Dreading our future

Michael Goodwin

I am a baby boomer, which is to say my life has coincided with turbulent and awesome times. From the Cold War to Vietnam, from Watergate to Monicagate, through the horrors of 9/11 and the stunning lifestyle advances, my generation's era has been historic and exciting.

Yet for all the drama and change, the years only occasionally instilled in me the sensation I feel almost constantly now. I am afraid for my country.

I am afraid - actually, certain - we are losing the heart and soul that made America unique in human history. Yes, we have enemies, but the greatest danger comes from within.

Watching the freak show in Copenhagen last week, I was alternately furious and filled with dread. The world has gone absolutely bonkers and lunatics are in charge.

Mugabe and Chavez are treated with respect and the United Nations is serious about wanting to regulate our industry and transfer our wealth to kleptocrats and genocidal maniacs.

Even more frightening, our own leaders joined the circus. Marching to the beat of international drummers, they uncoupled themselves from the will of the people they were elected to serve.

President Obama, for whom I voted because I believed he was the best choice available, is a profound disappointment. I now regard his campaign as a sly bait-and-switch operation, promising one thing and delivering another. Shame on me.

Equally surprising, he has become an insufferable bore. The grace notes and charm have vanished, with peevishness and petty spite his default emotions. His rhetorical gifts now serve his loathsome habit of fear-mongering.

"Time is running out," he says, over and again. He said it on health care, on the stimulus, in Copenhagen, on Iran. Instead of provoking thought and inspiring ideas, the man hailed for his Ivy League nuance insists we stop thinking and do what he says. Now.

His assertion we will go bankrupt unless Congress immediately adopts the health monstrosity marks a new low. At least it did until he barged into a meeting in Copenhagen to insult the Chinese with the same do-it-now arrogance on carbon emissions. Don't get me wrong - it's OK to insult the Chinese, but save it for an urgent life-and-death issue. Iran qualifies, with its plans for a nuclear arsenal, yet Obama has not pushed China on that issue with the fervor of his attacks on their dirty smokestacks.

Washington has its own freak show and it also features Big Government theocrats. One of the mainstream media myths is that the Democrat-on-Democrat attacks of late pit moderates against liberals.

Horse hockey. No person of conservative or moderate sensibility could possibly support a federal takeover of the massive health system. That some who profess to be moderates have gone along, either out of fear or partisan loyalty or payoffs, only underscores the madness.

In fact, it is a myth the fight is over health care at all. It is a vulgar power dispute between liberals and extreme liberals, with health care a convenient portal for command-and-control of 17 percent of the economy.

It's definitely not reform

Notice how little Obama talks about sick people or medicine or suffering or any of the realities of illness and death. There is almost no mention of the moral dimension that supposedly animates the demand for universal coverage.

The public intuitively understands the con, which is why it prefers the flawed status quo. Voters tell pollsters by as much as 3-to-1 they think a federal takeover will cost them and the country more money and will produce more red tape instead of better care.

Yet, because power corrupts, and one-party rule corrupts absolutely, dissenters are considered heretics. Until the next election.

Meanwhile, Mother Nature delivered her verdict with yesterday's blizzard in Washington. I am cheered by the thought that finally, hell has frozen over.

Unions feed as city bleeds

The disastrous decision by the City Council to kill a jobs-generating, $300 million development project in The Bronx was a scary sign of the rise of union power. But it's not the only one.

Virtually every day brings fresh evidence of how unions and their captive politicians are taking New York down a destructive path.

Consider the slash-and-burn MTA service cuts, which include a plan to end free rides for hundreds of thousands of students. It's no accident the decision, aimed at saving $400 million, comes as the agency is forced by the courts to pay raises of $300 million over two years.

At nearly 4 percent a year for each worker, the raises, first granted by a suspect arbitration process, mean the MTA's first obligation is to a union-protection racket instead of to paying customers. To cut services while giving raises in a recession is insane.

Something similar is happening with schools. Gov. Paterson's attempt to keep the state from running out of cash by delaying a fairly minor state-aid payment of $146 million was met with a lawsuit. The teachers union and some school boards claim he has no right to make the decision without legislative approval.

That would be the same Legislature that, when the union says jump, asks "how high."

Paterson showed courage by also calling the lawsuit the selfish act it is.

"We're supposed to get all the money and everybody else can just divide up the crumbs," he said of the attitude behind the suit. "It's clear to me they don't care about anybody but themselves."

The long-term impact of excessive union pandering is reflected by a Citizens Budget Commission study. Working with the Partnership for New York, it surveyed 52 large firms and found the city could save about $1.4 billion annually simply by providing the same health-insurance benefits as private firms.

Pension savings would be astronomical if the city could follow the private-market system of defined contributions instead of defined benefits.

Instead, it's locked into exorbitant and outdated plans. Taxpayers this year alone are paying $10.4 billion for the health insurance of employees and retirees and pensions for current workers.

In short, the problem is bad and getting worse. Each and every day.

Judge not - & be judged

There is no fury like that of an arrogant judge. Or 18 of them. That's how many signed an extraordinary letter calling the city's top lawyer, Michael Cardozo, "imperious" and "insulting."

Cardozo dared to criticize the slow pace of the courts, saying too many judges put off decisions or can't manage their caseloads.

The oddity is that Cardozo and his boss, Mayor Bloomberg, have too rarely faulted individual judges for bonehead rulings. Their silence earned them only an expectation it would be permanent.

With nothing to lose, maybe now they will speak up more often.

Larking up wrong tree

A story about city Christmas tree sellers told of their enduring long days and cold nights - and the daffy questions of customers. Among the dumbest: "How much are the $25 trees?"

Michael Goodwin is a Pulitzer Prize-winning columnist known for never letting the political elite forget their job is to represent taxpayers. He started his career with The New York Times as a housing reporter and then City Hall bureau chief. He was the editorial page editor at the Daily News, where he directed a series of reports on the Apollo Theater that won the Pulitzer. A series documenting abuse of farmworkers earned the board the Polk Award. In 2000, he was named executive editor of the News and returned to column writing in 2004.

www.nypost.com

Snarky Disinformation About Gold and the Nature of Money

Dan Denning

We're going to review your 2010 asset allocation strategy in a roundabout way by exposing some of the snarky disinformation being put out by the mainstream media about gold, courtesy of Michael Pascoe at The Age.

First though, let's just check to see that markets are still functioning normally. That is, let's just check to see that heavy government intervention is supporting house prices (by providing guarantees to home lenders), GDP growth (by spending money on infrastructure), and disguising the true state of the labour market (by lying about how many people are out of work).

Yep. Situation normal, all fouled up. The oil price, the U.S. dollar, and bond yields were all up on bullish industrial production figures in the U.S. The "recovery" meme is taking a tenuous hold. Stocks were down. Because why would stocks rise if the economy were recovering?

Ah. Well that tells you something right there. It tells you that stocks haven't risen in anticipation of a global recovery. They're just enjoying the benefits of all that monetary and fiscal smack being peddled in Washington, London, Tokyo and Canberra. It's hard to rally on fundamentals when you're already over-valued.

Speaking of value, let us now return to the question of element number 79 on the periodic table. The snarky article we mentioned at the top is from Michael Pascoe at The Age, titled "There's more gold where that came from."

In the article Pascoe takes on the issue of "peak gold." But how well has he done in accurately stating the argument for gold? And more importantly, is he right about the relationship between market prices and gold? Well, obviously we think he's pretty wrong. But let's see what he's said.

"Part of the dogma of the less rational gold bugs is that the world is running out of the stuff. As an article of faith, it makes a pleasant change from the idea that fiat money is about to be exposed as huge confidence trick and we're heading back to the caves."

Webster's defines "dogma" as "a religious doctrine that is proclaimed as true without proof." Already you can see what Pascoe is up to. Gold bugs are nutters and zealots. Apparently 5,000 years of monetary history where gold has proven utility as a medium of exchange and store of value does not qualify as empirical evidence of gold's value. There's no pleasing some people, especially those who come to an argument with their mind already made up.

But that's fair enough. Opinion journalists get paid to give opinions. They cloak themselves in supposed objectivity because that makes their views more respectable to the mainstream. But we've never been concerned about respectability here at the Daily Reckoning. Why base your judgments on what other people will think of them?

We're entirely subjective in our views. But at least it's transparent. And at least we base our conclusions on facts and arguments. And we've not once argued here - although perhaps some gold bugs have - that the world is running out of gold. That is not what "peak gold" means at all.

The first step in any debate is to define your terms. So we will do so here and say that "peak gold" mean's declining annual gold production. We'll prove that in a minute. But just so it's clear, no one in this space is saying the world is running out of gold. But gold IS getting harder to find and more expensive to mine. And the supply of paper money continues to grow faster than annual gold mine production.

We won't dwell on the subject of paper money too much longer, except to say Pascoe's dismissal of the current status quo is nearly as laughable as it is naive. He says 'peak gold' "makes a pleasant change from the idea that fiat money is about to be exposed as huge confidence trick and we're heading back to the caves."

Seriously. How can any objective observer take a look at fiscal and monetary policy of the last three years and assume that central banking and fiat money are not a giant con job on the general public? Fiat money allows the government to create money backed by nothing. Not only does that decrease purchasing power - especially hurting savers and those on fixed income - it accelerates the misuse of real resources.

When it comes down to it, it's a kind of theft. The government prints money and gets the benefit of using it first before purchasing power is diminished. It trades paper money for real goods and services - things which take labor and raw materials to produce. The systematic inflation inherent in fiat currencies IS theft of real labor and resources.

As long as that inflation makes house prices and stock prices go up, it appears to please everyone. But it's our argument that the monetary regime in place since August of 1971 - when Richard Nixon took the U.S. off the gold standard - is a) a fraud, and b) in the process of disintegrating. It's disintegrating because, at its heart, it's based on the idea that money doesn't have any real tangible value.

Gold does, of course, have tangible value. To the extent that it's intrinsically valuable, it's valuable because its physical properties - relative scarcity, durability, transportability, divisibility, homogeneity - make it particularly useful as a monetary unit of exchange. To suggest it has no inherent value is to misunderstand the qualities that make money useful, and more importantly, sound.

But back to the issue of production. It's not just the nut jobs in the newsletter industry warning that gold production is falling. It's the gold miners. Of course you have to discount what they're saying to the extent that they're talking their own book. But they do know their own business and they are saying that 2009 could be the last year for some time that gold production rises.

Omar Jabara, the spokesman for Newmont Mining in the US, says that in terms of production, "2009 is the outlier as far as the trend. The trend is that production has been in a general decline since 2000. Why does that matter?

Pascoe says, quite correctly in theory, that price discovery and market mechanisms help ensure that supply grows when prices rise. Or, in his own words, "The 'peak gold' story isn't quite as dodgy as some of the 'peak oil' scare mongering the more sensationalist media have trotted out over the years - we'll never run out of oil as the market mechanism very successfully rations it and because, at a price, we simply make the stuff. Shell, for example, is spending $20 billion building a gas-to-diesel plant in Qatar."

Running out of gold? Don' worry!! We'll just make more of it!

It's hard to reconcile this with the fact that the gold price has been rising since 2000, but gold production has not. In late 1998 the gold price was in the mid $200s and annual global production was just under 2,500 tons per year. Since then, the gold price is up 340%. Yet production this year is set to be just over 2,400 tons. That's an increase over last year, mind you. But still down from the production level over ten years ago. So why aren't higher prices attracting new producers?

Well there are a couple of factors here. First, a lot of the big mines that were producing in the 1970s - especially in South Africa - are seeing production declines. That's not say all the mines are played out. But they're having to dig deeper and pay more for labor and energy, all of which leads to rising production costs.

That is, despite the rising price, production costs are rising faster for some companies. Those companies are making less money from the price rise, leaving less to invest in new exploration and production. Besides which, surely Pascoe would know that there's no such thing as just-in-time gold production.

You have to find the stuff. And it has to exist in an ore body that's economic to mine at current gold prices. And you have to get permits to mine it. All of that takes time and money - usually years - during which central bank printing presses are busy churning out new paper notes at a much faster rate. The supply of paper money is growing a lot faster than the annual mine supply of gold, which does not look like growing much at all in the coming years.

Barrick Gold's Vincent Borg says that, "it's a fact that gold production from mines has been in decline since 2001 and has gone from 85 million ounces to about 75 million ounces a year... It sort of goes down about one million ounces every year and or forecast is that it will continue to decline despite the higher price."

In most markets, higher prices to attract new producers. But as we've said before, quoting our friend Doug Casey, gold mining is a lousy, capital-intensive, highly regulated business. It is not like opening a lemonade stand. Therefore gold production does not automatically increase because prices are higher. That's a fact, not a dogma.

Yet Pascoe persists. He quotes StandardBank analyst Waler de Wet, who, presumably because he has a South African sounding name, must be right about gold. De Wet told clients that, "Given that the US gold mine production is 10% of global mine production, if you assume gold resources are proportionate to current mine production, global resources could be 330,000 tonnes. That is another 137 years of production."

The argument here is that higher gold prices turn more resources into proven reserves. That is, marginal gold projects become economically viable with higher gold prices. But the reason that these projects were marginal to begin with is that they were more expensive to bring into production (away from infrastructure, lower ore grades, smaller ore bodies). If the margins don't improve on the projects, there's no guarantee anyone is going to bother producing them, especially if the cost of production is rising as much or more than the gold price.

Further, why would anyone assume that "gold resources are proportionate to current mine production?" It seems like a rather large assumption to make. As anyone who's spent any time analyzing resource stocks knows, a resource is not the same thing as a proven reserve.

The energy market is fortunate that higher oil prices make other sources of unconventional more economically viable. (That's why Australia's LNG and coal-seam-gas industries have done so well this year.)

But you can't just "make more" gold the way you can make more energy. The world doesn't need oil. The world needs fuel and the work that fuel can do when you burn it. Thus, high oil prices lead to investment opportunities in oil and other energy sources, which eventually brings down the price of energy.

The funny thing is that the last time we checked, the oil prices were above $70. This confirms the peak oil thesis. The age of cheap energy is over. Oil is still out there. But it's getting harder to find and more expensive to produce. The cheap stuff is going fast.

With gold, of course there is more gold in the ground waiting to be mined. But who's going to mine it? And at what cost? It's an expensive business. And even if exploration spending boomed and turned up even more gold, it will take years to bring into annual mine supply.

You could argue that the rising gold price is only a function of scaremongering by newsletters like the Daily Reckoning - or that it's being ramped up by speculators and fund managers. This would explain why gold producers didn't increase production to meet rising prices. They saw the price rise as fictional or fundamentally unsound.

We wouldn't agree with that argument, mind you. But it's one way to explain why gold production isn't more price sensitive. The other is the simpler one: gold production is hard to increase, no matter what economic theory or Michael Pascoe says.

But by the end of the article you can see that Pascoe doesn't really have his head in the argument, just his heart. "The gold price's recent stall thanks to the Greece and Dubai-inspired up-tick in the US dollar demonstrates just how much of the gold rally has really been a currency story rather than anything intrinsically valuable about the yellow metal.

"It's just another alternative to greenbacks, one that doesn't do much productive or pay dividends but relies purely on speculation for any non-currency price improvement. The unkind might think that's why the gold bugs keep the scare campaigns coming - that and the need to sell more internet newsletters."

He's partially right and mostly wrong here. Yes, the rising gold price is a function of the bear market in paper money. Gold is better money than paper, if you're a gold bull. That makes gold stocks a leveraged speculation on higher gold prices. We don't have to say any of that to sell newsletters. After all, this one is free.

But we keep saying it because it continues to be important. Only a numbskull would ignore all the warnings about paper money coming from the markets in the last two years. Rising fiscal deficits...insolvent banking systems...the re-monetization of gold by central banks as a reserve asset. These aren't articles of faith. They're facts.

Of course gold isn't an investment panacea. But it's something you should take a lot more seriously than Michael Pascoe does. Unless you're worried about being respectable amongst those of your friends who thought that a currency crisis was something that only happened in history books, and not something you ought to prepare for.

Regards, Dan Denning from the Daily Reckoning Australia

whiskeyandgunpowder.com

Snarky Disinformation About Gold and the Nature of Money

Dan Denning

We're going to review your 2010 asset allocation strategy in a roundabout way by exposing some of the snarky disinformation being put out by the mainstream media about gold, courtesy of Michael Pascoe at The Age.

First though, let's just check to see that markets are still functioning normally. That is, let's just check to see that heavy government intervention is supporting house prices (by providing guarantees to home lenders), GDP growth (by spending money on infrastructure), and disguising the true state of the labour market (by lying about how many people are out of work).

Yep. Situation normal, all fouled up. The oil price, the U.S. dollar, and bond yields were all up on bullish industrial production figures in the U.S. The "recovery" meme is taking a tenuous hold. Stocks were down. Because why would stocks rise if the economy were recovering?

Ah. Well that tells you something right there. It tells you that stocks haven't risen in anticipation of a global recovery. They're just enjoying the benefits of all that monetary and fiscal smack being peddled in Washington, London, Tokyo and Canberra. It's hard to rally on fundamentals when you're already over-valued.

Speaking of value, let us now return to the question of element number 79 on the periodic table. The snarky article we mentioned at the top is from Michael Pascoe at The Age, titled "There's more gold where that came from."

In the article Pascoe takes on the issue of "peak gold." But how well has he done in accurately stating the argument for gold? And more importantly, is he right about the relationship between market prices and gold? Well, obviously we think he's pretty wrong. But let's see what he's said.

"Part of the dogma of the less rational gold bugs is that the world is running out of the stuff. As an article of faith, it makes a pleasant change from the idea that fiat money is about to be exposed as huge confidence trick and we're heading back to the caves."

Webster's defines "dogma" as "a religious doctrine that is proclaimed as true without proof." Already you can see what Pascoe is up to. Gold bugs are nutters and zealots. Apparently 5,000 years of monetary history where gold has proven utility as a medium of exchange and store of value does not qualify as empirical evidence of gold's value. There's no pleasing some people, especially those who come to an argument with their mind already made up.

But that's fair enough. Opinion journalists get paid to give opinions. They cloak themselves in supposed objectivity because that makes their views more respectable to the mainstream. But we've never been concerned about respectability here at the Daily Reckoning. Why base your judgments on what other people will think of them?

We're entirely subjective in our views. But at least it's transparent. And at least we base our conclusions on facts and arguments. And we've not once argued here - although perhaps some gold bugs have - that the world is running out of gold. That is not what "peak gold" means at all.

The first step in any debate is to define your terms. So we will do so here and say that "peak gold" mean's declining annual gold production. We'll prove that in a minute. But just so it's clear, no one in this space is saying the world is running out of gold. But gold IS getting harder to find and more expensive to mine. And the supply of paper money continues to grow faster than annual gold mine production.

We won't dwell on the subject of paper money too much longer, except to say Pascoe's dismissal of the current status quo is nearly as laughable as it is naive. He says 'peak gold' "makes a pleasant change from the idea that fiat money is about to be exposed as huge confidence trick and we're heading back to the caves."

Seriously. How can any objective observer take a look at fiscal and monetary policy of the last three years and assume that central banking and fiat money are not a giant con job on the general public? Fiat money allows the government to create money backed by nothing. Not only does that decrease purchasing power - especially hurting savers and those on fixed income - it accelerates the misuse of real resources.

When it comes down to it, it's a kind of theft. The government prints money and gets the benefit of using it first before purchasing power is diminished. It trades paper money for real goods and services - things which take labor and raw materials to produce. The systematic inflation inherent in fiat currencies IS theft of real labor and resources.

As long as that inflation makes house prices and stock prices go up, it appears to please everyone. But it's our argument that the monetary regime in place since August of 1971 - when Richard Nixon took the U.S. off the gold standard - is a) a fraud, and b) in the process of disintegrating. It's disintegrating because, at its heart, it's based on the idea that money doesn't have any real tangible value.

Gold does, of course, have tangible value. To the extent that it's intrinsically valuable, it's valuable because its physical properties - relative scarcity, durability, transportability, divisibility, homogeneity - make it particularly useful as a monetary unit of exchange. To suggest it has no inherent value is to misunderstand the qualities that make money useful, and more importantly, sound.

But back to the issue of production. It's not just the nut jobs in the newsletter industry warning that gold production is falling. It's the gold miners. Of course you have to discount what they're saying to the extent that they're talking their own book. But they do know their own business and they are saying that 2009 could be the last year for some time that gold production rises.

Omar Jabara, the spokesman for Newmont Mining in the US, says that in terms of production, "2009 is the outlier as far as the trend. The trend is that production has been in a general decline since 2000. Why does that matter?

Pascoe says, quite correctly in theory, that price discovery and market mechanisms help ensure that supply grows when prices rise. Or, in his own words, "The 'peak gold' story isn't quite as dodgy as some of the 'peak oil' scare mongering the more sensationalist media have trotted out over the years - we'll never run out of oil as the market mechanism very successfully rations it and because, at a price, we simply make the stuff. Shell, for example, is spending $20 billion building a gas-to-diesel plant in Qatar."

Running out of gold? Don' worry!! We'll just make more of it!

It's hard to reconcile this with the fact that the gold price has been rising since 2000, but gold production has not. In late 1998 the gold price was in the mid $200s and annual global production was just under 2,500 tons per year. Since then, the gold price is up 340%. Yet production this year is set to be just over 2,400 tons. That's an increase over last year, mind you. But still down from the production level over ten years ago. So why aren't higher prices attracting new producers?

Well there are a couple of factors here. First, a lot of the big mines that were producing in the 1970s - especially in South Africa - are seeing production declines. That's not say all the mines are played out. But they're having to dig deeper and pay more for labor and energy, all of which leads to rising production costs.

That is, despite the rising price, production costs are rising faster for some companies. Those companies are making less money from the price rise, leaving less to invest in new exploration and production. Besides which, surely Pascoe would know that there's no such thing as just-in-time gold production.

You have to find the stuff. And it has to exist in an ore body that's economic to mine at current gold prices. And you have to get permits to mine it. All of that takes time and money - usually years - during which central bank printing presses are busy churning out new paper notes at a much faster rate. The supply of paper money is growing a lot faster than the annual mine supply of gold, which does not look like growing much at all in the coming years.

Barrick Gold's Vincent Borg says that, "it's a fact that gold production from mines has been in decline since 2001 and has gone from 85 million ounces to about 75 million ounces a year... It sort of goes down about one million ounces every year and or forecast is that it will continue to decline despite the higher price."

In most markets, higher prices to attract new producers. But as we've said before, quoting our friend Doug Casey, gold mining is a lousy, capital-intensive, highly regulated business. It is not like opening a lemonade stand. Therefore gold production does not automatically increase because prices are higher. That's a fact, not a dogma.

Yet Pascoe persists. He quotes StandardBank analyst Waler de Wet, who, presumably because he has a South African sounding name, must be right about gold. De Wet told clients that, "Given that the US gold mine production is 10% of global mine production, if you assume gold resources are proportionate to current mine production, global resources could be 330,000 tonnes. That is another 137 years of production."

The argument here is that higher gold prices turn more resources into proven reserves. That is, marginal gold projects become economically viable with higher gold prices. But the reason that these projects were marginal to begin with is that they were more expensive to bring into production (away from infrastructure, lower ore grades, smaller ore bodies). If the margins don't improve on the projects, there's no guarantee anyone is going to bother producing them, especially if the cost of production is rising as much or more than the gold price.

Further, why would anyone assume that "gold resources are proportionate to current mine production?" It seems like a rather large assumption to make. As anyone who's spent any time analyzing resource stocks knows, a resource is not the same thing as a proven reserve.

The energy market is fortunate that higher oil prices make other sources of unconventional more economically viable. (That's why Australia's LNG and coal-seam-gas industries have done so well this year.)

But you can't just "make more" gold the way you can make more energy. The world doesn't need oil. The world needs fuel and the work that fuel can do when you burn it. Thus, high oil prices lead to investment opportunities in oil and other energy sources, which eventually brings down the price of energy.

The funny thing is that the last time we checked, the oil prices were above $70. This confirms the peak oil thesis. The age of cheap energy is over. Oil is still out there. But it's getting harder to find and more expensive to produce. The cheap stuff is going fast.

With gold, of course there is more gold in the ground waiting to be mined. But who's going to mine it? And at what cost? It's an expensive business. And even if exploration spending boomed and turned up even more gold, it will take years to bring into annual mine supply.

You could argue that the rising gold price is only a function of scaremongering by newsletters like the Daily Reckoning - or that it's being ramped up by speculators and fund managers. This would explain why gold producers didn't increase production to meet rising prices. They saw the price rise as fictional or fundamentally unsound.

We wouldn't agree with that argument, mind you. But it's one way to explain why gold production isn't more price sensitive. The other is the simpler one: gold production is hard to increase, no matter what economic theory or Michael Pascoe says.

But by the end of the article you can see that Pascoe doesn't really have his head in the argument, just his heart. "The gold price's recent stall thanks to the Greece and Dubai-inspired up-tick in the US dollar demonstrates just how much of the gold rally has really been a currency story rather than anything intrinsically valuable about the yellow metal.

"It's just another alternative to greenbacks, one that doesn't do much productive or pay dividends but relies purely on speculation for any non-currency price improvement. The unkind might think that's why the gold bugs keep the scare campaigns coming - that and the need to sell more internet newsletters."

He's partially right and mostly wrong here. Yes, the rising gold price is a function of the bear market in paper money. Gold is better money than paper, if you're a gold bull. That makes gold stocks a leveraged speculation on higher gold prices. We don't have to say any of that to sell newsletters. After all, this one is free.

But we keep saying it because it continues to be important. Only a numbskull would ignore all the warnings about paper money coming from the markets in the last two years. Rising fiscal deficits...insolvent banking systems...the re-monetization of gold by central banks as a reserve asset. These aren't articles of faith. They're facts.

Of course gold isn't an investment panacea. But it's something you should take a lot more seriously than Michael Pascoe does. Unless you're worried about being respectable amongst those of your friends who thought that a currency crisis was something that only happened in history books, and not something you ought to prepare for.

Regards, Dan Denning from the Daily Reckoning Australia

whiskeyandgunpowder.com

Bernanke Tightens the Noose

Mike Whitney

Ben Bernanke has been a bigger disaster than Hurricane Katrina. But the senate is about to re-up him for another four-year term. What are they thinking? Bernanke helped Greenspan inflate the biggest speculative bubble of all time, and still maintains that he never saw it growing. Right. How can retail housing leap from $12 trillion to $21 trillion in 7 years (1999 to 2006) without popping up on the Fed's radar?

Bernanke was also a staunch supporter of the low interest rate madness which led to the crash. Greenspan never believed that it was the Fed's job to deal with credit bubbles. "The free market will fix itself", he thought. He was the nation's chief regulator, but adamantly opposed to the idea of government regulation. It makes no sense at all. Here's a quote from Greenspan in 2002: "I do have an ideology. My judgment is that free, competitive markets are by far the unrivaled way to organize economies. We have tried regulation, none meaningfully worked." Bernanke is no different than Greenspan; they're two peas in the same pod. Everyone could see what the Fed-duo was up to.

Now Bernanke is expected to carry on where his former boss left off, using all the tools at his disposal to offset the atrophy that's endemic to mature capitalist economies. "Stagnation", that the real enemy, which is why Bernanke supports this new galaxy of oddball debt-instruments and bizarre-sounding derivatives; because it creates a world where surplus capital can generate windfall profits despite chronic overcapacity. It's financial nirvana for the parasite class; the relentless transfer of wealth from workers to speculators via paper assets. Marx figured it out. And, now, so has Bernanke.

Bernanke is just following Greenspan's basic blueprint. It's nothing new. Unregulated derivatives trading is just one of the many scams he's thrown his weight behind. The list goes on and on; one swindle after another. Just look what happened when Lehman Bros blew up. Just weeks earlier, Bernanke and Co. had worked out a deal with JP Morgan to buy Bear Stearns with the proviso that the government would guarantee $40 billion in Bear's toxic assets. Fair enough. The whole transaction went by without a hitch. Then Lehman starts teetering, and Bernanke and Treasury Secretary Henry Paulson decide to do a complete policy-flip and let Lehman default. Their reversal stunned the markets and triggered a frenzied run on the money markets that nearly collapsed the global financial system.

Why?It was because Bernanke knew that the big banks were buried under a mountain of bad assets and needed emergency help from Congress. The faux-Lehman crisis was cooked up to extort the $700 billion from taxpayers via the TARP fund. Bernanke and Paulson pulled off the biggest heist in history and there's never even been an investigation.

Bernanke was in the wheelhouse when the subprime bubble blew and carved $13 trillion from aggregate household wealth. Consumers are now so deeply underwater that personal credit is shrinking for the first time in 50 years while unemployment is hovering at 10 per cent. If Bernanke isn't responsible, than who is?

Take a look at Bernanke's so-called lending facilities. They are all designed with one object in mind, to support financial markets at the expense of workers. The media praises the Troubled asset-backed security lending facility (TALF) as a way to restart the wholesale credit system (securitzation). But is it? Under the TALF, the government provides up to 92 per cent of the funding for investors willing to buy assets backed by auto, credit card, or student loans. In other words, the Fed is putting the taxpayer on the hook for another trillion dollars (without congressional authorization or oversight) to produce more of the same high-risk assets which investors still refuse to purchase two years after the two Bear Stearns hedge funds defaulted in July 2007. Fortunately, the TALF turned out to be another Fed boondoggle that fizzled on the launchpad. Taxpayers were lucky to dodge a bullet.

Bernanke's latest stealth-ripoff is called quantitative easing (QE) which is being touted as a way to increase consumer lending by building up banks reserves. In fact, it doesn't do that at all and Bernanke knows it. As an "expert" on the Great Depression, he knows that stuffing the banks with reserves was tried in the 1930s, but it did nothing. Nor will it today. Here's how economist James Galbraith explains it:

"The New Deal rebuilt America physically, providing a foundation from which the mobilization of World War II could be launched. But it also saved the country politically and morally, providing jobs, hope, and confidence that in the end democracy was worth preserving....

"What did not recover, under Roosevelt, was the private banking system. Borrowing and lending—mortgages and home construction—contributed far less to the growth of output in the 1930s and ’40s than they had in the 1920s or would come to do after the war. If they had savings at all, people stayed in Treasuries, and despite huge deficits interest rates for federal debt remained near zero. The liquidity trap wasn’t overcome until the war ended..... the relaunching of private finance took twenty years, and the war besides.

"A brief reflection on this history and present circumstances drives a plain conclusion: the full restoration of private credit will take a long time. It will follow, not precede, the restoration of sound private household finances. There is no way the project of resurrecting the economy by stuffing the banks with cash will work. Effective policy can only work the other way around." ("No Return to Normal:Why the economic crisis, and its solution, are bigger than you think" James K. Galbraith, Washington Monthly)

Bernanke QE is a joke. He's just creating a diversion so he can shovel more money into insolvent banks, pump-up the stock markets, and recycle Treasuries. Otherwise why would Obama's Chief Economic Advisor, Lawrence Summers say this:

"In the current circumstances the case for fiscal stimulus... is stronger than ever before in my professional lifetime. Unemployment is almost certain to increase - probably to the highest levels in a generation. Monetary policy has little scope to stimulate the economy given how low interest rates already are and the problems in the financial system. Global experience with economic downturns caused by financial distress suggests that while they are of uncertain depth, they are almost always of long duration." ("A Bailout Is Just a Start", Lawrence Summers, Washington Post)

QE is monetary policy writ large and-by Summers’ own admission-it won't work. It won't reduce unemployment or spark a credit expansion. That's why total consumer spending is falling, retail sales are flat, and wages are beginning to tank. Everywhere businesses are trimming hours and cutting salaries. Bernanke's $1 trillion in excess bank reserves has had no material effect on lending, credit expansion or jobs. It's been a dead loss. Here's Damian Paletta of the Wall Street Journal:

"U.S. lenders saw loans fall by the largest amount since the government began tracking such data, suggesting that nervousness among banks continues to hamper economic recovery.

Total loan balances fell by $210.4 billion, or 3 per cent, in the third quarter, the biggest decline since data collection began in 1984, according to a report released Tuesday by the Federal Deposit Insurance Corp. The FDIC also said its fund to backstop deposits fell into negative territory for just the second time in its history, pushed down by a wave of bank failures.

"The decline in total loans showed how banks remain reluctant to lend, despite the hundreds of billions of dollars the government has spent to prop up ailing banks and jump-start lending. The issue has taken on greater urgency with the U.S. unemployment rate hitting 10.2 per cent in October, even as the economy appears to be stabilizing.

"The total of commercial and industrial loans, a category that includes business loans, fell to $1.28 trillion at the end of September, from $1.36 trillion at the end of June. The outstanding total of construction loans, credit cards and mortgages also fell. ("Lending Declines as Bank Jitters Persist" Damian Paletta, Wall Street Journal)

Bernanke, Summers, Geithner and Obama have all misrepresented quantitative easing (QE) so they can improve the liquidity position of the banks without the public knowing what's going on. The fact is, the banks are not "capital constrained" by lack of reserves. Therefore, extra reserves won't lead to increased lending. Billy Blog clarifies how the banking system really works and how that relates to QE: "Does quantitative easing work? The mainstream belief is that quantitative easing will stimulate the economy sufficiently to put a brake on the downward spiral of lost production and the increasing unemployment. It is based on the erroneous belief that the banks need reserves before they can lend and that quantitative easing provides those reserves. That is a major misrepresentation of the way the banking system actually operates. But the mainstream position asserts (wrongly) that banks only lend if they have prior reserves. The illusion is that a bank is an institution that accepts deposits to build up reserves and then on-lends them at a margin to make money. The conceptualization suggests that if it doesn’t have adequate reserves then it cannot lend. So the presupposition is that by adding to bank reserves, quantitative easing will help lending. But this is a completely incorrect depiction of how banks operate. Bank lending is not "reserve constrained". Banks lend to any credit worthy customer they can find and then worry about their reserve positions afterwards."

So, if bank lending is not constrained by lack of reserves, then what does QE actually do? Not much, apparently. All quantitative easing does is exchange one type of financial asset (long-term bonds) with another (reserve balances). "The net financial assets in the private sector are in fact unchanged although the portfolio composition of those assets is altered (maturity substitution) which changes yields and returns." (Bill Mitchell) The net result of Bernanke's meddling is just this: Quantitative easing and the lending facilities have kept the price of financial assets artificially high, which has minimized financial sector deleveraging. (Financial sector debt is currently $16.4 trillion, nearly the same as it was a year ago. $16.3 trillion) In contrast, households have lost $13 trillion which has thrust the middle class into an ongoing depression. The soaring unemployment and viscous credit contraction are the result of the Fed's policies, not economics.

Tightening the Noose

The Fed is engaged in various covert-strategies to recapitalize the banking system. At the same time, Bernanke, Summers, Geithner, and Obama have stated repeatedly, that they're committed to slashing the long-term deficits. This means that they plan to reduce liquidity and push the economy back into recession so they can launch a surprise attack on Medicaid, Medicare, and Social Security.

Last Thursday, Bernanke announced that he will begin to tighten the noose as early as March 31 2010, when the Fed ends its $1.65 trillion purchases of agency debt, mortgage-backed securities, and US Treasuries. That's why stock market volatility has picked up since the Fed released its December 16 statement. Here's a clip:

"In light of ongoing improvements in the functioning of financial markets, the Committee and the Board of Governors anticipate that most of the Federal Reserve’s special liquidity facilities will expire on February 1, 2010,... These facilities include the Asset-Backed Commercial Paper Money Market Mutual Fund Liquidity Facility, the Commercial Paper Funding Facility, the Primary Dealer Credit Facility, and the Term Securities Lending Facility. The Federal Reserve will also be working with its central bank counterparties to close its temporary liquidity swap arrangements by February 1. The Federal Reserve expects that amounts provided under the Term Auction Facility will continue to be scaled back in early 2010. The anticipated expiration dates for the Term Asset-Backed Securities Loan Facility remain set at June 30, 2010, for loans backed by new-issue commercial mortgage-backed securities and March 31, 2010, for loans backed by all other types of collateral."

By April 1, 2010 the mortgage monetization program will be over; long-term interest rates will rise and housing prices will fall. When the Fed withdraws its support, liquidity will drain from the system, stocks will drop, and the economy will slide back into recession. Obama's second blast of fiscal stimulus-which is a mere $200 billion dollars -won't make a lick of difference.

The Obama administration and the Fed are on the same page. There will be no lifeline for the unemployed or the states. Those days are over. Now it's on to "starve the beast" and crush the middle class. Maestro Greenspan summed up the Fed's approach in a recent appearance on Meet the Press when he opined, "I think the Fed has done an extraordinary job and it's done a huge amount (to bolster employment). There's just so much monetary policy that the central bank can do. And I think they've gone to their limits, at this particular stage."

Indeed. Brace yourself for a hard landing.

Mike Whitney lives in Washoington state. He can be reached at fergiewhitney@msn.com

counterpunch.org

IL BIGLIETTO VERDE RINASCE DALLE SUE CENERI

La paura di un collasso finanziario europeo rafforza il dollaro e sgonfia l’euro Questo giovedì l’euro continuava a perdere posizioni rispetto al dollaro di fronte al timore generale che alcuni paesi dell’eurozona possano cadere in un’insolvenza dei pagamenti prodotta dal deficit della caduta delle entrate. Ma l’incertezza sulla cancellazione degli impegni sul debito non è l’unico fattore che dà un impulso al dollaro: La moneta statunitense beneficia anche del timore che il riscatto statale delle banche e aziende crei una ricaduta della crisi finanziaria. Come è stato già dimostrato dalla storia e dalla realtà, il dollaro USA è il rifugio “sicuro” del capitalismo finanziario speculativo transnazionale (statale e privato) in epoca di cataclismi. Dopo il collasso di Dubai, gli speculatori internazionali su vasta scala si sono rifugiati nei mercati europei, nel dollaro in mezzo a timori che questa condotta possa trasformarsi in una tendenza generalizzata a livello mondiale, secondo il Wall Street Journal. L’euro, che fino a qualche settimana fa faceva la sua una scalata spiazzando il dollaro, è sceso negli ultimi 15 giorni e potrebbe continuare a cadere con forza di fronte ad una fuga in massa degli speculatori verso l’acquisto di attivi più “sicuri” in moneta statunitense. La situazione torna a ripetersi con il debito regionale che cresce e si propaga per tutta l’eurozona, con epicentro in Grecia, mentre crescono i timori degli speculatori ad un’insolvenza di pagamento generalizzata e ad un crollo a catena delle economie più deboli che vede in testa alla Spagna. In generale, l’ombra di una insolvenza dei pagamenti generalizzata (a causa del deficit e delle basse entrate fiscali) fa temere una rinascita della crisi finanziaria, e continua a favorire il sorpasso del dollaro sull’euro, nonostante che la Federal Reserve degli USA ha deciso questo martedì di mantenere i tassi d’interesse, vicino allo zero, ribadendo che rimarranno a questo livello per qualche tempo. Il dollaro è salito giovedì ai suoi massimi livelli in tre mesi di fronte ad un paniere di monete, favorito da un tono più “ottimista” della Riserva Federale statunitense, mentre l’euro cadeva colpito da nuove preoccupazioni sui problemi fiscali della Grecia e l’incertezza finanziaria nell’eurozona. L'euro è sceso a Giovedi per la quarta sessione consecutiva ieri, dopo l'adesione S & P e Fitch che hanno deciso di tagliare il rating del debito della Grecia, il paese dell'Unione europea con il più alto deficit di bilancio. In un mercato con poco volume prima delle feste di fine anno, l’euro è affondato al suo livello minore contro il dollaro dall' inizio di settembre, dopo aver superato la forte barriera di 1,4500 dollari e generando ordini di vendita per sospenderne le perdite ben al di sotto 1,4400. Le preoccupazioni degli speculatori sull’insolvenza di alcuni paesi della zona euro hanno preso forza dopo che mercoledì la Grecia ha subito il suo secondo declassamento creditizio in una settimana. Gli esperti e le pubblicazioni specializzate considerano che il declassamento delle economie più deboli dell’eurozona imbarazza e guida il crollo dell'euro. “L’euro sta soffrendo come risultato dei problemi del debito vincolato ai paesi della periferia della zona euro, che potrebbero rappresentare una gravissima tensione regionale, mentre la sterlina è sotto pressione a causa di un’economia povera” ha commentato Steve Barrow, stratega del cambio della Standard Bank. Barrow ha pronosticato che l’euro potrebbe scendere ai 1,42 o 1,41 dollari. L’euro sarebbe sceso di due centesimi rispetto al dollaro alla chiusura di New York, mercoledì, a 1,4330 dollari, secondo i dati della Reuters, il suo livello minore da settembre. Il dollaro forte, a sua volta, porta ad ulteriore debolezza del petrolio e materie prime sul mercato, la cui quotazione è pesata anche mercoledì sul calo delle scorte negli USA. “Se il dollaro si mantiene forte, il petrolio potrebbe continuare a scendere”, segnala l’agenzia Bloomberg. L’indice del dollaro, che misura le sue prestazioni di fronte ad altre sei valute di riferimento, è salito fino ai 77,823, la sua quotazione più alta da settembre, dando agli investitori la fiducia che il dollaro ha già rotto il trend al ribasso che ha avuto inizio nel mese di marzo. Secondo le stime degli esperti, l’economia greca, il centro (insieme alla Spagna) del caos finanziario che minaccia la zona dell’euro e fa si che gli speculatori cerchino rifugio nel dollaro, è sull'orlo del precipizio. Si calcola che la scalata del dollaro di fronte all’euro continuerà ad intensificarsi guidata da nuovi ribassi della quotazione delle agenzie di rating per la Grecia ed il Portogallo, e di fronte al timore di una caduta a catena delle economie più deboli dell’eurozona, tra le quali si trova quella spagnola. Martedì l’agenzia Fitch ha ribassato ancora di più il rating della Grecia ad un livello di “BBB+” per i suoi dubbi su come far fronte ai propri obblighi finanziari, essendo il primo paese dell' eurozona che si avvicina al livello di “buono spazzatura”. Allo stesso modo, il Portogallo ha recentemente subito un taglio che Standard & Poor’s annota questo paese ad un “A+”. Standard &Poor’s ha anche ribassato il rating della Grecia da un grado di “BBB+” a “A-”, dato che è poco probabile che le misure di austerità annunciate dal primo ministro George Papandreou , questa settimana, producano una riduzione “sostenibile” del debito pubblico. Secondo alcuni analisti europei, la Spagna e l'Italia potrebbero essere i prossimi a sperimentare tagli ai loro livelli di qualifica del debito dato che continuano con un outlook negativo. Mercoledì, Standard &Poor’s ha pubblicato un documento nel quale prevede un nuovo ribasso della qualifica del debito spagnolo “se non ci sono misure più aggressive per far fronte allo squilibrio fiscale”. La Spagna è la quarta maggiore economia dell’eurozona, e quasi una quinta parte della popolazione è senza lavoro. La sua economia sta sfiorando la deflazione e, contro ciò che succede nell’eurozona, potrebbe restringersi ancora di più. Sebbene altri paesi della periferia dell’Europa, come l’Irlanda e la Grecia, appaiano al centro dei timori per l’insolvenza dei pagamenti, l’economia spagnola è cinque volte superiore a quella di questi paesi e, quindi, i suoi problemi sono anche molto maggiori. Per molti esperti, tra cui il Financial Times, la Spagna segna il centro dell’ “incertezza” e nuove cadute di rating della sua economia potrebbero innescare un collasso finanziario incatenato dei paesi che si mantengono nella “linea rossa” per affrontare l' insolvenza dei loro debiti pubblici. Fonte: http://www.iarnoticias.com/2009/secciones/europa/0019_dolar_arriba_euro_se_desinfla_17dic09.html Tradotto e segnalato per Voci Dalla Strada da VANESA

Pubblicato da Alba kan. a 08:44 0 commenti

Facciamo le carte al 2010

Analisti ed economisti si cimentano in questo fine anno con previsioni che una volta erano prerogativa di astrologi, maghi e lettori di tarocchi. Tra i tanti che si azzardano a divinare un 2010 prospero e felice (dimenticando la piaga della disoccupazione in crescita) e i pochi che rimangono con i piedi per terra scelgo questi ultimi. Quella che segue è la previsione, non certo fantascientifica, degli analisti di Comstock. Il rally del mercato azionario ha ormai raggiunto un punto in cui si prevede una ripresa a forma di V che invece non è affatto probabile che si avveri. A fare da catalizzatore di tutto questo ottimismo sono una interpretazione rialzista dell' attuale attività economica, una apparente stabilizzazione del mercato immobiliare e i risultati di diverse aziende che hanno superato le stime previste. Da non trascurare neanche la percezione della forza dell'economia cinese che incide sulla crescita globale e nel movimento verso l'alto di alcuni prodotti di base. Riteniamo che tutti questi punti sono stati sopravvalutati, mentre la paura di perdere il treno che lascia la stazione si traduce in un rialzo speculativo che potrebbe lasciare delusa la maggioranza. Il fattore chiave da considerare è che la cosiddetta "Grande Recessione" è stata causata da una crisi del credito susseguente ad un boom artificiale e mostra quindi più somiglianza con la grande depressione avvenuta dopo il 1929 o in Giappone dopo il 1989 che con la serie di recessioni sperimentate nel periodo post Seconda Guerra Mondiale. Dopo il crollo del boom delle dot-com nel 2000 a 2002, la Fed ha mantenuto i tassi di interesse a livelli storicamente bassi per un lungo periodo di tempo, e con l'aiuto di norme permissive sui mutui, complessi strumenti finanziari di cartolarizzazione e irresponsabili agenzie di rating, ha favorito un clima che ha determinato un massiccio boom immobiliare. Le famiglie sono state in grado di incassare l'accresciuto valore delle loro case, attraverso rifinanziamenti e prestiti per la casa, che ha permesso loro di spendere liberamente e ridurre i loro risparmi, anche se la crescita dei salari è stata estremamente lenta. Il boom dei consumi ha portato allo sviluppo a livello mondiale della capacità di soddisfare la domanda artificialmente indotta dal libero flusso del credito che è stato scambiato per abbondanza di liquidità da gran parte degli economisti e degli specialisti di mercato. Ora il conto deve essere pagato. Nonostante la grave recessione in estate, il consumatore deve ancora adeguarsi a un livello molto più basso di spesa. Se tale livello è finalmente raggiunto l'economia può ancora crescere in maniera robusta, ma oggi non siamo vicini a quel punto. Il massiccio stimolo monetario e fiscale messo in atto nel corso degli ultimi nove mesi ha attenuato la crisi del credito e impedito un collasso globale, ma non ha evitato la necessità per l'economia di riadattarsi ad una nuova serie di circostanze. Siamo ancora di fronte a livelli storicamente elevati del debito, un basso tasso di risparmio delle famiglie e una debole industria edilizia. Riduzione del debito e riportare sù il tasso di risparmio prenderà un periodo di tempo prolungato. Inoltre, a seguito della riduzione della spesa dei consumatori vi è anche un eccesso di capacità che frenerà anche gli investimenti. E non dimentichiamo che le nazioni straniere che per la crescita sono diventate dipendenti dal consumatore americano (leggi Cina) dovranno trovare un'altra strada. Per spiegare brevemente la natura dei cambiamenti precedenti, considerate quanto segue. Dal 1955 al 1985 la spesa dei consumatori rappresenta tra il 61% e il 64% del PIL. Il 30 settembre, questa percentuale era salita al 71%, un importo che è insostenibile data l'artificiosità del boom che l'ha causata. Perchè la percentuale scenda a un più tradizionale 65% del PIL, la spesa dovrebbe diminuire del 7,8%. Anche se questo non accadrà tutto in una volta, sarà un freno alla spesa dei consumatori per qualche tempo a venire. Un analogo ragionamento è applicabile al debito delle famiglie e al risparmio. Il debito delle famiglie ha registrato una media del 57% del PIL negli ultimi 55 anni ed era ancora al 64% nel 1995. Da allora, è salito al 98,6% (solo leggermente sotto il suo picco) dando una grande spinta alla spesa. Anche se il debito rimane ad un livello elevato l'assenza di un ulteriore aumento toglie una fonte importante di crescita che c'è stata in passato. Il tasso di risparmio delle famiglie per lo più è rimasto in un intervallo compreso tra il 7% e l'11% del reddito disponibile dei consumatori nei decenni precedenti al 1992, e ha continuato a scendere fino a circa zero entro il 2008 per poi passare a un corrente 4,4%, non appena i consumatori hanno avviato un processo di limitazione della spesa .. In assenza di un aumento dei valori immobiliari e a causa della quasi totale scomparsa del prelievo derivante dai mutui che, al suo apice, rappresentava un annualizzato 12% della spesa dei consumatori, il tasso di risparmio potrebbe facilmente risalire a un più tradizionale 9%. Questo sarebbe ancora un altro freno alla spesa. A nostro avviso la ripresa economica è ancora nel reparto di rianimazione e non è sostenibile. I progressi visti fino ad oggi sono quasi interamente dipendenti da programmi governativi temporanei che sono destinati ad essere ridotti al minimo. Non appena l'economia sarà in grado di espandersi per proprio conto. Condizioni molto sfavorevoli in tre settori chiave --- abitazioni, immobili commerciali e spesa dei consumatori --- rendono altamente probabile che la crescita economica sarà molto tiepida o cadrà in un'altra recessione. Circa il 25% di tutte le case con mutui sono underwater (cioè con il valore della casa inferiore al valore del mutuo rimanente), con circa la metà di queste oltre il 20% underwater. L'esperienza indica che un gran numero di questi mutui finiranno in default se non l'hanno già fatto. Anche adesso il 14% di tutte le case con mutui sono in default o in procedura esecutiva. I prezzi delle case sono saliti leggermente rispetto ai mesi passati solo a seguito dello sconto fiscale concesso dal governo agli acquirenti di prima casa e il fatto che i pignoramenti sono stati temporaneamente sospesi per il tempo necessario agli istituti erogatori di verificare quali casi sono suscettibili di modifiche. Non appena questo processo sarà completato quelli non qualificati verranno messi in procedura esecutiva. Inoltre siamo anche di fronte ad un altro round di revisione dei tassi che porterà ancora più default e pignoramenti nel prossimo periodo. Quando ciò accadrà i prezzi delle case riprenderanno il loro declino, mettendo underwater molti più mutui di ora. Non dimentichiamo che la crescente disoccupazione e la mancanza di nuove assunzioni si tradurrà in più famiglie che non riescono a mantenere i loro pagamenti. Quello degli immobili commerciali - Commercial real estate (CRE) - è un altro settore che esporrà le istituzioni finanziarie e l'economia a ulteriori rischi. I prezzi degli immobili commerciali sono già in calo del 33% nel 2009 e del 45% dal loro picco con una stima dal 55% al 65% a prezzi inferiori al valore dei loro mutui. Circa 1,5 trilioni in dollari di mutui CRE andranno a scadenza nei prossimi anni, e un numero consistente di essi non potrà beneficiare di rifinanziamento a meno che le già indebolite istituzioni finanziarie non mettano a segno insperati risultati. Un gran numero di mutui sono in carico a piccole-medie banche locali. Questa è un'altra ragione per cui le banche sono così restie a concedere nuovi prestiti alle piccole imprese. La terza gamba del traballante sgabello dell'economia sono le diminuite prospettive per la spesa dei consumatori. I consumatori stanno riducendo il debito e aumentando il loro tasso di risparmio, un processo che è appena iniziato. Il debito delle famiglie / PIL è ancora circa il 100% rispetto ad una media di 57 anni del 57%. Mentre il tasso di risparmio delle famiglie è aumentato al 4,4% da un valore vicino allo zero, con una media generalmente tra l'8% e il 9% nei decenni precedenti al 1992. Ma mentre un maggiore tasso di risparmio ha benefici effetti sull'economia nel lungo termine, esso tende a frenare la spesa dei consumatori quando il processo è in corso. Inoltre il freno alla spesa dei consumatori è la causa per cui i salari sono diminuiti del 5% rispetto a un anno fa, la disoccupazione è ancora in aumento, le nuove assunzioni sono ancora in calo, il reddito netto è precipitato e il credito al consumo è molto ridotto. Il credito al consumo è sceso del 4,3% rispetto all'anno passato, il massimo in almeno 44 anni. Il reddito netto delle famiglie è diminuito del 12%, anno su anno, il massimo calo in 57 anni. Un altro sviluppo inquietante è la recente comparsa di problemi nel debito sovrano. La rivelazione dell'insolvenza di Dubai World si è risolta in un calo del mercato di un solo giorno, presto liquidata come un evento isolato. Dopo l'emersione dei problemi per i mutui subprime, il mondo avrebbe dovuto imparare che tali eventi non si verificano mai in un vuoto. Dopo la baldoria mondiale del debito basata sulla teoria che gli asset non possono che aumentare di valore, un inaspettato severo calo del valore degli asset ha lasciato i debitori con troppa poca liquidità per onorare i propri debiti. È stato quindi ingenuo pensare che Dubai sarebbe stato l'unico paese a scontrarsi con questo problema e, difatti, altri hanno cominciato a cadere. Fitch ha abbassato il rating sulla Grecia a BBB e S&P ha proseguito con una modifica in negativo di quello della Spagna dal suo corrente rating AA+ . Questa agenzia aveva già declassato i bond portoghesi pochi giorni prima. Le difficoltà di Grecia, Portogallo e Spagna pone la BCE in una posizione difficile. La banca centrale deve fare ciò che è meglio per tutti i 16 paesi membri nel loro insieme, e quando c'è una stretta della politica monetaria le pressioni sui membri deboli aumentano. Non saremmo sorpresi di vedere altre nazioni con difficoltà nel debito, sia nella BCE che in qualsiasi altro posto del mondo. Noi crediamo che il livello del debito privato e quello del governo degli Stati Uniti sarà diverso per i prossimi quattro o cinque anni, in quanto le autorità tentano di utilizzare il debito pubblico per sostituire il debito privato che è quasi certo diminuirà sensibilmente. Il debito totale degli Stati Uniti è attualmente poco meno di 55 trilioni di dollari (55mila miliardi), composto da debito pubblico per circa 15 trilioni di dollari e debito privato (società statunitensi e privati) di circa 40 trilioni di dollari. Le somiglianze con il Giappone al suo picco economico e di mercato del 1989 ci porta a ritenere che siamo vicini alla stessa "road map" che in Giappone partì da quel momento e continua fino ad oggi. Detto questo, ci aspettiamo che il debito corrente di 15 trilioni di dollari del governo degli Stati Uniti raddoppi a circa 30 trilioni e il debito privato scenda della metà a circa 20 trilioni nei prossimi 4 - 5 anni. Le somiglianze tra il deleverage del Giappone in corso dal 1989 e quello in atto negli Stati Uniti sono inquietanti. Il debito totale del Giappone in rapporto al PIL è cresciuto dal 270%, quando è iniziato il loro bear market secolare, a circa il 350%, otto anni dopo (1998), per poi scendere all'attuale 110%. Gli Stati Uniti hanno aumentato il loro debito totale / PIL dal 275% del PIL, quando il nostro bear market secolare è iniziato nel 2000, al 375% attuale (10 anni più tardi), e sospettiamo un calo totale del debito simile al Giappone, anche se il debito pubblico giapponese è triplicato durante il loro deleveraging. Il debito pubblico in rapporto al PIL è stato circa il 50% sia negli Stati Uniti che in Giappone, quando il bear market secolare è iniziato. Abbiamo anche il sospetto che il nostro debito pubblico crescerà notevolmente, proprio come ha fatto in Giappone, così come prevediamo il crollo del debito privato. Il debito privato in Giappone è diminuito in modo sostanziale dal suo picco dopo sette anni dall'inizio del suo bear market secolare (passando dal 270% del PIL al 110% attuale). Se gli Stati Uniti dovessero seguire la road map deflattiva del Giappone, ci aspettiamo che il nostro debito pubblico aumenti di circa 7 trilioni di dollari (il debito pubblico netto escluso il debito utilizzato per finanziare la sicurezza sociale), a circa 21 trilioni di dollari e il debito privato diminuisca da circa 39 trilioni di dollari a circa 20 trilioni. Inoltre, il mercato azionario giapponese è raddoppiato nel corso dei tre anni precedenti il loro bear market secolare nel 1987, 1988 e 1989, mentre anche il mercato statunitense è raddoppiato nel corso dei tre anni precedenti l'inizio del nostro bear market secolare nel 1997, 1998 e 1999. In conclusione, la recessione che abbiamo vissuto non è stata una di quelle tipiche del dopoguerra ma la fine di un'epoca, e per riportare l'economia sulla sua curva di crescita a lungo termine occorrerà un lungo periodo di tempo. Per il mercato azionario, questo comporterà una riduzione degli utili societari e prezzi rapportati agli utili. Alla luce di ciò riteniamo che i grandi incrementi dei profitti previsti per il 2010 e oltre sono di gran lunga troppo alti. E' probabile che il recente rally sia andato sù più di quanto si possa andare senza una prova che l'economia può recuperare ad un forte ritmo, e riteniamo che probabilmente questa prova non arriverà affatto presto.

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