China Cannot Afford to Buy Gold

Peter Souleles B. Com. LLB.

Putting Things in Perspective

China has 1,054 tonnes of gold. So what? With a population of 1,336,260,000 people, that equates to 0.78 grams per person. You need three times that amount for just one wedding band. Just to give you an idea of how ridiculous their holding is, it should be pointed out that debt ravaged Greece with its 112.4 tonnes has the equivalent of 9.98 grams per person or 12.79 times more than China. In fact China would have to buy an additional 12,282 tonnes of gold just to match a bankrupt Greece. The market value of this additional purchase would be over $440 billion. If China wanted to match the USA on a per capita basis (presuming there is any gold in Fort Knox) it would have to purchase over 34,000 tonnes and pay over $1.2 trillion.

China also has $2.3992 trillion in foreign exchange reserves. Now that is a truly astounding figure until you realize two things. Firstly, this equates to only $1,795 per person. Secondly, the largest allocation is in dollar denominated assets. Whilst the standard of living in China is climbing in leaps and bounds it should be kept in mind that the improvements are off a very low base and secondly they are quite unevenly distributed.

The Problem

The point to the above is not to belittle the gargantuan size and progress of the People's Republic of China. It is to point out how futile it would be for China to aspire to a quick, visible or meaningful increase in its gold holdings by entering the market with its bulging wallet sticking out of its back pocket.

China produces around 300 tonnes of gold a year locally. There is little doubt that the bulk of this disappears into its holdings unnoticed. There is also little doubt that China is still buying gold on the international market in quantities and through intermediaries designed to not attract attention.

What is almost certain is that it will be a long time before China announces its gold holdings again. The last announcement sent a telegraphic surge through the gold market's pulse and they are unlikely to want to repeat that effect.

The irony in all this is that neither China nor the USA is going to be open and frank about their gold holdings but for totally opposite reasons. China wants to conceal its build-up of gold reserves whilst the USA is probably trying to conceal its run-down of reserves. It's a funny world.

In view of the above China will accumulate gold quietly, slowly and at the times of its choosing. It is not improbable that China is adding anywhere up to 500 tonnes per annum to its gold stockpile. If we knew this for a fact, the price of gold would shoot up. Instead, China keeps its mouth shut and enjoys a lower acquisition price. The rest of the gold community gets depressed and allows itself to be played by the manipulators.

The Bigger Problem

In the meantime, Yi Gang who is the Director of the State Administration of Foreign Exchange in China stated that "China's investment in the treasury bonds of the U.S. is based upon market behavior and should not be politicized." Now this man is no fool, but politics and investment on that scale are inextricably woven and connected and therefore unavoidably become politicized. There are serious ramifications if the delicate balance between the two is disrupted.

China has kept its currency peg to the US dollar largely in place for a number of reasons which have been identified on numerous occasions. In a nutshell this pegging basically allows China to continually feed off the US consumer whilst holding the US economy and therefore the United States to ransom. That is the macro view of the relationship. On a micro level we witness slight variations in the exchange rate as well as the level of purchases or sales of US paper when it wants to send subtle messages. At other times, it either allows Geithner to be ridiculed by Chinese University students or switches to pronouncing the importance of the US/China relationship.

While China can find nations that will accept US dollars for the payment of oil, resources as well as income producing assets such as gold mines, land etc it will keep the dollar alive in what is potentially a dangerous game of pass the parcel. The pegging though serves another purpose apart from exchange rate advantages vis-a-vis other export nations by allowing it to conceal the damage being done to the value of its holdings of US denominated assets. Had China allowed its currency to float freely, the game would be over. At the same time China's financial infrastructure is not quite ready to deal with such a scenario.

China is too calculating and is constantly shifting its position and shape to achieve its end goals. For example, the LA Times recently reported:

"China isn't buying trophy properties that might incite anger from the American public. It's also using local American partners, in order to provide even further political cover.

The largest Chinese investments in the U.S. have come from state-owned firms, primarily a $300-billion fund known as China Investment Corp. It initially targeted well-known financial companies, spending billions to buy stakes in private equity giant Blackstone Group and investment bank Morgan Stanley.

But after getting burned by the financial crisis that emerged in 2008, the sovereign wealth fund has been shifting to real estate. Its investments in the last year have included hundreds of millions of dollars in real estate-related funds managed by Oaktree Capital of Los Angeles, Goldman Sachs Group Inc. and BlackRock Inc."

The Cunning Excuse

China could easily have made an announcement up front to eliminate the possibility of it buying the remaining gold offering from the IMF. It refrained from doing so, so as to watch the market first inflate and then deflate through depression. When it finally announced that it would not buy, the following snippet appeared in Bloomberg's:

March 9 (Bloomberg) - Gold is "unlikely" to be China's primary investment to diversify its reserve holdings because of price risks, Yi Gang, head of the State Administration of Foreign Exchange, said today.

The "gold price has had handsome gains in recent years," Yi said at a briefing in Beijing today. Still, "if we look at the past 30 years, it had big ups and downs."

To not purchase the IMF's parcel on the basis of price risks is laughable, particularly when the dangers of holding US paper and Euros are far greater. This also begs the question as to why they bother buying their own local production of gold? Once again, Mr Yi is not stupid, he is simply making an announcement that suits the behind the scenes efforts and aspirations of his nation. Finally, Yi Gang states that gold is unlikely to be the PRIMARY investment. This simply means that gold will nevertheless continue to be on their shopping list.

Conclusion

Gold is the ultimate asset but does not exist in a vacuum. For this reason, readers must be constantly sensitive to any information as well as any movements that China makes in relation to Treasury Note purchases and sales, its stranglehold on rare earth metals, its constantly improving relationships and trade flows with various nations, its own internal surging demand but also lopsided investments and finally the fate of the European Union. If the Euro bites the dust maybe the purchase of gold might not seem so risky after all.

China is still slowly stripping the USA at its leisure. Only recently, the Chinese Commerce Minister Chen Deming called on the US to loosen high-tech exports to China to bridge the trade gap. What can I say? If past performance is any indication of future performance, the USA is more likely to find itself in the gap rather than bridging it.

In the meantime we lesser mortals will be entertained by two gladiators (the US and China) engaging in a game of cat and mouse in the economic and financial arena's of the world. During the intermissions in this game make sure you buy a little gold and silver.

PETER SOULELES B. Com LLB Sydney Australia 10 March 2010

Entropy - Why the World as We Know It Is Dying

David Galland

The concept of entropy is one of the most useful terms for understanding just about everything. While it has its origins in natural law - thermodynamics, specifically - the concept holds true pretty much across all closed systems.

In the simplest of terms, every closed system will ultimately degrade toward a state of maximum entropy.

I'll use the current political system of the U.S. as a convenient example. When American democracy was first shoved out of the nest by the founding fathers, it was new, fresh, and energetic. It took the world's breath away at its boldness and unlimited promise, and set the wheels turning on tangible change across much of the world.

Before the ink dried on the Constitution, however, the degradation began. From the beginning, the country's political operations fell into the hands of a strictly limited number of parties, which quickly coalesced into just two. Since then, they have essentially shared power, with only minor differences in policies between the two. Simply, absent a disruptive external force, the closed political system quickly matured into an institutionalized "sameness" that all but assures no serious challenges - leading, ultimately, to the certainty it will degrade to only a shell of its former self.

It was, perhaps, because of his own understanding of natural law that Thomas Jefferson was heard to remark, "The tree of liberty must be refreshed from time to time with the blood of patriots and tyrants. It is its natural manure."

That doesn't mean I am advocating revolution - just pointing out the fact that any closed system, no matter how well constructed, will degrade. To expect the United States of America to avoid this fate is to expect the impossible.

Switching to a corporate example, I used to be a regular buyer of Toyota cars. They were well made, innovative, and suited my changing needs over the years. And I wasn't alone - in 2007 they became the world's largest automobile maker, with a global manufacturing and distribution system that made them appear dominant. Behind the scenes, though, entropy was at work.

In 2008, when the time had come to lease a new car, I reflexively headed over to the local dealer fully expecting to drive off with yet another Toyota, just as I had done several times over the previous decade or more. But as I walked around the showroom, it was impossible not to notice that the company had lost its edge. The cars on offer were not only more expensive than the competition, but even the newest models had that "so yesterday" look about them.

Surprising even myself, I walked out and ended up leasing from another company. I remember vividly at the time saying to my wife that we should short Toyota's stock. Of course we didn't - but if we had, it would have been a good play, as you can see in the chart of the company's stock price here. Note that Toyota's share price peaked in 2007, almost concurrently with it becoming the world's largest car company.

As I said at the onset, you can see entropy at work in virtually every closed system. Consider the U.S. dollar, which became the world's de facto reserve currency as a result of Bretton Woods. What an amazing advantage for the United States - this unique ability to provide the world's central banks with their primary reserve component! And to have all the world's commodities dealt in dollars. In short, the dollar became the centerpiece of the global economic system.

It was, of course, damned to entropy, with Nixon's ending the dollar's gold backing just being part of the natural progression. And if he hadn't done it, one of his successors would have - due to some "emergency" or as a "temporary" measure, or some other flimsy political cover. Regardless, the degradation of the currency gained speed and, systematically, it's been all downhill since.

You may also want to think about entropy when pondering the Chinese miracle. No question, China is having a heck of a run. As James Quinn writes in his article "Is China's Recovery a Fraud?" in the February edition of The Casey Report, in 1970 that country's GDP was just $92 billion. Today it is $4.9 trillion!

"Unstoppable!" cheers the punditry. The Chinese leadership, whose capable hands are very much on the levers of the macro-economy, are cut from special cloth, they add.

In answer to that, Quinn points out that despite China being an export-based economy, purpose-built to supply goods to a U.S. population engaged in a mad rush to spend themselves into debt and default - which is to say, an economy now only a memory - there is currently 30 billion square feet of commercial real estate under construction in China.

I'm not sure if bowling is popular with the Chinese, but with all that spare space, some enterprising individual might want to consider promoting it as the coming thing. Roller rinks? Indoor laser tag centers?

Meanwhile, back in the U.S., we the people are no longer content with a free-market system that embraces periodically burning down the house in order to rebuild stronger and better - a system which has been proven to create wealth, and lots of it. Instead, we are hell bent on adopting the closed economic system of a socialist model where everything and everyone is tightly controlled.

On that point, a recent article in the Wall Street Journal titled "No Exit in Sight for U.S. as Fannie, Freddie Flail" sheds light on the continuing degradation in the free market that used to underpin the nation's hugely important housing sector...

Fannie and Freddie, for their part, remain at the core of a housing-finance system that inflated a dangerous housing bubble. After prices collapsed, sending shock waves around the world, the federal government put America's housing-finance system on life support. It has yet to decide how that troubled system should be rebuilt.

On Dec. 24, Treasury said there would be no limit to the taxpayer money it was willing to deploy over the next three years to keep the two companies afloat, doing away with the previous limit of $200 billion per company. So far, the government has handed the two companies a total of about $111 billion. (Full story here.)

Can't you just smell the entropy? The results are not just predictable, they are evident - just look around.

As investors, it is, I would contend, important to understand the notion of entropy - and to watch for it in your portfolio companies, in your bureaucracies, and, on a more personal level, your relationships and your health. On that last point, the human body is very much a closed system and so, as we all are too painfully aware, will degrade until it ceases to exist.

You can slow the degradation by taking care of yourself. But it's also worth remembering that it's a one-way slope, so enjoy yourself while you are fit and able to.

While it's impossible to halt entropy, what you can do is take action to protect yourself and your assets from its effects. That's what the editors of The Casey Report do best: recognize and examine emerging trends in the economy and markets, and help investors take advantage of the opportunities that arise from them. And profits are everywhere if you know what to look for - even in the worst economic crises. Click here for more...

© 2010 David Galland, Managing Director, Casey Research

David Galland is the Managing Director of Casey Research, LLC., publishers of Doug Casey's International Speculator which provides unbiased research and recommendations on the highest quality junior exploration companies.

Casey Research has also recently launched a brand new monthly advisory, The Casey Report, which focuses on the most powerful trends now driving the U.S. and global economy, and how to profit from those trends. As a special introductory offer, when you subscribe to either the International Speculator or The Casey Report before the end of July 2008 you will receive the other free of charge for as long as you remain an active subscriber. Plus, your subscription comes with a full three month money back satisfaction guarantee... so you have nothing to lose when you try these publications today. Learn more about this special offer now

AUTO: MERCATO EUROPA;CRESCE A FEBBRAIO,MA ATTESO TONFO/ANSA

(di Graziella Marino) (ANSA) - ROMA, 10 MAR - Sempre in progresso a febbraio il mercato dell'auto in Europa, ma ancora per poco. E' la lettura che gli analisti del settore danno delle stime elaborate sulle nuove immatricolazioni di febbraio in Europa occidentale, che indicano un progresso tra il 4,4% (J.D.Power) e il 5% (Global Insight) rispetto a febbraio 2009. In attesa dei dati ufficiali dell'Acea, che saranno diffusi il prossimo 16 marzo, la stima di febbraio evidenzia un forte ridimensionamento della crescita registrata in Europa occidentale a gennaio (+15,7%). Questo - spiegano gli analisti - perché la spinta degli ordini inevasi del 2009, accumulati grazie agli incentivi alla rottamazione, si sta gradualmente esaurendo e in molti Paesi europei i sostegni statali all'acquisto di auto nuove sono terminati o diminuiti di entità. Pertanto, si prevede una flessione del mercato in Europa occidentale già a partire dai prossimi mesi ed un calo compreso tra il 10% e l'11% per l'intero 2010. In particolare, J.D.Power stima per fine anno un calo delle nuove immatricolazioni in Europa occidentale del 9,6% a quota 12,33 milioni di unita', mentre Global Insight e' meno ottimista e vede nel 2010 una flessione a due cifre di quasi l'11% (precisamente del 10,9%), con un mercato che si dovrebbe fermare a 12 milioni di immatricolazioni. Secondo gli analisti, a guidare la flessione dei prossimi mesi saranno proprio quei mercati, come Francia, Spagna, Gran Bretagna e Italia che finora hanno segnato i progressi maggiori grazie all'effetto incentivi. Il tonfo maggiore e piu' repentino lo fara' l'Italia dove, quasi certamente, il programma di incentivi governativi all'auto non sara' rinnovato. Piu' graduale, invece, sara' il calo delle vendite in Francia, dove gli incentivi sono ancora in corso ma sono stati ridotti da 1.000 a 700 euro con ulteriore riduzione nel mese di luglio a 500 euro. In Spagna invece i cali piu' accentuati arriveranno nella seconda meta' dell'anno, con la fine degli incentivi, che in Gran Bretagna saranno in vigore invece fino alla fine di marzo. Tra i grandi mercati europei resta la Germania, dove proseguira' la flessione delle vendite, iniziata gia' dallo scorso dicembre a seguito della fine degli incentivi a settembre 2009. Sempre sul fronte europeo, e a corredo della notizia arrivata oggi dall'Istat di una crescita della produzione di auto in Italia a gennaio del 44,1%, gli analisti di J.D.Power hanno stimato la produzione di auto in Europa nel primo mese del 2010. L'analisi evidenzia un incremento nel Vecchio Continente del 36,9% con una produzione di 1.224.091 unita', contro le 893.961 del gennaio 2009. Forte spinta anche per la produzione in Europa del gruppo Fiat di cui si stima una cresciuta a gennaio del 56,5% a 96.742 unità, suddivise quasi a metà tra impianti in Europa occidentale (47.046 unità) e impianti in Europa Centrale e Orientale (49.696 unità). (ANSA) ISIN:IT0001207098,IT0001976403.

The One Idea that Destroyed America

Porter Stansberry

I have a major announcement to share with you. We are launching a very big new business - a bank. I'd always thought publishing was a great business... but I've found something much, much better - banking!

Banking will allow me to leverage my capital 15 to 20 times. It offers me guaranteed profit margins, thanks to the Fed's manipulation of interest rates. And best of all, it's completely backed by the government. No matter how many dumb loans I make to my cronies and political backers, I'll never lose a cent. It's truly the greatest business in the world. I've been working hard to think of an appropriate name for a business like this... I think The Socialist National Bank has quite a ring to it. What do you think?

I'm only kidding, of course. But a lot of entrepreneurs had the same idea over the last couple decades. And you can hardly blame them. Banking lies at the heart of our capitalist system. Bankers literally decide who gets capital and who doesn't. And yet banking relies completely on a socialist promise: The state insures all bank deposits. At the end of the day, it's really the taxpayers who own all of the banks.

Assuming you know a little bit about the history of state-run banks, you won't be surprised to learn taking all of the risks out of banking results in lots of bad loans. We've already seen how the government's guarantee of residential mortgages via Fannie and Freddie resulted in trillions of losses.

Now all of the same kinds of problems are showing up in commercial mortgage loans. These loans are the mainstay assets of regional and local banks. Most of these loans have seven-year durations. And most of these loans are interest-only. So over the next three to four years, all of the bad loans made during the real estate mania from 2004-2007 are going to come due. It's going to be a complete disaster.

Already 7.1% of all commercial real estate loans are more than 90 days overdue. That's double the default rate of a year ago. Construction and development loans are performing even worse, with a default rate of 16%. The FDIC says more than 700 regional and local banks are in immediate danger of failing. And there are a lot more to come.

At some point between now and 2012, I expect between 500 and 1,000 regional and local banks to fail. Residential loan losses have been enormous - but were borne mostly by hedge funds, large investment banks, and the two enormous agencies of the U.S. government, Fannie and Freddie, which guarantee nearly half of all residential mortgages. Commercial real estate loans, on the other hand, carry no such guarantees. They are the principal assets of regional and local banks.

It's pretty amazing the United States, which considers itself the leading capitalist economy in the world and the land of the free, has at its core a completely statist monetary and banking system. In fact, most of the real risks of our entrepreneurial system are borne by the taxpayers, not the capitalists. Think about it. Assuming you borrow money to launch a business, who is really taking the risk? The bank. And who insures the bank's depositors against the risk of loss? The FDIC. And who insures the FDIC? You and me, my friend. The taxpayers.

I've enjoyed watching so-called conservative television pundits arguing about whether or not they dare to call OBAMA! a socialist, as if using the word will tarnish their credibility. Meanwhile, as any serious economist could tell you, the United States has been a socialist country since the administration of Franklin Delano Roosevelt. Of course, we have a different kind of socialism than Europe.

In Europe's version of socialism, the government owns the means of production outright. In America, we don't like the appearance of the government owning everything, so we don't actually transfer title. We just shift all of the risks of ownership to the government. In this way, private interests can claim all the profits of enterprise, while all of the risk of loss can be shifted to the taxpayers. We ought to call our version Socialossism - because we're only socializing the losses, not the profits.

Alas, taxpayers rarely approve enormous increases to the size of the government. So to sell Socialossism to the public, the promoters claimed these policies were merely insurance schemes, which would never cost the public a dime. You've heard them do it many times. They say the government is here to help. They say the problem with socialism is government power is being used in the wrong way. They promise to deliver all of the benefits of big government with none of the costs.

There's only one problem: None of their insurance schemes are ever solvent, or even close to solvent. Like Social Security. Or Medicare. Or the FDIC. The only difference between Socialossism and Bernie Madoff is you had to be a rich New Yorker or Palm Beach socialite to do business with Madoff.

What will happen, we wonder, when the people discover what's really happened to our country over the last 30 years? We don't know, of course. We hope the promises of Socialossism are revealed for what they really are - a pile of lies that's led to an economy based on debt that will never be repaid. Haven't you wondered why there's a bank (FDIC) on every corner and a pharmacy (Medicare) on every other? We've built an entire economy around a set of promises (phony insurance schemes) that rely on the creditworthiness of the taxpayer. And he's broke. How ironic is it that the people we call "communists" (China) have been financing our love affair with socialism for the last 30 years?

What does this mean for you and me... for our investments? I have two big, obvious recommendations. One, don't be a creditor to a bankrupt nation that's promised to support an enormous array of insolvent insurance schemes. (Don't own U.S. government debt.) And two, don't hold your savings in the paper money of a bankrupt government that's promised to take care of its entire population through a series of fraudulent insurance schemes.

Crux Note: A subscription to the S&A Digest comes free with Porter Stansberry's Investment Advisory. To learn more about this highly recommened service, click here.

www.thedailycrux.com

Welcome to the Permanent Recession – Food and Transportation Prices Rising

Brian Gordon

If employment is inversely proportional to oil prices (it is), and oil prices are only going to trend up...then employment by necessity is going down. Because oil is so fundamental to our economy, oil price increases ripple through the entire economy.

Take food as an example: current factory farming methods are entirely dependent upon oil from planting to processing to getting the food to market. Certain types of food are also heavily subsidised, especially meat and dairy. Note that these subsidies do not necessarily include oil subsidies, taxpayer-provided roads, subsidised water, and so on. As the price of oil increases, so goes the price of food; in fact this has already been happening in Canada and the United States. Note especially the increase in transportation costs, and both sources cite rises in fuel as a primary driver of inflation, so-to-speak.

If we take subsidised, oil-based factory farming prices as our minimum, and locally-grown, unsubsidised, organic (requiring little or no oil) prices as our maximum, in an environment where oil prices are increasing then the prices of factory-grown foods will tend to approach – and ultimately exceed – those of locally-grown organic.

Now, anybody who has done any grocery shopping recently knows that organic produce, meat, and dairy costs considerably more than factory-grown food, sometimes double or more. As the price of oil increases, more shoppers will switch to organic. Why not? If the cost differential evaporates, why not buy organic?

There is a big problem with this.

Let’s assume this does not drive up the price of organic, because factory farms switch to organic. This is easier said than done, and there are still plenty of oil-based costs (e.g.: for transportation) that will drive up the price of both organic and non-organic food. However, let’s be generous and ignore that.

If all food approaches the price of organic food, everyone not currently buying organic will see their food budget increase proportionally. As food is a necessity, cutbacks will be made elsewhere. Entertainment, purchases of non-necessities, etc. will decline, reducing jobs in those sectors.

Voila, food price increases translate to lower overall employment, aka a recession.

On the plus side, organic agriculture requires more labour and less oil, so there will be jobs there. On the downside, those jobs are typically very hard work for very little pay, which is why we use migrant workers. As long as we continue to do that, there will be unemployed Canadians and Americans with no income to buy the now much more expensive organic produce and animal products.

One way for people to compensate will be to eat less meat, as factory-grown meat is far more energy-intensive compared to vegetables, and therefore will be affected more by oil price increases. Compare the price of free range, organic beef to feedlot beef in your local grocery store, for example. Meat is also one of the most heavily subsidised foods, and no doubt there will be considerable pressure on governments to increase subsidies to keep meat prices down.

How long that can go on is uncertain. Because Canadian and U.S. governments are already heavily in debt and running deficits, any additional subsidies are added to the national debt and increase the deficit. That is clearly unsustainable, and eventually real food prices will have to be paid. The longer the subsidies remain in place, the greater the ultimate pain.

One way for people to compensate will be to eat less meat, as factory-grown meat is far more energy-intensive compared to vegetables, and therefore will be affected more by oil price increases. Compare the price of free range, organic beef to feedlot beef in your local grocery store, for example. Meat is also one of the most heavily subsidised foods, and no doubt there will be considerable pressure on governments to increase subsidies to keep meat prices down.

How long that can go on is uncertain. Because Canadian and U.S. governments are already heavily in debt and running deficits, any additional subsidies are added to the national debt and increase the deficit. That is clearly unsustainable, and eventually real food prices will have to be paid. The longer the subsidies remain in place, the greater the ultimate pain.

The miracle of the Green Revolution was made possible by cheap fossil fuels to supply crops with artificial fertilizer, pesticides, and irrigation. Estimates of the net energy balance of agriculture in the United States show that ten calories of hydrocarbon energy are required to produce one calorie of food. Such an imbalance cannot continue in a world of diminishing hydrocarbon resources.

Eating Fossil Fuels examines the interlinked crises of energy and agriculture and highlights some startling findings:

• The worldwide expansion of agriculture has appropriated fully 40 percent of the photosynthetic capability of this planet.
• The Green Revolution provided abundant food sources for many, resulting in a population explosion well in excess of the planet’s carrying capacity.
• Studies suggest that without fossil fuel-based agriculture, the United States could only sustain about two-thirds of its present population. For the planet as a whole, the sustainable number is estimated to be about two billion.

www.theoildrum.com

Unemployment

Howard S. Katz

Well, the train is pulling out of the station. Gold has said goodbye to the $1,000 level and is off for northern climes. It is not your last chance to get on board, but it is your last chance to get on board at these low, low prices. The hard analysis of the past few months has been identifying the intermediate bottom, but now that that is in it is time to step back and once again focus on the big picture. Friday's Wall Street Journal has an excellent article on unemployment and the "minimum wage" law, and this is a very good time to discuss this most important subject.

The subject of unemployment is the centerpiece of our modern economy. Let us imagine an economic discussion between a "liberal" and a conservative:

"Liberal:" I am a sensitive, caring person. I feel the pain of the lower members of society, and I am on their side. I am in favor of all measures intended to reduce unemployment.

Conservative: That is very commendable. So you go down to your local soup kitchen and devote hours each day to helping the poor?

"Liberal:" No, of course not. But I favor social measures to raise these people up to a higher level.

Conservative: Ah, I see. You favor giving my money to the poor.

"Liberal:" You selfish monster, rugged individualist. How can you look yourself in the mirror in the morning?

Conservative: Oh, I'm sorry. I'm sorry. I'm so ashamed.

The reason that unemployment is so important is that, while it seems to be a political or moral issue, it is also an economic issue. And in fact it is the crucial economic issue of our age. As I have noted in the past, Franklin Delano Roosevelt was a Wall Streeter. In the 1920s, he was the manager of a vulture fund (so called because it swoops down on troubled companies and gobbles them up). On his first day in office, he rammed through legislation to give the power to create money to the commercial banks (working hand in glove with the Federal Reserve). It was passed without hearings in one day (illegally), and members of the House of Representatives did not even have copies of the bill to read when they voted on it.

FDR's objective was to help his Wall Street buddies. He knew (from the experience of WWI) that the issuing of new money by the banks also helps their corporate loan customers, and this is done at the expense of the working people, who suffer a decline in their real wages. In short, FDR wanted to rob from the poor and give to the rich.

If this is what you are trying to do, then you naturally can't tell anybody. And the well-known positions of the New Deal - that it was robbing from the rich to give to the poor and that it was the party of the working man - were blatant lies. The conservative opponents of FDR were unable to counter his policies in the public mind because they were afraid to penetrate the mask of altruism which he employed.

During WWI, prices in the U.S. had doubled. This had caused a significant decline in the real wages of the average working man. At that time, almost every American was saving for retirement, and the depreciation of the currency sharply reduced the retirement savings of the average American. The Republicans of the day arose as the champions of the working man. They adopted the policy of the "good 5 cent cigar," which meant a reduction in the money supply and prices back to the levels of 1914. This policy was successful, and prices (Wholesale Price Index, or what we today call the Producer Price Index) by 1933 were back down to their level of 1914 (and 1793). America had experienced 140 years of stable prices, and the savings of the average Americans were restored to their pre-World War I value.

The Republicans were aware that their policy would cause high unemployment. The exact same thing had happened in the 1870s. At that time, the real wages of the working class were also being restored (after being forced down by the paper money of the Civil War). Higher real wages, of course, lead to unemployment. Employers cannot afford to pay the high wages. Also, wages were not being increased in nominal terms. They were only increased in real terms, in terms of what they could buy. But many working people do not understand real wages. They only think of the nominal figure they are receiving (not what it can buy). In the 1870s, these nominal wages were declining, and many wage earners felt insulted that they were being asked to accept a wage beneath their social status. Rather than accept what they felt was an insult, they lived off their increasing real savings while they sought for a job with pay that was much too high for the prices of the time. An incident from the 1930s illustrates the psychology. A businessman was trying to start up an operation and could afford to pay $40/wk. (about $680 per week in today's money). No takers. So he offered $50/wk. But to get the job in these "bad" times, you had to kick back $10. The workers felt, "I'm a $50 man. I just have to kick back because my employer is unethical, but my status in society is recognized. In the 1870s, America had a free market, and so the unemployment was speedily reduced. The Republicans of the 1920s assumed that the same thing would happen again.

However, the New Deal had a good thing going. They were robbing from the poor to give to the rich. But they had to pretend to rob from the rich. The paper money and easy credit policies of FDR directly benefited Wall Street and the banks. Low real interest rates cause a rise in both stock prices and corporate profits. (Most corporations carry a significant amount of debt.) And of course, it is very much to the benefit of these large corporations to pay lower real wages. Stock prices about doubled from just prior to FDR's inauguration to the end of his first year in office and almost quadrupled by the end of his first term. (These profits far outweighed FDR's progressive income tax, which was done for show and was filled with loopholes)

The Republicans had pursued sound money policies from the end of the Civil War to 1933. These policies had been good for the country and good for the Republicans at the polls. American enterprise produced an explosion in wealth never before seen in any country in the history of the world. Real wages grew by an average of 60% per generation (taken as 30 years). Foreigners flooded into America (to get these higher wages) from all over the world. My ancestors immigrated to America at this time, and it is natural to assume that this large inflow (of immigrants willing to work for very low wages) would have caused unemployment among American workers. Natural but wrong. Historical Statistics of the United States, Colonial Times to 1954 (published by the U.S. Commerce Dept.) lists the unemployment rate for the U.S. in 1906 as 0.8%. That is, it was less than 1%. Those foreigners were being snapped up as they walked off the boat.

This illustrates the unemployment problem of the time. (Today, of course, it is almost 10%.) Indeed, there was no word for unemployment in America prior to the 1870s because there was just no problem.

Further, America is a very good model for the study of unemployment because it went through all of the stages which theoretical economics predicts. When the Pilgrims landed at Plymouth Colony, they were organized under communism. So the question of unemployment did not arise. They abolished communism in March 1623 (according to the diary of Gov. William Bradford). The conversion to private property "had very good success," and the holiday of Thanksgiving was instituted to celebrate the new system of private property. This first Thanksgiving, by the way, was celebrated at the end of July 1623 (about Aug. 8-9 taking account of the calendar change of the 18th century). Thus Plymouth Colony converted to a self sufficient economy.

Then people began to specialize (division of labor), and each person produced the goods at which he was best (leading to another large increase in wealth). They exchanged their goods using the medium of money. Then, some of the older members of the community realized that they could increase production even more by hiring younger workers and training them. Thus was the relationship of employment born, and the producers of society became divided into employer and employee. This benefited both the young employee and the older employer. Everyone was better off.

The type of phonies and frauds who pander to the paper money faction usually argue that a "capitalist" economy cannot provide full employment. (What the blazes is a capitalist economy? The term was coined by Karl Marx, and I have never heard a definition of capitalist. It changes its meaning from day to day and does nothing more than confuse people who think in terms of it. I advocate a free economy, not a capitalist one.)

Is this true? Is a free economy unable to provide full employment? I would suggest that these people look at the facts. As the employer-employee relationship proved profitable, employers developed a hunger for more and more employees. They kept hiring more and more people. First they hired fellow Americans off the farms, and the late 19th century is a time when Americans flooded from the farms to the cities to get the higher wages of a job. When they ran out of Americans to hire, they started to hire foreigners. The desire of American employers for more workers is insatiable, and there is only one force which can trump it.

This is as follows. Once the New Deal had established (in people's minds) that it was the party of the working man and that FDR was a traitor to his social class, it found that it needed to increase unemployment. If unemployment was temporarily high, ignorant working people would vote Democrat. High unemployment equaled a Democratic victory.

One of the ways this was accomplished was by backing the Union movement of the day. Union workers (competing with ordinary Americans for jobs) were given the right (by the National Labor Relations Act) to beat up non union workers competing for the same job. These non-union workers were intimidated and forced into unemployment.

Another of the ways was by enacting what are fraudulently called minimum wage laws. If you actually read these laws, they do not guarantee anyone a minimum wage. If the worker's wage is to be raised, somebody has to pay the extra money, and these laws do not provide any extra money. The employer simply evades this intent by not hiring the worker, and workers whose labor value is not worth the legal minimum find themselves unemployed. The Friday WSJ article ("The Lost Wages of Youth") demonstrated that the recent increase in the "minimum wage" (2007-09) from $5.15/hr-$7.25/hr caused massive unemployment, hitting the lowest level of workers hardest. Total teenage unemployment rose from 15% of the labor force to 27%. Black teenage unemployment rose from 38% to almost 50%. These unemployed teenagers, being idle, drift into crime, and the black-on-black murder rate in this country is horrific. (It should be noted that the first unemployment statistics to separate black from white unemployment showed that the two were almost the same. This was in 1940, when American society was openly racist and blacks were the victim of heavy discrimination. Since that time, due to the "minimum wage" laws, black unemployment has risen to double white despite numerous laws prohibiting discrimination by race.

A third technique was to put burdens on employers, such as making them pay health care costs. Today this makes it almost impossible for older workers to get jobs because health insurance for these people is prohibitively expensive. In sum, the cause of unemployment in America is the (New Deal version of the) Democratic Party. If a magic wand could be waved which transported all Democrats to the planet Klingon, then unemployment would pretty much disappear in America, and our economy would dramatically revive. Meanwhile the Klingon economy would collapse, and their unemployment rate would go through the roof.

But the most common way of increasing unemployment is via the Federal Reserve. The Fed has had a repeated policy since it was created of first easing and then tightening credit. The easing brings profits to credit sensitive industries (such as housing) and draws workers into jobs created in those fields. But then the money created by the Fed causes higher prices and a public demand for the Fed to tighten. Then we have a period of higher interest rates (e.g., 1979-81) and the jobs created originally are now abolished. (Today's unemployment rate is mostly caused by the Fed tightening of 2004-06). I have charts on the economy going back to WWII, and one can clearly see the Fed easings, followed by a drop in unemployment, and the Fed tightenings, followed by a rise in unemployment. This is the part of the unemployment cycle which gets all the attention from our (short-term oriented) media.

In these articles, I try to present an economic overview so that you can get an appreciation for the massive irrationality and ignorance of facts which pervades our society on the subject of economics. For people who already understand this and are looking for specific advice on how to protect yourself (and profit) from the dishonest policies of our government, I publish a fortnightly (every two weeks) newsletter which gives specific buy and sell signals and discusses tactics (such as whether you should be in gold or gold stocks, and what kinds of stocks). This newsletter is The One-handed Economist, and the cost is $300 per year. (It has proven a very good investment for subscribers over the past 10 years). You may subscribe either by going to my web site, www.thegoldspeculator.com and hitting the Paypal button or via the old fashion way by using the U.S. mail. Simply send a check to: The One-handed Economist, 614 Nashua St. #122, Milford, N.H. 03055. I am increasing the cash discount for using the mail to $10. So include a check for $290. (However, OHE has been at the same price for a decade, and a cost of living adjustment is due to keep the real price the same. This is a few months away.) We do not accept credit cards. OHE is sent primarily via e-mail, so be sure to include your e-mail address. But any subscriber is free to request regular mail delivery as well as e-mail.

Thank you for your interest.

thegoldspeculator.blogspot.com

Breve commento sul referendum islandese

di Francesco Rossi - 10/03/2010 Fonte: eurasia [scheda fonte]

Il risultato del cosiddetto referendum “Icesave” non lascia adito a dubbi interpretativi. Il 92.3% dell’elettorato islandese ha sonoramente bocciato il nuovo disegno di legge, approvato dal parlamento il 30 Dicembre 2009, che prevedeva una restituzione dei “prestiti” britannici ed olandesi slegata dall’andamento economico del paese nei prossimi anni. Londra e l’Aia avevano unilateralmente risarcito i propri cittadini rimasti vittime del fallimento di Landsbanki e della sua banca online Icesave. Da allora, negoziati triangolari tra Islanda, Gran Bretagna ed Olanda si sono succeduti senza sosta: il Tesoro di Reykjavik ha sempre confermato la sua disponibilità a garantire le somme già versate da Londra e l’Aia. Il problema, piuttosto, ha riguardato il “quanto”, il “quando” ed il “come”.

Nel mio articolo sulla vicenda, preannunciavo una bocciatura per l’Icesave II con un voto contrario pari al 53%. L’approccio elettorale utilizzato per elaborare la previsione, pur non essendo “statico” (venivano considerati, per esempio, i trend di consenso per ogni partito), si basava su diversi presupposti, diciamo così, “non-dinamici”. Due di questi, in particolare il fatto che l’affluenza alle urne fosse in linea con l’affluenza media delle consultazioni legislative ed il fatto che non succedessero eventi politici rilevanti nei giorni precedenti alla consultazione, non hanno trovato conferma.

A poche ore dal voto, la dichiarazione del Primo Ministro Jóhanna Sigurðardóttir, secondo la quale il referendum sarebbe stato inutile poiché un nuovo accordo era già “sul tavolo”, ha avuto un effetto dirompente sull’elettorato. Molti elettori di centro-sinistra (e della sinistra estrema), teoricamente i più propensi a votare in favore dell’Icesave II, hanno disertato le urne (come, tra l’altro, lo stesso Primo Ministro): rispetto alle ultime elezioni politiche, l’affluenza è scesa dall’85% al 63%. Gli altri elettori di sinistra, preferendo seguire il Presidente socialdemocratico Ólafur Ragnar Grímsson (piuttosto che un premier che prima aveva voluto il nuovo disegno di legge, per poi rinnegarlo) e desiderando mandare un segnale forte all’intera comunità internazionale, hanno votato contro la nuova normativa Icesave.

Occorre ora rispondere a due domande: che tipo di segnale ha voluto mandare il popolo islandese? E perché Jóhanna Sigurðardóttir, il primo capo dell’esecutivo nella storia islandese ad essere filo-europeo, ha lasciato mettere a rischio l’ingresso dell’Islanda nell’UE?

Partiamo dalla seconda domanda. Non c’è dubbio, nonostante le rassicurazioni di Bruxelles, che il referendum di ieri abbia fortemente compromesso il cammino di Reykjavik verso l’Unione Europea. Altrettanto evidente è il fatto che di accordi sicuri “sul tavolo”, come li ha definiti Jóhanna Sigurðardóttir, non ve n’è traccia. Inoltre, quello ch’è certo, è che il Primo Ministro, ormai conscio di difendere una causa perdente (o, come ha testimoniato il mio articolo, a forte rischio di sconfitta), ha deciso di distanziarsi sempre più da quello stesso provvedimento votato poco prima in parlamento. Non è un caso che Jóhanna Sigurðardóttir abbia dichiarato, a qualche ora dal voto, che un eventuale esito negativo del referendum non avrebbe in alcun modo minato la stabilità del governo. Dunque, perdere una battaglia oggi per non perdere una guerra, la guerra per il controllo dell’esecutivo islandese. È da vedere se tale ragionamento sia corretto: le conseguenze politiche del referendum, in realtà, sono tutt’altro che prevedibili.

Per quanto concerne invece il primo quesito, emerge chiaramente come il popolo islandese, oltre ad aver perso quasi totalmente la fiducia nei confronti della propria classe politica, abbia voluto mandare un chiaro segnale alla comunità internazionale: “non pagheremo noi gli errori delle nostre banche”, è stato lo slogan che ha accompagnato i cortei e le manifestazioni contro il nuovo disegno di legge Icesave. Certo, questo non è precisamente il messaggio che i politici islandesi hanno rivolto a Londra e l’Aia negli ultimi mesi: nella loro opinione, come già ricordato, in ballo non vi sarebbe il “se” pagare, ma il “quanto”, il “quando” ed il “come” pagare. In altre parole, l’Icesave II ha ricevuto una chiara bocciatura, ma non è detto che a futuri accordi, magari più favorevoli di questo, il popolo islandese non riservi (se consultato) lo stesso trattamento. Alcuni commentatori parlano d’irresponsabilità degli islandesi; in fondo, si dice, anche loro avevano beneficiato di questo capitalismo di carta, anche loro si erano comprati auto di grossa cilindrata e beni di lusso che mai erano stati visti prima nel paese. Può essere, ma questa è la democrazia. Ed è quantomeno curioso che nel giorno in cui i principali media nostrani celebrano le votazioni in Iraq e s’interrogano sullo stato della democrazia italiana, gli stessi media facciano passare uno storico pronunciamento di una democrazia come l’Islanda in secondo o, sempre se va bene, terzo piano. Esistono forse momenti nei quali è lecito parlare di democrazia e momenti nei quali non lo è?

* Francesco Rossi, dottore in Relazioni internazionali (Università di Bologna), collabora con “Eurasia”

Tante altre notizie su www.ariannaeditrice.it

Gold is Toppy, Buy More?

Wednesday, March 10, 2010 - by Staff Report

Forget gold and focus on its producers ... In December, I was told that China had appointed an agent in London to buy up every ounce of gold they could find. It was too incredible to believe. When speculation gets this hard to swallow it's a certain sign that a market is hitting a top. Today's news suggests it was another fantasy from the legion of gold bugs. The man in charge of China's $2.4 trillion of foreign-exchange reserves said that the yellow metal is unlikely to be a 'primary investment' as it diversifies. So the argument beloved of gold bugs that China will move to severely reduce the dollar as its reserve currency in favour of gold has been shot down. But that doesn't mean you should not have exposure to the yellow metal – quite the contrary. Gold is a key part of any portfolio. For now, it's not a good idea to buy into the metal directly, but instead to invest in gold companies that look set for strong production growth in the next few years. – UK Telegraph

Dominant Social Theme: Gold is bad, but gold producers are good, especially Barrick.

Free-Market Analysis: The logic of this article is a bit puzzling to us. The author, Garry White, describes himself this way: "As editor of the Questor column, I'm the Telegraph's share tipster, as well as its mining correspondent. I believe stock market investing is easy - all you have to do is look at trends in the world around you [and then] employ common sense. I'm particularly interested in commodities and the effect population growth will have on demand for life's basics such as food and water over time."

We're not sure in the article excerpted above, that White is entirely taking his own advice. Obviously knowledgeable, he seems to have left us with a logic gap. First, he writes that China buying up gold aggressively was a "fantasy from the legion of gold bugs." He also writers that "when speculation gets this hard to swallow, it's a certain sign that a market is hitting a top." Then he writes it's not a good idea to buy the metal directly but instead to invest in gold companies that look set for "strong production growth."

This seems to us, as we stated above, to be a tad illogical. There are reasons to buy mining shares and, yes, gold and silver will be toppy at some point. But we are not sure the article fully defines the theoretical underpinnings of the gold (and silver's) cyclical parabola. White has, however, inspired us (once again) to take a stab at it.

From our perspective, the market itself is not complex, nor is the arc it follows, though the time line can be short or long. In fact, the timing is always uncertain. Gold and silver break out in a big way only when central-banking generated fiat money has so distorted the larger economy that there is a gigantic blow-off and subsequent collapse.

Once a generalized collapse has started to take place, the value of paper money shrinks and gold and silver seem to gain in value, perhaps a good deal. The worse the economy gets, the more value accrues to gold and silver. As the business cycle turns, the powers that be flood the market with fiat money once more to salvage the system. Sooner or later in these scenarios there is almost inevitably a good deal of price inflation as a staggering amount of money has been printed to stabilize the lynchpin players of the fiat system. This happened in the 1970s and is happening in the 2000s.

But we have not, in our estimation, entered an inflationary period yet. The cyclical collapse of the 2000s is considerably longer than the collapse of the 1970s. It may take up to 15 years or more to work itself out and may, in fact, involve the failure of fiat currency as we know it and a new financial structure. Whether it does or not, the chances are that price inflation will eventually become onerous. And it is this price inflation that will send gold and silver – and its producers – soaring. (The alternative being a prolonged deflationary depression.)

Until we get to a point where price inflation is evident, we suggest that a gold and silver mania is NOT taking place. Inflation in the 1970s drove gold and silver to higher highs. But where is price inflation today? In a real price-inflation, gold and silver would likely move hard and fast. And once they did so, people, unable to buy the physical anymore, would begin to buy paper in earnest, especially mining stocks, and even junior mining stocks. The purchases would be driven by economic realities not by "promising fundamentals." Also, the money would flow to the best promoted mining stocks, regardless of promise. That's just how life is.

Conclusion: The mechanism we are suggesting is a bit different than the one presented in the Telegraph article. But we have done our best to present it realistically, as we understand it. Since we have not seen evidence of severe price inflation yet (and sooner or later we believe we probably will) we think physical gold and silver are probably not toppy. A rumor about Chinese gold buying does not a blow-off make. First comes price-inflation, then higher gold and silver prices and finally the purchase of paper assets by those (investors) who can no longer afford the physical metal. When you, dear reader, see these various factors being realized, you may be able to orient yourself as to the market's historical position and act accordingly.

What credit-card payoff? Consumers are dumping debt

Steep drops in credit-card balances driven by companies charging off bad debt

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By Jennifer Waters, MarketWatch

CHICAGO (MarketWatch) -- Credit-card debt has been falling for 16 straight months but consumers aren't paying off their financial obligations as much you might think. Instead, they're walking away from the debt, forcing credit-card issuers to write off as much as 90% of that reported drop, according to a new report by CardHub.com.

U.S. banks charged off a record $83.3 billion in credit-card losses last year. That makes up the bulk of the $93.2 billion drop in outstanding credit-card debt that was reported by the Federal Reserve for 2009.

Savings bonds

Holding on to matured bonds is like stashing money under the mattress. Just don't be shy about getting help with redemptions, advises Andrea Coombes.

"The reduction in credit-card debt is not because consumers have found a bag of cash under their mattresses and are now paying down their debt," said Odysseas Papadimitriou, chief executive of CardHub.com.

Papadimitriou drilled down into the Federal Reserve data detailing the declining consumer-debt levels. While the numbers painted a picture of frugality and fiscal conservatism, Papadimitriou was baffled, considering the high numbers of cash-strapped consumers and the now 9.7% jobless rate.

"When consumers are paying off more than they usually do, that's a time of financial health," he said.

What Papadimitriou found was this: Last year, outstanding credit-card debt dropped an eye-popping $93.2 billion to about $876 billion, according to Federal Reserve data, which are not seasonally adjusted. During the same period, charge-offs -- the unsecured debt the banks determine they won't get back and charge off to loss reserves -- added up to $83.3 billion.

In other words, only about $10 billion of the drop is attributable to consumers paying off their debt.

Robert Hammer, chief executive of investment bank R.K. Hammer, said when credit charge-offs are exceeding receivables, the impact is clear.

"For the first time in my 30 years in this business, the dollar amount of card loans finished the year lower than they started," he said. "That would mean that consumers have either put their credit cards in a safe-deposit box and only get them out for special occasions or that some are cutting them up and not using them at all. And we don't think any of that is going on."

Consider some of January's results, the most recent available. Capital One's charge-off rate climbed to 10.41%, above December's 10.14%. In 2005, Capital One's charge-offs shot up similarly with a rash of bankruptcy filings ahead of tighter federal laws.

Overall credit-card charge-offs as charted by Moody's Credit Card Index shot up to 11.15% in January, compared with 10.32% in December. Moody's expects charge-offs to peak at close to 12% over the next several months, eclipsing an all-time high of 11.5% in August.

If there is a silver lining, it's that there are some signs that the rate of late payments -- those 30 days past due -- is starting to slow. Bank of America, the largest U.S. lender, reported that 7.35% of accounts were past due in January, the lowest level in a year.

"In the coming months we'll see clearly if consumers have learned their lessons in lowering their debt levels," Papadimitriou said.

Jennifer Waters is a MarketWatch reporter, based in Chicago.

MBA: Mortgage Applications Increase Slightly

by CalculatedRisk on 3/10/2010 07:25:00 AM

The MBA reports: Purchase Applications Increase in Latest MBA Weekly Survey

The Market Composite Index, a measure of mortgage loan application volume, increased 0.5 percent on a seasonally adjusted basis from one week earlier. ... The Refinance Index decreased 1.5 percent the previous week and the seasonally adjusted Purchase Index increased 5.7 percent from one week earlier. ... The refinance share of mortgage activity decreased to 67.2 percent of total applications from 69.1 percent the previous week. The refinance share is at its lowest level since it was 66.1 percent in October 2009. ... The average contract interest rate for 30-year fixed-rate mortgages increased to 5.01 percent from 4.95 percent, with points decreasing to 0.82 from 0.99 (including the origination fee) for 80 percent loan-to-value (LTV) ratio loans.

Click on graph for larger image in new window. This graph shows the MBA Purchase Index and four week moving average since 1990. Even with the increase in purchase applications this week, the 4 week average is still at the levels of 1997. Also, with mortgage rates slightly above 5% again, refinance activity decreased last week.

Posted by CalculatedRisk on 3/10/2010 07:25:00 AM

CHI C’È DIETRO LA CRISI FINANZIARIA?

Argomento: Economia DI CLIFF KINCAID NewsWithViews.com Il New York Times cita un portavoce di George Soros che dice che il famoso operatore di hedge fund non è colpevole di alcun illecito in relazione allo sconvolgimento finanziario che sta attualmente coinvolgendo la Grecia e l’Europa nel suo insieme. Ma Zubi Diamond, autore del poderoso nuovo libro, Wizards of Wall Street, dice che l’ordine del giorno di Soros e di altri venditori allo scoperto è chiaro. Il loro obiettivo, dice, è di “saccheggiare l’America e ogni altro paese straniero che ha investito sull’America. Tra cui c’è anche la Grecia. L’Islanda è stata devastata e annichilita”. Il termine “vendita allo scoperto” (short selling) in questo contesto si riferisce agli investitori, agli speculatori e ai manipolatori della valuta che scommettono sul declino o sul crollo di azioni o valute attraverso complessi strumenti finanziari gestiti in gran parte per mezzo di conti esteri segreti. Perché un venditore allo scoperto faccia un profitto, i prezzi devono scendere. I venditori allo scoperto, che saranno presenti ad un evento presso il libertario Cato Institute il prossimo 11 Marzo, insistono che “forniscono liquidità e trasparenza ai nostri mercati di capitale” e che le loro operazioni “rivelano le frodi e il cattivo management delle società”. Ma Diamond è in forte disaccordo. Dice che la Management Funds Association, il braccio lobbista dei venditori allo scoperto degli hedge fund, è scaltra e fraudolenta. “Quando dicono che la vendita allo scoperto fornisce liquidità al mercato, è una menzogna,” dice. “La vendita allo scoperto distrugge il capitale e sottrae liquidità al mercato. Quando dicono che stanno prendendo dei provvedimenti per eliminare la manipolazione dal mercato azionario, è una menzogna. Stanno facendo dei passi per introdurre la manipolazione all’interno del mercato azionario, e per preparare il mercato azionario per la manipolazione e il saccheggio. Quando dicono che la regola dell’incremento (o “uptick”) è sorpassata, a causa della decimalizzazione, è una menzogna. Mentono per poter ingannare, per potersi accaparrare un bel gruzzolo dalla vendita allo scoperto, ed ecco quindi il saccheggio dell’America e delle più ricche aziende d’America e dei loro azionisti, sancito dai loro cagnolini di Washington D.C.”. “I membri più influenti della Managed Funds Association, i venditori allo scoperto degli hedge fund, hanno un ordine del giorno anticapitalistico, un ordine del giorno contro le nazioni industrializzate, e un ordine del giorno radicale, marxista, liberale, di estrema sinistra,” sostiene Diamond. “i venditori allo scoperto di hedge fund non sono capitalisti. Sono anticapitalisti e non sono investitori; sono contro gli investitori”. Dice che “saccheggiano” società e nazioni. Il Times ha osservato che il mese scorso c’è stata una cena a New York nel corso della quale “i rappresentanti di alcuni di questi hedge fund avrebbero parlato di scommettere contro l’euro” a seguito della crisi finanziaria in Grecia. Per questo motivo, secondo il quotidiano, il Dipartimento di Giustizia avrebbe chiesto ad almeno quattro hedge funds di presentare i registri commerciali ed altri documenti. Erano la Greenlight Capital, la SAC Capitol Advisors, la Paulson & Company e la Soros Fund Management. Sostenendo che Soros non è coinvolto in alcuna attività illecita, Michael Vachon, un portavoce della Soros Fund Management ha detto al Times che “è diventato un luogo comune portare l’attenzione su George Soros ogni qual volta che i mercati monetari sono in primo piano”. Diamond, un immigrato africano che è venuto in America ed è diventato un uomo d’affari di successo, trae una conclusione differente, dicendo che Soros ed altri venditori allo scoperto che appartengono alla Managed Funds Association, la “voce della comunità di investimento alternativa globale”, stanno corrompendo le influenze che minano le nazioni, la loro economia e la loro moneta, e il sistema finanziario globale nel suo complesso. Diamond, che ha alle spalle 14 anni di esperienza nei mercati finanziari, ha chiamato il suo libro un corso “Economic crisis 101” [ “crisi economica 101”, sarebbe a dire “un corso sui fondamenti della crisi economica” N.d.r.] a ragione della necessità di informare gli Americani su quello che sta avvenendo davanti ai loro stessi occhi. Il libro è di facile lettura, pur trattando di regolamenti ed operazioni finanziare complesse, e pur contando solo 118 pagine. Il tema è che la crisi economica è stata intenzionalmente ingegnerizzata per trarne vantaggi economici e politici, e che ha già causato il “saccheggio” di $11 mila miliardi di dollari dall’economia americana. L’AIM ha avvisato di questo potenziale problema in un articolo del 16 gennaio 2008 intitolato “Soros scommette sul crollo economico dell’America”, in cui abbiamo sottolineato i legami dell’hedge fund con il partito democratico, nonché una notizia che i manager degli hedge fund, compreso Soros, si aspettavano di guadagnare miliardi di dollari da un crollo del mercato immobiliare negli Stati Uniti. Il regolamento dell’industria degli hedge fund ed altre raccomandazioni sono comprese nel libro di Diamond, che ha per sottotitolo “la truffa che ha eletto Obama”. Accusa molti degli stessi attori globali, ora sotto indagine per aver causato il caos in Europa, di essere dietro la crisi finanziaria americana che ha consentito ad Obama di arrivare alla presidenza. “George Soros ha messo il sostegno dell’organizzazione [la MFA] dietro Obama”, dice nel suo libro. “Soros voleva qualcuno che odia l’America tradizionale e la sua costituzione, un radicale di sinistra come è lui stesso, quindi ha scelto Obama”. “Non succederà niente finché il popolo d’America non saprà cosa ha provocato la crisi economica e quale sia la soluzione per risolverla”, dice ad AIM. “Non avverrà niente finché il pubblico americano non sarà a conoscenza del ruolo della Managed Funds Association nella fabbricazione del crollo economico”. Chiama la MFA un “cancro nella nostra società che deve essere eliminato, sterminato e abolito. L’America e il capitalismo non sopravvivranno se la Managed Funds Association non verrà estirpata, sradicata e distrutta”. La MFA nel frattempo, sta facendo quello che in gergo politico si chiama un “cambiamento di immagine”, con l’applicazione di un maggior scrutinio alle operazioni dei suoi membri. Il presidente e direttore esecutivo della MFA Richard Baker dice alla pubblicazione [AIM] che “… abbiamo un enorme compito di fronte a noi nel fornire una chiave di lettura dell’industria che è basata sul reale ruolo di mercato che rivestiamo, contrariamente alle percezioni che si sono sedimentate”. Diamond dice ad AIM che la crisi in Grecia “è solo l’ennesimo teatro delle ripercussioni della truffa per annientare il capitalismo. Devono essere regolati proprio come i fondi comuni. Se regoliamo i venditori allo scoperto di hedge fund, come i fondi comuni, si eliminerà l’incentivo al loro comportamento predatore di prendere di mira le società, le nazioni e le valute”. Guardando al futuro, Diamond dice, “quando l’Unione Europea (UE) salverà la Grecia, un tale salvataggio aumenterà il deficit dell’UE e ne indebolirà la valuta, portando al declino della valuta europea. Questa è la teoria che viene proposta dai manipolatori. George Soros, i venditori allo scoperto di hedge fund e gli speculatori si muoveranno partendo da questo presupposto. Faranno affondare la moneta europea e questa sarà una manipolazione per collusione”. Diamond osserva che Soros è un membro della Managed Funds Association, e che “stanno facendo commenti negativi sull’euro. Prendono come bersaglio e depredano le nazioni capitaliste e le loro monete”. Prosegue, “si sentono invincibili. Hanno la licenza di distruggere qualsiasi società o nazione, o di tenere in ostaggio una società o una nazione mentre predano sugli investitori. Fanno cene di affari, discutono apertamente della collusione per attaccare una particolare asset class [categoria di attività contenuta in un portafoglio finanziario], equity [valore netto di una società], o la valuta di una nazione. Se questa non è criminalità organizzata, non so che cosa lo è”. Avverte che ogni asset class che è quotata in borsa nel NYSE [New York Stock Exchange], il CME [Chicago Mercantile Exchange] o l’Eurex è suscettibile di manipolazione da parte dei membri della Managed Funds Association e da parte dei loro partner strategici. “Hanno preparato il mercato per la manipolazione”, dice. Nel caso della Grecia, Diamond sostiene che il paese “ha raccolto tutti i suoi risparmi e li ha portati alla tana dei lupi della Goldman Sachs,” un membro della Managed Funds Association, “ma dopo la Goldman Sachs vendeva allo scoperto mentre i suoi clienti erano dall’altra parte dello scambio”. Diamond dice che non si sarebbe verificata una crisi del credito in Grecia se non fossero stati eliminati tutti i regolamenti di tutela. Accusa Christopher Cox, che ha prestato servizio come presidente della Securities and Exchange Commission (SEC) , per aver gettato le basi per questo sconvolgimento finanziario. “L’abolizione della regola dell’incremento e dei 'circuit breakers' e l’introduzione del 'mark to market' è ciò che ha provocato il crollo economico e della borsa” dice. “la Grecia ha perso il capitale di investimento nel crollo di Wall Street del 2008, che ha dato al paese un problema di bilancio oltre al debito che aveva già. Il deficit della Grecia è andato alle stelle. Il resto lo sapete già. L’UE accusa la Grecia di non aver dichiarato tutto il suo debito e l’esposizione al rischio di investimento”. Commentando le notizie che le autorità federali e la SEC indagheranno sulla Goldman Sachs per il suo coinvolgimento nella crisi del credito in Grecia, Diamond dice “la mia previsione è che non accadrà niente” perché la Goldman Sachs è membro della potente MFA. “La Management Fund Association è il Governo” accusa Diamond. “hanno comprato i politici e i regolatori, e hanno preso il controllo del nostro governo”. Cliff Kincaid, giornalista veterano e critico mediatico, si è specializzato in giornalismo e comunicazioni presso la University of Toledo, dove ha conseguito la laurea. Cliff ha scritto e partecipato alla stesura di nove libri sui media e gli affari culturali e sulle questioni di politica estera. Uno dei suoi libri, “Global Bondage: The UN Plan to Rule the World” è ancora disponibile. Cliff è apparso su Hannity & Colmes, The O’Reilly Factor e Crossfire, ed è stato pubblicato nel Washington Post, Washington Times, Chronicles, Human Events e Insight. Website: www.AIM.org E-mail: cliff.kincaid@aim.org Titolo originale: "WHO'S BEHIND THE FINANCIAL CRISIS?" Fonte: http://www.newswithviews.com Link 05.03.2010 Traduzione per www.comedonchisciotte.org a cura di MICAELA MARRI Questo Articolo proviene da ComeDonChisciotte http://www.comedonchisciotte.org/site L'URL per questa storia è: http://www.comedonchisciotte.org/site/modules.php?name=News&file=article&sid=6839