There are many reasons why gold is still our favorite investment – from inflation fears and sovereign debt concerns to deeper, systemic economic problems. But let's be honest: It's been rising for over 11 years now, and only the imprudent would fail to think about when the run might end. Is it time to start eyeing the exit? In a word, no. Here's why. There's one indicator that clearly signals we're still in the bull market – and further, that we can expect prices to continue to rise. That indicator is negative real interest rates.
The Deepwater Horizon incident demonstrated that most of the oil left is deep offshore or in other locations difficult to reach. Moreover, to obtain the oil remaining in currently producing reservoirs requires additional equipment and technology that comes at a higher price in both capital and energy. In this regard, the physical limitations on producing ever-increasing quantities of oil are highlighted, as well as the possibility of the peak of production occurring this decade. The economics of oil supply and demand are also briefly discussed, showing why the available supply is basically fixed in the short to medium term. Also, an alarm bell for economic recessions is raised when energy takes a disproportionate amount of total consumer expenditures. In this context, risk mitigation practices in government and business are called for. As for the former, early education of the citizenry about the risk of economic contraction is a prudent policy to minimize potential future social discord. As for the latter, all business operations should be examined with the aim of building in resilience and preparing for a scenario in which capital and energy are much more expensive than in the business-as-usual one.
Six centuries ago, when London and Paris were irrelevant, plague-infested backwaters, and New York City wasn’t even on the map, the greatest city in the world was Nanjing– the capital of the Great Ming. At the time, Nanjing was not only the most populous city on the planet, it was also the pinnacle of civilization. Art, science, technology, and commerce flourished in the Ming Dynasty’s liberalized economy, which constituted a full 31% of global GDP at the time. (By comparison, the US economy is roughly 25% of global GDP today…) Taxes were low, the currency was strong, and overseas trade thrived. For a time, Nanjing truly was the center of the world. Over the next several hundred years, the tide shifted. The Ming Dynasty fell, and power was transferred further west to the Ottoman Empire, and eventually to Europe which had finally emerged from the Dark Ages as the most advanced civilization on Earth... This phenomenon has lasted for several hundred years now… but as history has shown repeatedly, power centers frequently shift. The world is now witnessing yet another transition of power, this time from west to east, as the US-led western hierarchy suffocates within its own debt-laden Keynesian fiat bubble.
Anyone who hasn’t sensed a mood change in this country since the 2008 financial meltdown is either ignorant or in denial. Millions of Americans fall into one of these categories, but many people realize something has changed – and not for the better. The sense of pure financial panic that existed during September and October of 2008 had not been seen since the dark days of 1929. Our leaders used the initial terror and fear to ram through TARP and stimulus packages that rewarded the perpetrators of the financial collapse rather than helping the middle class who lost 8 million jobs, destroyed by Wall Street criminality. The stock market plunged by 57% from its 2007 high by March 2009. What has happened since September 2008 has set the stage for the next downward leg in this Crisis. The rich and powerful have pulled out all the stops and saved themselves at the expense of the many. Despite overwhelming proof of unabashed mortgage fraud, rating agency bribery, document forgery on a grand scale and insider trading based on non-public information, the brazen audacity of Wall Street oligarchs is reminiscent of the late stages of the Roman Empire.
You have publicly gone on record with some off-the-wall assertions about the gold standard. What made you think you could get away with it? Your best strategy would have been to ignore gold. Although I concede that with the endgame of the regime of irredeemable paper money near, you might not be able to pretend that people aren’t talking and thinking about gold. You can’t win, Ben. In this letter I will address your claims and explain your errors so that the whole world can see them, even if you cannot.
As it now stands, the US economy faces a “fiscal cliff” in early 2013 – meaningful Government spending cuts AND tax increases at the household level. Nothing like a double whammy, now is there? Unquestionably this is one of the reasons why the Fed has pledged to leave short-term interest rates low for some time. So what happens if nothing is changed and both tax increases and spending cuts are allowed to materialize? Although it’s an approximation, the deadly combo could shave 1.5% plus from US GDP next year. Estimates from the Congressional Budget Office are for a more meaningful contractionary impact. And that’s before the ultimate global economic fallout influence of Europe and China slowing. But there is a larger and very important issue beyond this, although the “cliff” is something investors will not ignore and could be very meaningful to forward economic and financial market outcomes, especially given the relative complacent market mood of the moment.
We all know there is no shortcut to anything worth having--mastery, security, wealth-- yet all we have in America is another useless, doomed shortcut. Insolvency is scale-invariant, meaning that being unable to live within your means leads to insolvency for households, towns, corporations, states and national governments. There is no shortcut to living within one's means. Expenses must align with revenues or the debt taken on to fill the gap will eventually bankrupt the entity--even an Empire. We know this, but all we have in America is the shortcut of borrowing more to fill the gap between revenues and expenses. The Federal government is borrowing a staggering 40% of its budget this year--and it has done so for the past three years. Despite all the fantastic predictions of future solvency, the cold reality is that no plausible level of "growth" will close the gap: either expenses must be cut by $1.5 trillion or tax revenues raised by $1.5 trillion or some combination of those realities.
Watching pompous politicians, egotistical economists, arrogant investment geniuses, clueless media pundits, and self- proclaimed experts on the Great Depression predict an economic recovery and a return to normalcy would be amusing if it wasn’t so pathetic. Their lack of historical perspective does a huge disservice to the American people, as their failure to grasp the cyclical nature of history results in a broad misunderstanding of the Crisis the country is facing. The ruling class and opinion leaders are dominated by linear thinkers that believe the world progresses in a straight line. Despite all evidence of history clearly moving through cycles that repeat every eighty to one hundred years (a long human life), the present generations are always surprised by these turnings in history. I can guarantee you this country will not truly experience an economic recovery or progress for another fifteen to twenty years. If you think the last four years have been bad, you ain’t seen nothing yet. Hope is not an option. There is too much debt, too little cash-flow, too many promises, too many lies, too little common sense, too much mass delusion, too much corruption, too little trust, too much hate, too many weapons in the hands of too many crazies, and too few visionary leaders to not create an epic worldwide implosion. Too bad. We stand here in the year 2012 with no good options, only less worse options. Decades of foolishness, debt accumulation, and a materialistic feeding frenzy of delusion have left the world broke and out of options. And still our leaders accelerate the debt accumulation, while encouraging the masses to carry-on as if nothing has changed since 2008.
In the initial stages of nearly every recorded tyranny, the saucer eyed dumbstruck masses exhibit astonishing and masterful skill when denying reality. The facts behind their dire circumstances and of their antagonistic government become a source of cynical psychological gameplay rather than a source of legitimate concern. Their desperate need to maintain their normalcy bias creates a memory and observation vacuum in which all that runs counter to their false assumptions and preconceptions disappears forever. It is as if they truly cannot see the color of the sky, or the boot on their face. The concrete world of truth becomes a dream, an illusion that can be heeded or completely ignored depending on one’s mood. For them, life is a constant struggle of dissociation, where the tangible is NOT welcome… This is the problem that we in the Liberty Movement deal with most often in our writings and films. Our confrontation with willful ignorance has been epic, even by far reaching historical standards. The gains in social awareness have been substantial, and yet the obstacles are incredible. Unprecedented. As an activist trend, we have an almost obsessive drive to draw back the curtain so that the public has at least the opportunity to see what is on the other side. Unfortunately, there is another danger that must be taken into account…
The United States of America (and the rest of the world for that matter) has not fundamentally grown much at all over the last 40 years. We have instead replaced fundamental growth with the illusion of growth brought on by constantly increasing the monetary supply, aka, inflation. But like any good Ponzi scheme, even this one has a limit and investors briefly approached it in 2008. When it looked like our global banking system was going to collapse, investors started dumping everything in site, essentially a de facto rejection of dollar based assets. Alas, this terrible 'fiat' system is finally coming to its' inevitable end. And good riddance at that. The death of fiat money will be the best thing to happen to human freedom and liberty in over 100 years. However, you must realize that the deflation associated with the collapse of the dollar-based fiat monetary system will wipe out decades worth of false asset price growth in a very short time. Think days or months.
A few words on this IMO must watch lecture - Niall Ferguson: Empires on the Edge of Chaos While Fergie is brilliant in his historical analysis, he gets a few niggling points wrong - Which I suspect is in part from having an Anglocentric viewpoint, which leads one to ignore some fairly hushed up (by the MSM) points of the good 'ol US of A, and in part from his rather British nature of believing in above all else, order, honoring of contracts, rule of law, and other quaint genteel notions of civil society.
We've read mixed reports about how lofty gold and silver prices are affecting demand in India. One month we're told demand is up, and the next it's supposedly down. I'm not suggesting that official reports are inaccurate, but it is admittedly confusing and doesn't help us understand the real trend in the country. Why should we care about the gold market in India? Well, let's face it; the nation is one of the biggest consumers of the metal, a major driver that can give us hints about demand and investment trends, along with what to perhaps eventually expect here in North America. But reading third-party reports about India is very different than getting information firsthand from a credible source in the country. I wanted to get to the bottom of what's really going on in India by talking to a reputable bullion dealer who could give me the inside scoop, an up-to-the-moment dispatch from the front lines, as it were. So I did just that.
The sharp drop in the personal savings rate in the month of February, which just hit to lowest level since January of 2008, is indicative of the problem. While personal savings rates could be bled down further to sustain the current level of subpar economic growth - the world today is vastly different than prior to the last two recessions where access to credit and leverage we very easy to obtain. It is entirely possible, that in the very short term, we could see personal consumption expenditures continue to make some gains even in the face of the obvious headwinds. However, it is important to keep these month to month variations in context with longer term historical trends. Personal consumption is ultimately a function of the income available from which that spending is derived. As such, the current decline in the growth rate of incomes, without the tailwind of easy credit, poses a much greater threat to the current level of anemic economic growth than we have seen in past cycles.
Guest Post: Welcome to the United States of Orwell, Part 4: "Consumer Protection" Just Another Federal Reserve Power GrabSubmitted by Tyler Durden on 03/29/2012 14:22 -0400
This is truly Orwellian: the latest and greatest Executive Branch/Federal Reserve power grab is labeled "consumer protection." I am indebted to correspondent Jim S. who seems to be one of the few Americans to have actually sorted through this monstronsity and gleaned its true nature: an unprecedented extension of Executive (i.e. Imperial Presidency) and Federal Reserve power. Let's start by recalling that the Federal Reserve is a consortium of private banks. Calling a private consortium of banks the "Federal Reserve" is the original Orwellian misdirection, for there is nothing "Federal" about the Federal Reserve. It is not a government agency. Now guess who will fund and control this vast new bureaucracy of "consumer protection"? Yes, the private consortium known as the Federal Reserve. "The Consumer Financial Protection Bureau (CFPB) will be an independent unit located inside and funded by the United States Federal Reserve. It will write and enforce bank rules, conduct bank examinations, monitor and report on markets, as well as collect and track consumer complaints." Since managing the money supply and interest rates is the ultimate "consumer protection," we can ask how well the Fed managed those tasks in the past 15 years: alas, their management has been catastrophic for the nation and the middle class, which has been gutted by their policies of serial bubble blowing, leveraged speculation and bank predation.
Rising geopolitical tensions and high oil prices are continuing to help renewable energy find favour amongst investors and politicians. Yet how much faith should we place in renewables to make up the shortfall in fossil fuels? Can science really solve our energy problems, and which sectors offers the best hope for our energy future? To help us get to the bottom of this we spoke with energy specialist Dr. Tom Murphy, an associate professor of physics at the University of California. Tom runs the popular energy blog Do the Math which takes an astrophysicist’s-eye view of societal issues relating to energy production, climate change, and economic growth.
In the interview Tom talks about the following:
Why we shouldn’t get too excited over the shale boom
Why resource depletion is a greater threat than climate change
Why Fukushima should not be seen as a reason to abandon nuclear
Why the Keystone XL pipeline may do little to help US energy security
Why renewables have difficulty mitigating a liquid fuels shortage
Why we shouldn’t rely on science to solve our energy problems
Forget fusion and thorium breeders – artificial photosynthesis would be a bigger game changer