Ambrose Evans-Pritchard
12:13am GMT 23/02/2007
Fresh signs that inflation is raising its ugly head again in the United States sent gold rocketing $23.50 to a nine-month high of $680.50 in late trading in New York.
US core consumer prices jumped 0.3pc in January led by medical care and drugs, the sharpest rise since June and fresh evidence that inflation is becoming lodged more deeply across the economy. Core prices are now up 2.7pc over the past 12 months.
The bombshell data came as minutes from the US Federal Reserve showed that inflation was still the "dominant concern" of the policy-making board.
Adding to the incendiary mix, the index of leading indicators published by the New York Conference Board rose for a second month in January, suggesting that the economy was gathering steam again after the autumn downturn.
The data triggered the sharpest one-day rise in gold since the bull market began in 2001 as bullion re-found its traditional role as a "hard money" hedge. It now looks poised to challenge the 24-year peak of $730 reached in May. Equities fared less well as the Dow slipped amid mounting jitters over the risk of significantly higher interest rates - a risk that is not priced into the current "Goldilocks" assumptions of the markets.
Federal Reserve vice-president Donald Kohn warned that investors had mis-priced the level of risk and were assuming a "very benign" climate that might not last.
The board minutes said "all members agreed that some inflation risks remained", indicating that even doves feared price pressures were the greater menace.
"This is a wake-up call to the markets," said Mickey Levy, chief economist at Bank of America.
Overall bank credit in the US has expanded by 10pc or $763bn over the last year and mortgage finance is up 14.3pc, despite the housing and automobile troubles.
Although the Federal Reserve no longer publishes M3 broad money figures, reconstructed data shows that it grew 10.3pc in 2006 - well over the safe speed limit. This sea of liquidity now appears to be leaking into High Street price pressures, renewing enthusiasm for gold.
Tuesday 27 February 2007
Bullish about Bullion
By EDWARD RAJENDRA
newsdesk@thestar.com.my
KLANG: Soaring gold prices have led to a new trend among buyers, who are now buying more bullion in the form of coins.
Malaysian Indian Goldsmith and Jewellers Association adviser N.P. Raman said, “Many regular buyers are now beginning to look at gold purely as a financial asset, adding to their investment portfolio.
“Many women now choose to buy gold coins or even bars as investment, instead of jewellery as jewellery adds 25% to 30 % to the cost, to cover craftsmanship,” he said.
Raman said the current investment-led buying has led jewellery shops in the Indian business enclave of Jalan Tengku Kelana here to display more gold coins.
“Before the prices started to climb, we had two different types of buyers – the ones who bought gold to convert it into jewellery for special occasions, and young executives who buy gold for capital appreciation,” he said.
Raman said parents are now saving in gold coins as an alternative to traditional insurance policies that tied them for a stipulated period.
Some people were even buying gold coins on an instalment basis, by “depositing” cash with goldsmiths every month.
“People are not waiting to see if the market is going up or down but are buying bullion as it is considered a hedge against inflation. Market watchers anticipate that the price of gold may surge to US$800 (RM2,794) an ounce soon, due to Middle-East tensions,” he added.
The price of gold yesterday closed at RM78 per gram.
newsdesk@thestar.com.my
KLANG: Soaring gold prices have led to a new trend among buyers, who are now buying more bullion in the form of coins.
Malaysian Indian Goldsmith and Jewellers Association adviser N.P. Raman said, “Many regular buyers are now beginning to look at gold purely as a financial asset, adding to their investment portfolio.
“Many women now choose to buy gold coins or even bars as investment, instead of jewellery as jewellery adds 25% to 30 % to the cost, to cover craftsmanship,” he said.
Raman said the current investment-led buying has led jewellery shops in the Indian business enclave of Jalan Tengku Kelana here to display more gold coins.
“Before the prices started to climb, we had two different types of buyers – the ones who bought gold to convert it into jewellery for special occasions, and young executives who buy gold for capital appreciation,” he said.
Raman said parents are now saving in gold coins as an alternative to traditional insurance policies that tied them for a stipulated period.
Some people were even buying gold coins on an instalment basis, by “depositing” cash with goldsmiths every month.
“People are not waiting to see if the market is going up or down but are buying bullion as it is considered a hedge against inflation. Market watchers anticipate that the price of gold may surge to US$800 (RM2,794) an ounce soon, due to Middle-East tensions,” he added.
The price of gold yesterday closed at RM78 per gram.
Wednesday 21 February 2007
Gold and the Weather
What about the weather! Everybody skirts around it, (especially hurricanes) but few address the major economic and social implications. We need to get the debate into the open.(depending on the weather!) As usual, people generally can’t see the wood for the trees, and get fobbed off with the political and media spin. It seems to me that the present climate (I make appointment with analyst to stop this juvenile attitude) is one that we have virtually no control over (neo-con or otherwise), and yet the results would have a major effect on our way of life (god help us – whatever form he takes! I hear Amenhotep is making a comeback), and shoot the price of gold through the roof. Here is a couple of snippets:
CHINA
Global weather conditions are beginning to deteriorate apace. Massive sandstorms come in from the desert and pound China for months on end – I’ve been there, you can’t see your hand in front of you, and everybody has to wear a mask while walking in the street. They have mistakenly tried to create a barrier of trees and forest for the last ten years to act as a break, but all it has done is to worsen the situation by creating a funnel effect.
Over 400,000 farmers have been relocated from the edge of two deserts in north China's Inner Mongolia Autonomous Region over the past five years to accelerate the ecological recovery of the fragile environment.
Yun Feng, secretary of the Erdos city committee of the Communist Party of China, said the farmers depended on meager farm yields and livestock. Human activity, however, was primarily to blame for the degraded biological conditions on the edge of Mu Us and Hobq deserts.
48 percent of the 87,000 square km of the land administered by Erdos city has been engulfed by the two deserts, which now deposit 100 million tons of yellow sand in the Yellow River, the biggest in north China.
Years of heavy drought and increasing population have deteriorated the ecosystem.
The local government realized that biological rehabilitation was only possible if human activities were eliminated. NICE ONE CHINA.
USA
At this moment in time, serious weather fronts are building up off the coast of Africa which could cause some more force 5 hurricanes off the US coast of Florida, Texas and New England in the next few weeks.
Homeowners insurance doesn't cover flood damage if you live in a Special Flood Hazard Area (SFHA) or high risk area. If you do, your mortgage lender requires you to have flood insurance. PARADOX OR WHAT!
The economic impact of Katrina has been unprecedented. Federal disaster declarations covered approximately 90 thousand square miles, an area roughly the size of the United Kingdom. According to the Federal Emergency Management Agency (FEMA), more than 1.4 million applicants have registered for housing and other needs assistance, and over $5.1 billion has been provided to applicants for housing assistance and other needs. (To me that comes to about $3600 a piece! – MORE THAN ENOUGH TO PEPLACE A SHATTERED LIFE! ) Katrina damaged or destroyed 30 oil platforms in the Gulf of Mexico, and forced the closure of nine Gulf Coast refineries. In the six months following Katrina, the total shut-in oil production from the Gulf was about one quarter of the annual production, and the shut in gas production for the same period was 18 percent. According to a Marshall University study, the total economic impact on Louisiana and Mississippi alone could top $150 billion.
And so it goes on, and I haven’t even mentioned potential earthquakes (San Francisco is due), CO2, CFC’s, Tsunamis, polar-axis shift, volcanoes, melting polar icecaps etc (and any further levels of paranoia that you can think of!
If these figures even barely resemble the truth, we won’t have to worry about creeping inflation over the next 10 years, it will be crawling all over us (From out of a Dense Swamp in the Everglades).
CHINA
Global weather conditions are beginning to deteriorate apace. Massive sandstorms come in from the desert and pound China for months on end – I’ve been there, you can’t see your hand in front of you, and everybody has to wear a mask while walking in the street. They have mistakenly tried to create a barrier of trees and forest for the last ten years to act as a break, but all it has done is to worsen the situation by creating a funnel effect.
Over 400,000 farmers have been relocated from the edge of two deserts in north China's Inner Mongolia Autonomous Region over the past five years to accelerate the ecological recovery of the fragile environment.
Yun Feng, secretary of the Erdos city committee of the Communist Party of China, said the farmers depended on meager farm yields and livestock. Human activity, however, was primarily to blame for the degraded biological conditions on the edge of Mu Us and Hobq deserts.
48 percent of the 87,000 square km of the land administered by Erdos city has been engulfed by the two deserts, which now deposit 100 million tons of yellow sand in the Yellow River, the biggest in north China.
Years of heavy drought and increasing population have deteriorated the ecosystem.
The local government realized that biological rehabilitation was only possible if human activities were eliminated. NICE ONE CHINA.
USA
At this moment in time, serious weather fronts are building up off the coast of Africa which could cause some more force 5 hurricanes off the US coast of Florida, Texas and New England in the next few weeks.
Homeowners insurance doesn't cover flood damage if you live in a Special Flood Hazard Area (SFHA) or high risk area. If you do, your mortgage lender requires you to have flood insurance. PARADOX OR WHAT!
The economic impact of Katrina has been unprecedented. Federal disaster declarations covered approximately 90 thousand square miles, an area roughly the size of the United Kingdom. According to the Federal Emergency Management Agency (FEMA), more than 1.4 million applicants have registered for housing and other needs assistance, and over $5.1 billion has been provided to applicants for housing assistance and other needs. (To me that comes to about $3600 a piece! – MORE THAN ENOUGH TO PEPLACE A SHATTERED LIFE! ) Katrina damaged or destroyed 30 oil platforms in the Gulf of Mexico, and forced the closure of nine Gulf Coast refineries. In the six months following Katrina, the total shut-in oil production from the Gulf was about one quarter of the annual production, and the shut in gas production for the same period was 18 percent. According to a Marshall University study, the total economic impact on Louisiana and Mississippi alone could top $150 billion.
And so it goes on, and I haven’t even mentioned potential earthquakes (San Francisco is due), CO2, CFC’s, Tsunamis, polar-axis shift, volcanoes, melting polar icecaps etc (and any further levels of paranoia that you can think of!
If these figures even barely resemble the truth, we won’t have to worry about creeping inflation over the next 10 years, it will be crawling all over us (From out of a Dense Swamp in the Everglades).
Tuesday 20 February 2007
Investing in gold mining stocks is NOT easy
Factors to consider when considering investing in gold mining stocks
Exploration stage companies almost always make readily available the information that they have collected from their initial work in an area: surface signature, geophysics, structural data, geochemistry and the like. This initial information could be a good indicator of the degree of success a company could realize with its project.
Focus on the history of the drilling crew, their track records and qualifications, could also provide insight.
Look beyond the current information and examining the area itself, how many times it has been explored by different companies, previous geological reports on the evolution of that land, studying the way it has formed, etc., could also be good indication of an area's potential output.
The geopolitical climate surrounding the land in question is extremely important. As most of us are aware, parts of South America Russia , for example, contain profitable deposits but current political conditions in some of these areas are certainly not conducive for secure investing and folks would do well to stay away until conditions change.
Basic key factors certainly include people. Is the management technically competent? Do they have the ability to raise capital? What is their experience in the area? If the answers to all of these questions are yes, things can be promising.
It is critical to be able to “gauge the level of risk in the investment”. If that cannot be accomplished with some degree of certainty, an investor should stay away.
Exploration stage companies almost always make readily available the information that they have collected from their initial work in an area: surface signature, geophysics, structural data, geochemistry and the like. This initial information could be a good indicator of the degree of success a company could realize with its project.
Focus on the history of the drilling crew, their track records and qualifications, could also provide insight.
Look beyond the current information and examining the area itself, how many times it has been explored by different companies, previous geological reports on the evolution of that land, studying the way it has formed, etc., could also be good indication of an area's potential output.
The geopolitical climate surrounding the land in question is extremely important. As most of us are aware, parts of South America Russia , for example, contain profitable deposits but current political conditions in some of these areas are certainly not conducive for secure investing and folks would do well to stay away until conditions change.
Basic key factors certainly include people. Is the management technically competent? Do they have the ability to raise capital? What is their experience in the area? If the answers to all of these questions are yes, things can be promising.
It is critical to be able to “gauge the level of risk in the investment”. If that cannot be accomplished with some degree of certainty, an investor should stay away.
Blowing the lid off Western Economics
Dr. Ron Paul is a Republican member of Congress from Texas. He is a free thinker in the midst of closed minded, powerfull self interest groups that now control America and the West and are looking to take control of the entire globe. He also offers a few initial suggestions as to how we can begin to rectify the growing economic and social problems. I believe that this idea of global control is not in any way an exageration, read on, and I can assure you that their is much more detail to come.
Statement at Hearing of the House Financial Services Committee, February 15, 2007
"Transparency in monetary policy is a goal we should all support. I've often wondered why Congress so willingly has given up its prerogative over monetary policy. Astonishingly, Congress in essence has ceded total control over the value of our money to a secretive central bank.
Congress created the Federal Reserve, yet it had no constitutional authority to do so. We forget that those powers not explicitly granted to Congress by the Constitution are inherently denied to Congress – and thus the authority to establish a central bank never was given. Of course Jefferson and Hamilton had that debate early on, a debate seemingly settled in 1913.
But transparency and oversight are something else, and they're worth considering. Congress, although not by law, essentially has given up all its oversight responsibility over the Federal Reserve. There are no true audits, and Congress knows nothing of the conversations, plans, and actions taken in concert with other central banks. We get less and less information regarding the money supply each year, especially now that M3 is no longer reported.
The role the Fed plays in the President's secretive Working Group on Financial Markets goes unnoticed by members of Congress. The Federal Reserve shows no willingness to inform Congress voluntarily about how often the Working Group meets, what actions it takes that affect the financial markets, or why it takes those actions.
But these actions, directed by the Federal Reserve, alter the purchasing power of our money. And that purchasing power is always reduced. The dollar today is worth only four cents compared to the dollar in 1913, when the Federal Reserve started. This has profound consequences for our economy and our political stability. All paper currencies are vulnerable to collapse, and history is replete with examples of great suffering caused by such collapses, especially to a nation's poor and middle class. This leads to political turmoil.
Even before a currency collapse occurs, the damage done by a fiat system is significant. Our monetary system insidiously transfers wealth from the poor and middle class to the privileged rich. Wages never keep up with the profits of Wall Street and the banks, thus sowing the seeds of class discontent. When economic trouble hits, free markets and free trade often are blamed, while the harmful effects of a fiat monetary system are ignored. We deceive ourselves that all is well with the economy, and ignore the fundamental flaws that are a source of growing discontent among those who have not shared in the abundance of recent years.
Few understand that our consumption and apparent wealth is dependent on a current account deficit of $800 billion per year. This deficit shows that much of our prosperity is based on borrowing rather than a true increase in production. Statistics show year after year that our productive manufacturing jobs continue to go overseas. This phenomenon is not seen as a consequence of the international fiat monetary system, where the United States government benefits as the issuer of the world's reserve currency.
Government officials consistently claim that inflation is in check at barely 2%, but middle class Americans know that their purchasing power – especially when it comes to housing, energy, medical care, and school tuition – is shrinking much faster than 2% each year.
Even if prices were held in check, in spite of our monetary inflation, concentrating on CPI distracts from the real issue. We must address the important consequences of Fed manipulation of interest rates. When interests rates are artificially low, below market rates, insidious mal-investment and excessive indebtedness inevitably bring about the economic downturn that everyone dreads.
We look at GDP numbers to reassure ourselves that all is well, yet a growing number of Americans still do not enjoy the higher standard of living that monetary inflation brings to the privileged few. Those few have access to the newly created money first, before its value is diluted.
For example: Before the breakdown of the Bretton Woods system, CEO income was about 30 times the average worker's pay. Today, it's closer to 500 times. It's hard to explain this simply by market forces and increases in productivity. One Wall Street firm last year gave out bonuses totaling $16.5 billion. There's little evidence that this represents free market capitalism.
In 2006 dollars, the minimum wage was $9.50 before the 1971 breakdown of Bretton Woods.
Today that dollar is worth $5.15. Congress congratulates itself for raising the minimum wage by mandate, but in reality it has lowered the minimum wage by allowing the Fed to devalue the dollar. We must consider how the growing inequalities created by our monetary system will lead to social discord.
GDP purportedly is now growing at 3.5%, and everyone seems pleased. What we fail to understand is how much government entitlement spending contributes to the increase in the GDP. Rebuilding infrastructure destroyed by hurricanes, which simply gets us back to even, is considered part of GDP growth. Wall Street profits and salaries, pumped up by the Fed's increase in money, also contribute to GDP statistical growth. Just buying military weapons that contribute nothing to the well being of our citizens, sending money down a rat hole, contributes to GDP growth! Simple price increases caused by Fed monetary inflation contribute to nominal GDP growth. None of these factors represent any kind of real increases in economic output. So we should not carelessly cite misleading GDP figures which don't truly reflect what is happening in the economy. Bogus GDP figures explain in part why so many people are feeling squeezed despite our supposedly booming economy.
But since our fiat dollar system is not going away anytime soon, it would benefit Congress and the American people to bring more transparency to how and why Fed monetary policy functions.
For starters, the Federal Reserve should:
Begin publishing the M3 statistics again. Let us see the numbers that most accurately reveal how much new money the Fed is pumping into the world economy.
Tell us exactly what the President's Working Group on Financial Markets does and why.
Explain how interest rates are set. Conservatives profess to support free markets, without wage and price controls. Yet the most important price of all, the price of money as determined by interest rates, is set arbitrarily in secret by the Fed rather than by markets! Why is this policy written in stone? Why is there no congressional input at least?
Change legal tender laws to allow constitutional legal tender (commodity money) to compete domestically with the dollar.
How can a policy of steadily debasing our currency be defended morally, knowing what harm it causes to those who still believe in saving money and assuming responsibility for themselves in their retirement years? Is it any wonder we are a nation of debtors rather than savers?
We need more transparency in how the Federal Reserve carries out monetary policy, and we need it soon."
Statement at Hearing of the House Financial Services Committee, February 15, 2007
"Transparency in monetary policy is a goal we should all support. I've often wondered why Congress so willingly has given up its prerogative over monetary policy. Astonishingly, Congress in essence has ceded total control over the value of our money to a secretive central bank.
Congress created the Federal Reserve, yet it had no constitutional authority to do so. We forget that those powers not explicitly granted to Congress by the Constitution are inherently denied to Congress – and thus the authority to establish a central bank never was given. Of course Jefferson and Hamilton had that debate early on, a debate seemingly settled in 1913.
But transparency and oversight are something else, and they're worth considering. Congress, although not by law, essentially has given up all its oversight responsibility over the Federal Reserve. There are no true audits, and Congress knows nothing of the conversations, plans, and actions taken in concert with other central banks. We get less and less information regarding the money supply each year, especially now that M3 is no longer reported.
The role the Fed plays in the President's secretive Working Group on Financial Markets goes unnoticed by members of Congress. The Federal Reserve shows no willingness to inform Congress voluntarily about how often the Working Group meets, what actions it takes that affect the financial markets, or why it takes those actions.
But these actions, directed by the Federal Reserve, alter the purchasing power of our money. And that purchasing power is always reduced. The dollar today is worth only four cents compared to the dollar in 1913, when the Federal Reserve started. This has profound consequences for our economy and our political stability. All paper currencies are vulnerable to collapse, and history is replete with examples of great suffering caused by such collapses, especially to a nation's poor and middle class. This leads to political turmoil.
Even before a currency collapse occurs, the damage done by a fiat system is significant. Our monetary system insidiously transfers wealth from the poor and middle class to the privileged rich. Wages never keep up with the profits of Wall Street and the banks, thus sowing the seeds of class discontent. When economic trouble hits, free markets and free trade often are blamed, while the harmful effects of a fiat monetary system are ignored. We deceive ourselves that all is well with the economy, and ignore the fundamental flaws that are a source of growing discontent among those who have not shared in the abundance of recent years.
Few understand that our consumption and apparent wealth is dependent on a current account deficit of $800 billion per year. This deficit shows that much of our prosperity is based on borrowing rather than a true increase in production. Statistics show year after year that our productive manufacturing jobs continue to go overseas. This phenomenon is not seen as a consequence of the international fiat monetary system, where the United States government benefits as the issuer of the world's reserve currency.
Government officials consistently claim that inflation is in check at barely 2%, but middle class Americans know that their purchasing power – especially when it comes to housing, energy, medical care, and school tuition – is shrinking much faster than 2% each year.
Even if prices were held in check, in spite of our monetary inflation, concentrating on CPI distracts from the real issue. We must address the important consequences of Fed manipulation of interest rates. When interests rates are artificially low, below market rates, insidious mal-investment and excessive indebtedness inevitably bring about the economic downturn that everyone dreads.
We look at GDP numbers to reassure ourselves that all is well, yet a growing number of Americans still do not enjoy the higher standard of living that monetary inflation brings to the privileged few. Those few have access to the newly created money first, before its value is diluted.
For example: Before the breakdown of the Bretton Woods system, CEO income was about 30 times the average worker's pay. Today, it's closer to 500 times. It's hard to explain this simply by market forces and increases in productivity. One Wall Street firm last year gave out bonuses totaling $16.5 billion. There's little evidence that this represents free market capitalism.
In 2006 dollars, the minimum wage was $9.50 before the 1971 breakdown of Bretton Woods.
Today that dollar is worth $5.15. Congress congratulates itself for raising the minimum wage by mandate, but in reality it has lowered the minimum wage by allowing the Fed to devalue the dollar. We must consider how the growing inequalities created by our monetary system will lead to social discord.
GDP purportedly is now growing at 3.5%, and everyone seems pleased. What we fail to understand is how much government entitlement spending contributes to the increase in the GDP. Rebuilding infrastructure destroyed by hurricanes, which simply gets us back to even, is considered part of GDP growth. Wall Street profits and salaries, pumped up by the Fed's increase in money, also contribute to GDP statistical growth. Just buying military weapons that contribute nothing to the well being of our citizens, sending money down a rat hole, contributes to GDP growth! Simple price increases caused by Fed monetary inflation contribute to nominal GDP growth. None of these factors represent any kind of real increases in economic output. So we should not carelessly cite misleading GDP figures which don't truly reflect what is happening in the economy. Bogus GDP figures explain in part why so many people are feeling squeezed despite our supposedly booming economy.
But since our fiat dollar system is not going away anytime soon, it would benefit Congress and the American people to bring more transparency to how and why Fed monetary policy functions.
For starters, the Federal Reserve should:
Begin publishing the M3 statistics again. Let us see the numbers that most accurately reveal how much new money the Fed is pumping into the world economy.
Tell us exactly what the President's Working Group on Financial Markets does and why.
Explain how interest rates are set. Conservatives profess to support free markets, without wage and price controls. Yet the most important price of all, the price of money as determined by interest rates, is set arbitrarily in secret by the Fed rather than by markets! Why is this policy written in stone? Why is there no congressional input at least?
Change legal tender laws to allow constitutional legal tender (commodity money) to compete domestically with the dollar.
How can a policy of steadily debasing our currency be defended morally, knowing what harm it causes to those who still believe in saving money and assuming responsibility for themselves in their retirement years? Is it any wonder we are a nation of debtors rather than savers?
We need more transparency in how the Federal Reserve carries out monetary policy, and we need it soon."
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