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Socio-Economics & History Commentary

Emerging Market Eyeing Gold Reserves as US Dollar Fear Rises!

  • The fear of a USD collapse has been rising steadily. As a world reserve currency, should it collapse, it will cause quite a few countries to go down with it. The PTB do not want gold price to rise significantly. They want to protect their USD hegemony.
     
  • This is the main reason why gold has not behaved in the way most gold bugs have expected. Gold should be alot higher but it is not. The manipulation of gold price continues to depress its price to prevent a rapid collapse of the USD. Should countries opt for gold as its main reserves, the USD days as reserve currency is over.
     
  • The days of gold manipulation are numbered. Reuters reports : 
     
    Major emerging economies are seeking to raise their central banks’ gold reserve holdings as fears of a sharp depreciation in the U.S. dollar mount, senior industry officials said on Monday.
     
    Investors have been piling into gold as a safe haven as the the world’s worst financial crisis since the 1930s depression sent global stock markets crashing.
     
    “In this recession it is India and China which are going to grow at a slow rate, but they are growing,” said Aram Shishmanian, chief executive officer of the World Gold Council.
     
    “And they will naturally be looking to gold as part of their reserve asset management strategy, and I see them buying.”
     
    China, the biggest foreign holder of dollar denominated treasury securities with some $681.9 billion or about 12 percent of treasury papers outstanding, could reverse that by paring its dollar holdings.
     
    “China has $2 trillion of reserves, and only one percent in gold and nearly all of the rest is in U.S. dollars,” said Marcus Grubb, managing-director of investment research and marketing at the industry-sponsored World Gold Council.
      
    “What we are seeing is a reassessment of the risk associated with the high exposure to the dollar. Obviously at the moment you see the dollar appreciating 25 to 30 percent against most currencies around the world, but a lot of that is obviously driven by liquidity.”
     
    European central banks, which hold about half of global gold reserves, saw gold sales fall to their lowest levels since 1999, according to Grubb as governments store the precious metal as a buffer against worsening markets.
     
    “Sales were underneath the Central Bank Gold Agreement (CBAG) cap … the cap was about 400 metric tonnes and I think they sold 356 tonnes … something is going on.”
     
    Under the terms of the CBAG, signed in 1999 by key European institutions including Germany’s Bundesbank and the European Central Bank and renewed in 2004, members can sell up to 500 tonnes of gold a year.
     
    The dollar hit a three-year high against a basket of six major currencies on Monday, with news that the U.S. government would pour a further $30 billion into troubled insurer AIG (AIG.N: Quote, Profile, Research) hastening risk-averse flows. The dollar index hit 88.822 — its highest since April 2006 .DXY.
     
    MIDDLE EAST CONCERN
    But Grubb said the strength of the U.S. dollar is likely to be short-lived. “That is a temporary phenomenon, if you look at the size of the bailout packages in North America the fact that the U.S. economy may well enter a depression … there is a real fear of that,” he said. “In that scenario I wonder what will happen to the U.S. dollar.”
     
    Such a decline would apply pressure on Gulf Arab states which have faced popular pressure to ditch their currencies link to the greenback and switch to fight imported inflation when the dollar was weak.
     
    “It would certainly be (a concern) to all regions pegged on the dollar … because they have run surpluses, and the Western countries have been in deficits, they have huge accumulation of dollar reserves,” Grubb said. “In that scenario you could see an increased demand for gold then.” 

      
  • Any pull back of gold price is a great opportunity to buy and accumulate. However, make sure you buy physical gold and not paper gold.

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March 3, 2009 Posted by | Economics | , , , , , | Comments Off on Emerging Market Eyeing Gold Reserves as US Dollar Fear Rises!

Jim Rogers – No Such Thing As Too Big to Fail !

  • Jim Rogers: Obama is making things worse!… Mr Bernanke has never been right…. Timothy Geithner is part of the problem…. We have to face reality …… Agriculture is going to be an exciting industry…

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March 3, 2009 Posted by | Economics | , , , , | 1 Comment

The Panic Phase of the Economic Collapse

  • Dow Jones Industrial Index plunged 300 points yesterday. It seems to be in free fall. The next support is at the 5600-5800 level. So we probably have another 1100-1200 points downside to go. The market will likely pause for a while as it is in grossly oversold region. But mark my words it will go down alot further.
     
  • We no longer find much delusional optimism in the market now. Reality is setting in, the world is in deep deep trouble. However, there are still many investors that are caught when the market turned down sharply last October and November. These investors decided to hang on and ride things out for the long term.
     
  • They are getting increasingly nervous as they watch their savings, 401Ks, retirement funds… evaporate chunk by chunk. They are living in the hope that the market will stage a big turnaround. This is the stage where we are at. Living in hope but with impending doom around the corner. The sword of Damocles hanging over their heads.
     
  • The next phase of this collapse is likely to be massive panic. People hanging on will just give up and get out at any price. Martin D. Weiss writes in Beginning Now: The Panic Phase of the Economic Collapse :
      
    The panic phase is an acceleration in the economic decline … a chain reaction of debt explosions … a free-fall in the financial markets … and a series of rude awakenings that will accelerate the decline even further:
     
    Rude Awakening #1
    In a Collapse, Washington’s Economic Forecasting Models Are Worthless. Economists rely on computer models designed to forecast gradual, continuous, linear changes, such as economic growth.
     
    But these models are incapable of handling sudden, discontinuous, structural changes, such as housing market collapses, mortgage meltdowns, megabank failures, credit market shutdowns, or stock market crashes. 
      …..
    In the panic phase now unfolding, a growing number will begin to realize how wrong they’ve been. They’ll see that this crisis represents a clean break with the past, rendering their forecasting models worthless. Some already see the light. It’s only a matter of time before they admit it in public.  
     
    Rude Awakening #2
    The Economy Is Sinking Three to Five Times Faster Than Expected. Every single step taken by the Bush and Obama administrations has been based on the flawed assumptions embedded in their economic models. They assume that:

    • the world economy is not collapsing …
    • the banking system is not broken …
    • corporations, investors, consumers and entire nations will not take drastic action to protect their own interests, and, therefore …
    • we will not see widespread factory shutdowns, wholesale layoffs, mass dumping of assets, or major new trade barriers.

They assume that none of this is happening or will continue to happen. They assume that the six-decade growth cycle that began after World War II remains largely intact. They think, talk and act as though we were still living in an era that’s now over.
 
Each of these assumptions is, on the face of it, patently false. And yet, it’s based on these assumptions that our government continues to spend, lend or guarantee TRILLIONS of dollars.

  • Are people waking up? Martin Weiss adds :
     
    Starting right now, however, we can begin to see the first signs of a rude awakening in that realm as well: 

    • The New York Times reports “a sense of disconnect between the projections of the White House and the grim realities of everyday American life.”
    • Economist Allen Sinai calls the White House’s economic forecasts “a hope, a wing and prayer.”
    • Even Obama advisor Paul Volcker admits this crisis is swifter and broader than that of the Great Depression — something that, at this juncture, most Obama advisers refuse to admit.   ….
       
  • Martin Weiss continues :
     
    Rude Awakening #3
    The Dangerous, Unintended Consequences of the Government’s Rescue Efforts Can Only Deepen, Broaden and Prolong the Economic Decline. These include:
      

    • The dangerous and inevitable surge in government borrowing. ……
    • The dangerous and inevitable surge in borrowing costs. …
    • The dangerous and inevitable damage caused by higher interest rates. …..
    • A dangerous and inescapable two-tiered market for credit. ….
    • A dangerous diversion of precious capital from strong hands to weak hands. ….
       

In the panic phase of the crisis now unfolding, a minority of Washington and Wall Street experts is beginning to fear these dangerous consequences. It’s only a matter of time before they openly confess their real concerns.
 
Sadly, though, confession is one thing; action is another. And sadly, each of these unintended consequences deepens the depression, spreads the pain, prolongs the crisis, and weakens the eventual recovery.
 

Rude Awakening #4
Investors Who Fail to Take Protective Action Could Lose as Much as 90 Percent In Virtually Every Asset Imaginable. 
 
In an economic collapse of this magnitude, the only predictable bottom in the value of most assets is zero . In that context, any value investors can squeeze out of their assets that’s significantly above zero must be counted as a blessing.

  • What is about to happen will not look pretty. People will start to abandon wishful thinking. Fear will grip the stock market. Fear and foreboding will grip the world. Survival and capital preservation are the key words.

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March 3, 2009 Posted by | Economics | , , , , | 1 Comment

Obama’s Wall Street & War Budget !

  • Is the Obama administration serving the needs of Americans, Main Street or Wall Street and the Military Industrial Complex? He is a great speaker. But as always, look at his actions not his words. Never trust what politicians say. Always verify by observing their actions.
     
  • Michel Chossudovsky writes in America’s Fiscal Collapse :
      
    To reach these stated objectives, a significant hike in public spending on social programs (health, education, housing, social security) would be required as well as the implementation of a large scale public investment program. Major shifts in the composition of public expenditure would also be required: i.e. a move out of a war economy, requiring a movement out of military related spending in favour of civilian programs. 
     
    In actuality, what we are dealing with is the most drastic curtailment in public spending in American history, leading to social havoc and the potential impoverishment of millions of people. 
     
    The Obama promise largely serves the interests of Wall Street, the defence contractors and the oil conglomerates. In turn, the Bush-Obama bank “bailouts” are leading America into a spiralling public debt crisis. The economic and social dislocations are potentially devastating. 
     
  • America is headed to more wars! In a time of economic hardship any sane person will reduce defence spending and concentrate on domestic needs. Just look at Obama’s budget :
      
    War and Wall Street
    This is a “War Budget”. The austerity measures hit all major federal spending programs with the exception of:  1. Defence and the Middle East War: 2. the Wall Street bank bailout,  3. Interest payments on a staggering public debt. 
     
    The budget diverts tax revenues into financing the war. It  legitimizes the fraudulent transfers of tax dollars to the financial elites under the “bank bailouts”. 
     
    The pattern of deficit spending is not expansionary. We are not dealing with a Keynesian style deficit, which stimulates investment and consumer demand, leading to an expansion of production and employment. 
     
    The “bank bailouts” (involving several initiatives financed by tax dollars) constitute a component  of government expenditure. Both the Bush and Obama bank bailouts are hand outs to major financial institutions. They do not not constitute a positive spending injection into the real economy. Quite the opposite. The bailouts contribute to financing the restructuring of the banking system leading to a massive concentration of wealth and centralization of banking power. 
     
    A large part of the bailout money granted by the Us government will be transferred electronically to various affiliated accounts including the hedge funds.  The largest banks in the US will also use this windfall cash to buy out their weaker competitors, thereby consolidating their position. The tendency, therefore, is towards a new wave of corporate buyouts, mergers and acquisitions in the financial services industry. 
     
    In turn, the financial elites will use these large amounts of liquid assets (paper wealth), together with the hundreds of billions acquired through speculative trade, will be used to buy out real economy corporations (airlines, the automobile industry, Telecoms, media, etc ), whose quoted value on the stock markets has tumbled. 
     
    In essence, a budget deficit ( combined with massive cuts in social programs) is required to fund the handouts to the banks as well as finance defence spending and the military surge in the Middle East war. Obama’s budget envisages: 

    1. defense spending of $534 billion for 2010, a supplemental 130 billion dollar appropriation for fiscal 2010 for the wars in Afghanistan and Iraq, and a supplemental $75.5 billion emergency war funding for the rest of the 2009 fiscal year. Defence spending and the Middle East war, with various supplemental budgets, is (officially) of the order of 739.5 billion. Some estimates place aggregate defence and military related spending at $ 1 trillion+. 

    2. A bank bailout of the order of $750 billion announced by Obama, which is added on to the 700 billion dollar bailout money already allocated by the outgoing Bush administration under the Troubled Assets Relief Program (TARP). The total of both programs is a staggering 1.45 trillion dollars to be financed by the Treasury. It should be understood that the actual amount of cash financial “aid” to the banks is significantly larger than $1.45 trillion. (See Table 2 below). 

    3. Net Interest on the outstanding public debt is estimated by the Bureau of the Budget) at $164 billion in 2010.

    The order of magnitude of these allocations is staggering. Under a “balanced budget” criterion –which has been a priority of government economic policy since the Reagan era–, almost all the revenues of the federal government amounting to $2.381 trillion would be used to finance the bank bailout (1.45 trillion), the war ($739 billion) and interest payments on the public debt ($164 billion). In other words, no money would be left over for other categories of public expenditure. 

  • The intention of the Illuminati ruling elite is not to help Main Street. It is to help themselves at the expense of Mr John Q Public. The sheeple will be led down the road of financial destruction and be made to fight unnecessary wars to decimate them. All under false pretenses! Wakey! Wakey!
     
  • There is no doubt that America is heading towards financial, economic, monetary …. collapse. Many will die, much like in the 1929 Great Depression. Some estimate that about 7% of Americans died during 1929-1939. I have no doubt that these Satanic Illuminati elite is leading America to another major war. Maybe even start World War 3 to depopulate the sheeple, the ‘useless eaters’.

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March 3, 2009 Posted by | Economics, GeoPolitics | , , , , , , | 5 Comments