Tuesday, October 2, 2012

Currency Wars - RBA lowers cash rate by 0.25%

It seems Australia has made another move in the Currency War by again lowering the official cash rate by 0.25%. The reasons stated in the article below for the move are valid but I am sure downward pressure on the AUD:USD exchange rate was also in the minds of the Mandarins of Martin Place.

The immediate impact of the cut was to raise precious metal prices (in AUD) and lower the AUD:USD exchange rate.

Chart from xe.com

Chart from goldprice.org

From The Sydney Morning Herald
The Reserve Bank has cut official interest rates to their lowest in three years in response to a worsening outlook for the global economy and signs of a weakening local labour market.

The RBA cut the cash rate by 0.25 percentage points to 3.25 per cent in a move that will be welcomed by borrowers.

Global growth risks

The RBA flagged weaker global growth and a high exchange rate as the reason for cutting rates.

"The outlook for growth in the world economy has softened over recent months, with estimates for global GDP being edged down, and risks to the outlook still seen to be on the downside," governor Glenn Stevens said in his accompanying statement. "Economic activity in Europe is contracting, while growth in the United States remains modest."

"Growth in China has also slowed, and uncertainty about near-term prospects is greater than it was some months ago.

"Key commodity prices for Australia remain significantly lower than earlier in the year, even though some have regained some ground in recent weeks."

Ross Perot - The US is headed for disaster

Ross Perot is not a "doom and gloom merchant" as stated in this report, he was just a truthful visionary. He predicted that offshoring to Asia and the North American Free Trade Agreement would gut the US economy and lead to persistently high unemployment.

Ron Paul - Gold is Good Money

By Ron Paul

Original source

Last year the Chairman of the Federal Reserve told me that gold is not money, a position which central banks, governments, and mainstream economists have claimed is the consensus for decades. But lately there have been some high-profile defections from that consensus. As Forbes recently reported, the president of the Bundesbank (Germany's central bank) and two highly-respected analysts at Deutsche Bank have praised gold as good money.

Why is gold good money? Because it possesses all the monetary properties that the market demands: it is divisible, portable, recognizable and, most importantly, scarce - making it a stable store of value. It is all things the market needs good money to be and has been recognized as such throughout history. Gold rose to nearly $1800 an ounce after the Fed's most recent round of quantitative easing because the people know that gold is money when fiat money fails.

Central bankers recognize this too, even if they officially deny it. Some analysts have speculated that the International Monetary Fund's real clout is due to its large holdings of gold. And central banks around the world have increased their gold holdings over the last year, especially in emerging market economies trying to protect themselves from the collapse of Western fiat currencies.

Fiat money is not good money because it can be issued without limit and therefore cannot act as a stable store of value. A fiat monetary system gives complete discretion to those who run the printing press, allowing governments to spend money without having to suffer the political consequences of raising taxes. Fiat money benefits those who create it and receive it first, enriching government and its cronies. And the negative effects of fiat money are disguised so that people do not realize that money the Fed creates today is the reason for the busts, rising prices and unemployment, and diminished standard of living tomorrow.

This is why it is so important to allow people the freedom to choose stable money. Earlier this Congress I introduced the Free Competition in Currency Act (H.R. 1098) to permit people to use gold as money again. By eliminating taxes on gold and other precious metals and repealing legal tender laws, people are given the option between using good money or fiat money. If the government persists in debasing the dollar – as money monopolists have always done – then the people would be able to protect themselves by using alternatives such as gold that are both sound and stable.

As the fiat money pyramid crumbles, gold retains its luster. Rather than being the barbarous relic Keynesians have tried to lead us to believe it is, gold is, as the Bundesbank president put it, "a timeless classic." The defamation of gold wrought by central banks and governments is because gold exposes the devaluation of fiat currencies and the flawed policies of government. Governments hate gold because the people cannot be fooled by it.

More Pet Rocks

This time Feldspar with approx 1g/tonne of Gold. Sample from Central West New South Wales, Australia.

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