Posted November 1, 2011 at 1:55 am
Over the past 24 hours, the price of gold has plunged as much as $104/ounce, or 10%, ahead of what looks to be an imminent Greek debt default.
In fact, the past three days have seen the largest consecutive drop in gold prices in 28 years!
The question is why, you might ask. Debt problems in the Eurozone would usually encourage investors to flock to the golden “safe haven,” would they not?
In the face of the debasement of currencies worldwide (prompted by the massive quantitative easing led by the Federal Reserve – a process known as exporting inflation), the past year has seen gold climb astronomically, particularly in the summer of 2011.
So what’s changing now?
The fact is that institutions are clamoring to sell gold in order to take cash and keep cash positions. This could be for a variety of reasons. One, gold is seen as having [continue]…
Posted October 26, 2011 at 2:02 am
The American phoenix is slowly rising again. Within five years or so, the US will be well on its way to self-sufficiency in fuel and energy. Manufacturing will have closed the labour gap with China in a clutch of key industries. The current account might even be in surplus.
by Ambrose Evans-Pritchard
Assumptions that the Great Republic must inevitably spiral into economic and strategic decline — so like the chatter of the late 1980s, when Japan was in vogue — will seem wildly off the mark by then.
Telegraph readers already know about the “shale gas revolution” that has turned America into the world’s number one producer of natural gas, ahead of Russia.
Less known is that the technology of hydraulic fracturing — breaking rocks with jets of water — will also bring a quantum leap in shale oil supply, mostly from the Bakken fields in North Dakota, Eagle Ford in Texas, and other reserves across the Mid-West.
“The US was the single largest contributor to global oil supply growth last year, with a net 395,000 barrels per day (b/d),” said Francisco Blanch from Bank of America, comparing the Dakota fields to a new North Sea.
Total US shale output is “set to expand dramatically” as fresh sources come on stream, possibly reaching 5.5m b/d by mid-decade. This is a tenfold rise since [continue]…
Posted October 25, 2011 at 12:20 am
by Bruce Upbin
Three systems theorists at the Swiss Federal Institute of Technology in Zurich have taken a database listing 37 million companies and investors worldwide and analyzed all 43,060 transnational corporations and share ownerships linking them. They built a model of who owns what and what their revenues are and mapped the whole edifice of economic power.
They discovered that global corporate control has a distinct bow-tie shape, with a dominant core of 147 firms radiating out from the middle. Each of these 147 own interlocking stakes of one another and together they control 40% of the wealth in the network. A total of 737 control 80% of it all. The top 20 are at the bottom of the post.
This is, say the paper’s authors, the first map of the structure of global corporate control.
The occupy movement will eat this up as evidence for massive redistribution of wealth. The New Scientist talked to one systems theorist who is “disconcerted” at the level of interconnectedness, but not surprised.
Posted October 16, 2011 at 4:17 pm
from the Pragmatic Capitalist
At this point in the Euro saga, it’s clear that all roads lead to Rome. That is, Italy has become the true endgame.
If the contagion in Greece and Portugal spreads then the larger countries like Spain and most importantly, Italy, have the potential to cause massive turmoil in the region. Italy alone carries more sovereign debt than Portugal, Ireland and Greece combined.
I think the bogey here is still the sovereign bond markets. As our friend Martin noted this morning, credit is not improving in Europe and if Italian bond yields are any sign it’s clear that they’re calling BS on this latest fix.
As long as the Euro crisis remains unresolved the bond vigilantes in Italy (yes, unlike the USA, they have real bond vigilantes because of their status as a currency user) will push the envelope as budgets deteriorate and austerity fails to generate a sustainable recovery.
Remember, fixing the banks does not fix the currency crisis [continue]…
Posted October 7, 2011 at 1:41 am
by Anthony Wile
A popular movement called Occupy Wall Street is attracting attention by protesting in and around the US financial district. In this editorial, I want to examine what the protest means in a larger context.
The impulse of the demonstration is surely correct insofar as it goes. Today’s monetary system is likely creating a kind of globalist society verging on feudalism. But are the fingers pointing in the right direction? I’m not so sure. We’ve written about this in the past, here:
In fact, we’ve been waiting for this subdominant social theme to make progress for some four years now since the economic meltdown of early 2008. People are very angry, and it’s handy to blame stockbrokers and bankers for what’s gone wrong.
It’s not entirely right, of course. Wall Street, or much of it, provides an essentially transactional function. It wouldn’t exist as it does without the larger economic system of the Western world driven by central banking.
There are very large centers of money power in Wall Street such as Goldman Sachs; and Goldman Sachs is certainly an integral and purposeful part of the modern corporatist system.
But even much of what Goldman Sachs does is essentially transactional. It’s fundamentally a business, an intermediary, and its employees are paid (a lot, admittedly) to perform certain functions. The real control, I’d argue, lies elsewhere.
To get at the root of the problem, one should be protesting, say, in London’s City where central banking originated. Or protesting in front of the Federal Reserve in Washington DC. These are real seats of power.
But the shadowy and excessively powerful and wealthy individuals who have created the modern economic system are quite satisfied no doubt to have Wall Street take the blame. It suits their purposes.
In fact, the handful of powerful Anglosphere families that control central banking have done everything they can to focus the blame on the [continue]…
Posted October 5, 2011 at 10:58 am
by John Stossel
Politicians say they create jobs, but they really don’t. Or rather, they rarely create productive jobs. Government has no money of its own. All it does is take resources from one group and give them to another.
The pharaohs might have claimed they created work when they ordered that pyramids be built, but think how much richer (and freer) the Egyptians would have been if they’d been allowed to pursue their own interests.
It’s individuals in the marketplace who create real jobs — when they have the protection of life and property under the rule of law.
Economic freedom is the key. The theory couldn’t be more clear, and at this late date in human history, it shouldn’t be necessary to rehearse the abundant evidence. Look at the various indexes that correlate economic freedom with economic growth.
The healthiest economies are those with the most economic freedom. Unemployment is low in those places — 3 percent in Hong Kong, 2 percent in Singapore, 5 percent in Australia
Alas, the United States places ninth, behind Canada, and those countries with the least economic freedom have few real jobs and no prosperity.
Unfortunately, most politicians still don’t understand — or have no incentive to understand — that economic freedom, and therefore less government, creates prosperity. Well, maybe that’s changing.
This year is first I’ve heard so many presidential candidates talk about the private sector. Indeed, one candidate, former New Mexico Gov. Gary Johnson, told me he created “not one single job. … Government does not create jobs.”
The truth is we have too few jobs today because [continue]…
Posted September 29, 2011 at 12:44 am
Someone took risks to start every business—whether Ford, Google or your local dry cleaner…
by Charles R. Schwab
In his speech before a joint session of Congress on Sept. 8, President Obama said, “Ultimately, our recovery will be driven not by Washington, but by our businesses and our workers.”
He is right. We can spark an economic recovery by unleashing the job-creating power of business, especially small entrepreneurial businesses, which fuel economic and job growth quickly and efficiently. Indeed, it is the only way to pull ourselves out of this economic funk.
But doing so will require a consistent voice about confidence in businesses—small, large and in between. We cannot spend our way out of this. We cannot tax our way out of this. We cannot artificially stimulate our way out of this. We cannot regulate our way out of this. Shaming the successful or redistributing income won’t get us out of this. We cannot fund our government coffers by following the “Buffett Rule,” i.e., raising taxes on Americans earning more than $1 million a year.
What we can do—and absolutely must—is knock down all hurdles that create disincentives for investment in business.
Private enterprise works. I founded Charles Schwab in 1974, when America was confronting a crisis of confidence similar to today’s. We had rapidly rising inflation and unemployment, economic growth grinding into negative territory, and paralyzed markets. The future looked pretty bleak.
Yet I had faith that our economy would recover. My vision was simple [continue]…
Posted September 22, 2011 at 3:55 am
by Daniel Gross
The Federal Reserve has announced its latest effort to jolt the economy back to life. In the widely anticipated move, dubbed Operation Twist, it is pledging, over the next nine months, to sell some $400 billion in short-term government bonds it owns and use the proceeds to buy government bonds that mature in 6-30 years.
The theory: This market intervention will help further lower long-term interest rates. The Fed also said that when mortgage-backed securities it owns pay off, it will roll the money back into similar securities. That could help push mortgage rates down.
There are some reasons why we shouldn’t have great expectations for this move.
First, the Federal Reserve moves with all the surprise and guile of a lumbering elephant. It talks about moving, says what direction it might go in and at what speed, and provides a specific date on which it will act. It does so because it wants to avoid spooking the market.
But it also means that the market tends to react well ahead of the actual event. Look at the path of the 10-year bond over the last several weeks. The interest rate on the 10-year bond has fallen from 3.2 percent on July 1 to about 1.9 percent today. The mere anticipation of the Fed’s move has caused the market to do much of the Fed’s work.
Second, given how low long-term interest rates already are — they’ve fallen by 40 percent in the past three months — this action is like pushing on a string, or adding another drop of water to a full pitcher. Pick your metaphor. Long-term borrowing costs for creditworthy borrowers are already at Crazy Eddie levels — they’re so low, they’re insane.
In August, according to Freddie Mac, the average commitment rate on 30-year mortgages it backed was 4.27 percent. Disney in August sold 30-year bonds that yielded 4.375 percent. Google in May sold three-year notes that pay a paltry 1.25 percent in annual interest. The government borrows for 10 years at less than 2 percent. That’s all to the good.
These lower rates help free up more cash for some people to spend, help corporations pay their bottom line, and lessen the fiscal bite of high deficits. But when you get close to zero, it becomes harder to make a bigger percentage difference. Money simply can’t get much cheaper.
In recent years, lower interest rates have generally allowed people who are already able to borrow do so at [continue]…
Posted September 16, 2011 at 3:11 am
by Chris Arsenault
China is shifting some of its massive foreign holdings into gold and away from the US dollar, undermining the dollar’s role as the world’s reserve currency, accoding to a recently released WikiLeaks cable.
“They [the US and Europe] intend to weaken gold’s function as an international reserve currency. They don’t want to see other countries turning to gold reserves instead of the US dollar or Euro,” stated the 2009 cable, quoting Chinese Radio International. “China’s increased gold reserves will thus act as a model and lead other countries towards reserving more gold.”
The cable is titled “China increases its gold reserves in order to kill two birds with one stone”. Taken together with recent policy announcements from Chinese banking officials, it may signal moves by China to eventually replace the US dollar as the world’s reserve currency.
Last week, European business officials announced that China plans to make its currency, the yuan, fully convertible for trading on international markets by 2015. Zhou Xiaochuan, governor of China’s central bank, said the offshore market for the yuan is “developing faster than we had imagined” but there is no definitive timetable for making the currency fully convertible. Presently, the yuan cannot be easily converted into other currencies, because of government restrictions.
China’s gold holdings are small compared to other major economies. It has 1,054 tonnes, the sixth-largest reserves in the world, according to data from the World Gold Council.
Buying gold and allowing the yuan to be traded freely would weaken the US dollar’s dominance as the international reserve currency. The move would have major implications, making it more [continue]…
Posted September 15, 2011 at 1:20 am
by Jeff Macke
Earlier today ratings agency Moody’s (MCO) downgraded French banks SocGen and Credit Agricole, and kept BNP Paribas on review, due to concerns about the banks’ holdings of Greek debt.
In short, the credit worthiness of what amounts to the entire private French banking system is being infected with Greece’s worthless paper. France catching the Greek’s disease is precisely what the early stages of a banking contagion looks like.
Breakout has warned our audience about the death of the Eurozone for months. Frankly nothing much has changed in my view.
I reiterate my contentions that the Eurozone will fail and the Euro currency will [continue]…