- You cannot convince me of the so called economic recovery in America. What recovery, Main Street is still experiencing 22%+ unemployment rate (www.shadowstats.com). It is only the Wall Street banksters that are benefiting from the floods of money from the FedRes. The amount of people on food stamps is now 43.2 million! The American middle class is being destroyed.
Deepening crisis traps America’s have-nots
The US is drifting from a financial crisis to a deeper and more insidious social crisis. Self-congratulation by the US authorities that they have this time avoided a repeat of the 1930s is premature.
There is a telling detail in the US retail chain store data for December. Stephen Lewis from Monument Securities points out that luxury outlets saw an 8.1pc rise from a year ago, but discount stores catering to America’s poorer half rose just 1.2pc.
Tiffany’s, Nordstrom, and Saks Fifth Avenue are booming. Sales of Cadillac cars have jumped 35pc, while Porsche’s US sales are up 29pc. Cartier and Louis Vuitton have helped boost the luxury goods stock index by almost 50pc since October. Yet Best Buy, Target, and Walmart have languished.
Such is the blighted fruit of Federal Reserve policy. The Fed no longer even denies that the purpose of its latest blast of bond purchases, or QE2, is to drive up Wall Street, perhaps because it has so signally failed to achieve its other purpose of driving down borrowing costs.
Yet surely Ben Bernanke’s `trickle down’ strategy risks corroding America’s ethic of solidarity long before it does much to help America’s poor. The retail data can be quirky but it fits in with everything else we know. The numbers of people on food stamps have reached 43.2m, an all time-high of 14pc of the population. Recipients receive debit cards – not stamps — currently worth about $140 a month under President Obama’s stimulus package.
The US Conference of Mayors said visits to soup kitchens are up 24pc this year. There are 643,000 people needing shelter each night. Jobs data released on Friday was again shocking. The only the reason that headline unemployment fell to 9.4pc was that so many people dropped out of the system altogether. The actual number of jobs contracted by 260,000 to 153,690,000. The “labour participation rate” for working-age men over 20 dropped to 73.6pc, the lowest the since the data series began in 1948. My guess is that this figure exceeds the average for the Great Depression (minus the cruellest year of 1932).
“Corporate America is in a V-shaped recovery,” said Robert Reich, a former labour secretary. “That’s great news for investors whose savings are mainly in stocks and bonds, and for executives and Wall Street traders. But most American workers are trapped in an L-shaped recovery.”
It is no surprise that America’s armed dissident movement has resurfaced. For a glimpse into this sub-culture, read Time Magazine’s “Locked and Loaded: The Secret World of Extreme Militias”.
The long-term unemployed (more than six months) have reached 42pc of the total, twice the peak of the early 1990s. Nothing like this has been seen since the World War Two. The Gini Coefficient used to measure income inequality has risen from the mid-30s to 46.8 over the last quarter century, touching the same extremes reached in the Roaring Twenties just before the Slump. It has also been ratcheting up in Britain and Europe.
Raghuram Rajan, the IMF’s former chief economist, argues that the subprime debt build-up was an attempt – “whether carefully planned or the path of least resistance” – to disguise stagnating incomes and to buy off the poor. “The inevitable bill could be postponed into the future. Cynical as it might seem, easy credit has been used throughout history as a palliative by governments that are unable to address the deeper anxieties of the middle class directly,” he said.
Bank failures in the Depression were in part caused by expansion of credit to struggling farmers in response to the US Populist movement. Extreme inequalities are toxic for societies, but there is also a body of scholarship suggesting that they cause depressions as well by upsetting the economic balance. They create a bias towards asset bubbles and overinvestment, while holding down consumption, until the system becomes top-heavy and tips over, as happened in the 1930s.
There is no easy solution to creeping depression in America and swathes of the Old World. A Keynesian `New Deal’ of borrowing on the bond markets to build roads, bridges, solar farms, or nuclear power stations to soak up the army of unemployed is not a credible option in our new age of sovereign debt jitters. The fiscal card is played out.
So we limp on, with very large numbers of people in the West trapped on the wrong side of globalization, and nobody doing much about it. Would Franklin Roosevelt have tolerated such a lamentable state of affairs, or would he have ripped up and reshaped the global system until it answered the needs of his citizens?
- Silver is greatly undervalued by any measure. Taking official inflation statistics, the inflation adjusted silver high in 1980 is about US$145/oz. It is now US$30/oz ie. about 80% below its 1980 high. Taking real inflation statistics, from www.shadowstats.com, the 1980 inflation adjusted high is around US$450/oz. It is now at a 93% discount to this price!
- Unlike gold, the industrialized world cannot do without silver. It is used in all electronic equipments: Iphone, Notebooks, handphones, LCDs ….etc. Even if there is a 10x rise in the price of silver, manufacturers will still buy it. Silver as a percentage to their total end product bill of material is hardly 1%.
- Silver is the poor man’s gold. It is more volatile but the reward is magnificent. There is a worldwide tight supply of silver at the moment. This is exacerbated by the increase demand for silver bullion ie. silver as monetary investment.
Demand for Silver Bullion Soars in Australia
Silver has been one of the most neglected of all precious metals, but it is now the most wanted asset by all precious metal investors in Australia, according to Gold De Royale http://www.goldderoyale.com.au one of the nation’s largest online precious metals companies. Silver outshone gold in 2010, with prices rising up by 80 percent, but it is still undervalued in relation to gold and hasn’t yet reached its 1980 peak of US$50 an ounce. In 2010, both gold and silver moved to new highs, with gold hitting an all-time high above US$1423 and silver moving above US$30 per ounce.
“Silver bullion coins and bars are the metal of choice for our customers according to 2010 purchasing data,” says Mr. George Vo, Precious Metals Sales Manager of Gold De Royale. Customers are buying silver bullion bars and coins as one would buy bread and milk.
“PAMP Swiss silver bullion and Panda silver bullion coins were the most sought after silver products”. Sales for PAMP Swiss silver bullion were so high that we now have a delivery delay of four to seven weeks for these products.
“Consumers have no trust in paper money and want hard assets such as silver and gold. Interestingly, however, this Christmas more people gave their loved ones silver coins compared with gold bars. This shows a dramatic shift in buying choices by consumers in the precious metals market.”
Owing to the current debt crisis, geopolitical tensions, medium term inflation fears and currency debasement, Gold De Royale believes that silver prices will keep moving forward in 2011. “Silver prices may rise as high as $36 per ounce in 2011 if current market trends continue,” says Mr. Vo.
- Mr Griffiths is correct. The coming global currency crisis will awake the world to this fact! The love affair with fiat currencies will end. The ginormous fiat currencies bubble will burst! Will 2011 be the year gold price goes hyperbolic? The probability is very high!
- To those of you who think the collapse of the USD is impossible, here is what the state of Virginia is preparing for:
Virginia, a “Fed Breakdown,” Gold and Silver
The state of Virginia has introduced legislation to consider currency alternatives, including gold and silver, in the event of a “major breakdown of the Federal Reserve System.”
House Resolution No. 557 seeks to form a joint subcommittee to study the “timely adoption of an alternative sound currency that the Commonwealth’s government and citizens may employ without delay in the event of the destruction of the Federal Reserve System’s currency,” aimed to “at least mitigate many of the economic, social, and political shocks to be expected to arise from hyperinflation, depression, or other economic calamity related to the breakdown of the Federal Reserve System.”
‘Not Owning Gold is a Form of Insanity’: Chartist
Gold will eventually rally exponentially and investors who don’t own the precious metal are “insane,” and may be showing “masochistic tendencies,” Robin Griffiths, technical strategist at Cazenove Capital, told CNBC.
“I think not owning gold is a form of insanity, it may even show unhealthy masochistic tendencies, which might need medical attention,” Griffiths said. Gold, along with other metals such as copper, has been making new all time highs, which is a strong buying signal, according to Griffiths.
“Although it’s been a top performer for each of the last ten years, it’s still in a linear trend. Eventually it will go exponential and make more in the last little bit than the whole of the ten year trend,” he said. Griffiths said that any short-term declines in the price of gold represent a buying opportunity and the asset is still not an “over-owned trade”.
“Real assets hedge paper money being printed into oblivion, so you’ve got to own gold and you’ve got to own other commodity-related investments still,” he said. As gold .. // // is likely to continue its rise, the value of the dollar is likely to remain in a long-term downtrend against other major currencies as the Federal Reserve maintains its policy of quantitative easing to stimulate the economy, according to Griffiths.
“The downward trend in the dollar is awesomely powerful. It’s vital to get yourself out of the dollar long-term on any significant rally. Continuing to own a currency that is going to be printed virtually into oblivion … is crazy,” he said.
- The floods in Australia do not seem to be letting up. Harvests and crops are affected. This is bad for the world but bullish for agricultural commodity prices.
Australia floods: Food prices ‘to rise 30%’
Food prices in Australia could rise by as much as 30% in the coming months as a result of the Queensland floods, it has been warned. The investment bank JP Morgan says it expects food prices to spike, which will also push up headline inflation. The bank’s chief economist in Australia said 50% of crops had been affected by the floods, with 20% wiped out.
Stephen Walters also told the BBC that rises in Australia could have a knock-on impact on prices in Asia. JP Morgan also said that coal mining had been significantly damaged and estimated that the floods would shave 0.4% off GDP growth in the last quarter of 2010 and the first three months of 2011.
The worst floods to hit Queensland for more than 50 years have left 10 people dead and more than 70 missing.
There have been reports of panic-buying by some Brisbane residents who fear rising floodwaters and further heavy rain. “Food prices are likely to go up because shortages will emerge,” Mr Walters told BBC World Service. He said crops likely to be affected include wheat and other grains, sugar cane, as well as fruit and vegetables.
But he said the fourfold increase in prices that was seen in 2006, when Cyclone Larry wiped out the banana crop, was unlikely to be repeated because there are other parts of the country that produce fruit and vegetables. But he warned of the impact that could be felt outside Australia.
“The Queensland region, in particular, is one of the world’s biggest exporters of sugar cane as well as wheat, so they’re two commodities for which we know the prices are going to spike up,” he said. “And the biggest buyers of those products are in Asia. One thing we do know about the Asian economies is they’re already suffering quite a bit of food price inflation and that’s going to be added to now with these price rises coming out of Australia.”
Meanwhile, a spokesman for Coles, Australia’s second-biggest supermarket, said: “We are going to see far heavier impacts now in terms of availability and price rises on a lot of lines.”
- Gold is real money. You should not think of buying gold as an investment. It is the conversion of fiat fraudulent paper currencies into real money. People who measure their wealth in terms of fiat currencies will soon realize that it is a CONfidence Job! It is losing value against hard asset ie it is being devalued with rising inflation worldwide. The USD has under gone a stealth devaluation via commodity and precious metals price increases. It may look good against the Euro or other fiat currencies. But the fact is: all fiat currencies are on a race to the bottom when measured against hard asset!
Physical Gold Demand Exceeds Current Availability -Perth Mint
SINGAPORE, Jan 11, 2011 (Dow Jones Commodities News via Comtex) — 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.