credit card debt.

#8 Last year, Social Security ran a deficit for the first time since 1983, and the "Social Security deficits" in future years are projected to be absolutely horrific.

#9 The U.S. government now says that the Medicare trust fund will run out five years faster than they were projecting just last year.

#10 Right now we are watching what could potentially be the worst Mississippi River flood ever recorded play out right in front of our eyes. One agricultural economist at Mississippi State University believes that this disaster could do 2 billion dollars of damage just to farms alone.

#11 The "tornadoes of 2011" that we just saw in the southeast United States are being called the worst natural disaster that the U.S. has seen since Hurricane Katrina. It has been estimated that up to 25 percent of all of the poultry houses in Alabama were either significantly damaged or destroyed. It is also believed that millions of birds were killed.

#12 The economic effects of the BP oil spill just seem to go on and on and on. The number of very sick fish in the Gulf of Mexico is really starting to alarm scientists. The following is how one local newspaper recently described the situation....

Scientists are alarmed by the discovery of unusual numbers of fish in the Gulf of Mexico and inland waterways with skin lesions, fin rot, spots, liver blood clots and other health problems.

#13 The number of "low income jobs" in the U.S. has risen steadily over the past 30 years and they now account for 41 percent of all jobs in the United States.

#14 All over America, hospitals that care for the poor and needy are so overwhelmed and are so broke that they are being forced to shut down. Recently, a local newspaper in Florida ran an article about two prominent charity hospitals in Illinois that have served the poor for more than 100 years but are now asking for permission to shut down....

Two charity hospitals in Illinois are facing a life-or-death decision. There's not much left of either of them - one in Chicago's south suburbs, the other in impoverished East St. Louis - aside from emergency rooms crowded with patients seeking free care. Now they would like the state's permission to shut down.

#15 The U.S. dollar is in such bad shape that now even Steve Forbes is predicting that the U.S. is "likely" to go back to a gold standard within the next five years.

#16 Most Americans don't realize how much the U.S. dollar has been devalued over the years. An item that cost $20.00 in 1970 would cost you $115.93 today. An item that cost $20.00 in 1913 would cost you $454.36 today.

#17 Over the past 12 months the average price of gasoline in the United States has gone up by about 30%.

#18 U.S. oil companies will bring in about $200 billion in pre-tax profits this year. They will also receive about $4.4 billion in specialized tax breaks from the U.S. government.

#19 It is being projected that for the first time ever, the OPEC nations are going to bring in over a trillion dollars from exporting oil this year. Their biggest customer is the United States.

#20 According to the Pentagon, there are minerals worth over a trillion dollars under the ground in Afghanistan. Now, J.P. Morgan is starting to tap those riches with the help of the U.S. military.

#21 Speaking of J.P. Morgan, most Americans don't realize that they are actually the largest processor of food stamp benefits in the United States. In fact, the more Americans that go on food stamps the more money that J.P. Morgan makes.

#22 When 2007 began, there were about 26 million Americans on food stamps. Today, there are over 44 million on food stamps, and one out of every four American children is on food stamps.

#23 Back in 1965, only one out of every 50 Americans was on Medicaid. Today, one out of every 6 Americans is on Medicaid.

#24 Only 66.8% of American men had a job last year. That was the lowest level that has ever been recorded in all of U.S. history.

#25 The financial system is more vulnerable today than it was back in 2008 before the financial panic. Today, the world financial system has been turned into a giant financial casino where bets are made on just about anything you can possibly imagine, and the major Wall Street banks make a ton of money from this betting system. The system is largely unregulated (the new "Wall Street reform" law has only changed this slightly) and it is totally dominated by the big international banks. The danger from derivatives is so great that Warren Buffet once called them "financial weapons of mass destruction". It is estimated that the "derivatives bubble" is somewhere in the neighborhood of a quadrillion dollars, and once it pops there isn't going to be enough money in the entire world to bail everyone out.

#26 Between December 2000 and December 2010, the United States ran a total trade deficit of 6.1 trillion dollars with the rest of the world, and the U.S. has had a negative trade balance every single year since 1976.

#27 The United States has lost an average of 50,000 manufacturing jobs per month since China joined the World Trade Organization in 2001, and the U.S. trade deficit with China is now 27 times larger than it was back in 1990.

#28 In 2010, the number one U.S. export to China was "scrap and trash".

#29 All over the United States, many of our once great manufacturing cities are being transformed into hellholes. In the city of Detroit today, there are over 33,000 abandoned houses, 70 schools are being permanently closed down, the mayor wants to bulldoze one-fourth of the city and you can literally buy a house for one dollar in the worst areas.

#30 During the first three months of this year, less new homes were sold in the U.S. than in any three month period ever recorded.

#31 New home sales in the United States are now down 80% from the peak in July 2005.

#32 America's real estate crisis just seems to get worse and worse. U.S. home prices have now fallen a whopping 33% from where they were at during the peak of the housing bubble.

#33 According to a new report from the AFL-CIO, the average CEO made 343 times more money than the average American did last year.

#34 The European debt crisis could cause a global financial collapse like the one that we saw in 2008 at any time. The world economy is incredibly interconnected today, and the United States would not be immune. A recent IMF report stated the following about the growing sovereign debt crisis in Europe....

Strong policy responses have successfully contained the sovereign debt and financial-sector troubles in the euro area periphery so far. But contagion to the core euro area and then onward to emerging Europe remains a tangible risk.

#35 According to one study, the 50 U.S. state governments are collectively 3.2 trillion dollars short of what they need to meet their pension obligations.

#36 A different study has shown that individual Americans are $6.6 trillion short of what they need to retire comfortably.

#37 The cost of college tuition in the United States has gone up by over 900 percent since 1978.

#38 According to the Bureau of Economic Analysis, health care costs accounted for just 9.5% of all personal consumption back in 1980. Today they account for approximately 16.3%.

#39 One study found that approximately 41 percent of working age Americans either have medical bill problems or are currently paying off medical debt.

#40 The combined debt of the major GSEs (Fannie Mae, Freddie Mac and Sallie Mae) has increased from 3.2 trillion in 2008 to 6.4 trillion in 2011. Thanks to our politicians, U.S. taxpayers are standing behind that debt.

#41 The U.S. government is over 14 trillion dollars in debt and the budget deficit for this year is projected to be about 1.5 trillion dollars. However, if the U.S. government was forced to use GAAP accounting principles (like all publicly-traded corporations must), the U.S. government budget deficit would be somewhere in the neighborhood of $4 trillion to $5 trillion each and every year.

#42 Most Americans don't understand that the Federal Reserve and the debt-based monetary system that it runs are at the very heart of our economic problems. All of this debt is absolutely crushing us. The U.S. government spent over 413 billion dollars on interest on the national debt during fiscal 2010, and it is being projected that the U.S. government will be shelling out 900 billion dollars just in interest on the national debt by the year 2019.

#43 Standard & Poor’s has altered its outlook on U.S. government debt from "stable" to "negative" and is warning that the U.S. could soon lose its AAA rating.

#44 In 1980, government transfer payments accounted for just 11.7% of all income. Today, government transfer payments account for 18.4% of all income.

#45 U.S. households are now receiving more income from the U.S. government than they are paying to the government in taxes.

#46 59 percent of all Americans now receive money from the federal government in one form or another.

#47 According to Gallup, 41 percent of Americans believed that the economy was "getting better" at this time last year. Today, that number is at just 27 percent.

#48 The wealthiest 1% of all Americans now own more than a third of all the wealth in the United States.

#49 The poorest 50% of all Americans collectively own just 2.5% of all the wealth in the United States.

#50 The percentage of millionaires in Congress is more than 50 times higher than the percentage of millionaires in the general population.

New Palladium Paradigm Shift Coming?

By Mark Anthony

Russia's Norilsk Nickel (NILSY.PK), the world's single largest nickel producer who is also responsible for 45% of the world's palladium mine production, made two big strategic moves, one of which escaped everyone's attention (except for mine), and another which gained everyone's attention but still caught me by surprise.

The surprise move is that Norilsk Nickel actually meant it when they said early in the year that they were going to sell their stake in Stillwater Mining (SWC), the only US based palladium and platinum mine, an extremely important strategic asset that Norilsk Nickel acquired in 2004, after going through the trouble of getting two superpower presidents involved in the negotiation, among other things. I could not believe Norilsk Nickel would sell their SWC stake, because Norilsk Nickel and SWC combined gives them the monopoly power of controling more than half of the world's palladium supply. But they did just sell their SWC stake. They acquired their SWC stake for US$100M cash and 877K ounces of palladium, valued at today's market value, their investment did not bring them much profit after all.

What made the Russians change their strategic mind regarding palladium, at a time when palladium price looks to be spiralling higher by the day? Do they no longer consider themselves a key palladium supplier to the world in the future?

The Russian riddle is solved when I noticed another less observed, but much more significant strategic move made by Norilsk Nickel. The story goes back to 2007 when Norilsk Nickel outbid Xstrata (XSRAY.PK) to acquire LionOre in an all cash offer worth more than US$6.5B. At the time, analysts could not understand why Norilsk Nickel paid such a high price for a mining company of limited mineral reserves. The answer became clear only recently, long after the LionOre acquisition, in a Bloomberg news story:

Norilsk Nickel Plans $20 Billion Program to Boost Arctic Output

"We're considering switching from pyro-metallurgy to hydro-metallurgy based on Activox technology," Muravyov said. Within a year, the company will test whether the technology, which Norilsk bought in 2007 as part of its $6.5 billion LionOre acquisition, will be suitable for Arctic ores. Activox uses chemicals to dissolve nickel from concentrate and then produce the pure metal.

"The cost of applying Activox in Norilsk still needs to be evaluated," Muravyov said. Installing the technology at all of Norilsk Nickel's facilities, at a cost of as much as $10 billion, would allow the company to "remove all ecological problems and cut electricity and gas consumption," he said.

I suddenly had a eureka moment: The Activox Process, originally owned by LionOre, was the real reason for the Norilsk acquisition. The Norilsk Nickel mine, being one of the top ten most polluted places on earth due to sulphur dioxide and heavy metal emission from the smelters, and facing deteriorating nickel ore grade in coming years, desperately needs this new chemical-based metal producing technology that cuts pollution and production costs drastically.

Except for one catch. Platinum and palladium are very stable and extremely chemical inert metals. Therefore unlike nickel and copper which are easily dissolved, these two precious metals are virtually impossible to be leached from the mineral ores, using any chemical solution. A demonstration chart of the Activox Process confirms my intuition. The lower left corner of the flow chart indicates that the leach residue, containing the precious metals, are either simply disposed, or be send to alternative precious metal recovery process.

After base metals are extracted, the leach residue would contain virtually all of the original material from the mineral ores: rocks, sands, dirts grinded into fine powder, and wet with all the nasty chemicals mixed in during leaching. It probably contains no more than a few part per million precious metal content. Once again those precious metals: palladium and platinum, are chemically inert and can not be extracted efficiently using any chemical solution. The only way to process them is to use high temperature smelters, which bring back all the air pollution problem and high energy cost, problems that Norilsk wanted to solve in the first place, moving away from smelter based pyrometallurgy towards Activox Process based hydrometallurgy.

The inescapable conclusion is that Norilsk Nickel will become just a low cost nickel and copper producer, and will cease to produce palladium and platinum as byproducts, once they adopt the Activox Process.This is true unless palladium and platinum prices are driven to such high levels that it makes economic sense to try to recover the trace amount of precious metals contained in the leach residue despite of the high processing cost.

A technical paper discussing the Activox Process running at the Norilsk Nickel owned Tati plant in Botzwana, written by experts of that plant, confirms my conclusion. The 16 pages technical paper contains not a single word mentioning of either palladium or platinum: Solvent extraction design consideration for the Tati Activox® plant.

This shocking development is very bullish for palladium and is a very good news to fellow palladium investors. We are talking about 45% of the world's supply of palladium removed when Norilsk ceases to produce byproduct PGM metals. Of course, I do not expect this paradigm shift to occur overnight. But shouldn't it be time that precious metal investors leverage the opportunity to hoard the palladium metal and ride the palladium super bull up to the moon, and mean while industry users like GM (GM), FORD (F) and TOYOTA (TM) need to start to panic now and build their strategic palladium inventories before it is too late. If a 4% shortage was enough to drive rhodium's price from $300-ish to $11000 per ounce, I don't know how high palladium prices can go to if we have more than a 50% shortage in the global supply.

Maybe, just maybe, the recent remarkable surge of palladium price indicates that some investors out there have already figured out what the Activox Process means to Norilsk Nickel and to global palladium
supply, and are already quietly loading up while keeping their lips sealed.

Full disclosure:
The author has studied the global palladium market for a few years and is heavily invested in physical palladium metal, as well as in stocks of the world's only primary palladium mining companies: SWC and PAL. The author has no position in Norilsk Nickel.

By William L. Anderson

In a recent screed masquerading as the thoughts of a Nobel prize winner in economics, Paul Krugman excoriates those who speak of fear: fear of a debt crisis, of runaway inflation, of a disastrous plunge in the dollar. Scare stories are very much on politicians' minds.

As Krugman explains, such worries are irrational and certainly untrue:

None of these scare stories reflect anything that is actually happening, or is likely to happen. And while the threats are imaginary, fear of these imaginary threats has real consequences: an absence of any action to deal with the real crisis, the suffering now being experienced by millions of jobless Americans and their families.

In other words, there is no real inflation, and to even broach the subject is proof that one hates the poor and jobless.

The rise of prices for fuel, food, and other commodities is nothing more than a reflection of their "volatility." And the decline of the US dollar against other fiat currencies of the world is a good thing, because it will improve US manufacturing sales.

But while Krugman takes the move-along-folks-nothing-to-see-here approach to the real crises at hand, calling them "phantom menaces," others are looking at the horrific damage that Ben Bernanke and his allies in both the Bush and Obama administrations have created - and rightly seeing even more crises ahead. To make things even more ironic, we are seeing a situation akin to what occurred in the early 1930s; Bernanke and others claim they want to avoid the "mistakes" make by the Federal Reserve System at that time, and so they are following the same path the Fed took 80 years ago. We are at the end of the "end game" that Bernanke and his allies have been imposing upon the rest of us.

Forget for the moment the argument that Krugman and others have made, that the economy is in that "special case": the "liquidity trap," which requires an infusion of massive government spending in order to snap the economy back into prosperity. Instead, let us look at the actions the Fed took right after the failure of Lehman Brothers in September 2008, a failure that "convinced" Congress to bail out Wall Street.

Until that time, the Fed's portfolio consisted mostly of short-term Treasuries, something one would expect given the nature of the central bank's open-market activities, in which it would buy and sell government bonds in order to increase or shrink the economy's monetary base. However, the Wall Street crisis provided the fig leaf allowing the Fed to play the role of the rich uncle who bails out family members when they become financially overextended.

Thus, Bernanke's minions entered the financial marketplace with a bottomless checkbook, purchasing assets that had lost value (like mortgage securities, AIG stock, and the like) in the marketplace. However, in order to make it look as though the markets were fine, the Fed purchased these securities at prices close to their precollapse worth; Bernanke and company were playing the let's-pretend-this-worthless-paper-is-valuable game.

If you want a sense of just how reckless the Fed turned out to be in its rich-uncle role, the diagram below will help put things into perspective:

Source: Federal Reserve Bank of Atlanta

This was supposed to be Bernanke saving the economy, at least in the short term, but actually Bernanke's actions did no such thing. At this point, the gulf between the Austrians (who are unanimous in their criticism of Bernanke's actions) and the Keynesians (whose only regret is that Bernanke did not purchase even more worthless assets) is exposed. Let me explain.

In the Keynesian analysis, assets are held to be homogeneous, and the economy is believed to be a bland mixture of those assets that are fully employed when the amount of consumer and investment spending is high enough to continue to give the economy "traction."

When consumer and investment spending flag, however, Keynesians hold that the government must step in by borrowing and printing money in order to revive the spending circle. If the government spends enough, then the economy can move on its own to the point where consumers and investors keep it going - at least until the next crisis. Keynesians call this movement the "circular flow," although it is more like circular logic, in which the premise is the conclusion and the conclusion is the premise.

What must never happen is a large-scale liquidation of assets, because that would trigger deflation, which would be accompanied by an endless downward spiral and an economy stuck in a "liquidity trap" with falling prices and high unemployment. Thus, in the Keynesian view, the Fed was justified in purchasing these worthless assets, because it prevented their liquidation and preserved at least their "paper" values.

Austrians, however, take a much different view. What Keynesians call idle resources, which need only an injection of spending to be reemployed, Austrians call malinvested resources. The different is crucial, because Keynesians believe that the Fed's actions prevent an economic downward spiral, while Austrians hold that what the Fed has done furthers the economic downturn.

The difference in opinion centers on causality. Keynesians believe that the downturn is created simply by a reduction in spending, while Austrians hold that the recession is caused by the fact that the series of malinvestments created during the previous boom cannot be sustained. The drop in spending is the result of the downturn, not its cause. The difference in beliefs is crucial: in the Austrian paradigm, trying to sustain the boom conditions by injecting new government spending will always end in disaster.

The reason is simple: it takes real resources to prop up malinvestment, resources that should be going to those investments that fit within a sustainable structure of production. This point is absolutely crucial. Keynesians believe that because there are "idle" factors of production, directing them toward anything is better than letting them go unemployed; the opportunity cost of using them tends toward zero.

The Keynesian paradigm holds that if these idle factors are not directed by new government spending, they will be unemployed for an indefinite time period, as the system is locked into a "liquidity trap" and cannot move away from this perverse "equilibrium" without government help. Thus, massive new injections of government spending are absolutely necessary to keep the economy from imploding into deflation and depression.

To a Keynesian like Krugman, the only question one needs to ask is how much spending is needed. That the economy has not really moved in the direction of full employment is prima facie evidence to Krugman that spending has been too low, and he dismisses criticisms of his theory as the rantings of lunatics.

But here is the problem: despite Krugman's complaint that government spending is not high enough and despite his defense of Bernanke's actions against criticisms from people like Ron Paul (whom Krugman never misses a chance to smear with false allegations), the truth is that the Fed and the Obama administration are at the end of the tracks, and their train cannot go any farther. Even though the Fed and the government have thrown billions of dollars at the housing market to try to keep housing prices from falling, prices are falling.

Furthermore, even though Krugman admits the "recovery" is running out of steam, he blames people like Ron Paul because they don't believe the Fed should be in the money-printing business. What Krugman and Bernanke refuse to even acknowledge is that the scheme of diverting resources to prop up the failures of the last boom's malinvestments is a colossal failure, and until government policymakers stop trying to reflate the failed boom, there will be no recovery.

Ben Bernanke has opened the Fed's checkbook in an unprecedented fashion, and while he claims to be "saving" the financial system, in reality he is destroying it. He has kept the failed firms afloat, thus preventing the necessary transfers of resources from lower-valued uses to higher-valued uses. (Like Krugman and his boss, President Obama, Bernanke seems to believe that government can create wealth by transferring resources from higher-valued to lower-valued uses, the reason being that government can order any set of values into existence by sheer coercion.)

Although Bernanke and others arrogantly dismiss the rise in commodities like gold, silver, oil, and agricultural products as having nothing to do with the Fed's overt policies of inflation, it is clear that the markets are ignoring these "experts," paying no attention to the men behind the curtain. People are making their own decisions with their own money, and more and more they are voting Bernanke and his declining dollars off the island.[1]

So, trillions of dollars later, with the dollar hopelessly debased, we find we are no better off than when we started, and the necessary asset liquidation has barely begun (thanks to Bernanke). While Krugman and others claim that Bernanke has saved the economy from sliding into depression, I think he has merely guaranteed that things are going to get a lot worse.


[1] Savvy billionaire investors like Jim Rogers are out of dollar-denominated assets altogether, and my sense is that while George Soros continues to lavish billions of dollars upon organizations that support Obama and Bernanke's Keynesian nonsense, Soros himself is not following their political investment advice, at least when it comes to his own money.

William Anderson, an adjunct scholar of the Mises Institute, teaches economics at Frostburg State University. Send him mail.