Jim Grant: "The Fed Is Now In The Business Of Manipulating The Stock Market...Should Confess It Has Sinned Grievously"
The fact that the Fed, through Wall Street, is managing the Dow and S&P is no surprise to any of us at GATA. We've known about his for years...and even the Fed now admits they're doing it. As Chris Powell's famous quote goes..."There are no markets anymore, only interventions". The link to the article...and the James Grant interview...is here. Source
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Close Call For US Banks
U.S. Treasury Secretary Admits U.S. Default is Imminent
By James West
MidasLetter.com
January 23, 2011
Timothy Geithner, U.S. Treasury Secretary, admitted in a letter to congress dated January 6th, that the United States Treasury would be forced to default on its credit obligations without clearance from congress to raise the amount of money that the treasury is allowed to borrow.
After citing a list of “extraordinary measures” congress has had to resort to int he past to avoid entering a state of defualt, Geithner stated, “Once these steps have been taken, no remaining legal and prudent measures would be available to create additional headroom under the debt limit, and the United States would begin to default on its obligations. The extraordinary measures include, “suspending sales of State and Local Government Series (SLGS) Treasury securities; suspending reinvestment of the Government Securities Investment Fund (G-Fund); suspending reinvestment of the Exchange Stabilization Fund (ESF); and determining that a “debt issuance suspension period” exists, permitting redemption of existing, and suspension of new, investments of the Civil Service Retirement and Disability Fund (CSRDF).
That the United States has already defaulted on its obligations is beyond dispute, at this point, as its the rate at which its debt service obligations is growing exceeds the rate at which the United States GDP could possibly grow, meaning that, without drastic cuts to governmenbt spending, the debt can only continue to grow.
Before our very eyes, the so-called leadership of the world’s largest economy is intentionally bankrupting the country and devaluing its currency in what can only be a precursor to rampant inflation. Since the integrity necessary to manage this problem does not exist within the United States political system, the rest of the world has no choice but to stand by and watch the value of their United States Treasury Bills diminish incrementally on a daily basis. Selling them will only exacerbate the problem, but the question must be asked, how long until the remedy is preferred over the miserable condition?
Geithner goes on to say, in a remarkable baring of the national soul,
However, if Congress were to fail to act, the specific consequences would be as follows:
The Treasury would be forced to default on legal obligations of the United States, causing catastrophic damage to the economy, potentially much more harmful than the effects of the financial crisis of 2008 and 2009.
A default would impose a substantial tax on all Americans. Because Treasuries represent the benchmark borrowing rate for all other sectors, default would raise all borrowing costs. Interest rates for state and local government, corporate and consumer borrowing, including home mortgage interest, would all rise sharply. Equity prices and home values would decline, reducing retirement savings and hurting the economic security of all Americans, leading to reductions in spending and investment, which would cause job losses and business failures on a significant scale.
Default would have prolonged and far-reaching negative consequences on the safe-haven status of Treasuries and the dollar’s dominant role in the international financial system, causing further increases in interest rates and reducing the willingness of investors here and around the world to invest in the United States.
Payments on a broad range of benefits and other U.S. obligations would be discontinued, limited, or adversely affected, including:
-U.S. military salaries and retirement benefits;
-Social Security and Medicare benefits;
-veterans’ benefits;
-federal civil service salaries and retirement benefits
-individual and corporate tax refunds;
-unemployment benefits to states;
-defense vendor payments;
-interest and principal payments on Treasury bonds and other securities;
-student loan payments;
-Medicaid payments to states; and
-payments necessary to keep government facilities open.
I personally am stunned. No mention is made of sales of assets held by the United States government. Rather than liquidate its own real estate to cover its debt, the defective and fiduciarily delinquent U.S. government plans to first eradicate the incomes of its poorest citizens.
If this document is not a harbinger of impending civil unrest ona national scale in the United States, i can’t imagine what is. Big big changes are on the horizon though. Of that there is no doubt.
Second wave of housing bust hammers more cities
Associated Press
A second wave of falling home prices is battering some cities that had escaped the worst of the housing market bust.
Prices in Seattle, Charlotte, N.C., and Portland, Ore., have hit their lowest points since peaking in 2006 and 2007. Denver and Minneapolis are nearing new lows. High unemployment and rising foreclosures are taking a toll even on markets that never overheated during the boom years.
Home values are dwindling in nearly every American market. Prices fell in November in all but one of the 20 cities in the Standard & Poor's/Case-Shiller index released Tuesday. Eight of those markets hit their lowest point since the housing bubble burst.
The damage from the real estate bubble has spread well beyond Las Vegas, Phoenix and Miami, which built frantically during the mid-2000s, and is sapping prices from coast to coast. In many places, prices are expected to keep falling for at least the next six months.
In Charlotte, homes are going for 2004 prices. Last year, more than half of the homes sold in surrounding Mecklenberg County were foreclosures, says Mark Vitner, a senior economist with Wells Fargo.
"There's a huge oversupply, and a lot of people are struggling," says Vitner, who works in Charlotte. "We're expecting it to fall even further in 2011."
The banking industry, which helped Charlotte boom over the past two decades and accounts for roughly one in every 11 jobs there, was hit hard during the recession. The city lost 12 percent of its financial jobs in 2008 and 2009, according to the Labor Department.
Adding to the region's economic woes, about a third of jobs tied to the auto industry also vanished in the downturn, said Michael Walden, an economist at North Carolina State University in Raleigh. Charlotte's unemployment rate was 12.8 percent a year ago, well above the national rate. It has fallen to 10.8 percent, still more than twice what it was when the recession started.
"We're feeling it, there's no doubt about that," says Mike Shaffer, owner of Century 21 Southern Comfort Realty.
Of course, while foreclosures weaken resale values, they're great for renters who want to own a home. Robert Hubbard closed on Monday on a three-bedroom, two-bath house in Charlotte that he bought for about $79,000. While it takes some looking to find the right place, the market is "saturated" with foreclosures, he says.
Associated Press
A second wave of falling home prices is battering some cities that had escaped the worst of the housing market bust.
Prices in Seattle, Charlotte, N.C., and Portland, Ore., have hit their lowest points since peaking in 2006 and 2007. Denver and Minneapolis are nearing new lows. High unemployment and rising foreclosures are taking a toll even on markets that never overheated during the boom years.
Home values are dwindling in nearly every American market. Prices fell in November in all but one of the 20 cities in the Standard & Poor's/Case-Shiller index released Tuesday. Eight of those markets hit their lowest point since the housing bubble burst.
The damage from the real estate bubble has spread well beyond Las Vegas, Phoenix and Miami, which built frantically during the mid-2000s, and is sapping prices from coast to coast. In many places, prices are expected to keep falling for at least the next six months.
In Charlotte, homes are going for 2004 prices. Last year, more than half of the homes sold in surrounding Mecklenberg County were foreclosures, says Mark Vitner, a senior economist with Wells Fargo.
"There's a huge oversupply, and a lot of people are struggling," says Vitner, who works in Charlotte. "We're expecting it to fall even further in 2011."
The banking industry, which helped Charlotte boom over the past two decades and accounts for roughly one in every 11 jobs there, was hit hard during the recession. The city lost 12 percent of its financial jobs in 2008 and 2009, according to the Labor Department.
Adding to the region's economic woes, about a third of jobs tied to the auto industry also vanished in the downturn, said Michael Walden, an economist at North Carolina State University in Raleigh. Charlotte's unemployment rate was 12.8 percent a year ago, well above the national rate. It has fallen to 10.8 percent, still more than twice what it was when the recession started.
"We're feeling it, there's no doubt about that," says Mike Shaffer, owner of Century 21 Southern Comfort Realty.
Of course, while foreclosures weaken resale values, they're great for renters who want to own a home. Robert Hubbard closed on Monday on a three-bedroom, two-bath house in Charlotte that he bought for about $79,000. While it takes some looking to find the right place, the market is "saturated" with foreclosures, he says.
Recent Quote:
Gold is insurance against a financial Armageddon. Gold's over $1,400 an ounce as we speak. When it gets up to $5,000 people will say, "Oh my goodness. I bought it at $1,400. I can sell it at $5,000 and make a lot of money." That profit may be there, but the way to look at gold is that it anticipates the inflation ahead and preserves the purchasing power of your paper assets. Even if gold gets to $100,000, it's not that you've made $98,600 profit, it's just that you still have the purchasing power you did with your $1,400 gold. - John Williams, shadowstats.com
Gold is insurance against a financial Armageddon. Gold's over $1,400 an ounce as we speak. When it gets up to $5,000 people will say, "Oh my goodness. I bought it at $1,400. I can sell it at $5,000 and make a lot of money." That profit may be there, but the way to look at gold is that it anticipates the inflation ahead and preserves the purchasing power of your paper assets. Even if gold gets to $100,000, it's not that you've made $98,600 profit, it's just that you still have the purchasing power you did with your $1,400 gold. - John Williams, shadowstats.com
Want To Know The Future Of Gold?
Click HERE to hear a ten minute interview with James Rickards regarding the future of the world financial markets and how it will impact gold.
Jim Rickards is Senior Managing Director for Market Intelligence at Omnis, Inc. - Jim has been a direct participant in many of the most significant financial events over the past 30 years including the 1981 release of hostages from Iran and was also the principal negotiator for the government sponsored bailout of LTCM. His clients include private investment funds, investment banks and government directorates in national security and defense. He is an advisor to the Committee on Foreign Investment in the United States and Support Group of the Director of National Intelligence and recently testified before Congress on the causes of the financial crisis.
Click HERE to hear a ten minute interview with James Rickards regarding the future of the world financial markets and how it will impact gold.
Jim Rickards is Senior Managing Director for Market Intelligence at Omnis, Inc. - Jim has been a direct participant in many of the most significant financial events over the past 30 years including the 1981 release of hostages from Iran and was also the principal negotiator for the government sponsored bailout of LTCM. His clients include private investment funds, investment banks and government directorates in national security and defense. He is an advisor to the Committee on Foreign Investment in the United States and Support Group of the Director of National Intelligence and recently testified before Congress on the causes of the financial crisis.
Correction in Gold Nears a Key Target
by Rick Ackerman
Gold and Silver got whomped again yesterday, adding yet more carnage to a correction that will soon enter its fifth week. For long-term investors who have chosen to ride out the storm, the selloff must seem brutal. And yet, from early December’s high at $1432 to yesterday’s $1310 low, the loss so far has amounted to just 8.5 percent. Granted, it’s been worse for some owners of mining shares, which have declined by a little more than 17 percent, basis the ARCA Gold Bugs Index. But even that falls shy of the 20 percent standard that is often applied to distinguish moderate corrections from truly ugly ones.
How much further will bullion and precious metal shares fall? Rick’s Picks has been using a worst-case target of 1296.50 for the Comex February contract. It was first identified in the following trading “tout,” with the futures hovering around $1332: “A 1296.50 target can be tortured out of the chart I’ve furnished, and its [technical] provenance is shown in red. Because the pattern yielding that target is so visually un-intuitive, and because the breach of $1300 would touch off a minor panic, I’d categorize 1296.50 as a back-up-the-truck price where February Gold could — and should – be accumulated aggressively.”
by Rick Ackerman
Gold and Silver got whomped again yesterday, adding yet more carnage to a correction that will soon enter its fifth week. For long-term investors who have chosen to ride out the storm, the selloff must seem brutal. And yet, from early December’s high at $1432 to yesterday’s $1310 low, the loss so far has amounted to just 8.5 percent. Granted, it’s been worse for some owners of mining shares, which have declined by a little more than 17 percent, basis the ARCA Gold Bugs Index. But even that falls shy of the 20 percent standard that is often applied to distinguish moderate corrections from truly ugly ones.
How much further will bullion and precious metal shares fall? Rick’s Picks has been using a worst-case target of 1296.50 for the Comex February contract. It was first identified in the following trading “tout,” with the futures hovering around $1332: “A 1296.50 target can be tortured out of the chart I’ve furnished, and its [technical] provenance is shown in red. Because the pattern yielding that target is so visually un-intuitive, and because the breach of $1300 would touch off a minor panic, I’d categorize 1296.50 as a back-up-the-truck price where February Gold could — and should – be accumulated aggressively.”
No Way Out
311,927,341 Americans, 138,588,037 working and 64,703,760 retired or disabled, face $14 Trillion in official U.S. debt, $55.6 Trillion in total debt, $112 Trillion in unfunded liabilities, $576 Trillion in unsecured currency and debt derivatives held by a few banks, and a $638 Trillion trade deficit. [Click here to see the U.S. Debt Clock update in real time. You’ll be astounded. And by the way, your family’s share of the $55.6 Trillion is $681,000 and rising.]
No wonder the overstretched dollar fell from $20 an ounce of gold to $1430.60, a -98.6% drop in the value of the dollar.
The above statistics are courtesy of Rick Ackerman.
At $681k/family, it is IMPOSSIBLE for us to grow our way out of this mess. Depression, both economic and mental, are already baked into the cake. No crystal balls are necessary to see the future of both the dollar and gold. One is bright and the other will soon be just a memory.
Got gold?
DT
_____________________________________________
This guy is better prepared for what's coming than 99% of all Americans. What's that old saying.... Even a blind hog finds an acorn every once in a while.
311,927,341 Americans, 138,588,037 working and 64,703,760 retired or disabled, face $14 Trillion in official U.S. debt, $55.6 Trillion in total debt, $112 Trillion in unfunded liabilities, $576 Trillion in unsecured currency and debt derivatives held by a few banks, and a $638 Trillion trade deficit. [Click here to see the U.S. Debt Clock update in real time. You’ll be astounded. And by the way, your family’s share of the $55.6 Trillion is $681,000 and rising.]
No wonder the overstretched dollar fell from $20 an ounce of gold to $1430.60, a -98.6% drop in the value of the dollar.
The above statistics are courtesy of Rick Ackerman.
At $681k/family, it is IMPOSSIBLE for us to grow our way out of this mess. Depression, both economic and mental, are already baked into the cake. No crystal balls are necessary to see the future of both the dollar and gold. One is bright and the other will soon be just a memory.
Got gold?
DT
_____________________________________________
This guy is better prepared for what's coming than 99% of all Americans. What's that old saying.... Even a blind hog finds an acorn every once in a while.
Take Delivery Of Your Metals Now
As more and more people begin to understand the protection that precious metals offer, the question always arises: "Should I hold my metals or allow them to be held in safekeeping by someone else?" I think this short video might help answer that question for you.
15% Premiums For Physical Metals
As more and more people begin to understand the protection that precious metals offer, the question always arises: "Should I hold my metals or allow them to be held in safekeeping by someone else?" I think this short video might help answer that question for you.
15% Premiums For Physical Metals
More spectacular debt won't fix anything, Agnico CEO tells King World News
Submitted by cpowell on Tue, 2011-01-25 01:09. Section: Daily Dispatches
5:05p PT Monday, January 24, 2011
Dear Friend of GATA and Gold (and Silver):
Interviewed today by Eric King of King World News, Agnico-Eagle CEO Sean Boyd remarks that confidence in the world economy is misplaced and more spectacular debt creation won't fix anything. Boyd sees gold rising to $2,000 this year. You can find excerpts from the interview at the King World News blog here:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/24_Agnico_Eagle_CEO_Sean_Boyd_-_%242%2C000_Gold_This_Year.html...
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
--------------------------------------------------------------------------------
Submitted by cpowell on Tue, 2011-01-25 01:09. Section: Daily Dispatches
5:05p PT Monday, January 24, 2011
Dear Friend of GATA and Gold (and Silver):
Interviewed today by Eric King of King World News, Agnico-Eagle CEO Sean Boyd remarks that confidence in the world economy is misplaced and more spectacular debt creation won't fix anything. Boyd sees gold rising to $2,000 this year. You can find excerpts from the interview at the King World News blog here:
http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/1/24_Agnico_Eagle_CEO_Sean_Boyd_-_%242%2C000_Gold_This_Year.html...
CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Committee Inc.
--------------------------------------------------------------------------------
Why Gold is Falling
Many people are selling gold. Does this mean the boom in gold is over?
Personally, I’m not selling. I’m waiting to buy more gold and silver if the price continues to drop.
While prices of anything goes up and down, gold and silver are over due for a correction. The price should drop. Both metals have been in a ten-year bull market cycle. Another reason why precious metals aren’t rising is because Asian markets are raising interest rates on bonds (debt).
Many people don’t like gold and silver because there’s no interest. When interest rates were near or at zero, gold and silver prices were rising and people got out of bonds and into the precious metals bull market. Now that Asian interest rates are rising, some investors are leaving precious metals, and possibly stocks, and getting back into bonds.
Many people believe China’s bubble will bust in mid-to-late 2011. There’s simply too much money flowing into China and the Chinese markets are overheated, just as the US and European markets were overheated in 2007. If China goes bust, the world will also go bust. This is why they’re raising interest rates, trying to slow speculation and financial insanity.
Those of you who read Conspiracy of the Rich: The 8 New Rules of Money know that too much money at low interest rates was the cause of the 2007 US market collapse. Unfortunately, there’s still too much money running around looking for a place to call home, which causes inflation and speculation worldwide.
I believe we’ll be in a boom and bust world economy for at least ten more years. This is why I encourage people to stay vigilant, pay attention to the price of gold, silver, oil, food prices, and interest rates. I believe those prices more than I believe the words from our leaders.
For now, I trust gold and silver more than I trust political promises.
Thank you for supporting COR.
Robert Kiyosaki
Robert Kiyosaki is author of the #1 bestselling personal finance book of all time, Rich Dad Poor Dad.
Many people are selling gold. Does this mean the boom in gold is over?
Personally, I’m not selling. I’m waiting to buy more gold and silver if the price continues to drop.
While prices of anything goes up and down, gold and silver are over due for a correction. The price should drop. Both metals have been in a ten-year bull market cycle. Another reason why precious metals aren’t rising is because Asian markets are raising interest rates on bonds (debt).
Many people don’t like gold and silver because there’s no interest. When interest rates were near or at zero, gold and silver prices were rising and people got out of bonds and into the precious metals bull market. Now that Asian interest rates are rising, some investors are leaving precious metals, and possibly stocks, and getting back into bonds.
Many people believe China’s bubble will bust in mid-to-late 2011. There’s simply too much money flowing into China and the Chinese markets are overheated, just as the US and European markets were overheated in 2007. If China goes bust, the world will also go bust. This is why they’re raising interest rates, trying to slow speculation and financial insanity.
Those of you who read Conspiracy of the Rich: The 8 New Rules of Money know that too much money at low interest rates was the cause of the 2007 US market collapse. Unfortunately, there’s still too much money running around looking for a place to call home, which causes inflation and speculation worldwide.
I believe we’ll be in a boom and bust world economy for at least ten more years. This is why I encourage people to stay vigilant, pay attention to the price of gold, silver, oil, food prices, and interest rates. I believe those prices more than I believe the words from our leaders.
For now, I trust gold and silver more than I trust political promises.
Thank you for supporting COR.
Robert Kiyosaki
Robert Kiyosaki is author of the #1 bestselling personal finance book of all time, Rich Dad Poor Dad.
Silver In Backwardation - Set To Explode
James Turk has alerted King World News that silver is in backwardation. Turk spoke with KWN saying, “Silver is in backwardation which is an extremely important development. Most are aware that when backwardation occurs, the spot price is higher than the futures price. Backwardation happens regularly in most commodities, but it is rare in the precious metals.”
Turk continues:
“Silver is in backwardation not just in the short-term, this time it is extending twelve months forward!
The last time this happened was in January of 2009. Over the next few weeks silver rose from about $10.50 to $14.50, a roughly a 40% move higher. The key to understanding backwardation is that the price must rise to entice holders of physical metal to sell and accept a national currency in return. I think we can expect a similar event to repeat over the next few weeks.
A similar type of move would clearly put silver well above its previous high. What this backwardation shows is that there is a disconnect between the physical and the paper markets in silver. As I said previously, the silver shorts simply cannot hold the paper price down here any longer without seriously discrediting the paper silver market as a price discovery mechanism.
Gold is not in backwardation, nevertheless the demand for physical gold is extremely intense. With the sentiment indicators at very low levels, it suggests we are about to see a stunning short covering rally in gold.”
Weakness in the metals can end as quickly as it began. When the metals turn, this next move should be breathtaking.
Eric King
KingWorldNews.com
James Turk has alerted King World News that silver is in backwardation. Turk spoke with KWN saying, “Silver is in backwardation which is an extremely important development. Most are aware that when backwardation occurs, the spot price is higher than the futures price. Backwardation happens regularly in most commodities, but it is rare in the precious metals.”
Turk continues:
“Silver is in backwardation not just in the short-term, this time it is extending twelve months forward!
The last time this happened was in January of 2009. Over the next few weeks silver rose from about $10.50 to $14.50, a roughly a 40% move higher. The key to understanding backwardation is that the price must rise to entice holders of physical metal to sell and accept a national currency in return. I think we can expect a similar event to repeat over the next few weeks.
A similar type of move would clearly put silver well above its previous high. What this backwardation shows is that there is a disconnect between the physical and the paper markets in silver. As I said previously, the silver shorts simply cannot hold the paper price down here any longer without seriously discrediting the paper silver market as a price discovery mechanism.
Gold is not in backwardation, nevertheless the demand for physical gold is extremely intense. With the sentiment indicators at very low levels, it suggests we are about to see a stunning short covering rally in gold.”
Weakness in the metals can end as quickly as it began. When the metals turn, this next move should be breathtaking.
Eric King
KingWorldNews.com
Suppy & Demand
For the last 30 years, sovereign governments have been selling their gold reserves. However, over the last 5 years, that trend has changed and now central banks are buyers. More demand equals higher prices: Econ 101.
Here's a graph of the Russian Central Bank's gold holdings. Looks like they are pretty bullish on gold I'd say.
CLICK ON GRAPH TO ENLARGE
CLICK ON GRAPH TO ENLARGE
Shooting in Arizona
Most people are aware of the shooting in Arizona that killed a number of people and wounded US Congresswoman, Gabrielle Gifford. The shooter, Jared Loughner, is apparently extremely disturbed.
More disturbing than even Jared Loughner is how this shooting in Arizona has become political. Once again the right and left are attacking each other, each accusing the other of causing the shooting. For example, a number of people used this tragedy to attack Sarah Palin’s bull’s eyes on a map graphic, saying it provoked this insanity. I’m not a fan of Sarah, but to use this tragedy to take cheap shots at a person you don’t like is the true insanity.
Rather than join the insanity, I thought I’d offer a slightly different point of view, even though it won’t be popular—or a politically correct.
I live in Arizona. One reason I live here is because of the state’s gun laws. I have a license to carry a concealed weapon, and I do carry one.
Now, I know this sounds insane to many of you that I carry a concealed weapon. But let me explain my reasons for living here and carrying a gun.
First of all, I like guns. I grew up with guns, using them even though my mom and dad were against them. I was fortunate to have a neighbor who liked to hunt. He took me along with his sons and taught us how to hunt and how to properly use and respect the power of guns.
Second, while I was in high school, I got into a fight with a guy who had a gun. I was unarmed. The moment he pulled his gun and put it in my face, I knew I had to back down or die. I didn’t like kissing the butt of a punk just because he had a gun.
Third, I’m a former Marine. I’m well-trained in the use of guns and warfare, and I spent a year in Vietnam. Being shot at in combat is a life changing experience.
Fourth, I’ve been attacked with a gun twice in civilian life. Once was by a deranged war veteran who didn’t like me criticizing the Vietnam War, and another time during an armed robbery in Waikiki.
Fifth, a few years ago, my neighbor called the police because he came home for lunch and found a burglar in his home. The police took over thirty minutes to arrive even though the station is less than two miles away. If the burglar had been armed, my neighbor might’ve been dead.
Through my experiences, I’ve learned this lesson: the police don’t prevent crimes. They only investigate, arrest, and prosecute after a crime is committed. If no crime is committed, the police can’t do anything.
The real tragedy of the murders in Tucson is that police couldn’t have prevented it, even if the state had tougher gun laws or outlawed guns entirely. Unfortunately, the world is awash with guns and anyone who wants a gun can get one, legally or illegally.
Also, the police can’t arrest every weird person in the world, crazy or not. If they had the power to do that, we would be back to living under an oppressive government with the power to round up anyone who they deemed as strange, sick, or undesirable. History is full of such governments. One only has to think of Hitler or Stalin to realize the importance of retaining our freedoms even in the face of danger.
Freedom is great, but it has its risks. One risk is allowing strange, even insane people the same freedoms we all enjoy.
Simply said, in a free society, the police can’t protect you until after a crime is committed. In other words, it’s up to you to prevent crimes against you.
This is why I’m thankful to live in Arizona, carry a gun, and practice shooting on a regular basis.
Thank you for supporting COR.
Robert Kiyosaki
**********************************
Robert Kiyosaki is the author of the #1 bestselling personal finance book of all time, Rich Dad Poor Dad.
Most people are aware of the shooting in Arizona that killed a number of people and wounded US Congresswoman, Gabrielle Gifford. The shooter, Jared Loughner, is apparently extremely disturbed.
More disturbing than even Jared Loughner is how this shooting in Arizona has become political. Once again the right and left are attacking each other, each accusing the other of causing the shooting. For example, a number of people used this tragedy to attack Sarah Palin’s bull’s eyes on a map graphic, saying it provoked this insanity. I’m not a fan of Sarah, but to use this tragedy to take cheap shots at a person you don’t like is the true insanity.
Rather than join the insanity, I thought I’d offer a slightly different point of view, even though it won’t be popular—or a politically correct.
I live in Arizona. One reason I live here is because of the state’s gun laws. I have a license to carry a concealed weapon, and I do carry one.
Now, I know this sounds insane to many of you that I carry a concealed weapon. But let me explain my reasons for living here and carrying a gun.
First of all, I like guns. I grew up with guns, using them even though my mom and dad were against them. I was fortunate to have a neighbor who liked to hunt. He took me along with his sons and taught us how to hunt and how to properly use and respect the power of guns.
Second, while I was in high school, I got into a fight with a guy who had a gun. I was unarmed. The moment he pulled his gun and put it in my face, I knew I had to back down or die. I didn’t like kissing the butt of a punk just because he had a gun.
Third, I’m a former Marine. I’m well-trained in the use of guns and warfare, and I spent a year in Vietnam. Being shot at in combat is a life changing experience.
Fourth, I’ve been attacked with a gun twice in civilian life. Once was by a deranged war veteran who didn’t like me criticizing the Vietnam War, and another time during an armed robbery in Waikiki.
Fifth, a few years ago, my neighbor called the police because he came home for lunch and found a burglar in his home. The police took over thirty minutes to arrive even though the station is less than two miles away. If the burglar had been armed, my neighbor might’ve been dead.
Through my experiences, I’ve learned this lesson: the police don’t prevent crimes. They only investigate, arrest, and prosecute after a crime is committed. If no crime is committed, the police can’t do anything.
The real tragedy of the murders in Tucson is that police couldn’t have prevented it, even if the state had tougher gun laws or outlawed guns entirely. Unfortunately, the world is awash with guns and anyone who wants a gun can get one, legally or illegally.
Also, the police can’t arrest every weird person in the world, crazy or not. If they had the power to do that, we would be back to living under an oppressive government with the power to round up anyone who they deemed as strange, sick, or undesirable. History is full of such governments. One only has to think of Hitler or Stalin to realize the importance of retaining our freedoms even in the face of danger.
Freedom is great, but it has its risks. One risk is allowing strange, even insane people the same freedoms we all enjoy.
Simply said, in a free society, the police can’t protect you until after a crime is committed. In other words, it’s up to you to prevent crimes against you.
This is why I’m thankful to live in Arizona, carry a gun, and practice shooting on a regular basis.
Thank you for supporting COR.
Robert Kiyosaki
**********************************
Robert Kiyosaki is the author of the #1 bestselling personal finance book of all time, Rich Dad Poor Dad.
Inflationary Guerilla Tactics Resume As Comex, Nymex Hike Margins On Gold, Silver, Cracks, Spreads And Other Products
Here's my last offering of the day...and it's a very important read. It was a zerohedge.com posting that Washington state reader S.A. sent me early yesterday evening that's headlined "Inflationary Guerilla Tactics Resume As Comex, Nymex Hike Margins On Gold, Silver, Cracks, Spreads And Other Products". Normally, margins are increased as prices rise...but not this time...and this is the second time that margin prices have been increased as the underlying asset has fallen steeply in value.
Tyler Durden has this to say about it..."Wonder why the smart money was rushing headlong out of gold and silver over the past few days, and especially today in the AM session? Here's your answer: in tried and true fashion the Comex just hiked margins in gold, and silver by about 6%, and threw in a few other commodities to mask things up."
As the headline reads, these are truly 'guerilla tactics' that are being used to force the technical longs to puke up their long positions. Needless to say, this was done at the behest of the bullion banks in cahoots with their 'friends' at the Comex. And, as I said before, 'da boyz' are really serious about getting out of their short positions this time...especially in silver...and they are leaving no stone unturned in their quest to pick up every speculative long Comex contract that they can find.
I consider this a must read...and the link is here.
But, in an e-mail from silver analyst Ted Butler in the wee hours of this morning, Ted had this to say about yesterday's margin increases..."I don't think it's as critical this time, due to the damage already done...and the relatively small increase."
Here's my last offering of the day...and it's a very important read. It was a zerohedge.com posting that Washington state reader S.A. sent me early yesterday evening that's headlined "Inflationary Guerilla Tactics Resume As Comex, Nymex Hike Margins On Gold, Silver, Cracks, Spreads And Other Products". Normally, margins are increased as prices rise...but not this time...and this is the second time that margin prices have been increased as the underlying asset has fallen steeply in value.
Tyler Durden has this to say about it..."Wonder why the smart money was rushing headlong out of gold and silver over the past few days, and especially today in the AM session? Here's your answer: in tried and true fashion the Comex just hiked margins in gold, and silver by about 6%, and threw in a few other commodities to mask things up."
As the headline reads, these are truly 'guerilla tactics' that are being used to force the technical longs to puke up their long positions. Needless to say, this was done at the behest of the bullion banks in cahoots with their 'friends' at the Comex. And, as I said before, 'da boyz' are really serious about getting out of their short positions this time...especially in silver...and they are leaving no stone unturned in their quest to pick up every speculative long Comex contract that they can find.
I consider this a must read...and the link is here.
But, in an e-mail from silver analyst Ted Butler in the wee hours of this morning, Ted had this to say about yesterday's margin increases..."I don't think it's as critical this time, due to the damage already done...and the relatively small increase."
Buy Silver?
I am a big fan of gold and a small fan of silver. However, the following article was too good not to be passed on. It's title says it all, and I think I might add a little silver to my gold stash.
Sell Gold, Buy Silver
by Robert Kiyosaki
Friday, January 14, 2011
Yahoo Finance
You may have noticed that gold is hovering around $1,360 an ounce (sliding recently after a big run-up) and silver is around $30 an ounce. That means in November of 2010 alone, gold increased in price by 2 percent and silver by 14 percent. Investing in gold and silver beats saving money in a bank earning less than 0.1 percent per month. Once again, this is further evidence that savers are losers as central banks of the world print trillions of dollars.
With paper money declining in value, millions of people are finally climbing on the gold wagon. Everywhere I go, I see signs that say, "We Buy Gold," calling out to people desperate for cash to trade in their gold jewelry.
For years now, I've said that silver is a better investment than gold.
To quickly summarize, here are a few reasons:
• Silver is consumed and gold is hoarded.
• Silver is a precious metal and is also an industrial metal that is used in electronics, medicine, water purification, and jewelry
• Today stockpiles of gold are increasing while stockpiles of silver are decreasing. (This means there's an abundance of gold and a shortage of silver).
• The gold/silver ratio is historically 14:1. This means that if gold were $14 an ounce then silver would $1 an ounce. Today, the ratio is approximately 50:1. Silver is extremely underpriced. If silver held to the historic 14:1 ratio, with gold at $1,400 an ounce then silver should be $100 an ounce -- not the $30 an ounce it is today.
In my opinion, when you combine the fact that there's a shortage of silver and that it's underpriced, silver is the safest and best investment today..... but not for long.
A logical question is, "Why is the price of silver suppressed? Why is silver so much lower than gold?"
There are two primary reasons for silver's low price.
Number one, central banks buy gold, not silver. To bankers, gold is money and silver isn't. Today central banks are buying tons of gold, with India being one of the biggest buyers. This elevates the price of gold, leaving silver the bridesmaid but not the bride.
The price of silver is manipulated. The price of silver is intentionally kept low. While this is criminal, it's not illegal. Yet for decades, COMEX, the commodities exchange, has been in cahoots with the biggest silver investors at the expense of the little silver investor. This is about to end, thanks to some regulatory changes that may offer the biggest opportunity for silver investors between January and March of 2011.
What has changed?
Rumors are flying that more than 25 lawsuits have been filed against commercial investors such as JP Morgan and HSBC, accusing them of price manipulation to keep the price of silver artificially low.
The Commodities Futures Trading Commission (CFTC), which is to the COMEX what the SEC is to the New York Stock Exchange, has passed a new law which will force COMEX to play fair, forbidding such massive short positions on silver.. The actions of the CFTC are one more reason for last November's 14 percent price rise in silver. The price manipulation of silver is about to end.
How was the price of silver kept low?
Big investors short-selling silver have kept the price low. For decades, the biggest players in the silver market, commercial investors such as JP Morgan and HSBC, have taken massive short positions on silver.
What does short selling mean?
Short selling (shorting) means you sell something you don't own. Simply put, you borrow something to sell with the promise you will return what you borrowed.
It's not much different than going to your neighbor to borrow 5 pounds of flour and promising to return 5 pounds of flour in a month.
Shorting is done in all markets: commodities, stocks, bonds, and real estate.
The commercial banks, generally large banks such as JPMorgan and HSBC, sell borrowed silver from the COMEX and pocket the money. The banks use that money to invest in other higher-returning investments such as stocks or bonds.
Meanwhile, COMEX has earned billions of dollars from the interest on the borrowed silver. The commercial banks and the COMEX both profit from this large short position of silver, the larger the better.
Now, with the new CFTC law, the commercial banks will need to buy back silver and return it to the exchange. The problem is not a money problem. The problem is a shortage of silver.
When the commercial banks start buying rather than selling silver, this will cause the price of silver to rise, increasing the costs to replace the silver. It's simple supply and demand.
This massive big short has left the banks with a large margin-call when a broker asks an investor to bring an account up to a minimum position. How big is the margin call in silver? It is estimated that the total net short position on the COMEX is 550 million ounces of silver. And that's just on the COMEX. Worldwide, it's estimated that the short position is 2 billion to 3 billion ounces of silver.
If this is true, that means 2 billion to 3 billion ounces of silver have been borrowed and need to be purchased and replaced.
Again, the problem is not a money problem. The problem is that there's not enough silver to cover the margin-call.
When will this margin-call occur?
The laws passed by the CFTC and Congress take effect by March 2011.
If the laws aren't repealed, the big commercial banks will be forced to buy silver to replace the silver they've been borrowing. When they buy, the price will go up.
And if the price of silver goes up during this buying period, their losses will grow like an atomic mushroom cloud. This means that the big banks and COMEX will be doing everything possible to keep the price of silver low so that they can buy silver to cover their exposed positions. In the next two to three months, you will probably see huge swings, up and down, in the price of silver.
I've been buying silver for years, starting at under $4 an ounce. One year ago, silver was about $17 an ounce. Today it's about $30 an ounce. I believe $50 to $60 an ounce is possible for 2011.
I believe it's possible to see the price of silver gain more in one year than it has gained in the past twenty years.
As I close this column, I advise you to read this great interview of Ted Butler, the person who has for years single-handedly been demanding Congress to force the COMEX and big commercial banks to play fair.
As Ted Butler states, "It is time to sell gold and buy silver."
I am a big fan of gold and a small fan of silver. However, the following article was too good not to be passed on. It's title says it all, and I think I might add a little silver to my gold stash.
Sell Gold, Buy Silver
by Robert Kiyosaki
Friday, January 14, 2011
Yahoo Finance
You may have noticed that gold is hovering around $1,360 an ounce (sliding recently after a big run-up) and silver is around $30 an ounce. That means in November of 2010 alone, gold increased in price by 2 percent and silver by 14 percent. Investing in gold and silver beats saving money in a bank earning less than 0.1 percent per month. Once again, this is further evidence that savers are losers as central banks of the world print trillions of dollars.
With paper money declining in value, millions of people are finally climbing on the gold wagon. Everywhere I go, I see signs that say, "We Buy Gold," calling out to people desperate for cash to trade in their gold jewelry.
For years now, I've said that silver is a better investment than gold.
To quickly summarize, here are a few reasons:
• Silver is consumed and gold is hoarded.
• Silver is a precious metal and is also an industrial metal that is used in electronics, medicine, water purification, and jewelry
• Today stockpiles of gold are increasing while stockpiles of silver are decreasing. (This means there's an abundance of gold and a shortage of silver).
• The gold/silver ratio is historically 14:1. This means that if gold were $14 an ounce then silver would $1 an ounce. Today, the ratio is approximately 50:1. Silver is extremely underpriced. If silver held to the historic 14:1 ratio, with gold at $1,400 an ounce then silver should be $100 an ounce -- not the $30 an ounce it is today.
In my opinion, when you combine the fact that there's a shortage of silver and that it's underpriced, silver is the safest and best investment today..... but not for long.
A logical question is, "Why is the price of silver suppressed? Why is silver so much lower than gold?"
There are two primary reasons for silver's low price.
Number one, central banks buy gold, not silver. To bankers, gold is money and silver isn't. Today central banks are buying tons of gold, with India being one of the biggest buyers. This elevates the price of gold, leaving silver the bridesmaid but not the bride.
The price of silver is manipulated. The price of silver is intentionally kept low. While this is criminal, it's not illegal. Yet for decades, COMEX, the commodities exchange, has been in cahoots with the biggest silver investors at the expense of the little silver investor. This is about to end, thanks to some regulatory changes that may offer the biggest opportunity for silver investors between January and March of 2011.
What has changed?
Rumors are flying that more than 25 lawsuits have been filed against commercial investors such as JP Morgan and HSBC, accusing them of price manipulation to keep the price of silver artificially low.
The Commodities Futures Trading Commission (CFTC), which is to the COMEX what the SEC is to the New York Stock Exchange, has passed a new law which will force COMEX to play fair, forbidding such massive short positions on silver.. The actions of the CFTC are one more reason for last November's 14 percent price rise in silver. The price manipulation of silver is about to end.
How was the price of silver kept low?
Big investors short-selling silver have kept the price low. For decades, the biggest players in the silver market, commercial investors such as JP Morgan and HSBC, have taken massive short positions on silver.
What does short selling mean?
Short selling (shorting) means you sell something you don't own. Simply put, you borrow something to sell with the promise you will return what you borrowed.
It's not much different than going to your neighbor to borrow 5 pounds of flour and promising to return 5 pounds of flour in a month.
Shorting is done in all markets: commodities, stocks, bonds, and real estate.
The commercial banks, generally large banks such as JPMorgan and HSBC, sell borrowed silver from the COMEX and pocket the money. The banks use that money to invest in other higher-returning investments such as stocks or bonds.
Meanwhile, COMEX has earned billions of dollars from the interest on the borrowed silver. The commercial banks and the COMEX both profit from this large short position of silver, the larger the better.
Now, with the new CFTC law, the commercial banks will need to buy back silver and return it to the exchange. The problem is not a money problem. The problem is a shortage of silver.
When the commercial banks start buying rather than selling silver, this will cause the price of silver to rise, increasing the costs to replace the silver. It's simple supply and demand.
This massive big short has left the banks with a large margin-call when a broker asks an investor to bring an account up to a minimum position. How big is the margin call in silver? It is estimated that the total net short position on the COMEX is 550 million ounces of silver. And that's just on the COMEX. Worldwide, it's estimated that the short position is 2 billion to 3 billion ounces of silver.
If this is true, that means 2 billion to 3 billion ounces of silver have been borrowed and need to be purchased and replaced.
Again, the problem is not a money problem. The problem is that there's not enough silver to cover the margin-call.
When will this margin-call occur?
The laws passed by the CFTC and Congress take effect by March 2011.
If the laws aren't repealed, the big commercial banks will be forced to buy silver to replace the silver they've been borrowing. When they buy, the price will go up.
And if the price of silver goes up during this buying period, their losses will grow like an atomic mushroom cloud. This means that the big banks and COMEX will be doing everything possible to keep the price of silver low so that they can buy silver to cover their exposed positions. In the next two to three months, you will probably see huge swings, up and down, in the price of silver.
I've been buying silver for years, starting at under $4 an ounce. One year ago, silver was about $17 an ounce. Today it's about $30 an ounce. I believe $50 to $60 an ounce is possible for 2011.
I believe it's possible to see the price of silver gain more in one year than it has gained in the past twenty years.
As I close this column, I advise you to read this great interview of Ted Butler, the person who has for years single-handedly been demanding Congress to force the COMEX and big commercial banks to play fair.
As Ted Butler states, "It is time to sell gold and buy silver."
The Dollar Is A Currency Of The Past Says Chinese President
BEIJING—Chinese President Hu Jintao emphasized the need for cooperation with the U.S. in areas from new energy to space ahead of his visit to Washington this week, but he called the present U.S. dollar-dominated currency system a "product of the past" and highlighted moves to turn the yuan into a global currency.
"We both stand to gain from a sound China-U.S. relationship, and lose from confrontation," Mr. Hu said in written answers to questions from The Wall Street Journal and the Washington Post.
Mr. Hu acknowledged "some differences and sensitive issues between us," but his tone was generally compromising, and he avoided specific mention of some of the controversial issues that have dogged relations with the U.S. over the past year or so—including U.S. arms sales to Taiwan that led to a freeze in military relations between the world's sole superpower and its rising Asian rival.
On the economic front, Mr. Hu played down one of the main U.S. arguments for why China should appreciate its currency—that it will help China tame inflation. That is likely to disappoint Washington, which accuses China of unfairly boosting its exports by undervaluing the yuan, making its products cheaper overseas. The topic is expected to be high on U.S. President Barack Obama's agenda when he meets Mr. Hu at the White House on Wednesday.
Mr. Hu also offered a veiled criticism of efforts by the U.S. Federal Reserve to stimulate growth through huge bond purchases to keep down long-term interest rates, a strategy that China has loudly complained about in the past as fueling inflation in emerging economies, including its own. He said that U.S. monetary policy "has a major impact on global liquidity and capital flows and therefore, the liquidity of the U.S. dollar should be kept at a reasonable and stable level."
Mr. Hu's responses reflect a China that has grown more confident in recent years—especially in the wake of the global financial crisis, from which it emerged relatively unscathed.
Mr. Hu reiterated China's belief that the crisis reflected "the absence of regulation in financial innovation" and the failure of international financial institutions "to fully reflect the changing status of developing countries in the world economy and finance." He called for an international financial system that is more "fair, just, inclusive and well-managed."
Mr. Hu, who also heads China's ruling Communist Party, rarely interacts with the international media. The Wall Street Journal submitted a series of questions to China's Foreign Ministry for Mr. Hu to answer. The Washington Post also submitted questions. The Foreign Ministry supplied Mr. Hu's responses to seven questions—but did not address questions about imprisoned Nobel Peace Prize winner Liu Xiaobo, China's growing naval power and complaints about alleged Chinese cyberattacks, among others.
Mr. Hu's veiled criticism of the Fed reflects widespread feelings among developing nations that U.S. interest-rate policy is devaluing the dollar, prompting flows of capital overseas and creating inflation elsewhere. China and other developing countries would like the Fed to factor in those consequences when it makes decisions. Fed officials counter that their mandate is to bolster the U.S. economy and that a stronger U.S. economy is in the interests of China and other countries, which depend heavily on trade and investment from the U.S.
This could be a major issue of contention between Messrs. Hu and Obama. The U.S. blames Chinese currency undervaluation—not Fed policy making—for worsening competitive and inflation problems overseas.
Some of Mr. Hu's most significant comments dealt with the future of the dollar and currency exchange rates.
"The current international currency system is the product of the past," he said, noting the primacy of the U.S. dollar as a reserve currency and its use in international trade and investment.
The comment is the latest sign that the dollar's future continues to concern the most senior levels of the Chinese government. Beijing fears not only that loose U.S. monetary policy is fueling inflation, but that it will erode the value of China's holdings of dollars within its vast foreign-exchange reserves, which reached $2.85 trillion at the end of 2010.
China's central bank governor, Zhou Xiaochuan, created an international stir in March 2009 by calling for the creation of a new synthetic reserve currency as an alternative to the dollar. Mr. Hu's comments add to the sense that China intends to challenge the post-World War II financial order largely created by the U.S. and dominated by the dollar.
Mr. Hu called attention to China's accelerating effort to expand the role of its own currency, describing recent moves to allow greater use of the yuan in cross-border trade and investment—while acknowledging that making it a fully fledged international currency "will be a fairly long process."
China's moves already have spawned a thriving market for offshore trading of yuan in Hong Kong, and are widely seen as first steps toward making the yuan an international currency in line with China's new prominence as the world's second largest economy. Mr. Hu offered an enthusiastic endorsement of what are officially described as currency "pilot programs." They "fit in well with market demand as evidenced by the rapidly expanding scale of these transactions," he said.
Mr. Hu didn't signal any changes on the most sensitive aspect of China's currency policy: the exchange rate.
Last week, U.S. Treasury Secretary Timothy Geithner reiterated the U.S. position that a stronger yuan is in China's own best interests, because it would help tame rising inflation that has become a key risk to China's rapid growth, which is underpinning the global economic recovery. A stronger yuan would reduce the price of imports in local-currency terms.
But Mr. Hu shrugged off the U.S. argument, saying that China is fighting inflation with a whole package of policies, including interest-rate increases, and "inflation can hardly be the main factor in determining the exchange rate policy."
Further, Mr. Hu suggested that inflation was not a big worry, saying prices were "on the whole moderate and controllable." He added: "We have the confidence, conditions and ability to stabilize the overall price level."
The U.S. argues that the yuan's real exchange rate—that is, the exchange rate as adjusted for the higher inflation level in China than the U.S.—is rising at a 10% annual rate. Treasury officials have argued to China that its policy options are limited—either it can boost the exchange rate to fight inflation, or inflation will effectively boost the value of China's currency.
While the U.S. says some Chinese economic officials buy that argument, it hasn't been widely adopted within China, as Mr. Hu's comments illustrate. But the U.S. feels that economics and time are on its side. Even so, the administration and Congress will continue to press China to boost the pace of its currency appreciation.
Mr. Hu renewed a Chinese pledge to offer a level playing field in China for U.S. companies, which have complained about aggressive Chinese moves to usurp their technology and shut them out of massive government-procurement contracts.
"All foreign companies registered in China are Chinese enterprises," Mr. Hu said, responding to concerns that China discriminates in government procurement against foreign businesses as part of its drive to encourage so-called indigenous innovation.
He added: "Their innovation, production and business operations in China enjoy the same treatment as Chinese enterprises."
The U.S. has been pressing China to revamp its plans for indigenous innovation, which foreign companies say put them at a disadvantage in competition with China's state-owned firms, which limits the types of government development projects and requires that companies get government approval to participate. China has pledged to join the World Trade Organization's government procurement agreement, which limits a country's ability to discriminate. But the U.S. and other countries say that so far China's WTO offer is inadequate because it exempts provinces, municipalities and state-owned enterprises. Last month China pledged to amend a buy-Chinese provision. During the Hu visit, the U.S. hopes to see some other commitments on this front from China.
Mr. Hu began his answers with a relatively upbeat assessment of China-U.S. relations, which he said had "on the whole enjoyed steady growth" since the start of this century.
He spoke of expanding cooperation from economy and trade into new areas like energy, infrastructure development and aviation and space. "We should abandon the zero-sum Cold War mentality," he said, and "respect each other's choice of development path."
On the diplomatic front, Mr. Hu entirely glossed over what has been one of the most dramatic developments of the past year—a series of disputes between a more assertive China and its neighbors that has given the U.S. an opening to shore up its relations with a part of the world that felt neglected by Washington while it fought wars in Iraq and Afghanistan.
In the past year, China has feuded with Japan over the seizure of a Chinese fishing boat and its crew off disputed islands; opened deep differences with South Korea because of its subdued response to military provocations by North Korea; and alarmed countries in Southeast Asia by declaring the South China Sea and its energy and mineral riches one of its "core interests."
"Mutual trust between China and other countries in this region has deepened in our common response to tough challenges, and our cooperation has continuously expanded in our pursuit of mutual benefit and win-win outcomes," Mr. Hu said, ignoring the regional turmoil.
BEIJING—Chinese President Hu Jintao emphasized the need for cooperation with the U.S. in areas from new energy to space ahead of his visit to Washington this week, but he called the present U.S. dollar-dominated currency system a "product of the past" and highlighted moves to turn the yuan into a global currency.
"We both stand to gain from a sound China-U.S. relationship, and lose from confrontation," Mr. Hu said in written answers to questions from The Wall Street Journal and the Washington Post.
Mr. Hu acknowledged "some differences and sensitive issues between us," but his tone was generally compromising, and he avoided specific mention of some of the controversial issues that have dogged relations with the U.S. over the past year or so—including U.S. arms sales to Taiwan that led to a freeze in military relations between the world's sole superpower and its rising Asian rival.
On the economic front, Mr. Hu played down one of the main U.S. arguments for why China should appreciate its currency—that it will help China tame inflation. That is likely to disappoint Washington, which accuses China of unfairly boosting its exports by undervaluing the yuan, making its products cheaper overseas. The topic is expected to be high on U.S. President Barack Obama's agenda when he meets Mr. Hu at the White House on Wednesday.
Mr. Hu also offered a veiled criticism of efforts by the U.S. Federal Reserve to stimulate growth through huge bond purchases to keep down long-term interest rates, a strategy that China has loudly complained about in the past as fueling inflation in emerging economies, including its own. He said that U.S. monetary policy "has a major impact on global liquidity and capital flows and therefore, the liquidity of the U.S. dollar should be kept at a reasonable and stable level."
Mr. Hu's responses reflect a China that has grown more confident in recent years—especially in the wake of the global financial crisis, from which it emerged relatively unscathed.
Mr. Hu reiterated China's belief that the crisis reflected "the absence of regulation in financial innovation" and the failure of international financial institutions "to fully reflect the changing status of developing countries in the world economy and finance." He called for an international financial system that is more "fair, just, inclusive and well-managed."
Mr. Hu, who also heads China's ruling Communist Party, rarely interacts with the international media. The Wall Street Journal submitted a series of questions to China's Foreign Ministry for Mr. Hu to answer. The Washington Post also submitted questions. The Foreign Ministry supplied Mr. Hu's responses to seven questions—but did not address questions about imprisoned Nobel Peace Prize winner Liu Xiaobo, China's growing naval power and complaints about alleged Chinese cyberattacks, among others.
Mr. Hu's veiled criticism of the Fed reflects widespread feelings among developing nations that U.S. interest-rate policy is devaluing the dollar, prompting flows of capital overseas and creating inflation elsewhere. China and other developing countries would like the Fed to factor in those consequences when it makes decisions. Fed officials counter that their mandate is to bolster the U.S. economy and that a stronger U.S. economy is in the interests of China and other countries, which depend heavily on trade and investment from the U.S.
This could be a major issue of contention between Messrs. Hu and Obama. The U.S. blames Chinese currency undervaluation—not Fed policy making—for worsening competitive and inflation problems overseas.
Some of Mr. Hu's most significant comments dealt with the future of the dollar and currency exchange rates.
"The current international currency system is the product of the past," he said, noting the primacy of the U.S. dollar as a reserve currency and its use in international trade and investment.
The comment is the latest sign that the dollar's future continues to concern the most senior levels of the Chinese government. Beijing fears not only that loose U.S. monetary policy is fueling inflation, but that it will erode the value of China's holdings of dollars within its vast foreign-exchange reserves, which reached $2.85 trillion at the end of 2010.
China's central bank governor, Zhou Xiaochuan, created an international stir in March 2009 by calling for the creation of a new synthetic reserve currency as an alternative to the dollar. Mr. Hu's comments add to the sense that China intends to challenge the post-World War II financial order largely created by the U.S. and dominated by the dollar.
Mr. Hu called attention to China's accelerating effort to expand the role of its own currency, describing recent moves to allow greater use of the yuan in cross-border trade and investment—while acknowledging that making it a fully fledged international currency "will be a fairly long process."
China's moves already have spawned a thriving market for offshore trading of yuan in Hong Kong, and are widely seen as first steps toward making the yuan an international currency in line with China's new prominence as the world's second largest economy. Mr. Hu offered an enthusiastic endorsement of what are officially described as currency "pilot programs." They "fit in well with market demand as evidenced by the rapidly expanding scale of these transactions," he said.
Mr. Hu didn't signal any changes on the most sensitive aspect of China's currency policy: the exchange rate.
Last week, U.S. Treasury Secretary Timothy Geithner reiterated the U.S. position that a stronger yuan is in China's own best interests, because it would help tame rising inflation that has become a key risk to China's rapid growth, which is underpinning the global economic recovery. A stronger yuan would reduce the price of imports in local-currency terms.
But Mr. Hu shrugged off the U.S. argument, saying that China is fighting inflation with a whole package of policies, including interest-rate increases, and "inflation can hardly be the main factor in determining the exchange rate policy."
Further, Mr. Hu suggested that inflation was not a big worry, saying prices were "on the whole moderate and controllable." He added: "We have the confidence, conditions and ability to stabilize the overall price level."
The U.S. argues that the yuan's real exchange rate—that is, the exchange rate as adjusted for the higher inflation level in China than the U.S.—is rising at a 10% annual rate. Treasury officials have argued to China that its policy options are limited—either it can boost the exchange rate to fight inflation, or inflation will effectively boost the value of China's currency.
While the U.S. says some Chinese economic officials buy that argument, it hasn't been widely adopted within China, as Mr. Hu's comments illustrate. But the U.S. feels that economics and time are on its side. Even so, the administration and Congress will continue to press China to boost the pace of its currency appreciation.
Mr. Hu renewed a Chinese pledge to offer a level playing field in China for U.S. companies, which have complained about aggressive Chinese moves to usurp their technology and shut them out of massive government-procurement contracts.
"All foreign companies registered in China are Chinese enterprises," Mr. Hu said, responding to concerns that China discriminates in government procurement against foreign businesses as part of its drive to encourage so-called indigenous innovation.
He added: "Their innovation, production and business operations in China enjoy the same treatment as Chinese enterprises."
The U.S. has been pressing China to revamp its plans for indigenous innovation, which foreign companies say put them at a disadvantage in competition with China's state-owned firms, which limits the types of government development projects and requires that companies get government approval to participate. China has pledged to join the World Trade Organization's government procurement agreement, which limits a country's ability to discriminate. But the U.S. and other countries say that so far China's WTO offer is inadequate because it exempts provinces, municipalities and state-owned enterprises. Last month China pledged to amend a buy-Chinese provision. During the Hu visit, the U.S. hopes to see some other commitments on this front from China.
Mr. Hu began his answers with a relatively upbeat assessment of China-U.S. relations, which he said had "on the whole enjoyed steady growth" since the start of this century.
He spoke of expanding cooperation from economy and trade into new areas like energy, infrastructure development and aviation and space. "We should abandon the zero-sum Cold War mentality," he said, and "respect each other's choice of development path."
On the diplomatic front, Mr. Hu entirely glossed over what has been one of the most dramatic developments of the past year—a series of disputes between a more assertive China and its neighbors that has given the U.S. an opening to shore up its relations with a part of the world that felt neglected by Washington while it fought wars in Iraq and Afghanistan.
In the past year, China has feuded with Japan over the seizure of a Chinese fishing boat and its crew off disputed islands; opened deep differences with South Korea because of its subdued response to military provocations by North Korea; and alarmed countries in Southeast Asia by declaring the South China Sea and its energy and mineral riches one of its "core interests."
"Mutual trust between China and other countries in this region has deepened in our common response to tough challenges, and our cooperation has continuously expanded in our pursuit of mutual benefit and win-win outcomes," Mr. Hu said, ignoring the regional turmoil.
The Eight States Running Out of Homebuyers
Hey, South Carolina made the top 10! Finally, something for my state to brag about!
Hey, South Carolina made the top 10! Finally, something for my state to brag about!
Banks repossessed 1 million homes last year — and 2011 will be worse
Here's a link to a story about U.S. real estate foreclosures that is posted over at msnbc.com. The headline reads "Banks repossessed 1 million homes last year — and 2011 will be worse". Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages...and more will miss payments as they struggle with job losses and loans worth more than their home's value, industry analysts forecast. The link is here.
Here's a link to a story about U.S. real estate foreclosures that is posted over at msnbc.com. The headline reads "Banks repossessed 1 million homes last year — and 2011 will be worse". Lenders are poised to take back more homes this year than any other since the U.S. housing meltdown began in 2006. About 5 million borrowers are at least two months behind on their mortgages...and more will miss payments as they struggle with job losses and loans worth more than their home's value, industry analysts forecast. The link is here.
Insiders Know What's Coming!
[Source] The headline reads "Insider Selling To Buying Ratio: DIV/0, As No Insiders Bought Any Stock In Prior Week". According to Bloomberg, in the week ended January 14th, S&P 500 insiders sold $163 million worth of stock in 54 separate transactions. They bought exactly $0. It's a 30-second read...along with a list of the 54 transactions...and the link is here.
[Source] The headline reads "Insider Selling To Buying Ratio: DIV/0, As No Insiders Bought Any Stock In Prior Week". According to Bloomberg, in the week ended January 14th, S&P 500 insiders sold $163 million worth of stock in 54 separate transactions. They bought exactly $0. It's a 30-second read...along with a list of the 54 transactions...and the link is here.
U.S. Mint Gold and Silver Sales
According to today's commentary from Ed Steer, over at Casey Research,"the U.S. Mint had a little surprise for us yesterday as well. Their sales report showed that they sold another 12,500 ounces of gold eagles, along with a gargantuan 1,181,000 silver eagles. Month-to-date, the U.S. Mint has sold 75,500 ounces of gold eagles...and 4,588,000 silver eagles. This is a one month record for silver eagles sales...and I've seen full years go by when they didn't sell that many eagles...and 1996 comes to mind when only 3,466,000 were sold in the entire year. Those eagles are selling for a very healthy premium to spot."
Still, nobody in your neighborhood or at your office owns gold. Can you imagine what the price and premiums will be when the sheeple finally herd into gold?
According to today's commentary from Ed Steer, over at Casey Research,"the U.S. Mint had a little surprise for us yesterday as well. Their sales report showed that they sold another 12,500 ounces of gold eagles, along with a gargantuan 1,181,000 silver eagles. Month-to-date, the U.S. Mint has sold 75,500 ounces of gold eagles...and 4,588,000 silver eagles. This is a one month record for silver eagles sales...and I've seen full years go by when they didn't sell that many eagles...and 1996 comes to mind when only 3,466,000 were sold in the entire year. Those eagles are selling for a very healthy premium to spot."
Still, nobody in your neighborhood or at your office owns gold. Can you imagine what the price and premiums will be when the sheeple finally herd into gold?
2011 Starts With A Bang: $4.2 Billion In OUTFLOWS From Domestic Equity Funds
from ZeroHedge
Now this is just hilarious. After ICI just revised the last two data points of 2010 which were originally inflows, even if modest, to one outflow and one minimal inflow, more importantly it has disclosed the first flow of funds in 2011. And as we predicted looking at last week's inflows in taxable bond funds, the year starts with an equity outflow, confirming that the retail lemmings are really not as stupid as the Fed and the Primary Dealers believe they are. And what an outflow: at $4.2 billion, this was the largest one week outflow since early October! And yes, bond inflows have resumed as we speculated, even as the scariest indication that things are really not well persists: namely that outflows from that next domino to drop, municipal bond funds, accelerate. And when munis go, it is either a wipe out or QE3. Our money is on the latter.
CLICK CHART TO ENLARGE
from ZeroHedge
Now this is just hilarious. After ICI just revised the last two data points of 2010 which were originally inflows, even if modest, to one outflow and one minimal inflow, more importantly it has disclosed the first flow of funds in 2011. And as we predicted looking at last week's inflows in taxable bond funds, the year starts with an equity outflow, confirming that the retail lemmings are really not as stupid as the Fed and the Primary Dealers believe they are. And what an outflow: at $4.2 billion, this was the largest one week outflow since early October! And yes, bond inflows have resumed as we speculated, even as the scariest indication that things are really not well persists: namely that outflows from that next domino to drop, municipal bond funds, accelerate. And when munis go, it is either a wipe out or QE3. Our money is on the latter.
CLICK CHART TO ENLARGE
Home price drops exceed Great Depression
(Reuters) - Home prices fell for the 53rd consecutive month in November, taking the decline past that of the Great Depression for the first time in the prolonged housing slump, according to Zillow.
Home prices have fallen 26 percent since their peak in 2006, exceeding the 25.9 percent drop registered in the five years between 1928 and 1933, the housing data company said in a report on Monday. Prices fell 0.8 percent over the month.
It is a dubious milestone for the U.S. housing market which has failed to gain much traction despite a host of government programs to reduce delinquencies and encourage demand with temporary tax credits and lower interest rates. Many economists expect further price drops, even if there are some anecdotal signs of growing demand, such as in pending home sales data.
"For the next six to nine months, the larger factors affecting the housing market that will produce more home price declines will be the excess inventory of homes, high negative equity and foreclosure rates, and weakened demand due to elevated employment, Stan Humphries, Zillow's chief economist, said in a blog post.
Declines are accelerating, and it will take a while before falling unemployment and other signs of economic improvement support the market, Zillow said.
Home prices fell at a 0.78 percent pace in November, the fastest since February 2009, the company said.
(Reuters) - Home prices fell for the 53rd consecutive month in November, taking the decline past that of the Great Depression for the first time in the prolonged housing slump, according to Zillow.
Home prices have fallen 26 percent since their peak in 2006, exceeding the 25.9 percent drop registered in the five years between 1928 and 1933, the housing data company said in a report on Monday. Prices fell 0.8 percent over the month.
It is a dubious milestone for the U.S. housing market which has failed to gain much traction despite a host of government programs to reduce delinquencies and encourage demand with temporary tax credits and lower interest rates. Many economists expect further price drops, even if there are some anecdotal signs of growing demand, such as in pending home sales data.
"For the next six to nine months, the larger factors affecting the housing market that will produce more home price declines will be the excess inventory of homes, high negative equity and foreclosure rates, and weakened demand due to elevated employment, Stan Humphries, Zillow's chief economist, said in a blog post.
Declines are accelerating, and it will take a while before falling unemployment and other signs of economic improvement support the market, Zillow said.
Home prices fell at a 0.78 percent pace in November, the fastest since February 2009, the company said.
Perth Mint reports 'unrelenting' demand for gold on dip below $1,400
By James Campbell
Dow Jones Newswires
Tuesday, January 11, 2011
SINGAPORE -- Demand for gold bullion from Australia's Perth Mint has been unrelenting since gold's price dropped below $1,400 an ounce, a senior Mint official said Tuesday.
"At the moment demand is such that we cannot meet all the enquiries that we are getting," said Nigel Moffatt, treasurer of the Perth Mint, one of the world's largest gold refiners and distributors.
"Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars," he told Dow Jones Newswires.
One-kilogram bars are the most popular trading instrument in Asia's physical market.
Demand doesn't appear to be directly related to the upcoming Chinese Lunar New Year, with buying also coming from in from India, Moffatt said.
"The way I see it at this point, it is because of the current correction in the price rather than anything else," he said.
Spot gold has declined 3.1% since the start of 2011 to $1,376/oz during Asian trade Tuesday after hitting a low of $1,353/oz Friday.
Moffatt said premiums for physical gold had "doubled" in the past week, but declined to provide any figures.
Mitsui Global Precious Metals said in a report that gold was trading at premiums of up to $3 an ounce over the spot price in Hong Kong Monday.
By James Campbell
Dow Jones Newswires
Tuesday, January 11, 2011
SINGAPORE -- Demand for gold bullion from Australia's Perth Mint has been unrelenting since gold's price dropped below $1,400 an ounce, a senior Mint official said Tuesday.
"At the moment demand is such that we cannot meet all the enquiries that we are getting," said Nigel Moffatt, treasurer of the Perth Mint, one of the world's largest gold refiners and distributors.
"Demand for our coins and medallions is strong, but the biggest demand is coming from banks and traders looking for kilo bars," he told Dow Jones Newswires.
One-kilogram bars are the most popular trading instrument in Asia's physical market.
Demand doesn't appear to be directly related to the upcoming Chinese Lunar New Year, with buying also coming from in from India, Moffatt said.
"The way I see it at this point, it is because of the current correction in the price rather than anything else," he said.
Spot gold has declined 3.1% since the start of 2011 to $1,376/oz during Asian trade Tuesday after hitting a low of $1,353/oz Friday.
Moffatt said premiums for physical gold had "doubled" in the past week, but declined to provide any figures.
Mitsui Global Precious Metals said in a report that gold was trading at premiums of up to $3 an ounce over the spot price in Hong Kong Monday.
As West's gold paper price falls, metal gets scarce in Asia
By Jack Farchy
Financial Times, London
A spike in gold buying by Asian investors has created a scarcity of investment-grade gold bars in the region, supporting prices even as Western investors trim their holdings.
Traders said that gold sales to China had jumped 30 to 50 per cent since Christmas, driving the cost of kilo bars in Hong Kong more than $3 per ounce above the market price of gold, the highest level since 2008 and an indication of the tightness in the physical market.
"Physical demand has rocketed in China at the start of the year," said Walter de Wet, head of commodities research at Standard Bank.
The wave of Asian buying has propped up gold prices at about $1,360 a troy ounce, traders and analysts said.
The metal's price has dropped 4.6 per cent from its December record price of $1,430.95, trading at $1,364.10 on Friday, as optimism about prospects for U.S. growth has led Western investors to turn their attention away from gold to other commodities and equities. "We have a balanced situation where one part of the world is buying and the other part is selling," said a senior trader in Hong Kong. Chinese and Indian investors are increasingly turning to gold to protect savings against sharply rising food prices.
Investor buying of gold bars jumped 80 per cent to a record 144 tonnes last year in India, according to GFMS, the precious metals consultancy, while across east Asia bar hoarding was up 125 per cent at a 15-year high.
In another sign of the booming investment demand for gold in the region, China's first exchange-traded fund to offer exposure to physical gold, launched last month by Lion Fund Management, announced this week that it had already achieved its target of raising $500 million.
The tightness in the Asian market is likely to persist until the end of the month, traders said, as some refiners have booked out production until February and Chinese demand remains robust ahead of the new year holiday.
By Jack Farchy
Financial Times, London
A spike in gold buying by Asian investors has created a scarcity of investment-grade gold bars in the region, supporting prices even as Western investors trim their holdings.
Traders said that gold sales to China had jumped 30 to 50 per cent since Christmas, driving the cost of kilo bars in Hong Kong more than $3 per ounce above the market price of gold, the highest level since 2008 and an indication of the tightness in the physical market.
"Physical demand has rocketed in China at the start of the year," said Walter de Wet, head of commodities research at Standard Bank.
The wave of Asian buying has propped up gold prices at about $1,360 a troy ounce, traders and analysts said.
The metal's price has dropped 4.6 per cent from its December record price of $1,430.95, trading at $1,364.10 on Friday, as optimism about prospects for U.S. growth has led Western investors to turn their attention away from gold to other commodities and equities. "We have a balanced situation where one part of the world is buying and the other part is selling," said a senior trader in Hong Kong. Chinese and Indian investors are increasingly turning to gold to protect savings against sharply rising food prices.
Investor buying of gold bars jumped 80 per cent to a record 144 tonnes last year in India, according to GFMS, the precious metals consultancy, while across east Asia bar hoarding was up 125 per cent at a 15-year high.
In another sign of the booming investment demand for gold in the region, China's first exchange-traded fund to offer exposure to physical gold, launched last month by Lion Fund Management, announced this week that it had already achieved its target of raising $500 million.
The tightness in the Asian market is likely to persist until the end of the month, traders said, as some refiners have booked out production until February and Chinese demand remains robust ahead of the new year holiday.
Somebody's Gotta Be First
by David Tanner
I am still amazed at the number of people I talk to about the future collapse of the dollar who look at me as if I have been smoking crack. But then again, I am used to it by now, and like I've always said, "somebody's gotta be first." LOL. Guess it's me.
Well, under the headline of "Look Who Just Caught Up" we can add the Commonwealth of Virginia. Seems lawmakers there are worried about.... are you ready?.......drumroll please....... THE COLLAPSE OF THE DOLLAR!!!. Well, look who just caught up!
Anyway, the following line is a reprint from Virginia's HR557 and can be seen in its entirety here.
RESOLVED by the House of Delegates, the Senate concurring, That a joint subcommittee be appointed to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System.
I just want to humbly and meekly remind you that "I TOLD YOU SO!!!!!"
by David Tanner
I am still amazed at the number of people I talk to about the future collapse of the dollar who look at me as if I have been smoking crack. But then again, I am used to it by now, and like I've always said, "somebody's gotta be first." LOL. Guess it's me.
Well, under the headline of "Look Who Just Caught Up" we can add the Commonwealth of Virginia. Seems lawmakers there are worried about.... are you ready?.......drumroll please....... THE COLLAPSE OF THE DOLLAR!!!. Well, look who just caught up!
Anyway, the following line is a reprint from Virginia's HR557 and can be seen in its entirety here.
RESOLVED by the House of Delegates, the Senate concurring, That a joint subcommittee be appointed to study whether the Commonwealth should adopt a currency to serve as an alternative to the currency distributed by the Federal Reserve System in the event of a major breakdown of the Federal Reserve System.
I just want to humbly and meekly remind you that "I TOLD YOU SO!!!!!"
Gold: Short Term and Long Term
Below are two charts of gold prices, one for the last 60 days and one for the last year. Notice how gold has been bumping around the $1400 mark for a while now. Also, notice on the one year chart how when this happened in the past, it was a precursor to the next big move.
Bottom line, the next big move in gold might be down to $1300 and then a big spike up from there, OR it could just be a big spike up. Either way, unless you are a short term trader, holding gold right now, and buying on the dips, is the way to go.
Gold Pays No Interest
Once again gold has proved to be an effective preserver of wealth as well as an outstanding performing asset class. Since 2000, when the bull market in gold began, the price has moved from $250 an ounce to over $1400 an ounce. In 2010 gold was up 30% in US$, 35% in Sterling, 22% in Canadian dollars, 17% in Swiss Francs, 13% in Japanese Yen, 30% in Russian Rubbles, 25% in Chinese Yuan, 16% in South African Rand and $38% in Euro. And the average annual gain for gold in US dollars has been more than 20%, consistently for 10 years!
What amazes me is that there are still investors out there who continue to denigrate gold as an investment simply because it does not pay a dividend or interest. Yet, even a person who has the most rudimentary understanding of mathematics and who can manage to add a few prime numbers together can surely comprehend the following:
If you invested $100,000 in gold in 2000, the value of that gold is now worth around $560,000. If on the other hand you invested the same amount into bonds yielding say 8% per annum, on a compounded basis, the value of that investment is now worth around $216,000.
Uhh, which investment would you prefer? The one with interest, or without?
Once again gold has proved to be an effective preserver of wealth as well as an outstanding performing asset class. Since 2000, when the bull market in gold began, the price has moved from $250 an ounce to over $1400 an ounce. In 2010 gold was up 30% in US$, 35% in Sterling, 22% in Canadian dollars, 17% in Swiss Francs, 13% in Japanese Yen, 30% in Russian Rubbles, 25% in Chinese Yuan, 16% in South African Rand and $38% in Euro. And the average annual gain for gold in US dollars has been more than 20%, consistently for 10 years!
What amazes me is that there are still investors out there who continue to denigrate gold as an investment simply because it does not pay a dividend or interest. Yet, even a person who has the most rudimentary understanding of mathematics and who can manage to add a few prime numbers together can surely comprehend the following:
If you invested $100,000 in gold in 2000, the value of that gold is now worth around $560,000. If on the other hand you invested the same amount into bonds yielding say 8% per annum, on a compounded basis, the value of that investment is now worth around $216,000.
Uhh, which investment would you prefer? The one with interest, or without?
Roughly speaking, the mess we are in is the worst since 17th century financial collapse. Comparisons with the 1930’s are ludicrous. We’ve gone far beyond that. And, alas, the courage and political will to recognize the mess and act wisely to reverse gears, is absent in U.S. leadership, where the problems were hatched and where the rot is by far the deepest.- Harry Schultz, in his last newsletter to his subscribers before he retired last week.
Legislation proposes Utah adopt a gold-based system
By Robert Gehrke
The Salt Lake Tribune
First published Dec 28 2010 06:06PM
Updated Dec 29, 2010 12:58PM
Imagine paying your next parking ticket in gold Krugerrands or renewing your driver license using American Gold Eagles.
A proposal in the Utah Legislature would require the state to allow just that, requiring government agencies to accept gold for transactions, and creating a parallel monetary policy for intrastate commerce tied to the price of gold.
Under the legislation that has been drafted, Utah residents could mint their own gold or silver coins, a storehouse would be created to stockpile the precious metal and the Utah Defense Force, an arcane state militia that may be called and armed by the governor, would be responsible for securing the inventories.
“I think it has merit,” said Rep. John Dougall, R-Highland, who had the proposal brought to him by a constituent and committed to opening a bill file. Another representative will probably end up sponsoring the legislation.
“Fundamentally, what it comes down to is people’s concern about the fundamentally reckless policies at the federal reserve and what it does long-term to the financial standing of the country and giving folks another choice of monetary tools for their financial transactions,” Dougall said.
The concern is that the large U.S. debt and policies designed to increase liquidity by putting more dollars in the market have devalued the national currency.
“It’s really about creating an option,” said Larry Hilton, an attorney and insurance salesman who authored the “Utah Sound Money Act” and took it to Dougall. If the dollar falters, he said, it would be beneficial to the state to have an alternative.
“It’s not intended to be compulsory in any way,” Hilton said. “The state is offering to taxpayers, ‘If you want to pay your taxes in gold or silver, we’ll accept them.’ ”
Investing in gold has been pitched as an anchor during the recent economic turmoil. Rep. Ron Paul, R-Texas, has warned of the devaluation of the dollar for years, and conservative radio personality Glenn Beck plugs gold on his program as a hedge against inflation.
If it is enacted, the government would be required to transact any intrastate business in gold if that’s the citizen’s preference. Businesses could, if they choose, also accept gold as a form of payment.
Utah State Treasurer Richard Ellis said he hasn’t seen the bill, but it raises some questions on how the state would comply.
Since gold coins aren’t a standard currency, he said, he had questions about how the state would comply and how, for example, it could give change on a transaction. “Do they chip off a chunk of an ingot?” he asks.
Presumably, Ellis said, there would need to be extra security and he would have to talk with the banks about how they would look on the state doing business in gold and silver.
As treasurer, Ellis would be assigned the task of setting the exchange rate for Utah’s gold and maintaining a registry of gold and silver coins that would be recognized by the state. Coins could be privately minted if they meet certain standards.
The governor would be required to muster the Defense Force — which is authorized in state law — to protect and transport the state’s gold holdings.
The bill envisions “commerce cooperatives” that could be created to act like banks, to store the gold in Fort Knox-like caches and facilitate the gold transactions.
By Robert Gehrke
The Salt Lake Tribune
First published Dec 28 2010 06:06PM
Updated Dec 29, 2010 12:58PM
Imagine paying your next parking ticket in gold Krugerrands or renewing your driver license using American Gold Eagles.
A proposal in the Utah Legislature would require the state to allow just that, requiring government agencies to accept gold for transactions, and creating a parallel monetary policy for intrastate commerce tied to the price of gold.
Under the legislation that has been drafted, Utah residents could mint their own gold or silver coins, a storehouse would be created to stockpile the precious metal and the Utah Defense Force, an arcane state militia that may be called and armed by the governor, would be responsible for securing the inventories.
“I think it has merit,” said Rep. John Dougall, R-Highland, who had the proposal brought to him by a constituent and committed to opening a bill file. Another representative will probably end up sponsoring the legislation.
“Fundamentally, what it comes down to is people’s concern about the fundamentally reckless policies at the federal reserve and what it does long-term to the financial standing of the country and giving folks another choice of monetary tools for their financial transactions,” Dougall said.
The concern is that the large U.S. debt and policies designed to increase liquidity by putting more dollars in the market have devalued the national currency.
“It’s really about creating an option,” said Larry Hilton, an attorney and insurance salesman who authored the “Utah Sound Money Act” and took it to Dougall. If the dollar falters, he said, it would be beneficial to the state to have an alternative.
“It’s not intended to be compulsory in any way,” Hilton said. “The state is offering to taxpayers, ‘If you want to pay your taxes in gold or silver, we’ll accept them.’ ”
Investing in gold has been pitched as an anchor during the recent economic turmoil. Rep. Ron Paul, R-Texas, has warned of the devaluation of the dollar for years, and conservative radio personality Glenn Beck plugs gold on his program as a hedge against inflation.
If it is enacted, the government would be required to transact any intrastate business in gold if that’s the citizen’s preference. Businesses could, if they choose, also accept gold as a form of payment.
Utah State Treasurer Richard Ellis said he hasn’t seen the bill, but it raises some questions on how the state would comply.
Since gold coins aren’t a standard currency, he said, he had questions about how the state would comply and how, for example, it could give change on a transaction. “Do they chip off a chunk of an ingot?” he asks.
Presumably, Ellis said, there would need to be extra security and he would have to talk with the banks about how they would look on the state doing business in gold and silver.
As treasurer, Ellis would be assigned the task of setting the exchange rate for Utah’s gold and maintaining a registry of gold and silver coins that would be recognized by the state. Coins could be privately minted if they meet certain standards.
The governor would be required to muster the Defense Force — which is authorized in state law — to protect and transport the state’s gold holdings.
The bill envisions “commerce cooperatives” that could be created to act like banks, to store the gold in Fort Knox-like caches and facilitate the gold transactions.
Do You Need A Doctor?
Had to pass on this article. The last line is priceless!
Not Owning Gold is a Form of Insanity - Casenove's Robin Griffiths tells CNBC
Interviewed yesterday by CNBC, Cazenove Capital's technical strategist, Robin Griffiths, remarked that gold is still in a "linear trend" but eventually will "go exponential" as fiat currencies are "printed into oblivion," and so not owning gold is "a form of insanity."
Cazenove Capital is one of the oldest investment houses in the world tracing its origins back to the 17th century and the company was founded in 1823. It manages money on behalf of blue blooded clients and is widely believed to manage some of the British Royal family's wealth.
According to the Guardian J.P. Morgan Cazenove was purchased by JP Morgan for £1 billion in 2009; the company continued to be called J.P. Morgan Cazenove.
Robin Griffiths is highly respected. He was chief technical strategist with HSBC for over 20 years and has 44 years investment experience and is considered to be one of the top strategists in the world. Robin developed his own system, analyzing stock and market trends. He is followed globally because of his ground breaking work on world stock markets, bonds, currencies and commodities.
Griffiths said that not owning gold "may even show unhealthy masochistic tendencies, which might need medical attention."
Had to pass on this article. The last line is priceless!
Not Owning Gold is a Form of Insanity - Casenove's Robin Griffiths tells CNBC
Interviewed yesterday by CNBC, Cazenove Capital's technical strategist, Robin Griffiths, remarked that gold is still in a "linear trend" but eventually will "go exponential" as fiat currencies are "printed into oblivion," and so not owning gold is "a form of insanity."
Cazenove Capital is one of the oldest investment houses in the world tracing its origins back to the 17th century and the company was founded in 1823. It manages money on behalf of blue blooded clients and is widely believed to manage some of the British Royal family's wealth.
According to the Guardian J.P. Morgan Cazenove was purchased by JP Morgan for £1 billion in 2009; the company continued to be called J.P. Morgan Cazenove.
Robin Griffiths is highly respected. He was chief technical strategist with HSBC for over 20 years and has 44 years investment experience and is considered to be one of the top strategists in the world. Robin developed his own system, analyzing stock and market trends. He is followed globally because of his ground breaking work on world stock markets, bonds, currencies and commodities.
Griffiths said that not owning gold "may even show unhealthy masochistic tendencies, which might need medical attention."
Moving Backward
Lifted the following from a Rick's Pick's column last week:
Does anyone out there still remember Maslow’s Hierarchy of Needs ? At the top of the psychologist’s pyramid was self-actualization. I think we are there, for the most part. The idea of his chart, presented in a 1943 paper entitled A Theory of Human Motivation, was that we need to satisfy basic needs before we can move on to higher needs. Food, water, shelter and security were basics that came before love itself. Our motivations to climb the scale were generated by our success at having conquered needs that were lower on the pyramid. The chart assumes we are climbing higher, paying little attention to how we might respond if we were to start sliding back down the pyramid. That is most surely at the root of many of our fears — that we may soon lose the ability to meet basic needs that we have long taken for granted. Is that not also the fear of those who would silence the gloom-and-doomers, lest they cause us inconceivable hardship merely by discussing the prospect of it? We are a superstitious lot.
China’s Unprecedented Spree
It probably does seem inconceivable to anyone in an advanced society that we might ever revert to a more primitive state. It is beyond insane, however, that we cannot discuss the possibility openly without being ridiculed. And yet, we are witnessing the hollowing out of education in North America as one example, and watching idly as Asia bids fair to take the lead in so many categories, threatening both our self-esteem and our very security. As a highly focused and energized Chinese empire-in-the-making takes decisive action to ensure its own economic survival, we continue to dither over the vagaries of domestic tax law and how they might impact our (supposed) pension plans. We are distracted by bits and pieces of financial paper as Asia goes on one of the biggest commodity buying sprees in history. Not even the English or Spanish in their day entertained the idea of owning all of the world’s key resources, as China someday may.
The news media, meanwhile, glutted by corporate advertising and influence, have been watering down the news so that nobody knows where to find the truth anymore. Even the Internet is coming into question as doubts grow concerning its ability to resist the intrusion, depredations and designs of Big Government. God help us all, should totalitarianism arise on this continent. Computers never forget, now do they?
As we backslide down Maslow’s Pyramid, are we prepared for the social consequences of reverting to the mean? Many societies have collapsed in the past. Few saw it coming. I imagine that fewer still were prepared for that ugly day when nations went to war over supposedly scarce resources. But we don’t have to worry about that, right? Not unless money matters, that is, and access to energy is deemed important. In fact, the track we’re on now, greased by a dollar that is falling toward worthlessness, implies that many will not be able to afford to drive their vehicles in the future, never mind heat their homes.
What Dollar’s Collapse Means
That is what a dollar collapse really means, by the way. In its most basic form, a failure of our currency means we will not be able to fulfill our most basic needs: security, shelter, warmth and access to a healthy variety of foods year-round. And if those basics cannot be acquired and ensured without worry, then we are indeed headed down Maslow’s Pyramid, not up. The supposed lunatic fringe that wants to head for the hills may not be so crazy after all. Actually, they could be ahead of the curve in realizing that our society is on an unsustainable path.
Meanwhile, the global financial system could unravel and destroy all currencies. We need to understand one thing very clearly, though: There is a big difference between a 1930s-style Depression and the specter of North Americans actually freezing to death in their homes for lack of fuel, or starving for lack of food. Before that almost unimaginable day arrives, there will be another war, and it will be the big one. The perception is growing that supplies of key resources may not be sufficient to satisfy the ravenous appetite of the developed and developing world. We see this. Asia sees it. Hedge funds have begun to speculate on it. There is certain to be much grief as we, and assuredly other nations, ratchet lower on Maslow’s Pyramid. The power that spring from guns will ultimately win. Darwinism may well be at-hand. This is one battle we cannot afford to lose.
Lifted the following from a Rick's Pick's column last week:
Does anyone out there still remember Maslow’s Hierarchy of Needs ? At the top of the psychologist’s pyramid was self-actualization. I think we are there, for the most part. The idea of his chart, presented in a 1943 paper entitled A Theory of Human Motivation, was that we need to satisfy basic needs before we can move on to higher needs. Food, water, shelter and security were basics that came before love itself. Our motivations to climb the scale were generated by our success at having conquered needs that were lower on the pyramid. The chart assumes we are climbing higher, paying little attention to how we might respond if we were to start sliding back down the pyramid. That is most surely at the root of many of our fears — that we may soon lose the ability to meet basic needs that we have long taken for granted. Is that not also the fear of those who would silence the gloom-and-doomers, lest they cause us inconceivable hardship merely by discussing the prospect of it? We are a superstitious lot.
China’s Unprecedented Spree
It probably does seem inconceivable to anyone in an advanced society that we might ever revert to a more primitive state. It is beyond insane, however, that we cannot discuss the possibility openly without being ridiculed. And yet, we are witnessing the hollowing out of education in North America as one example, and watching idly as Asia bids fair to take the lead in so many categories, threatening both our self-esteem and our very security. As a highly focused and energized Chinese empire-in-the-making takes decisive action to ensure its own economic survival, we continue to dither over the vagaries of domestic tax law and how they might impact our (supposed) pension plans. We are distracted by bits and pieces of financial paper as Asia goes on one of the biggest commodity buying sprees in history. Not even the English or Spanish in their day entertained the idea of owning all of the world’s key resources, as China someday may.
The news media, meanwhile, glutted by corporate advertising and influence, have been watering down the news so that nobody knows where to find the truth anymore. Even the Internet is coming into question as doubts grow concerning its ability to resist the intrusion, depredations and designs of Big Government. God help us all, should totalitarianism arise on this continent. Computers never forget, now do they?
As we backslide down Maslow’s Pyramid, are we prepared for the social consequences of reverting to the mean? Many societies have collapsed in the past. Few saw it coming. I imagine that fewer still were prepared for that ugly day when nations went to war over supposedly scarce resources. But we don’t have to worry about that, right? Not unless money matters, that is, and access to energy is deemed important. In fact, the track we’re on now, greased by a dollar that is falling toward worthlessness, implies that many will not be able to afford to drive their vehicles in the future, never mind heat their homes.
What Dollar’s Collapse Means
That is what a dollar collapse really means, by the way. In its most basic form, a failure of our currency means we will not be able to fulfill our most basic needs: security, shelter, warmth and access to a healthy variety of foods year-round. And if those basics cannot be acquired and ensured without worry, then we are indeed headed down Maslow’s Pyramid, not up. The supposed lunatic fringe that wants to head for the hills may not be so crazy after all. Actually, they could be ahead of the curve in realizing that our society is on an unsustainable path.
Meanwhile, the global financial system could unravel and destroy all currencies. We need to understand one thing very clearly, though: There is a big difference between a 1930s-style Depression and the specter of North Americans actually freezing to death in their homes for lack of fuel, or starving for lack of food. Before that almost unimaginable day arrives, there will be another war, and it will be the big one. The perception is growing that supplies of key resources may not be sufficient to satisfy the ravenous appetite of the developed and developing world. We see this. Asia sees it. Hedge funds have begun to speculate on it. There is certain to be much grief as we, and assuredly other nations, ratchet lower on Maslow’s Pyramid. The power that spring from guns will ultimately win. Darwinism may well be at-hand. This is one battle we cannot afford to lose.
Fed's Hoenig says gold standard "legitimate" system
"This Reuters piece was a huge surprise to me when I read it," said Ed Steer of Casey Research.
"It was filed from Kansas City, Missouri yesterday...and bears the incredible headline Fed's Hoenig says gold standard 'legitimate" system'. Thomas Hoenig has a keen grasp of the obvious...but the fact that he said it at all is amazing. A gold standard that forces countries to back their currency reserves with bullion is a 'legitimate' monetary system, though it would not prevent financial crises, Kansas City Federal Reserve President Thomas Hoenig said on Wednesday."
Steer continues, "I'd say this is more than a trial balloon. This story is a must read...and the link is here."
"This Reuters piece was a huge surprise to me when I read it," said Ed Steer of Casey Research.
"It was filed from Kansas City, Missouri yesterday...and bears the incredible headline Fed's Hoenig says gold standard 'legitimate" system'. Thomas Hoenig has a keen grasp of the obvious...but the fact that he said it at all is amazing. A gold standard that forces countries to back their currency reserves with bullion is a 'legitimate' monetary system, though it would not prevent financial crises, Kansas City Federal Reserve President Thomas Hoenig said on Wednesday."
Steer continues, "I'd say this is more than a trial balloon. This story is a must read...and the link is here."
The De-Industrialization Of America
So you wanna buy stocks and invest in America, right? You're an idiot. You're investing in the Titanic AFTER it has already hit the iceberg! Oh well, no law against being stupid! Carry on mates!
The following was published here at TradeReform.org.
#1 The United States has lost approximately 42,400 factories since 2001.
#2 Dell Inc., one of America’s largest manufacturers of computers, has announced plans to dramatically expand its operations in China with an investment of over $100 billion over the next decade.
#3 Dell has announced that it will be closing its last large U.S. manufacturing facility in Winston-Salem, North Carolina in November. Approximately 900 jobs will be lost.
#4 In 2008, 1.2 billion cellphones were sold worldwide. So how many of them were manufactured inside the United States? Zero.
#5 According to a new study conducted by the Economic Policy Institute, if the U.S. trade deficit with China continues to increase at its current rate, the U.S. economy will lose over half a million jobs this year alone.
#6 As of the end of July, the U.S. trade deficit with China had risen 18 percent compared to the same time period a year ago.
#7 The United States has lost a total of about 5.5 million manufacturing jobs since October 2000. (That’s direct jobs - the multiplier takes it over 20,000,000 jobs)
#8 According to Tax Notes, between 1999 and 2008 employment at the foreign affiliates of U.S. parent companies increased an astounding 30 percent to 10.1 million. During that exact same time period, U.S. employment at American multinational corporations declined 8 percent to 21.1 million.
#9 In 1959, manufacturing represented 28 percent of U.S. economic output. In 2008, it represented 11.5 percent.
#10 Ford Motor Company recently announced the closure of a factory that produces the Ford Ranger in St. Paul, Minnesota. Approximately 750 good paying middle class jobs are going to be lost because making Ford Rangers in Minnesota does not fit in with Ford’s new “global” manufacturing strategy.
#11 As of the end of 2009, less than 12 million Americans worked in manufacturing. The last time less than 12 million Americans were employed in manufacturing was in 1941.
#12 In the United States today, consumption accounts for 70 percent of GDP. Of this 70 percent, over half is spent on services.
#13 The United States has lost a whopping 32 percent of its manufacturing jobs since the year 2000.
#14 In 2001, the United States ranked fourth in the world in per capita broadband Internet use. Today it ranks 15th.
#15 Manufacturing employment in the U.S. computer industry is actually lower in 2010 than it was in 1975.
#16 Printed circuit boards are used in tens of thousands of different products. Asia now produces 84 percent of them worldwide.
#17 The United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States.
#18 One prominent economist is projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040.
#19 The U.S. Census Bureau says that 43.6 million Americans are now living in poverty and according to them that is the highest number of poor Americans in the 51 years that records have been kept.
So you wanna buy stocks and invest in America, right? You're an idiot. You're investing in the Titanic AFTER it has already hit the iceberg! Oh well, no law against being stupid! Carry on mates!
The following was published here at TradeReform.org.
#1 The United States has lost approximately 42,400 factories since 2001.
#2 Dell Inc., one of America’s largest manufacturers of computers, has announced plans to dramatically expand its operations in China with an investment of over $100 billion over the next decade.
#3 Dell has announced that it will be closing its last large U.S. manufacturing facility in Winston-Salem, North Carolina in November. Approximately 900 jobs will be lost.
#4 In 2008, 1.2 billion cellphones were sold worldwide. So how many of them were manufactured inside the United States? Zero.
#5 According to a new study conducted by the Economic Policy Institute, if the U.S. trade deficit with China continues to increase at its current rate, the U.S. economy will lose over half a million jobs this year alone.
#6 As of the end of July, the U.S. trade deficit with China had risen 18 percent compared to the same time period a year ago.
#7 The United States has lost a total of about 5.5 million manufacturing jobs since October 2000. (That’s direct jobs - the multiplier takes it over 20,000,000 jobs)
#8 According to Tax Notes, between 1999 and 2008 employment at the foreign affiliates of U.S. parent companies increased an astounding 30 percent to 10.1 million. During that exact same time period, U.S. employment at American multinational corporations declined 8 percent to 21.1 million.
#9 In 1959, manufacturing represented 28 percent of U.S. economic output. In 2008, it represented 11.5 percent.
#10 Ford Motor Company recently announced the closure of a factory that produces the Ford Ranger in St. Paul, Minnesota. Approximately 750 good paying middle class jobs are going to be lost because making Ford Rangers in Minnesota does not fit in with Ford’s new “global” manufacturing strategy.
#11 As of the end of 2009, less than 12 million Americans worked in manufacturing. The last time less than 12 million Americans were employed in manufacturing was in 1941.
#12 In the United States today, consumption accounts for 70 percent of GDP. Of this 70 percent, over half is spent on services.
#13 The United States has lost a whopping 32 percent of its manufacturing jobs since the year 2000.
#14 In 2001, the United States ranked fourth in the world in per capita broadband Internet use. Today it ranks 15th.
#15 Manufacturing employment in the U.S. computer industry is actually lower in 2010 than it was in 1975.
#16 Printed circuit boards are used in tens of thousands of different products. Asia now produces 84 percent of them worldwide.
#17 The United States spends approximately $3.90 on Chinese goods for every $1 that the Chinese spend on goods from the United States.
#18 One prominent economist is projecting that the Chinese economy will be three times larger than the U.S. economy by the year 2040.
#19 The U.S. Census Bureau says that 43.6 million Americans are now living in poverty and according to them that is the highest number of poor Americans in the 51 years that records have been kept.
Three Irreversible Trends
Since gold appears to be rising because of currency debasement (a term derived from the Roman Empire's practice of hollowing out gold coins and filling them with base metals), we need to consider whether governments will continue to spend and whether inflation will continue to rise. Three irreversible trends indicate that this pattern will persist for years to come. They are the aging population, outsourcing and peak oil.
The world's population is getting older, and most countries offer government-funded social programs designed to help retirees enjoy their golden years. However, an aging population means rising health care costs along with declining tax revenues. This is an unsustainable situation. In Europe, there has been rioting in the streets, as people protest retirement age hikes and cuts to benefits and services.
North American companies now outsource whatever they can with no regard for employees or communities; only the bottom line matters. It is far cheaper to hire someone in China-at 80 cents per hour with no benefits-than it is to hire someone in America-at $20 per hour, plus benefits. Without government protectionism, shareholder pressure ensures that this trend is irreversible. Without jobs, people cannot pay taxes or buy goods.
Finally, we have the serious issue of peak oil, which threatens to destroy the global economy, heavily dependent on cheap fossil fuel. Peak discovery has already occurred and we are fast approaching peak production of reasonably priced oil. Switching over to more expensive oil or to alternative fuels will have a negative impact on global GDP. This irreversible trend will fuel inflation for years to come.
The Consequences
These macro trends will result in:
lower GDP
systemic unemployment
lower tax revenues
increased money supply
more government debt
rising inflation
declining currency value
and higher gold prices.
Increased government debt and money printing to service the interest on this debt are direct consequences of these three trends. Since 1971, U.S. debt has soared to $13.96 trillion from $776 billion. Boston University economist Laurence Kotlikoff disagrees with that number; he believes true U.S. debt is $200 trillion, or a staggering 840% of GDP.
As investors lose confidence in currencies, the world's appetite for the relatively small amount of available gold will increase. There is an estimated $200 trillion in financial assets worldwide, not including real estate and derivatives. When demand for gold as a safe haven increases, there will be a transition from the $200 trillion financial assets market, to the $3 trillion gold market-much of which is owned by central banks and the world's wealthiest families, and not for sale at any price.
Future: Too Much Money Chasing Too Little Gold
The Chinese government is encouraging its citizens to invest 5% of their savings in bullion. Central banks in China, India and Russia are scrambling to increase reserves. Investment funds and banking institutions globally are turning to gold for insurance. Meanwhile, gold discoveries are down and production costs are rising. Clearly, competition for available gold will become fierce.
Where will the price of gold go?
In 2011, if gold repeats its average five-year increase of 19%, it will climb to $1,785 per ounce. If gold repeats 2010's projected performance in 2011, it could reach $2,010 per ounce. If the U.S. Federal Reserve unleashes more QE, gold's price will be much higher.
Today, gold is telling us that it can protect our wealth as it has successfully done for thousands of years. In such uncertain times, it is comforting to know that bullion ownership allows for sovereignty over personal economic destiny, and can change the way we view and experience economic reality.
Interview with Doug Casey.
excerpt from Prepare For Social Upheaval
Doug: For all the reasons we've discussed in many different ways, the Greater Depression we're sliding into is going to be catastrophic for the old world order.
Uneconomic patterns of production and consumption are going to be liquidated – they have to be – and that's going to smash a lot of people's rice bowls. In today's richest societies, people won't be able to move back to the family farm the way they did in the 1930s; there's no farm left in most families. There's not even that much family left in many families – instead of extended families that care for their elders, who educate the young while the able-bodied adults work, we send our elderly to fade away in institutions and our young to be indoctrinated in other institutions, and we barely know what our brothers and sisters are doing, let alone our other relatives. What happens to the huge masses of such people when unemployment benefits can no longer be extended?
Yes, "It can happen here," and it's going to. Maybe not this year, maybe not for several, but when the real crash gets underway, it'll be unstoppable, and it will destroy the status quo with a speed that will leave most people still waking up to the danger after the harm has already been done.
L: Sounds like a sci-fi horror film…
Doug: I know, and it's unsettling to sound the alarm. People dismiss you for being a Chicken Little. But the plain truth is that we've already gone beyond the point of no return. There is simply no way the U.S. government can pay all its obligations without defaulting or destroying the dollar – which is just a different kind of default. The same goes for a lot of other governments. There is no way out that does not force a lot of people to make painful adjustments.
L: Are you talking blood in the streets or something more like a chapter 13 bankruptcy, where everything gets sold off to satisfy creditors? Do you see the world of Mad Max ahead, or are we all going to work for the Chinese?
Doug: Both could happen, but I'm leaning toward the latter. I think most of the world's wealth will still exist, but it will change hands. Better start learning Mandarin. You'll need it to do business in the new world after the crash – or to get a job as a houseboy, working for those who do learn to do business in the world after the crash.
L: How else do we prepare, besides learning Mandarin?
Doug: You know my mantra: liquidate, consolidate, speculate, and create. To which I add and must emphasize again: diversify your political risk. I truly believe that increasingly desperate states will be the greatest risk to your wealth, going forward. The swelling masses of have-nots are going to turn their increasingly hungry eyes on the haves, and the politicians are going to pander to them – and these days, if you have any net worth at all, you're a have. When the food riots start in New York, LA, London, Paris, etc., I want to be good and far away.
L: But isn't that true all around the world? Is there any point in trying to escape a global crisis when it's global?
Doug: Well, in places where people live closer to the land, where farmers can shrug and go back to growing food, the people are less likely to turn cannibalistic – metaphorically, or literally. Countries with economies still largely focused on agriculture, or the production of raw materials, and, frankly, where the people are used to poverty and inequality, should see less social unrest, even as the world's former leading economies go off the deep end. Countries that have already had tough times have some advantages, such as having no debt. That's one reason I've been investing so heavily in Argentina.
L: I had that thought about Paraguay, too, when I visited a couple weeks ago – and they have no personal income tax in Paraguay.
Doug: A sound thought. I'm looking into land there as well, although, unlike Argentina, Paraguay is quite isolated and rather backward. Just in case the world fails to make it through chapter 13 in a reasonably orderly manner – if we are looking at apocalyptic Mad Max-type scenarios – I'm setting things up in Argentina so that we are growing our own food. If nothing happens, we'll have the benefit of great organic produce, finely prepared and served. For what it's worth, I'm increasingly averse to "industrial" food, full of steroids, antibiotics, and pesticides. Stuff that's packaged in a factory and frozen for months, or shipped thousands of miles before you eat it. I understand the necessity of all that for the world at large, but I prefer something better. And more secure.
L: That's why I've placed some chips on your La Estancia de Cafayate project myself. Shameless plug to our good readers: you should check it out. It's hard to imagine a nicer place to weather the storm if things get really bad.
Doug: Not if. When. But even if I'm wrong about the Big Picture over the next few years – after all, there's always a possibility that friendly aliens will land on the roof of the White House and present Obama with a magic technology that cures all the world's ills – I'll still have excellent diversification, and an utterly fantastic place to hang out, play polo, and perfect my nonexistent golf game…
L: Do you think we'll have much warning for when it's really time to get out of Dodge?
Doug: The warning bells are ringing loudly now. The time to prepare is now, before currency controls get any worse. Once they do put America and Europe on financial lockdown, that's when it'll be time to treat those countries as places you visit, rather than live. I write about these trends in The Casey Report, and I'll do my best to give readers as much warning as possible. While also looking for the lowest-risk and highest-reward investment opportunities in the world. I'd like to think that some day we'll be able to buy Belarusian property, when 10:1 gains seem plausible.
excerpt from Prepare For Social Upheaval
Doug: For all the reasons we've discussed in many different ways, the Greater Depression we're sliding into is going to be catastrophic for the old world order.
Uneconomic patterns of production and consumption are going to be liquidated – they have to be – and that's going to smash a lot of people's rice bowls. In today's richest societies, people won't be able to move back to the family farm the way they did in the 1930s; there's no farm left in most families. There's not even that much family left in many families – instead of extended families that care for their elders, who educate the young while the able-bodied adults work, we send our elderly to fade away in institutions and our young to be indoctrinated in other institutions, and we barely know what our brothers and sisters are doing, let alone our other relatives. What happens to the huge masses of such people when unemployment benefits can no longer be extended?
Yes, "It can happen here," and it's going to. Maybe not this year, maybe not for several, but when the real crash gets underway, it'll be unstoppable, and it will destroy the status quo with a speed that will leave most people still waking up to the danger after the harm has already been done.
L: Sounds like a sci-fi horror film…
Doug: I know, and it's unsettling to sound the alarm. People dismiss you for being a Chicken Little. But the plain truth is that we've already gone beyond the point of no return. There is simply no way the U.S. government can pay all its obligations without defaulting or destroying the dollar – which is just a different kind of default. The same goes for a lot of other governments. There is no way out that does not force a lot of people to make painful adjustments.
L: Are you talking blood in the streets or something more like a chapter 13 bankruptcy, where everything gets sold off to satisfy creditors? Do you see the world of Mad Max ahead, or are we all going to work for the Chinese?
Doug: Both could happen, but I'm leaning toward the latter. I think most of the world's wealth will still exist, but it will change hands. Better start learning Mandarin. You'll need it to do business in the new world after the crash – or to get a job as a houseboy, working for those who do learn to do business in the world after the crash.
L: How else do we prepare, besides learning Mandarin?
Doug: You know my mantra: liquidate, consolidate, speculate, and create. To which I add and must emphasize again: diversify your political risk. I truly believe that increasingly desperate states will be the greatest risk to your wealth, going forward. The swelling masses of have-nots are going to turn their increasingly hungry eyes on the haves, and the politicians are going to pander to them – and these days, if you have any net worth at all, you're a have. When the food riots start in New York, LA, London, Paris, etc., I want to be good and far away.
L: But isn't that true all around the world? Is there any point in trying to escape a global crisis when it's global?
Doug: Well, in places where people live closer to the land, where farmers can shrug and go back to growing food, the people are less likely to turn cannibalistic – metaphorically, or literally. Countries with economies still largely focused on agriculture, or the production of raw materials, and, frankly, where the people are used to poverty and inequality, should see less social unrest, even as the world's former leading economies go off the deep end. Countries that have already had tough times have some advantages, such as having no debt. That's one reason I've been investing so heavily in Argentina.
L: I had that thought about Paraguay, too, when I visited a couple weeks ago – and they have no personal income tax in Paraguay.
Doug: A sound thought. I'm looking into land there as well, although, unlike Argentina, Paraguay is quite isolated and rather backward. Just in case the world fails to make it through chapter 13 in a reasonably orderly manner – if we are looking at apocalyptic Mad Max-type scenarios – I'm setting things up in Argentina so that we are growing our own food. If nothing happens, we'll have the benefit of great organic produce, finely prepared and served. For what it's worth, I'm increasingly averse to "industrial" food, full of steroids, antibiotics, and pesticides. Stuff that's packaged in a factory and frozen for months, or shipped thousands of miles before you eat it. I understand the necessity of all that for the world at large, but I prefer something better. And more secure.
L: That's why I've placed some chips on your La Estancia de Cafayate project myself. Shameless plug to our good readers: you should check it out. It's hard to imagine a nicer place to weather the storm if things get really bad.
Doug: Not if. When. But even if I'm wrong about the Big Picture over the next few years – after all, there's always a possibility that friendly aliens will land on the roof of the White House and present Obama with a magic technology that cures all the world's ills – I'll still have excellent diversification, and an utterly fantastic place to hang out, play polo, and perfect my nonexistent golf game…
L: Do you think we'll have much warning for when it's really time to get out of Dodge?
Doug: The warning bells are ringing loudly now. The time to prepare is now, before currency controls get any worse. Once they do put America and Europe on financial lockdown, that's when it'll be time to treat those countries as places you visit, rather than live. I write about these trends in The Casey Report, and I'll do my best to give readers as much warning as possible. While also looking for the lowest-risk and highest-reward investment opportunities in the world. I'd like to think that some day we'll be able to buy Belarusian property, when 10:1 gains seem plausible.
The Golden Rules
Rule 1: Gold is money, not a commodity. Gold trades on the currency desks of the major banks and brokerage houses, not the commodity desks. Central banks have always regarded gold as money, yet many investors today view it as an ordinary commodity, like pork bellies. Because none of the world's currencies are backed by gold, it has become the anti-currency-the money of last resort impervious to Wall Street games, Main Street's over-consumption or QE-happy Keynesians. In 2009, gold officially became money once again when central banks around the world, including those of China, India and Russia, became net buyers for the first time in nearly 20 years. We believe that central banks are preparing for a return to some form of the gold standard.
Rule 2: Gold does not rise: currencies lose purchasing power against gold. Milton Friedman-the renowned American economist-stated: "Nations are not ruined by one act of violence, but gradually and in an almost imperceptible manner, by the depreciating of their circulating currency, through excessive quantity." That is bad news for the U.S., Canada, Britain, the Eurozone and Japan. Their currencies have lost more than 70% of their purchasing power against gold during the past 10 years. When we begin asking: "How many ounces of gold will this cost?" rather than, "How many dollars will this cost?" The shift in perspective is eye-opening.
Gold is a stable economic measure and a reliable standard by which to measure real inflation. Governments manipulate inflation figures to keep the official Consumer Price Index (CPI) artificially low, since the slightest rise can translate into billions of dollars in government-indexed pension payments to the growing number of baby boomer retirees. Today, instead of using a fixed basket of goods that represents a certain standard of living, methods such as substitution, hedonic adjustments (for estimating demand or value) and geometric weighting, are used to understate the CPI.
For instance, John Williams of www.shadowstats.com, calculates the CPI using the original methodology. His figures show that real inflation is already at 8.5% and climbing. Since the CPI has an inverse relationship with Gross Domestic Product (GDP), understating the CPI automatically overstates GDP.
Rule 3: Gold has intrinsic value. Gold has intrinsic value because it is difficult to find, to mine and to refine. In Roman times, an ounce of gold would buy a good suit of clothes; today, the same applies. In his book, "The Golden Constant," Prof. Roy Jastram demonstrated that gold's purchasing power remained remarkably stable between the years of 1560 and 2007.
Rule 4: Gold is a wealth-preserving asset, not a wealth-accumulating asset. We buy and hold gold bullion to preserve wealth. We may speculate in gold stocks, exchange-traded funds, futures and options to increase wealth, but gold bullion ownership best serves the purpose of wealth preservation. This has been the case for thousands of years and will continue to be so unless governments discover a way to produce gold out of thin air, as they do fiat currencies.
Rule 1: Gold is money, not a commodity. Gold trades on the currency desks of the major banks and brokerage houses, not the commodity desks. Central banks have always regarded gold as money, yet many investors today view it as an ordinary commodity, like pork bellies. Because none of the world's currencies are backed by gold, it has become the anti-currency-the money of last resort impervious to Wall Street games, Main Street's over-consumption or QE-happy Keynesians. In 2009, gold officially became money once again when central banks around the world, including those of China, India and Russia, became net buyers for the first time in nearly 20 years. We believe that central banks are preparing for a return to some form of the gold standard.
Rule 2: Gold does not rise: currencies lose purchasing power against gold. Milton Friedman-the renowned American economist-stated: "Nations are not ruined by one act of violence, but gradually and in an almost imperceptible manner, by the depreciating of their circulating currency, through excessive quantity." That is bad news for the U.S., Canada, Britain, the Eurozone and Japan. Their currencies have lost more than 70% of their purchasing power against gold during the past 10 years. When we begin asking: "How many ounces of gold will this cost?" rather than, "How many dollars will this cost?" The shift in perspective is eye-opening.
Gold is a stable economic measure and a reliable standard by which to measure real inflation. Governments manipulate inflation figures to keep the official Consumer Price Index (CPI) artificially low, since the slightest rise can translate into billions of dollars in government-indexed pension payments to the growing number of baby boomer retirees. Today, instead of using a fixed basket of goods that represents a certain standard of living, methods such as substitution, hedonic adjustments (for estimating demand or value) and geometric weighting, are used to understate the CPI.
For instance, John Williams of www.shadowstats.com, calculates the CPI using the original methodology. His figures show that real inflation is already at 8.5% and climbing. Since the CPI has an inverse relationship with Gross Domestic Product (GDP), understating the CPI automatically overstates GDP.
Rule 3: Gold has intrinsic value. Gold has intrinsic value because it is difficult to find, to mine and to refine. In Roman times, an ounce of gold would buy a good suit of clothes; today, the same applies. In his book, "The Golden Constant," Prof. Roy Jastram demonstrated that gold's purchasing power remained remarkably stable between the years of 1560 and 2007.
Rule 4: Gold is a wealth-preserving asset, not a wealth-accumulating asset. We buy and hold gold bullion to preserve wealth. We may speculate in gold stocks, exchange-traded funds, futures and options to increase wealth, but gold bullion ownership best serves the purpose of wealth preservation. This has been the case for thousands of years and will continue to be so unless governments discover a way to produce gold out of thin air, as they do fiat currencies.
How High Will Gold Go in 2011?
By Jeff Clark, BIG GOLD
After stellar years for both gold and silver, what prices will precious metals hit in 2011? Here's an analysis based strictly on their price behavior in the current bull market.
First, take a look at the annual percentage gains that gold has registered since 2001 (based on London PM Fix closings):
By Jeff Clark, BIG GOLD
After stellar years for both gold and silver, what prices will precious metals hit in 2011? Here's an analysis based strictly on their price behavior in the current bull market.
First, take a look at the annual percentage gains that gold has registered since 2001 (based on London PM Fix closings):
Excluding 2001, the average gain is 20.4%. Tossing out the additional weak years of '04 and '08, the average advance is 24.8%.
So we can make some projections based on what it's done over the past 10 years. From the 12-31-10 closing price of $1,421.60, if gold matched…
•The average rise this decade, the price would hit $1,711.60
•The average rise excluding the three weak years = $1,774.15
•Last year's gain = $1,858.03
•The largest advance to date (2007) = $1,875.09
But what if global economic circumstances continue to deteriorate? What if worldwide price inflation kicks in? And what if government efforts at currency debasement get more abusive? If Doug Casey is right, a mania in all things gold lies ahead – what if that begins in 2011? Here's what price levels could be reached based on the following percentage gains.
•35% = $1,919.16
•40% = $1,990.24
•45% = $2,061.32
•50% = $2,132.40
•1979's gain of 125.7% = $3,208.55
It thus seems reasonable to expect gold to surpass $1,800 this year, as well as reach a potentially higher level since the factors pushing on the price could become more pronounced.
It's titillating to ponder these advances for gold, especially when you consider we might be getting close to the mania. And if we are, that should do wonderful things to our gold stocks, too.
I would add one caution: the odds are high that there will be a significant correction before gold begins its march to these price levels. In every year but two ('02 and '06), gold fell below its prior-year close before heading higher. And here's something to watch for: in every year but one ('08), those lows occurred by May.
In other words, a buying opportunity may be dead ahead. And if you buy on the next correction, your gains on the year could be higher than the annual advance.
The Younger Generation
excerpt from Rick Ackerman's daily column
.....it also reflects the evolution of the Internet in the sense that perhaps as recently as five years ago a commentator reporting economic truth in a blog (or whatever they were called in the good-old days) was regarded as a crank, and the mainstream press was regarded as the only place to find the truth. Hardly anybody nowadays would dispute that if you want the economic truth, you can only find it at blogs, etc. online, and that the mainstream press is not to be trusted.
The younger generation that is growing up with this online truth — do you know any young people who read newspapers? — and seeing the heartache caused to their parents and grandparents by the mismanagement of the economy over the last few decades, will be the ones to pull us out of this quagmire, but it ain’t gonna happen any time soon! After all, since the political generation responsible for causing the problems is currently charged with resolving those problems, it does not bode well for the short or medium term.
excerpt from Rick Ackerman's daily column
.....it also reflects the evolution of the Internet in the sense that perhaps as recently as five years ago a commentator reporting economic truth in a blog (or whatever they were called in the good-old days) was regarded as a crank, and the mainstream press was regarded as the only place to find the truth. Hardly anybody nowadays would dispute that if you want the economic truth, you can only find it at blogs, etc. online, and that the mainstream press is not to be trusted.
The younger generation that is growing up with this online truth — do you know any young people who read newspapers? — and seeing the heartache caused to their parents and grandparents by the mismanagement of the economy over the last few decades, will be the ones to pull us out of this quagmire, but it ain’t gonna happen any time soon! After all, since the political generation responsible for causing the problems is currently charged with resolving those problems, it does not bode well for the short or medium term.
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