The mainstream media attacks on precious metals were so extreme last year that they began to border on the bizarre. The “cult of fiat” was relentless in their attempts to slander gold investors and it seemed as though no matter how well the yellow stuff did, or how dismal the dollar’s performance was, they would never get tired of the disinformation game. Fast forward a year later, however, and they have been utterly silenced. What a difference twelve short months can make…
Not even 48 hours after Dagong dared to tell the truth about America's sad state of affairs (again) and downgraded the developed world's most insolvent nation for the second time in half a year, Moody's has confirmed that in the creditor-debtor relationship, it is the latter who wears the kneepads. As of a few hours ago, Moody's has upgraded China from A1 to Aa3. The reason cited: "we need China to keep buying our debt" - well, not really, we have the Fed to do that, and in 2 weeks, China's top holding of US paper will be a distant memory. But the last thing the US needs is to piss off the one country whose security dump could be too big even for the Fed to monetize. Ergo: throw Moody's in the wolves' den. After all nobody respects, cares or in any way pretends to even listen to the disgraced and Wells Noticed rating agency (speaking of which, whatever happened to that Wells Notice?).
America, that grand experiment created to probe the limits of human freedom, liberty and equality, has succumbed to its many injuries and passed away. The exact time of death is uncertain, the causes many. America was always, until its demise, a work in progress, but that progress stopped. The country lost its way, forgot where it was headed, and fell prey to a host of enemies, all of them coming from within.
The rise in oil and grain prices over the last several months will be reaching Main Street by this winter. Gonzalo Lira argues that those price rises, coupled with the Federal Reserve's Quantitative Easing 2—scheduled for announcement in the coming two weeks—as well as the escalating Currency War with China will inevitably lead to runaway inflation: And he is prediciting it will start this March of 2011. —Gonzalo Lira
An avalanche is not an “event”, it is an epic; a series of smaller events drifting and compacting one after another until the contained potential energy reaches an apex, a point at which it can no longer be managed or inhibited. A single tremor, an inopportune echo, an unexpected shift in the winds, and the entire icy edifice, the product of countless layered storms, is sent crashing down the valley like a great and terrible hand. In this way, avalanches in nature are quite similar to avalanches in economies; both events accumulate over the long span of seasons, and finally end in the bewildering flash of a single moment. The problem that most people have today is being unable to tell the difference between a smaller storm in our economy, and an avalanche. Very few Americans have ever personally witnessed a financial collapse, and so, when confronted with an initiating event, like the stock market plunge of 2008, they have no point of reference with which to compare the experience. They misinterpret the crash as a finale. Untouched, they breathe a sigh of relief, unaware that this is merely the beginning of something much more complex and threatening. So, without personal experience on our side to help us recognize a trigger point incident; the catalyst that brings down our meticulously constructed house of cards, how will we stand watch? Will we miss the danger parading right in front of our faces? Will we be caught completely off-guard?
The PBOC caught markets off guard on Tuesday after the central bank raised its 1y lending and deposit rates by 25bps in what was the first official tightening move since 2007. As such, in what looked like an attempt not only to suppress inflation expectations but also an attempt to ease potential trade wars between China and the US caused markets to fret over the potential implications on growth and also demand for commodities in the region. In turn, the USD continued to rebound from current oversold levels and gained over 1.00%. As a result, commodity linked currencies such as AUD, NZD and CAD posted heavy losses against the greenback.
Looming losses from the mortgage scandal dubbed “foreclosuregate” may qualify as the sort of systemic risk that, under the new financial reform bill, warrants the breakup of the too-big-to-fail banks. The Kanjorski amendment allows federal regulators to pre-emptively break up large financial institutions that—for any reason—pose a threat to U.S. financial or economic stability.
A quick look at gold price action demonstrates that someone somewhere is actively debasing currencies. An even quicker scan of headlines confirms this to be the case: per Reuters "Bank of Japan Governor Masaaki Shirakawa said on Wednesday the central bank will consider expanding a new scheme for buying assets ranging from government bonds to exchange-traded funds when deemed necessary." Harakiri Shirakawa continued: "We have taken a very bold measure ... If the need arises in the future, making further use of the new fund as part of monetary policy is one of our strongest policy options." Judging by the chart below, either gold has a tent in its pocket or was really happy to hear this announcement.
For different reasons, the Federal Reserve and the Bank of Japan are trying to weaken their respective currencies. China is allowing its currency, the yuan, to strengthen, but not quickly enough for the U.S. This amounts to a two-fer for central banks in that they can accomplish two seemingly diverse tasks. It reminds me of an old spoof television commercial showing a couple fighting over whether a product was a floor wax or a dessert topping–”It’s a stimulus program. No, it’s currency manipulation. No kids, it’s both.”
When the momentum of the masses gravitates toward the truth, those that desire to suppress it have always resorted to smoke and mirrors to divert the people’s attention away from the truth and to channel their focus into avenues that waste their energies.
A couple of readings on the jobs report following the latest weekly reading on mortgage applications, then Secretary Geithner… Of course, the only relevant thing is that the Fed will inject another $2 billion of high beta stock purchasing power via today's second consecutive POMO.
And then there was one, even if it was a TurboTax One. Bloomberg headlines flashing that Larry Summers is dunzo in November. He follows such other economic failures as Romer and Orszag, both of whom left the economy in a far more horrendous state than they found it. We wish godspeed to Larry, and hope he managed to get thick windows in the limo that will take him to his next private sector job, presumably somewhere above the 40th floor in 200 West.
Other than that, its a totally level playing field ...
Lots going on today – PPI, claims, current account balance, TICS, Philly Fed, and some FX testimony…
Nothing on the economic front, just Tim Geithner speaking and the budget balance…