14.3 TRILLION REASONS AND COUNTING TO OWN GOLD
Reasons to Own Gold

When a daisy chain of retrocessionaires exists, a single weak link can pose trouble for all. In assessing the soundness of their reinsurance protection, insurers must therefore apply a stress test to all participants in the chain, and must contemplate a catastrophe loss occurring during a very unfavorable economic environment. After all, you only find out who is swimming naked when the tide goes out. At Berkshire, we retain our risks and depend on no one. And whatever the world’s problems, our checks will clear.

The recent sell-off in gold could mean the correction is nearly complete.
And, as the price of gold approaches the $1,000 we could see some renewed interest by central banks
Author: David Levenstein
Sometimes markets seem to defy logic. Recently we have seen a "rush to safety" back into the U.S. dollar. But, what is safe about the US dollar when the national debt of the US is approaching 12 trillion, unemployment is at 9.7% and the economy is not booming. Whether or not this makes any sense, the fact remains that we have seen a strong rally in the dollar since the beginning of December 2009 and this has put pressure on the price of gold.

US and China: Tetchy twins

A year ago, China Daily gushed with upbeat epithets about the co-operation between the US and China. The relationship was already effective and smooth on trade, Taiwan and global warning. With two firm multilateralists, Barack Obama and Joe Biden, now in power, it would be positively strengthened and constructive, the official mouthpiece opined.How different the picture looks today – and how wounded the official tone. China sent a deputy foreign minister to negotiate with Mr Obama in Copenhagen, scuppering the deal that not just the US but many other countries wanted. Next came the cyber-attacks on Google. Then the White House approved a decision to sell patriot missiles to Taiwan, announced that Mr Obama would meet the Dalai Lama and lectured China on its overvalued currency.

Global Bear Rally Will Deflate as Japan Leads World in Sovereign Bond Crisis
by Ambrose Evans-Pritchard
Milton Keynes will be vindicated. Lord Keynes will lose some of his new-found gloss. The Krugman doctrine that we should all spend our way back to health by pushing deficits to the brink of a debt spiral – or beyond the brink – will be seen as dangerous.The contraction of M3 money in the US and Europe over the last six months will slowly puncture economic recovery as 2010 unfolds, with the time-honoured lag of a year or so. Ben Bernanke will be caught off guard, just as he was in mid-2008 when the Fed drove straight through a red warning light with talk of imminent rate rises – the final error that triggered the implosion of Lehman, AIG, and the Western banking system.

The Greek Crisis Spurs A Global Margin Call As Confidence Ebbs
Joe Weisenthal
Flow data shows an abrupt withdrawal of German and Asian capital from Club Med debt markets. The EU's refusal to offer Greece anything beyond stern words and a one-month deadline for harsher austerity – while admirable in one sense – is to misjudge how fast confidence is ebbing. Greece's drama has already metastasised into a wider systemic crisis. The world risks a replay of the Lehman collapse if this runs unchecked, this time involving sovereign dominoes.

Art Cashin Discusses The STUPIDs And The Global Dollar Margin Call
Submitted by Tyler Durden
We are delighted that the highly sophisticated, technical and proprietary acronym you saw here first, in collaboration with Credit Trader, the STUPIDs, has now made the UBS and Art Cashin vernacular, and is set to overtake the extremely politically incorrect acronym of the PIIGS, which seems to insult Barclays, the precursors of ham, and so many more with each passing day. We are confident that our version is much more palatable. A modest suggestion - convert PIIGS to GIPSI - now that is sure to please everyone. Anyway, that, and much more from Art Cashin's Friday note

G7 talk on Greece fails to soothe investors
The euro and growth-linked currencies fell on Monday as investors unwound risky trades amid growing worries about eurozone's debt problems, dismissing assurances from European finance ministers at the weekend.
European ministers told their counterparts at a Group of Seven meeting on Saturday they would make sure Greece sticks to its budget-cutting plan.But analysts said Europe needs to go beyond words to restore confidence among investors worried that problems in Greece, Portugal and other weaker euro zone states could upset or derail the global economic recovery."What I think is needed is an agreement on behalf of the EU to provide further support for Greece to further ensure that it doesn't default," said Michael Woolfolk, senior currency analyst at Bank of New York Mellon.

Why Costa Rica scores well on the happiness index
By James Painter  BBC News
Whatever the outcome of the presidential elections on Sunday, one thing seems certain. The country will continue to break the mould.Central America is a region still associated with coups and civil strife, but Costa Rica has no army. It was abolished in 1949.Successive governments have poured money into books, not bullets. Not even the recent threat of the Mexican drugs war spilling over has led to calls for the army's return.
It was also the first developing country to state its aim of being carbon neutral (by 2021), in part through the mass planting of trees.Official figures suggest that it has bucked the trend of losing its forests: more than half its territory is now covered in trees, compared to 20% in the 1980s.

Wars sending U.S. into ruin
Obama the peace president is fighting battles his country cannot afford
By ERIC MARGOLIS, QMI Agency
U.S. President Barack Obama calls the $3.8-trillion US budget he just sent to Congress a major step in restoring America’s economic health.In fact, it’s another potent fix given to a sick patient deeply addicted to the dangerous drug — debt.More empires have fallen because of reckless finances than invasion. The latest example was the Soviet Union, which spent itself into ruin by buying tanks.Washington’s deficit (the difference between spending and income from taxes) will reach a vertiginous $1.6 trillion US this year. The huge sum will be borrowed, mostly from China and Japan, to which the U.S. already owes $1.5 trillion. Debt service will cost $250 billion.

Palin beating drums for war on Iran
US conservative darling Sarah Palin says she thinks President Barack Obama should declare war on Iran.
The one-time Republican vice presidential candidate said in an interview with Fox News that Obama should play the war card if he wants to get re-elected in 2012. "Say he decided to declare war on Iran or decided really to come out and do whatever he could to support Israel, which I would like him to do," she said on Sunday. The military attack "changes the dynamics in what we can assume is going to happen between now and three years," Palin added. The former Alaskan governor also noted that she does not think the US president would be re-elected if he ran today. She made the remarks as the US and its allies have been flexing their muscles to impose a new round of sanctions on Iran over its nuclear program.
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Anti-terrorism chief rebukes politicians who use cases as talking points
By Walter Pincus and Ed O'Keefe
President Obama's senior counterterrorism adviser on Sunday criticized politicians for using terrorism situations such as the Detroit bombing case as a "political football."But leaders of the Republican Party, among the harshest critics of the handling of the Detroit incident, on Sunday disputed John O. Brennan's remarks.
Republican House and Senate members have questioned why Umar Farouk Abdulmutallab, the suspect in the Christmas Day bombing attempt, was not treated as an enemy combatant instead of being questioned for 50 minutes by the FBI and later given his Miranda rights.Former Alaska governor and 2008 GOP vice presidential candidate Sarah Palin, in her speech Saturday night before the Tea Party convention, said the Obama administration sees "no downsides or upsides to treating terrorists like civilian criminal defendants. But a lot of us would beg to differ."

Flight 253: Intelligence Agencies Nixed State Department Move to Revoke Bomber's Visa
Rightist demagogues, as they are wont to do, prattle-on how they, and they alone, can "keep America safe"--by shredding the Constitution.Waging a decades-long psychological war against the American people, corporatist thugs embedded within the National Security State assure us that secrecy, deceit and imperial adventures that steal other peoples' resources are the one true path to national prosperity and universal happiness.But what happens when those charged with protecting us from attack, actually aid and abet those who would kill us, and then handsomely profit from our slaughter in the process?

National Insecurity
By Philip Giraldi
The National Security Act of 1947 created the Central Intelligence Agency. The CIA was supposed to become a central office where all the information being collected by the US government could be pulled together and analyzed. The intention was to avoid another Pearl Harbor which, at that time, was regarded as an intelligence failure in that the information that would have revealed plans for an attack by the Japanese was not properly connected and acted upon. Most Americans would agree that an intelligence function is necessary for any country that has worldwide interests and most would likely also agree that a center for collecting and analyzing information would be a valuable resource for those who run the government

Another election goes the wrong way for Uncle Sam
Neil Clark: Just wait for the street protests as Ukraine’s presidential election upsets the West
By Neil Clark
It's a fix! So claims Yulia Tymoshenko, the defeated candidate in yesterday's Ukrainian presidential elections. Even before a vote was cast, Tymoshenko had been warning her rival Viktor Yanukovych of "the kind of resistance he has never seen before" if he tried to rig the election. "If we are unable to guarantee the honest expression of the people's will and honest results, we will mobilise the people," she said. "I have no doubt about this."Now that she has indeed lost we can prepare ourselves for days - even weeks - of protests as her supporters attempt to annul the result.A sense of deja vu? Absolutely. We've been here a few times before..

Fear of peace will be the death of Israel 
SHEIKH JARRAH, Jerusalem - As the grandson of anarchists, I've always had a soft spot in my heart for fanatics. Expressions of extremism, and passionately reasoned, exquisitely twisted world views make me feel, how shall I put this, at home. So it was with a certain relish that I approached the cover story of a recent issue of Commentary, "The Deadly Price of Pursuing Peace," written as it was by a talented colleague and friend, Evelyn Gordon. The thrust of the piece, which Commentary Editor John Podhoretz understandably calls "groundbreaking," is that Israel's international standing has plummeted to an unprecedented low - and the number of Palestinians killed by Israel has concurrently soared - specifically because of Israel's having done much too much for peace.

02/07/2010

China and U.S. heading for a cold war? What impact on gold?
Some observers feel that China may be looking to retaliate over recent U.S. political statements and moves and a recent Chinese poll suggests it and the U.S. may be moving towards a ‘cold war'. Such political uncertainties could have a positive impact on the gold price.
Author: Lawrence Williams
Chinese and U.S relations are at a low ebb and continuing to deteriorate fast so it seems and an article in today's Sunday Times in London says many Chinese hawks are promoting a cold war.  Indeed things appear to have got so bad that military leaders in China are preparing for the possibility of a limited armed conflict, possibly over Taiwan or Korea, although this seems very unlikely.China has always been unhappy with U.S. criticisms over its human rights record, but a number of recent diplomatic disagreements have escalated the feelings within China that it should be taking more action against the U.S. if only to show its displeasure.

G7 pledges to keep stimulus going, despite debt woes
Finance ministers of the world’s seven leading industrial nations, meeting in a remote part of northern Canada Saturday, promised to keep up stimulus spending to bolster the economic recovery despite growing concerns over rising debt in the US and Europe.Ministers debated the dangerous fiscal conditions of the euro zone – notably Greece, Spain and Portugal – which have been pushing down global stock markets over the past week. European officials expressed confidence that Greece would be able to deal with its debt troubles when it presents a budget solution next week.The Group of 7 (G7) also discussed means of recouping billions of dollars in taxpayer funds from banks that were bailed out over the last two years to keep the financial sector afloat, though ministers have been unable to agree on the method.



The time is nigh for gold as an investment
By Jim Jones
No one knows when exactly, though, and therein lies the rub
 Although the spot price of gold reached an all-time high of $1226/oz on bullion markets around the world on December 3, world jewellery demand has been declining more or less steadily from 3139 tons in 1999 to 2159 tons in 2008 Picture: Investment is what the gold market is all about these days. That's not the spin the world's gold bug advisers are putting out - it's the state of the market in physical gold that led the metal to a record high of more than $1200 an ounce in December last year, and which is helping keep prices at their present levels in the region of $1100/oz.As Credit Suisse gold analyst David Davis told delegates at the Mining Indaba conference in Cape Town this week: the world's total new mine production is at record annual levels, in the region of 2600 tons, and it is likely to remain there for another three or four years before heading into a steady three-fifths decline over the following 25 years.

Posted by Peter Grandich
Gold – If a picture is worth a thousand words, than I don’t need to say much about the long-term direction of gold. Back in 2004, 2006 and 2008, many were calling a top in gold. While there was a correction, gold eventually went to much higher levels. Such shall be the case IMHO. In fact, I believe we shall look back at this period and conclude it turned out to be the last great buying opportunity for quite some time. Yes, arguably one could make a case for another $100 down given the recent technical sell-off. But given the selling has been limited to the paper market on the Crimenex (Comex) and the reversal seen late Friday both in gold and gold shares, I think the chances of a substantial fall from here are remote.

Gold price hinges on money supply
Gold price has a positive correlation with money supply growth, according to a new empirical study produced by the World Gold Council, a fact that is extremely pertinent in today’s environment of elevated money supply growth. Moreover, money supply growth tends to precede gold price increases by 6 to 9 months.As money supply increases, gold price rises. This trend is upheld by the quantity theory of money which illustrates that money supply has a direct, positive relationship with the price level. It shows divergences caused by inflationary expectations may last for a very long time, even decades, but the long-term price of gold is driven by global money supply.The paper also shows that a surge in the price of gold is an advance signal of higher velocity of money and, consequently, future inflation pressures.

John Embry - Chief Investment Strategist Sprott Asset Management
John Embry speaks about why gold has been trending down over the last few weeks and the implications of a knee-jerk reaction to gold when the US dollar appreciates. He also looks at what we can expect from the quarterly numbers due out from the big gold stocks and why the next big move for gold is likely to be up.

Cash Costs: Handy Metric for Evaluating Investment Potential of Gold Miners
by: RD Gupta FebruaryThere are hundreds of small cap gold miners listed on US exchanges but only a handful that are actually producing meaningful amounts of gold. For the ones that are producing, an interesting metric to look at is the "Cash Cost" of an ounce of mined gold. Cash costs, in mining lingo, is the cost of production at a site per unit of output. Cash costs include operational cash costs at site level. This includes things like transport, refining , administrative costs and royalties.The value of the by-products is deducted from the final cash cost of the metal. For example, if a gold mine produces copper as a by-product, then the value of the copper produced will be deducted from the cash cost of the gold

Gold, Silver, Economy + More
By: Bob Chapman, The International Forecaster
As we have been forecasting for the last two years, the second wave of mortgage defaults and foreclosures will hit the economy this year. Not only will we have failure in prime loans and option-arm loans, but we are faced with a new crop of subprime and ALT-A loans put into motion by Fannie Mae, Freddie Mac, Ginnie Mae and FHA. In addition, we find it of great interest that the FHA is changing the rules to purchase homes. That, of course, means less homes will be purchased.The incidence of unemployment may be lessening, but it isn’t going away. Those of you who keep your ear to the ground know that real unemployment is 22.5% and in cities like Detroit it is somewhere near 45 to 50 percent.

This Just In: Goldman Sachs Killed AIG
Henry Blodget In order to implode and cost taxpayers $180 billion, AIG first had to make--and lose--positively massive market bets with other Wall Street firms.It will come as a surprise to no one that the firm on the other side of many of those lost bets was Goldman Sachs.In fact, as Gretchen Morgenson and Louise Story reveal in the NYT, Goldman's hardball tactics and smart bets bled AIG dry.But don't go blaming Goldman.  No one forced AIG to do these stupid deals.  All Goldman did was stick it to AIG at the negotiating table and then demand that AIG do what it said it was going to do.  The only entity responsible for collapse of AIG was AIG.

Obama's shameful touting of misleading unemployment numbers will come back to haunt him
Posted by Alan Orfi
President Obama's repeated references to Friday's surprising decline in the unemployment rate epitomize his utter disregard toward the intellect of our citizenry. His citation of these numbers as evidence we are "climbing out of the hole we found ourselves in" reveals an assumption on his part that the folks are incapable of figuring things out for themselves. While Obama surely isn't the coldest beer in the fridge, he isn't stupid enough to actually believe Americans can't figure out this scam. No, his use of the 9.7% figure to support his position is a blatant lie. After all, his own budget plan projects unemployment will remain higher than this figure at the end of the year. Even his own economic advisor, Christina Romer contradicited the President, saying, "The monthly employment and unemployment numbers are volatile and subject to substantial revision. Therefore, it is important not to read too much into any one monthly report, positive or negative."



A Bubble in Search of a Pin
We are going to once again return to the book highlighted the last few weeks, This Time Is Different, by Carmen M. Reinhart and Kenneth Rogoff. This is a book you should buy and read, especially the last 4-5 chapters, and try to get your Congressman to read it as well, so he or she can see what happens to countries that run up their debt. It makes no difference if it is small or large, the end result is the same.Last week we looked at the role of confidence in allowing governments to borrow money. This week we ask whether Greenspan and Bernanke, along with the entire Fed, should have been able to determine whether a bubble was building in the US economy and lean against it, preventing the debacle we are now in. Reinhart and Rogoff gently come down on the side of those who think they should have, and that we need to implement changes in our institutions. Others, as we will see, are not so gentle.



Obama, The New NeoCon
Military Confrontation Rising
By Joel Skousen
Foreign policy and war issues have taken a back seat to the Democratic administration's push to cram a health care reform bill down our throats. But the world won't wait any longer as it reacts to US provocations on several fronts. The Iran crisis is ripening towards a military confrontation after Obama's diplomacy charade collapsed in failure. It was never intended to succeed. Israel is going to be a major player, if not the instigator, of the coming Iran war but it currently has its hands full with the growing unrest in Gaza. Will the attack on Iran give them an excuse to take decisive military action in both Gaza and Lebanon? I believe it will. If the Iran attack blossoms into a full blown war in the Middle East, as I expect, we might see a major explosion of long-standing tensions between Israel, Iran, Syria and Egypt--with the US right in the middle. This week, I'll also cover the growing tensions with China over Taiwan arms sales and with Pakistan as it reacts to more news of US troop deaths in areas where no US forces are supposed to be.

China’s hawks demand cold war on the US
Michael Sheridan, Far East Correspondent
MORE than half of Chinese people questioned in a poll believe China and America are heading for a new “cold war”. The finding came after battles over Taiwan, Tibet, trade, climate change, internet freedom and human rights which have poisoned relations in the three months since President Barack Obama made a fruitless visit to Beijing.|According to diplomatic sources, a rancorous postmortem examination is under way inside the US government, led by officials who think the president was badly advised and was made to appear weak.
In China’s eyes, the American response — which includes a pledge by Obama to get tougher on trade — is a reaction against its rising power.

School bombing exposes Obama’s secret war inside Pakistan
Christina Lamb
THE discovery of three American soldiers among the dead in a suicide bombing at the opening of a girls’ school in the northwestern Pakistan town of Dir last week reignited the fears of many Pakistanis that Washington was set on invading their country.Barack Obama has banned the Bush-era term “war on terror” and dithered about sending extra troops to Afghanistan, but across the border in Pakistan, the US president has dramatically stepped up the covert war against Islamic extremists.

U.S. Senator Lieberman: Impose sanctions on Iran or attack it 
By News Agencies
The world faces a stark choice between imposing tough sanctions on Iran to stop its nuclear program, or attacking it, United States Senator Joe Lieberman said Saturday. Lieberman is the influential chairman of the Senate committee on homeland security. He was speaking a day after Iranian Foreign Minister Manouchehr Mottaki said that his country was ready to accept an international swap of uranium, but only under certain conditions. "We have a choice here: to go to tough economic sanctions to make diplomacy work or we will face the prospect of military action against Iran," Lieberman told the annual Munich Security Conference.

Report: Israeli warships on way to Persian Gulf
As Israel keeps threatening the regional countries with war, Egyptian maritime sources say the Israeli navy has deployed two missile ships to the Persian Gulf. Citing the sources, Yediot Ahronot reported Saturday that two Israeli missile ships passed through the Suez Canal en rout to the Red Sea on Thursday morning. The sources said the ships are expected to reach the Persian Gulf within the next four days. According to the report, Cairo adopted tight security measures to ensure the safe passage of the Israeli ships through the canal. The waterway, which had not previously been used by Israeli vessels for intelligence reasons, was traversed for the first time in June 2009 when a Dolphin-class submarine (a nuclear German-made submarine) reportedly sailed from the Mediterranean to reach military exercises in the Red Sea.

The Jewish dilemma of accepting Evangelical support 
By www.jewishjournal.com
Israel may have become a punching bag for much of the world, but 50 million Americans back the Jewish state 100 percent, no ifs, buts or maybes. As portrayed in the striking documentary "Waiting for Armageddon," these supporters are Christian Evangelicals who are neither rural hicks nor ranting fanatics. What they hold in common is an unshakeable faith that every inch of Israel/Palestine belongs to the Jews. "They want the Muslims to be evicted by the Jews, the Jews to rebuild the Temple of Solomon and then Christ to return and trump everyone," one analyst explains in the film.



Tea Party Sarah is a Neocon
Kurt Nimmo
Sarah Palin delivered a speech prior to her keynote at the Republican Tea Party fest in Nashville scheduled for this weekend. In addition to touching on government spending and the bankster bailout, Palin said the underwear bomber Umar Farouk Abdulmutallab should have been grilled before he was read his Miranda rights.
“We need a commander in chief, not a professor of constitutional law,” she said, according to the Wichita Eagle.
In fact, Obama was not a professor of constitutional law. He was a “senior lecturer” at the University of Chicago Law School. In academia, there is a vast difference between the two titles, not that we should expect Palin (or her script writers) to get it right

The Myth of American Exceptionalism
Howard Zinn MIT March 14, 2005

02/06/2010

Swiss Central Bank Mysteriously Intervenes In Its Currency Market, Causing Chaos
The Swiss Central Bank stepped in to defend its Swiss Franc (CHF) overnight in Asia. The move rocked the EUR/CHF as shown below. Did you buy gold at cheaper than yesterday’s price?
By Chuck Butler
Good day... And a Happy Friday to one and all! It's a draggin' the line Friday for me, but I'll make every attempt to turn it into a Fantastico Friday for sure! The Big Stock Sell off that I've warned about since probably June of last year, looks like it has finally arrived... Bringing with it, my biggest fears, that the link between all the risk assets, had not been broken completely, and this link has turned into a bloodletting on currencies and commodities... OK... So I got that out of the way, front and center this morning! You know... Ever since I began writing about a Big stock sell off, I told you that, should the link remain in place, and the currencies and commodities have adverse reactions, then we would come to the fork in the road... The people that bought currencies and commodities to keep up with their neighbors, in hopes of being able to brag about their returns at the next bar-b-que, will panic and sell, making the sell off even worse...

Bullish HUI Technicals 4
Over the last couple weeks, gold and silver stocks have been clobbered. The flagship index that tracks this sector, the HUI, hemorrhaged nearly a sixth of its value in just 8 trading days! Frightened traders have been scrambling for the exits, dumping their PM stocks at any price to rush their capital out of harm's way.While such a freefall sounds very bearish, it is actually incredibly bullish. The mission of investment and speculation is to buy low and sell high, and the best times to buy low are when prices are plunging and traders are practically soiling themselves in fear. If you want to multiply your capital in the markets, the surest way to do it is to buy aggressively when nearly everyone else is rushing to abandon ship.

Silver stocks smashed and bloodied
It's seems to be a case of "who blinks first" in this USD 25bn equities subsector, where the king of volatility resides.
Author: Barry Sergeant
What kind of investor gets mixed up with primary silver stocks, a global equities subsector that over time experiences some of the wildest gyrations in global markets? Take Hecla Mining, one of the top stocks in the group. During 2008, silver bullion traded above USD 20.00 an ounce early in the year, before falling, eventually, by about half towards the end of the year, after the bankruptcy of Lehman Bros. on Wall Street.US-listed Hecla, the biggest silver producer in that country, and 119 years young, traded across 2008 from nearly USD 13.00 a share to as little as USD 1.33. Silver bullion recovered during 2009, making it above the USD 18.00 an ounce barrier, but has since retreated to a few cents above USD 15.00 an ounce. Investors, or more likely speculators, have fled in droves, leaving only puffs on the horizon.

Is This the Buying Opportunity for Precious Metals Senior and Junior Stocks?
This essay is based on the Premium Update posted on February 5th, 2010
Gold, silver, and mining stocks have been declining very rapidly in the past several weeks and they have now reached (or are even below) our previous the target areas for this downswing. Is this a buying opportunity, or should precious metals investors take additional new factors into account? In the following essay we would like to provide you with our thoughts on the current situation in the precious metals stocks: both big senior companies (represented by the HUI Index and the GDX ETF) and the small-cap juniors (represented by the TSX Venture Index)

We Close The Week And The Move
Submitted by Nic Lenoir Of ICAP
Most of the reversal late in the day was short covering, as no one wants to be short over the weekend in case some resolution comes out of Europe. Trichet could not help saying there would be no special ECB meeting just to add a bit of fuel on the fire, but no short on her/his right mind was going to expose his P&L based on this very man's word.??The big question is how we open on Monday. We have a potential bullish hammer on the Nasdaq and on the S&P future. If we open Monday above today's open (no overlap of the bodies of the daily candles) it will be very tempting to get long equities. We are looking at this market from the short-side as we believe a major top could well be in, but a bullish open Monday would indicate the market will retrace up to 1,100/1,107 which will be massive resistance now
Global market turmoil hints that U.S. recovery may founder
By Kevin G. Hall | McClatchy Newspapers
WASHINGTON — Conflicting U.S. jobs data and mounting concerns about debt defaults abroad that threaten global economic growth triggered a worldwide wave of stock-market volatility Friday amid fears that the improving U.S. economy could unravel.A mixed jobs report from the Labor Department, including a revision that showed that 2009 job losses were far greater than thought, called into question the strength of the U.S. recovery.in Europe, the European Union's inability to chart a path forward for debt-ridden Greece, Ireland and Spain also led investors to fear a return to the credit freeze of 2008 and scurry for havens. Investors on Friday fled countries from Portugal to Argentina on concerns that their widening deficits could signal future debt defaults.

The Minsky Moment
by John Cassidy
Twenty-five years ago, when most economists were extolling the virtues of financial deregulation and innovation, a maverick named Hyman P. Minsky maintained a more negative view of Wall Street; in fact, he noted that bankers, traders, and other financiers periodically played the role of arsonists, setting the entire economy ablaze. Wall Street encouraged businesses and individuals to take on too much risk, he believed, generating ruinous boom-and-bust cycles. The only way to break this pattern was for the government to step in and regulate the moneymen.

Minsky moment
From Wikipedia, the free encyclopedia
A Minsky moment is the point in a credit cycle or business cycle when investors have cash flow problems due to spiraling debt they have incurred in order to finance speculative investments. At this point, a major selloff begins due to the fact that no counterparty can be found to bid at the high asking prices previously quoted, leading to a sudden and precipitous collapse in market clearing asset prices and a sharp drop in market liquidity.[1]
The term was coined by Paul McCulley of PIMCO in 1998, to describe the 1998 Russian financial crisis,[2] and was named after economist Hyman Minsky. The Minsky moment comes after a long period of prosperity and increasing values of investments, which has encouraged increasing amounts of speculation using borrowed money.

More Government Equals Fewer Jobs
by Peter Schiff
With today’s unexpected decline in December payrolls, the cry for more job-related stimulus will grow even louder. But the sad truth is that any new stimulus or jobs bills will ultimately swell the ranks of the unemployed, thereby raising calls for an even bigger federal effort. If we are not careful, government regulations, subsidies, and spending, all designed to fight unemployment, could push the labor market into a death spiral.Regulation acts like a tax on job creation. By subjecting employers to all sorts of extra expenses when they hire people, regulations increase the cost of employment far beyond the wages employers actually pay their workers. In fact, some regulations are specifically tied to the number of workers employed.

Mark Faber: Social Obligations Will Lead Western States to Default
by Gwen Robinson
The United States’ top credit rating is at risk, with its triple 'A' status warned it may be downgraded if the economy grows at a slower pace than expected, says ratings agency Moody's.The US is predicted to have a $1.5 trillion deficit in 2010, which could be a real problem for the country’s seemingly insatiable appetite for borrowing. Outspoken investor and writer Marc Faber doesn’t give America much time before it goes bust.
“Maximum within 10 years time more than 35% of tax revenues will have to be used to pay the interest on the government debt and then you are in trouble – because then there will be not enough money out of the budget to pay for other stuff. I’m convinced the US government will go bankrupt, but not tomorrow. And before they go bankrupt, they’ll print money, and then you get high inflation rates, you have a depression and eventually they’ll go to war.”

Fame & Fortune: Ron Paul
By Jay MacDonald • Bankrate.com
 Texas Rep. Ron Paul has earned his nickname: "Dr. No."
The lifelong advocate of limited government, individual liberty and fiscal responsibility refuses to vote for any bill not directly authorized by the Constitution.For more than 40 years, the small-town obstetrician has been a major voice of opposition to big government in general and the Federal Reserve's inflationary policies in particular. His latest book, "End the Fed," continues his campaign to end federal fiddling with the monetary system.His small-government platform has earned Paul a loyal following and respect from both sides of the aisle and across the generation gap. He has twice been a candidate for president, in 1988 as the Libertarian flag bearer and in 2008 as a Republican contender.Bankrate caught up with the energetic 74-year-old doctor just minutes before he won a key House panel vote to (what else?) audit the Fed.

The lynch-mob mentality

The fact that the Government labels Person X a "Terrorist" is not proof that Person X is, in fact, a Terrorist.

That proposition should be intrinsically understood by any American who completed sixth grade civics and was thus taught that a central prong of our political system is that government officials often abuse their power and/or err and therefore must prove accusations to be true (with tested evidence) before they're assumed to be true

Tension with Syria can turn into war in an instant 
By Aluf Benn 
About three weeks ago the New York Times published a list of recommended tourist sites for 2010. Damascus came in seventh and the writer wondered whether the Syrian capital was the "new Marrakesh." Ancient buildings in the Syrian capital are turning into boutique hotels, trying to emulate the popular Moroccan city, he wrote. The Old Vine Hotel, a luxurious 17th-century, nine-bedroom boutique hotel, a two-minute walk from the Grand Mosque of the Umayyads, is offering a room for 140 euros a night. Cheaper than Eilat. Damascus' appearance on the American tourist map and the imminent appointment of a U.S. ambassador there reflect a rapprochement between Bashar Assad's regime and the United States, after years of tension and distance. Assad has told The New Yorker that he has renewed intelligence-sharing efforts with the United States and Britain against terror.

Regime Change? Let's Be Realist...
By Leon T. Hadar
I've been following with great interest the many heated exchanges online and elsewhere over Council on Foreign Relation (CFR) President Richard Haass's call in a Newsweek commentary for "promoting regime change" in Iran. Haass is a self-described "card-carrying realist" and a former official in the administrations of Bush I and Bush II (he was director of policy planning for the Department of State under Secretary Colin Powell) who, after retiring from government, has been expressing strong criticism of the neoconservative-driven policy in the Middle East under Bush II, including in his book, War of Necessity, War of Choice: A Memoir of Two Iraq Wars.In fact, in his Newsweek article, Haass compared President Barack Obama to George H. W. Bush, suggesting that the current White House occupant, unlike Bush 43 and very much like Bush 41


02/05/2010

Risk aversion keeps gold floating just above three-month lows
Fears around mounting risks posed by rising sovereign debt in Europe kept investors wary as trading thinned ahead of Chinese New Year
Author: Chikako Mogi (Reuters)
Gold prices hovered above three-month lows on Friday, a day after after posting their biggest one-day loss since 2008, with investors wary of taking risks amid mounting sovereign debt fears in Europe.
Liquidity has been thinning ahead of the Chinese New Year holidays in mid-February, exposing the market to more volatility, traders said.A slide in stocks, commodities falling broadly and the weaker euro triggered large technical selling in the gold market on Thursday, pushing down prices to their lowest since November 3.

Gold buying continues as prices hit 3-month low
Traders would be awaiting the US non-farm payroll figures for direction in the precious metals complex
Reuters
Mumbai: India’s gold buying continued on Friday afternoon, with limited quantities changing hands as prices hit a fresh three-month low, dealers said.“Demand is still coming in but not in big lots as it did yesterday. We must have sold 300-400 kgs yesterday and most of the orders got triggered at $1,060-1,075 (an ounce),” said a dealer with a state-run bank in Mumbai.Demand has slowly picked up from late Thrusday evening, dealers said.
International gold was trading at $1,054.70/1,055.70 an ounce, after hitting an intra-day low of $1,050.50, the lowest level since 2 November.“I have orders in lots of 10 kgs and 40 kgs in between $1,045-1,050 (an ounce),” said another dealer with a private bank.

China eager to buy IMF gold for $1,000 per ounce
Published on January 13, 2010
By David Lew
BEIJING: Two months after India’s Reserve Bank made big global news with the purchase of 200 tonnes of gold from the International Monetary Fund (IMF), bullion traders are now waiting for the ‘golden’ news of 2010. The news in question: Will China buy the remaining 203 tonnes of gold from IMF soon? Bullion trader and gold investors in China want the dragon country to take the plunge and buy the rest of the IMF gold, following India’s footsteps. India bought 200 tonnes of IMF gold for $1,045 an ounce. Soon after the India purchase, gold price zoomed to touch a high of $1,227 per ounce in November last year. Since then, the yellow metal price has come down.

Poll: Americans worried, angry about deficit
Record budget deficit forecast makes a majority of Americans angry and worried.
A majority of American people are worried and angry about the size of US federal budget deficit, according to a new survey. On Thursday Fox News released a poll showing 86 percent of respondents are worried or angry over the growing budget deficit. Some 47 percent of participants said they believe President Barack Obama's federal spending freeze proposal is a gimmick and will not help to reduce the deficit. The poll also found that those who voted have a gloomy outlook for the economy, as 56 percent say "the worst is yet to come." On Monday, President Obama sent Congress a $3.8 trillion spending plan for fiscal year 2011. His proposal included a record $708 billion military budget. The new budget plan projects an increase in the federal deficit to a record $1.56 trillion this year.

A lot of people are very upset about the rapidly increasing U.S. national debt these days and they are  demanding a solution. What they don't realize is that there simply is not a solution under the current U.S. financial system. It is now mathematically impossible for the U.S. government to pay off the U.S. national debt. You see, the truth is that the U.S. government now owes more dollars than actually exist. If the U.S. government went out today and took every single penny from every single American bank, business and taxpayer, they still would not be able to pay off the national debt. And if they did that, obviously American society would stop functioning because nobody would have any money to buy or sell anything.

And the U.S. government would still be massively in debt.

So why doesn't the U.S. government just fire up the printing presses and print a bunch of money to pay off the debt?

Financial turmoil strikes as G-7 officials gather
IQALUIT, Nuvavut — A bout of turmoil in global markets has provided sobering reminder to global financial leaders that the aftershocks from the worst recession in seven decades are far from over.Finance ministers and central bank presidents from the world's seven major industrial countries — the United States, Japan, Germany, France, Britain, Italy and Canada — were scheduled to arrive Friday for discussions in this small snow-swept Canadian town about 200 miles (320 kilometers) south of the Arctic Circle.The talks are expected to be dominated by the question of how much longer extraordinary government stimulus should be provided to lift economic growth.The risks still facing the global economy were highlighted dramatically after bad economic news sent markets plunging around the world on Thursday.

Hair of Damocles' sword
By Chan Akya
Does not Dionysius seem to have made it sufficiently clear that there can be nothing happy for the person over whom some fear always looms? Cicero, commenting on the story of the sword of Damocles. Being the Treasury secretary of the United States can easily be described as the worst job in the world; a modern-day equivalent of the Greek myth involving Damocles, who recognized the hazards of power when he noticed a sword suspended above him, held there by a single horse hair. Not only is the job of being the borrower-in-chief for the world's sole superpower full of its own contradictions, ranging from how much you bow relative to the power of the country you represent; there are also the pesky aspects of democracy to deal with - congressional panels, presidential attention spans and political expediency.

Markets Fail When Humans Are Unregulated
by Paul Craig Roberts
Former Federal Reserve chairman Alan Greenspan answered that he had placed his trust in a flawed theory when he was called before Congress to explain why he, Goldman Sachs Treasury Secretary Robert Rubin and Deputy Treasury Secretary Larry Summers, prevented Brooksley Born, head of the Commodity Futures Trading Corporation, a government regulatory agency, from doing her job of regulating over-the-counter derivatives.
The efficient markets theory is that unregulated markets are efficient and rational. According to this theory in which Greenspan placed his trust, unregulated markets produce the best possible result. Any regulatory interference worsens the outcome.

Containing Inflation Via Unlimited Money Creation: The Fed’s Strategy
by Daniel R. Amerman,
CFAThe Federal Reserve was well aware of the severe inflationary dangers when it directly created almost a trillion dollars as part of its separate bailout of Wall Street. If this cash – which exists in highly liquid form right now - escapes into general circulation, the result could be immediate and major inflation that would devastate the value of the dollar and all of our savings. Therefore, even as it created the trillion dollars, the Fed set up a series of barriers to contain the new cash and ultimately return it to the void from whence it came, lest the new cash break out and wreak monetary havoc.

Can the US Learn from Argentina?
For years leading up to the millennium year change, the Argentine currency (peso) was pegged to the US dollar. As a result the Argentines 'lived high on the hog' so to speak. With their over-valued peso/dollar they bought goods from around the world like drunken sailors…indeed like the proverbial 'last of the big spenders."
Unfortunately, its principal trading partners - especially Brazil - was not so foolhardy. Slowly and methodically Brazil devalued its own currency (real). And as one might expect Argentine exports dwindled to a trickle, while imports went exponential. It was a formula for economic disaster.

Look who's come to dinner
Superfusion by Zachary Karabell Reviewed by Benjamin A Shobert
One could be forgiven for thinking that books about China tend to come and go in phases. The prevailing theme of the mid-1990s about China as a cheap production base was followed by hushed awe at the potential size of the country's market. Inevitably, a group of authors then made the obvious link: because China was cheap for industry and such a vast country, it was going to be a growth dynamo for the next several decades. And, as we might expect given a vacuum of conventional threats and a wee bit of insecurity on our own part, the next round of authors seemed enamored with the idea that the growth dynamo was likely to become - eventually - some sort of "near-peer" economic and military threat to the United States.

Frank Holmes: Game-Changing Action Is Afoot
Source: Interviewed by Karen Roche,
Specializing in emerging markets, natural resources and global infrastructure, U.S. Global Investors is positioned so perfectly for the times that CEO Frank Holmes might have written its business plan and tag line—"Resourceful Investing for a Developing World"—this morning. All of these areas of expertise at U.S. Global Investors play powerful but somewhat unpredictable roles in the evolving 21st century worldwide economy. Led by China and India, the emerging markets have placed unprecedented (and growing) demand on natural resources. From gas and oil to copper and zinc, it takes vast quantities of those natural resources to build infrastructure to accommodate explosive growth in population, upward mobility, urbanization and industrialization. So as the other Holmes once said, "The game is afoot."



Tensions spill over between Washington and Beijing
Jane Macartney in Hong Kong
Long-simmering tensions between Beijing and Washington over the value of China’s currency have spilled over into angry words at the highest level, further damaging ties hit by a series of disputes in the few brief weeks since the start of the year.The chill over one of the world’s most important diplomatic relationships is almost certain to deepen in the next few months as the world’s largest and third-largest economies tackle an array of contentious issues, ranging from cyber attacks to the Dalai Lama.


Will Obama Play the War Card?
by Patrick J. Buchanan?
Republicans already counting the seats they will pick up this fall should keep in mind Obama has a big card yet to play.Should the president declare he has gone the last mile for a negotiated end to Iran's nuclear program and impose the "crippling" sanctions he promised in 2008, America would be on an escalator to confrontation that could lead straight to war.And should war come, that would be the end of GOP dreams of adding three-dozen seats in the House and half a dozen in the Senate.Harry Reid is surely aware a U.S. clash with Iran, with him at the president's side, could assure his re-election. Last week, Reid whistled through the Senate, by voice vote, a bill to put us on that escalator.

On the claimed "war exception" to the Constitution
By Glenn Greenwald
Last week, I wrote about a revelation buried in a Washington Post article by Dana Priest which described how the Obama administration has adopted the Bush policy of targeting selected American citizens for assassination if they are deemed (by the Executive Branch) to be Terrorists.  As The Washington Times' Eli Lake reports, Adm. Dennis Blair was asked about this program at a Congressional hearing yesterday and he acknowledged its existence:
 
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