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OCTOBER ISSUE - 40 PAGES

Integrating Macro Research

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Gordon T Long

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READ ALL THE

"EXTEND & PRETEND" SERIES

 

 

Stage I Comes to an End!

 

A Matter of National Security

 

A Guide to the Road Ahead

 

Confirming the Flash Crash Omen

 

Its either RICO Act or Control Fraud

 

Shifting Risk to the Innocent

 

Uncle Sam, You Sly Devil!

 

Is the US Facing a Cash Crunch?

 

Gaming the US Tax Payer

 

Manufacturing a Minsky Melt-Up

 

Hitting the Maturity Wall

 

An Accounting Driven Market Recovery

FOR UPCOMING SHOW TIMES SEE: COMMENTARY READER 


 

 

 


 

READ ALL THE

"SULTANS OF SWAP"

 

ACT I

Sultans of Swap: Smoking Guns!

 

ACT II

Sultans of Swap: The Sting!

 

ACT III

Sultans of Swap: The Get Away!

 

 

ALSO

SULTANS OF SWAP: Explaining $605 Trillion in Derivatives!

 

SULTANS OF SWAP: Fearing the Gearing!

 

SULTANS OF SWAP: BP Potentially More Devastating then Lehman!

 

SULTANS OF SWAP: Gold Swaps Signal the Roadmap Ahead

 

FOR UPCOMING SHOW TIMES SEE: COMMENTARY READER

 


 

 

 

 

READ ALL THE

"EURO EXPERIMENT" SERIES

 

 

 

EURO EXPERIMENT: German Steel or Schmucks?!

 

 

 

FOR UPCOMING SHOW TIMES SEE: COMMENTARY READER

 

 

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Current Thesis Advisory

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Published November 2009

 

EXTEND & PRETEND

 

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READ ALL THE

"INNOVATION" SERIES

 

Innovate or Die

 

INNOVATION: America has a Structural Problem!

 

INNOVATION: What Made America Great is now Killing Her!

 

America - Innovate or Die!

 

FOR UPCOMING SHOW TIMES SEE: COMMENTARY READER

 


 

 

 

READ ALL THE

"PRESERVE & PROTECT" SERIES

 

 

 

 

FOR UPCOMING SHOW TIMES SEE: COMMENTARY READER

 

 

 

 

 

 

 

 

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COMMENTARY for all articles by Gordon T Long

 

CURRENCY WARS: Debase, Default, Deny!

 

In September 2008 the US came to a fork in the road. The Public Policy decision to not seize the banks, to not place them in bankruptcy court with the government acting as the Debtor-in-Possession (DIP), to not split them up by selling off the assets to successful and solvent entities, set the world on the path to global currency wars.

 

By lowering interest rates and effectively guaranteeing a weak dollar, the US ignited an almost riskless global US$ Carry Trade and triggered an uncontrolled Currency War with the mercantilist, export driven Asian economies. We are now debasing the US dollar with reckless spending and money printing with the policies of Quantitative Easing (QE) I and the expectations of QE II. Both are nothing more than effectively defaulting on our obligations to sound money policy and a “strong US$”. Meanwhile with a straight face we deny that this is our intention.  

 

Though prior to the 2008 financial crisis our largest banks had become casino like speculators with public money lacking in fiduciary responsibility, our elected officials bailed them out. Our leadership placed America and the world unknowingly (knowingly?) on a preordained destructive path because it was politically expedient and the easiest way out of a difficult predicament. By kicking the can down the road our political leadership, like the banks, avoided their fiduciary responsibility. Similar to a parent wanting to be liked and a friend to their children they avoided the difficult discipline that is required at certain critical moments in life. The discipline to make America swallow a needed pill. The discipline to ask Americans to accept a period of intense adjustment. A period that by now would be starting to show signs of success versus the abyss we now find ourselves staring into.  A future that is now massively worse and with potentially fatal pain still to come. READ MORE

   

 

CURRENCY WARS: Misguided Economic Policy

 

The critical issues in America stem from minimally a blatantly ineffective public policy, but overridingly a failed and destructive Economic Policy. These policy errors are directly responsible for the opening salvos of the Currency War clouds now looming overhead.

 

Don’t be fooled for a minute. The issue of Yuan devaluation is a political distraction from the real issue – a failure of US policy leadership. In my opinion the US Fiscal and Monetary policies are misguided. They are wrong! I wrote a 66 page thesis paper entitled “Extend & Pretend” in the fall of 2009 detailing why the proposed Keynesian policy direction was flawed and why it would fail. I additionally authored a full series of articles from January through August in a broadly published series entitled “Extend & Pretend” detailing the predicted failures as they unfolded. Don’t let anyone tell you that what has happened was not fully predictable!

 

Now after the charade of Extend & Pretend has run out of momentum and more money printing is again required through Quantitative Easing (we predicted QE II was inevitable in March), the responsible US politicos have cleverly ignited the markets with QE II money printing euphoria in the run-up to the mid-term elections. Craftily they are taking political camouflage behind an “undervalued Yuan” as the culprit for US problems. Remember, patriotism is the last bastion of scoundres  READ MORE


READER ROADMAP -  2010 TIPPING POINTS aid to positioning COMMENTARY

 

 

 

POSTS:  TUESDAY 11-02-10

Last Update: 11/03/2010 05:23 AM

SCHEDULE: 1st Pass: 5:30AM EST, 2nd Pass: 8:00 AM, 3rd Pass 10:30 AM. Last Pass 5:30 PM

ARTICLE SOURCE 1 2 3 4 5 6 7 8 9 10
                       
Greek Deputy PM Makes A Huge Gaffe, And Accidentally Reveals The Country's Debt Plans BI X                  
Fed Helping Spanish Debt Keeps ECB Mum on Dollar: Euro Credit Bloomberg X                  
Retire in France at 62? In Turkey, it’s 45 MW X                  
UK MPs to be warned on 1.6m job losses FT X                  
Debt costs jump for Dublin and Lisbon FT X                  
Australia unexpectedly raises rates FT X                  
USA                      
ISM Surges, Prints At 56.9, Beats Expectations of 54, As Inventories Supposedly Decline Despite Contribution To Q3 Preliminary GDP Beat ZH X                  
Societe Generale- The Commodity Rally Will End Because The ISM Manufacturing Index Will Soon Plummet BI X                  
U.S. Consumer Spending Rises Less Than Forecast, Prices Cool Bloomberg X                  
Personal Income And Spending Both Miss Expectations, As Savings Rate Drops To 2010 Low ZH X                  
Real Consumer Spending in September Bounces Back to Pre-Recession Level of $9.35 Billion Carpe Diem X                  
The wizards of ABS ATimes           X        
Back Office Blues New Yorker                 X  
Number of the Week: 107 Months to Clear Banks’ Housing Backlog WSJ                 X  
U.S. home prices expected to slide another 8% CNN                 X  
                       
ARTICLE SOURCE 11 12 13 14 15 16 17 18 19 20
                       
Chinese Economic Growth May Face `Big Drop,' CIC Chairman Lou Jiwei Says Bloomberg             X      
Sovereign Wealth Chief Warns Of Imminent "Big Drop" In Growth Thanks To Demographic BI             X      
STRATFOR'S TOP PREDICTIONS FOR THE NEXT DECADE- China Collapse, Global Labor Shortages, New American Dominance BI             X      
REMAINING                      
Food Inflation Rising as Cooking Oil Poised to Catch Grain Gains Bloomberg                   31
                       
                       
BP OIL                      
BP Profit Drops After Taking Further Charge on Gulf Spill FT                    
Gulf Spill Costs Hit BP's Net Profit WSJ                    
CENTRAL BANKING & MONETARY POLICY                      
The trillion pound drop Price                    
Quantitative Easing: Torching the Recovery Lamont                    
Bernanke’s snake oil and Obama’s leftism will be the undoing of America Jackson                    
The Fed's clear goal: Inflation Fleck                    
Fed Risks Its Credibility on Bowlful of Mush Baum                    
Fed's, Bernanke's credibility on line with new move to boost economy Irwin                    
Are the Fed's Honchos Simpletons, Or Are They Just Taking Orders? Smith                    
Why the Fed’s QE2 could be just a tempest in a teacup FT                    
Opinions Are Split On Fed Policy Move WSJ                    
GENERAL INTEREST                      
10 countries on the verge of a demographic crisis BI                    
Global aging 2010: An irreversible truth Finance Asia                    
Chavez Says Venezuela's Golf Courses Should Be Seized, Put to Other Uses Bloomberg                    
Global imbalances, the renminbi, and poor-country growth VOX                  
Ambac warns over prospect of bankruptcy FT                    
MARKET WARNINGS                      
Lessons From a Lost Decade Hussman                    
The grim reaper is back MW                    
Stocks Face Dark Side of Gridlock in Capital WSJ                    
Three signs that the stock market rally is on borrowed time Money Week                    

G20 MEETING

                     
US shifts G20 currency focus to trade deficits FT                    

CURRENCY WARS

                     
                       
Q3 EARNINGS                      
Focus on Net Margins - Detailed Q3 Earnings Review Prag. Cap.                    
Rosenberg On The Revenue-Less, And Now Margin-Less, Recovery ZH                    
MARKET & GOLD MANIPULATION                      
Conference Speakers Chime in on Silver Manipulation Story Kitco                    
Martin Wolf asks whether the current state of monetary disorder demands a return to the gold standard FT                    
IMF speeds gold sales amid soaring prices FT                    
VIDEO TO WATCH                      
                       

Complete Legend to the Right, Top Items below.
Articles with highlights, graphics and any pertinent analysis found below.

1

         

1-SOVEREIGN DEBT

2-EU BANKING CRISIS
3-BOND BUBBLE

4-STATE & LOCAL GOVERNMENT

5-CENTRAL & EASTERN EUROPE
6-BANKING CRISIS II
7-RISK REVERSAL

8-COMMERCIAL REAL ESTATE

9-RESIDENTIAL REAL ESTATE - PHASE II
10-EXPIRATION FINANCIAL CRISIS PROGRAM
11-PENSION CRISIS

12-CHRONIC UNEMPLOYMENT

13-GOVERNMENT BACKSTOP INSUR.
14-CORPORATE BANKRUPTCY

TODAY'S TIPPING POINTS UPDATE

RED ALERT

AMBER ALERT

ACTIVITY

MONITOR

Click to Enlarge





11-02-10

 

GEO-POLITICAL TENSIONS - ISRAEL / KOREA / IRAN

 

 

IRAN

 

 

ISREAL

 

 

 

KOREA

 

1- SOVEREIGN DEBT & CREDIT CRISIS

 

SOVEREIGNS

 

 

GREECE

Greek Deputy PM Makes A Huge Gaffe, And Accidentally Reveals The Country's Debt Plans  BI

 
Classic gaffe here by the Greek Deputy PM Theodoros Pangalos. According to Greek newspaper Kathemirini, Pangalos said in an interview Sunday: “Debts exist to be restructured... We may pursue it ourselves or the option may be offered to us and it could be in our interest to turn it down.” This is in radical contravention to the official party line out of Greece, which is that restructuring would be a disaster. Of course, this is a classic gaffe in that it's the truth. Opposition politicians have called on PM George Papandreou to sack Pangalos, which Papandreou has declined to do.

 

SPAIN

Fed Helping Spanish Debt Keeps ECB Mum on Dollar: Euro Credit BL

 

European governments are getting an unlikely assist from the Federal Reserve as the prospect it will buy more Treasuries helps the bonds of Greece, Portugal, Italy and Spain to their first simultaneous monthly gains since July.

 

Speculation the U.S. central bank will pump more liquidity into the bond market has helped revive investor demand for higher-yielding European debt by driving Treasury yields down. The Fed has asked bond dealers and investors to estimate how much it might purchase in the next six months in its so-called quantitative-easing program and what the effect on yields will be, ahead of this week’s policy meeting.

 

Portuguese bonds posted their first monthly gain in three in October, delivering returns of 2.6 percent, even as the government and opposition struggled to strike a deal on the 2011 budget until just days before parliament is scheduled to start discussions on the measure. Longer-dated Greek bonds recorded back-to-back monthly gains for the first time since March and the yield on 10-year Italian bonds fell in October to the lowest level in more than four years.

“I’m not convinced the recent outperformance of these bonds is being driven purely by improved fundamentals,” said Charles Diebel, the London-based head of market strategy at Lloyds Banking Group Plc. “The debt situation hasn’t changed much for a number of countries. In some cases, it’s getting worse. What has changed is the improvement in risk appetite and the expectation for another round of Fed QE may have had a lot to do with it.”

 

GERMANY

 

FRANCE

Retire in France at 62? In Turkey, it’s 45 MW

 

UK

UK MPs to be warned on 1.6m job losses  FT

 

IRELAND

Debt costs jump for Dublin and Lisbon  FT

 

Investors take fright at European proposals

 

AUSTRALIA

Australia unexpectedly raises rates  FT

 


JAPAN

 

 

USA

 

 

ISM Surges, Prints At 56.9, Beats Expectations of 54, As Inventories Supposedly Decline Despite Contribution To Q3 Preliminary GDP Beat  ZH

 

Major beat by the Chicago Manufacturing ISM, coming at 56.9, on expectations of 54, compared to 54.4 previous, and the highest since May 2010. Yet not all is rosy, as the majority of respondents still find conditions deteriorating: "The dollar is weakening again, which is resulting in higher costs for our materials we purchase overseas. It is hurting our profit margins"; "Currency continues to wreak havoc with commodity pricing"; "Customers remain cautious, placing orders at the last minute, making supply planning a challenge." Exports contribute substantially to resounding beat as somehow every country is now seeing surging exports to everyone else, and nobody admits to actually importing. Lastly, inventories, the key contributor to the Q3 preliminary GDP beat declined. Go figure. 

Key ISM Components, all better than prior:

  • New Orders: 58.9 vs. Prev. 51.1
  • Employment: 57.7 vs. Prev. 56.5
  • Prices Paid: 71 vs. Exp. 70.5 (Prev. 70.5)

Yet oddly enough, the main decline was in inventories, the same category that contributed to a major beat in Q3 preliminary GDP.

 

 

Here are what the respondents are saying:

  • "The dollar is weakening again, which is resulting in higher costs for our materials we purchase overseas. It is hurting our profit margins." (Transportation Equipment)
  • "Business slowing down but still double digit over last year." (Chemical Products)
  • "Currency continues to wreak havoc with commodity pricing." (Food, Beverage & Tobacco Products)
  • "Customers remain cautious, placing orders at the last minute, making supply planning a challenge." (Machinery)
  • "Our customer base — auto manufacturers — is expanding capacity and making major capital investments." (Fabricated Metal Products)

 

 

Societe Generale- The Commodity Rally Will End Because The ISM Manufacturing Index Will Soon Plummet  BI

 

 

The U.S. ISM manufacturing index for October is set to be released at 10:00 AM this morning, and the market is expecting a reading of 54 according to Finviz, which indicates continued expansion. It's a good time however to remind ourselves that even if the ISM meets expectations today, there are those who expect a sharp drop in the index by year-end.

 

Take Societe Generale, for example, whose Alain Bokobza warns the ISM could hit 48 by year-end, which would indicate a contraction of manufacturing activity. This could end the rally for commodities-related plays, he believes:

SG's Alain Bokobza:

 

Commodity prices face opposite forces: backed by strengthening QE and its corollary, the USD fall on one side, but also facing a significant slowdown of the US economy by year-end. We’re currently neutral on the commodity asset class within our portfolio, waiting for a sell back to re-weight.

...

Don’t get overexcited by commodities with the ISM at 48 soon!

 

Commodities prices are cyclical and tend to increase in line with demand during economic expansion and tend to drop during economic contraction. Abnormal situations such as in 2008, when commodity prices skyrocked while the economy slowed, never last long. If the ISM drops below 50, do not expect a bull run in Commodities.

 

U.S. Consumer Spending Rises Less Than Forecast, Prices Cool BL

Personal Income And Spending Both Miss Expectations, As Savings Rate Drops To 2010 Low  ZH

 

One thing is sure to happen when Americans buy more iPads than they can afford: the savings rate will fall. Sure enough, the just reported September savings rate dipped to 5.3%, the lowest reading in 2010, and a decline from August's downward revised 5.6%.

 

This is due to a miss in both personal income and personal spending, the former coming at -0.1% vs Exp. of 0.2 (and a prior revised to 0.4%) with the latter at 0.2% versus expectations of 0.4% (and an upward revised prior to 0.5%). The savings rate has now declined in a straight line since peaking at 6% (2010 high), to the current low.

 

 In other words Americans have been spending more than they were making for four months in a row. And on wonders why consumer discretionary names have been doing well... Luckily, it means that courtesy of Americans' savings decline by nearly 20%, there are only so many future landfill filling gadgets that will be bought going forward.

 

Personal Savings Rate:

 

 

The reason for the first 2010 negative print in personal income: expiration of unemployment benefits, aka free government subsidies to buy iPad apps:

The September change in personal income reflects provisions of unemployment compensation legislation, which had boosted emergency government unemployment benefits (within current transfer receipts) in August. Excluding emergency government unemployment insurance benefits, which are discussed more fully below, personal income increased $8.7 billion, or 0.1 percent, in September, following an increase of $33.9 billion, or 0.3 percent, in August.

Expect this drag to accelerate as more unemployed hit the 99 week limit, and more emergency benefits expire. 

 

Real Consumer Spending in September Bounces Back to Pre-Recession Level of $9.35 Billion Carpe Diem

 

The BEA reported Monday that real personal consumption expenditures reached $9.349 billion in September, the highest level of U.S. consumer spending since the recession started in December 2007, 33 months ago (see chart above).  On a year-over-year basis, September's 2.3% increase in consumer spending was the largest percentage increase in three years, since September of 2007 (see bottom chart above).  

 

 

 

 

 

 

2- EU BANKING CRISIS

   

 

3- BOND BUBBLE

 

 

4- STATE & LOCAL GOVERNMENT

 


5- CENTRAL & EASTERN EUROPE

 


6-BANKING CRISIS II


The wizards of ABS ATimes

7- RISK REVERSAL

 

 

8- COMMERCIAL REAL ESTATE

 

 

9-RESIDENTIAL REAL ESTATE - PHASE II

 

Back Office Blues New Yorker

Number of the Week: 107 Months to Clear Banks’ Housing Backlog WSJ

U.S. home prices expected to slide another 8%   CNN


10- EXPIRATION FINANCIAL CRISIS PROGRAM

 

 

11- PENSION & ENTITLEMENTS CRISIS



12- CHRONIC UNEMPLOYMENT



13- GOVERNMENT BACKSTOP INSURANCE

 

 

14- CORPORATE BANKRUPTCIES

 

 

17- CHINA BUBBLE


Chinese Economic Growth May Face `Big Drop,' CIC Chairman Lou Jiwei Says  BL

Sovereign Wealth Chief Warns Of Imminent "Big Drop" In Growth Thanks To Demographic BI
China needs to keep the pedal to the metal regarding growth and urbanization... and that means, if you expect the country to voluntarily limit its exporting power, like Japan did at the Plaza Accord in the 80s, you're nuts - Joe Weisenthal Business Insider

STRATFOR'S TOP PREDICTIONS FOR THE NEXT DECADE- China Collapse, Global Labor Shortages, New American Dominance  BI

19- PUBLIC POLICY MISCUES



 


OTHER TIPPING POINT CATEGORIES NOT LISTED ABOVE

 

24-RETAIL SALES

 

 

26-GLOBAL OUTPUT GAP

 

 

31-FOOD PRICE PRESSURES

Food Inflation Rising as Cooking Oil Poised to Catch Grain Gains BL

 

32-US STOCK MARKET VALUATIONS

 

 




BP - British Petroleum

SULTANS OF SWAP: BP Potentially More Devastating then Lehman!

------------

 


BP Profit Drops After Taking Further Charge on Gulf Spill  FT

Gulf Spill Costs Hit BP's Net Profit  WSJ

BP posted a 66.5% fall in third-quarter net profit as it took another $7.66 billion of charges related to the Gulf of Mexico oil spill.



   

CENTRAL BANKING MONETARY POLICIES, ACTIONS & ACTIVITIES

------------


The trillion pound drop Price

Quantitative Easing: Torching the Recovery Lamont

Bernanke’s snake oil and Obama’s leftism will be the undoing of America Jackson

The Fed's clear goal: Inflation Fleck

Fed Risks Its Credibility on Bowlful of Mush Baum

Fed's, Bernanke's credibility on line with new move to boost economy Irwin

Are the Fed's Honchos Simpletons, Or Are They Just Taking Orders? Smith

Why the Fed’s QE2 could be just a tempest in a teacup  FT

Opinions Are Split On Fed Policy Move  WSJ

The Fed's move to print money to begin a new round of bond-buying is aimed at lowering long-term interest rates to give the economy a lift. But inside and outside the Fed, there is an unusual divergence of opinions on how much good it will do.


 

 GENERAL INTEREST

 

10 countries on the verge of a demographic crisis  BI

 

Global aging 2010: An irreversible truth Finance Asia

 

Chavez Says Venezuela's Golf Courses Should Be Seized, Put to Other Uses BL

 

Global imbalances, the renminbi, and poor-country growth VOX

 

Ambac warns over prospect of bankruptcy  FT

 

FLASH CRASH - HFT - DARK POOLS

 

 

MARKET WARNINGS

Lessons From a Lost Decade Hussman

 

The grim reaper is back MW
Market declines could be more severe after FOMC

 

Stocks Face Dark Side of Gridlock in Capital WSJ

 

Three signs that the stock market rally is on borrowed time MoneyWeek

G20

US shifts G20 currency focus to trade deficits  FT

 

CURRENCY WARS

 

Q3 EARNINGS

 

Focus on Net Margins - Detailed Q3 Earnings Review  Pragmatic Capitalist

 

Rosenberg On The Revenue-Less, And Now Margin-Less, Recovery  ZH

 

A week ago, we presented a comprehensive analysis by Moody's highlighting the key items in the cash flow statement of non-financial corporate America. Not surprisingly, we noticed that one of the biggest sources of cash over the past several years, in addition to cutting expenses to the bone and the resulting surge in unemployment, was the lack of investment in organic growth opportunities, via a plunge in Capital Expenditures, meaning that a revenue flat lining is the best most companies could hope for as most have now given up on traditional top-line growth and instead are either hording cash or investing it in an occasional M&A transaction. Now, in addition to that, courtesy of the Fed's free money policy resulting in surging input prices (see Jones Apparel), the next shoe to drop on the path to an upcoming EPS collapse for the S&P is the imminent drop in gross,  operating and net margins for these very companies which are now seeing a contraction at both the top and bottom line. Today, David Rosenberg dissects this issue further, and sees nothing good on the horizon.

NOTICE THE WORD "PRICE CUTS"?

And, what the NYT had to conclude about 3M’s results? That it “reduced the top end of its full-year forecast and said rising raw materials costs and other pressures were cutting into margins, sending the company's shares sharply lower.” Margin compression at a time of low single-digit nominal GDP growth does not equate to a $95 operating EPS stream for 2011.

Further on this file of compressed margin pressure, S&P 500 revenue growth is already slowing down, notwithstanding the fact that 80% of the universe is beating their beaten-down profit estimates. The cost-cutting wave certainly did go much further than anyone expected but as the legendary Herb Stein once remarked, “anything that can’t last forever, by definition, won’t.” At some point, the well will run dry on the cost-cutting front and slowing revenue growth will take over — on track for +5.5% YoY in Q3 from 6.1% in Q2 and the consensus now for Q4 is sitting at +4.9%. As an added signpost of how this has proven to have been a revenue-less recovery, the top-line growth since the profits rebound began just over a year ago is running at barely more than half the average pace recorded in the 2002-07 cycle.

For all the talk about profits recovery, sales are still 11% lower now than they were in the spring of 2008. And, if you are wondering why it is that the stock market has still done little more than range trade in 2010, it is because earnings estimates are no longer rising as they were in 2009 — they are falling. The bottom-up consensus now sees 12.9% earnings growth for 2011 from 14.2% a month ago and 20.9% back in the spring. Have a look at the Paul Lim column on page 8 of the Sunday NYT business section — Raising a Caution Flag on Corporate Revenue.

From Gluskin-Sheff (full report pdf)

 

 

MARKET & GOLD MANIPULATION

Conference Speakers Chime in on Silver Manipulation Story Kitco

 

Martin Wolf asks whether the current state of monetary disorder demands a return to the gold standard  FT

 

After the experience of the last three decades the monetarism of Milton Friedman is no longer a credible alternative. It was abandoned for two simple reasons: first, it proved impossible for monetarists to agree on what money is; and, second, the relation between any given monetary aggregate and nominal income proved unstable.

 

Recent experience suggests that we can no longer be so confident that delegation to independent central banks protects against severe monetary instability. That system permitted a gigantic increase in credit, relative to gross domestic product. It is equally clear that governments do not wish to see this edifice collapse, for understandable reasons. This being so, the ultimate solution may be to increase nominal incomes, via inflation. Indeed, several economists recommend this. If that did happen, it would support those who argue for abandonment of the modern experiment with fiat money.

 

The biggest transition problem is the mismatch between the value of official gold holdings and the size of the monetary system. The value of gold held by central banks is apparently about $1,300bn, while global deposits of the banking system were about $61,000bn in 2008, according to the McKinsey Global Institute. To survive the slightest financial panic, the ratio of gold to bank money would need to be perhaps an order of magnitude higher. One obvious objection is that this would generate huge windfall gains to holders of gold.

In short, we cannot and will not go back to the gold standard. As L.P. Hartley wrote, “The past is a foreign country: they do things differently there.” We cannot live in the 19th century. It is foolish to pretend that we can.

 

IMF speeds gold sales amid soaring prices  FT

 

If sales continue at their current rate, the Washington-based lender could complete its planned disposal of 403.3 tonnes of bullion – or one-eighth of its total reserves – by the end of this year, ahead of earlier market expectations.

 

The IMF has been almost alone as a seller of gold from the so-called official sector, which includes central banks, governments and sovereign wealth funds as well as international organisations. As a whole, the sector is expected to be a small buyer of gold this year as purchases by Russia, the Philippines, Thailand and others outweigh the IMF’s sales.

 

Most analysts and advisers to central banks believe that buying will continue next year. Without the IMF’s sales as a counterbalance, the official sector could become a large net buyer.

 

“Barring something unexpected, central banks are going to be net buyers,” said Tom Kendall, precious metals analyst at Credit Suisse. “Net purchases could be quite significant next year: 100-120 tonnes or more.”

 

 

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Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, he recommends that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.ont>

 

© Copyright 2010 Gordon T Long. The information herein was obtained from sources which Mr. Long believes reliable, but he does not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that Mr. Long may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Mr. Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from him.

 

         

TODAY'S NEWS

TUESDAY

11-02-10

NOVEMBER

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ARCHIVAL

 

READING THE RIGHT BOOKS?  NO TIME?

 

WE HAVE IT ANALYZED & INCLUDED IN OUR LATEST RESEARCH PAPERS!

 

 

ACCEPTING PRE-ORDERS

 

 

 




 

         

TIPPING POINTS

1-SOVEREIGN DEBT & CREDIT CRISIS

2-EU BANKING CRISIS
3-BOND BUBBLE

4-STATE & LOCAL GOVERNMENT

5-CENTRAL & EASTERN EUROPE
6-BANKING CRISIS II
7-RISK REVERSAL

8-COMMERCIAL REAL ESTATE

9-RESIDENTIAL REAL ESTATE - PHASE II
10-EXPIRATION FINANCIAL CRISIS PROGRAM
11-PENSION CRISIS

12-CHRONIC UNEMPLOYMENT

13-GOVERNMENT BACKSTOP INSUR.
14-CORPORATE BANKRUPTCY
 

15-CREDIT CONTRACTION II

16-US FISCAL IMBALANCES
17-CHINA BUBBLE
18-INTEREST PAYMENTS
19-US PUBLIC POLICY MISCUES
20-JAPAN DEBT DEFLATION SPIRAL
21-US RESERVE CURRENCY.
22-SHRINKING REVENUE GROWTH RATE
23-FINANCE & INSURANCE WRITE-DOWNS
24-RETAIL SALES
25-US DOLLAR WEAKNESS
26-GLOBAL OUTPUT GAP
27-CONFIDENCE - SOCIAL UNREST
28-ENTITLEMENT CRISIS
29-IRAN NUCLEAR THREAT
30-OIL PRICE PRESSURES
31-FOOD PRICE PRESSURES
32-US STOCK MARKET VALUATIONS
33-PANDEMIC
34-S$ RESERVE CURRENCY
35-TERRORIST EVENT
36-NATURAL DISASTER

 


 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Book Review- Five Thumbs Up for Steve Greenhut's Plunder!  Mish

 

 

 

 

   

 

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Gordon T Long is not a registered advisor and does not give investment advice. His comments are an expression of opinion only and should not be construed in any manner whatsoever as recommendations to buy or sell a stock, option, future, bond, commodity or any other financial instrument at any time. While he believes his statements to be true, they always depend on the reliability of his own credible sources. Of course, we recommend that you consult with a qualified investment advisor, one licensed by appropriate regulatory agencies in your legal jurisdiction, before making any investment decisions, and barring that, we encourage you confirm the facts on your own before making important investment commitments.

Copyright and Disclaimer

© Copyright 2010, Gordon T Long. The information herein was obtained from sources which the Gordon T Long. believes reliable, but we do not guarantee its accuracy. None of the information, advertisements, website links, or any opinions expressed constitutes a solicitation of the purchase or sale of any securities or commodities. Please note that the Gordon T Long. or its principals may already have invested or may from time to time invest in securities that are recommended or otherwise covered on this website. Gordon T Long does not intend to disclose the extent of any current holdings or future transactions with respect to any particular security. You should consider this possibility before investing in any security based upon statements and information contained in any report, post, comment or recommendation you receive from us.