Great New Words From Egon Von Greyerz

Great New Words From Egon Von Greyerz
by Egon von Greyerz – October 2012

1. Worldwide money printing continues unabated

2. Just In 10 years $120 trillion have been printed making global debt $200 trillion

3. World GDP has gone from $32 trillion to $70 trillion 2001-2011

4. Thus $120 trillion debt is required to produce a $38 trillion annual increase in GDP

5. The marginal return on printed money is negative in real terms

6. Thus the world is living on an illusion of paper that people believe is money

7. This illusionary paper wealth will implode in the next few years

8. The initial trigger will be the collapse of the world’s reserve currency – the US dollar

9. The dollar is backed by $120 trillion of US government debt and probably NO gold

10. All currencies will continue their race to the bottom and lose 100% in real terms against gold

11. This will create a worldwide hyperinflationary depression

12. All assets financed by the credit bubble will go down in real terms

13. This includes stocks, bonds, property and paper money of course

14. The financial system is unlikely to survive in its present form

15. The banking system including derivatives has total liabilities of around $1.2 quadrillion

16. With world GDP of $70 trillion, the world is too small to save a financial system which is 17x greater

17. This is why there will be unlimited money printing and hyperinflation

18. The only asset that will maintain its purchasing power is gold Click here for chart

19. Gold has been money for 5,000 years and will continue to be the only currency with integrity

20. Western countries’ 23,000 tons of gold is probably gone. See recent article by Eric Sprott.

21. The consequence is that most of the gold in the banking system is likely to be encumbered

22. This means that Central Banks one day will claim it back against worthless paper gold IOUs

23. Thus gold and all other assets within the banking system involve an unacceptable counterparty risk

24. Gold should be held in physical form and stored outside the banking system

Sumitomo Mistui Chief Strategist: US Dollar will cease to be the world reserve currency

When you start to see long term supporters of the USD making statements like this, you know this isnt just a drill.

The inverse trade to the USD is gold.

Dollar to Hit 50 Yen, Cease as Reserve, Sumitomo Says

By Shigeki Nozawa

Oct. 15 (Bloomberg) — The dollar may drop to 50 yen next year and eventually lose its role as the global reserve currency, Sumitomo Mitsui Banking Corp.’s chief strategist said, citing trading patterns and a likely double dip in the U.S. economy.

“The U.S. economy will deteriorate into 2011 as the effects of excess consumption and the financial bubble linger,” said Daisuke Uno at Sumitomo Mitsui, a unit of Japan’s third- biggest bank. “The dollar’s fall won’t stop until there’s a change to the global currency system.”

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The Fuse is Short and Lit – China Goes Hostile

China - Hungry Dragon

China - Hungry Dragon

I have been saying for a long time that China has been aggressively stockpiling commodities, buying mineral rights all over the globe, and buying up companies that produce products of the earth.

This signals a new tactic for the Chinese: outright unsolicited offers for mining companies.

Normally the Chinese are more reserved, tactful, willing to be patient and win via masterfully executed maneuvers – much like Sun Tzu’s Art of War.

It seems their patience, as well as their willingness to depend on the dollar retaining its value (and thus the buying power of their portfolio) is coming to an end.

I think this is the beginning of an ever more aggressive stance towards purchasing commodities and raw materials. They know the dollar is going to the deadpool of currencies, and want to buy while it still commands the value it does.

Gold will again reign as the king of currencies.

China makes unexpected grab for Canadian miner

State-controlled Jilin Jien launches a surprise bid for Canadian Royalties, a stark change in tactics for the Asian superpower

ANDY HOFFMAN

From Tuesday’s Globe and Mail Last updated on Wednesday, Aug. 12, 2009 02:44AM EDT

China’s insatiable hunger for natural resources has officially turned hostile.

State-controlled Jilin Jien Nickel Industry Co. Ltd. launched a surprise $148.5-million unsolicited takeover bid for Canadian Royalties Inc. yesterday, marking one of the first times the Asian economic superpower has gone after foreign resource assets without first winning a friendly agreement with management.

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Russia, China should dump dollar in trade – Medvedev

Alex’s Notes: More moves around the USD.

For those of you who dont know, the USD is the world reserve currency, and for decades all world trade has been settled in it.

Governments of the world are not going to stand by until the US fixes it problems, China has been steadily putting the pieces in place to conduct global trade with or without the Dollar.

If using methods of trade settlement besides the dollar becomes common practice, it means further pressure on the dollar downward…which means dollars come home.
MOSCOW (Reuters) – Russia and China should consider switching to domestic currencies in bilateral trade without going to the dollar, Russia’s president Dmitry Medvedev said in an interview with Kommersant daily published on Friday.

China has already entered similar agreements with Brazil and Belarus. The deal involves a currency swap agreement between the two countries. Trade turnover between Russia and China reached about $50 billion in 2008 and is set to increase.

“I think that we can think about such positions, for example the rouble against yuan,” Medvedev was quoted by Kommersant as saying. Russia’s own attempt to switch to the rouble in bilateral trade with Belarus has so far not been successful.

Leaders of Brazil, Russia, India and China, known by their BRIC acronym, are meeting in the Russian city of Yekaterinburg on June 16 to discuss the role of the dollar in the global financial system among other issues.

Medvedev said bilateral currency deals between trade partners ease impact of the economic crisis in an environment when many countries have difficulties tapping international capital markets.

Original Article

The United States May Be The Next Banana Republic

With this announcement, the US has stepped into a realm formerly reserved for such lofty icons of global financial dominance as the Wiemar Republic, Argentina, and Zimbabwe.

We are now officially directly monetizing debt, and creating money out of thin air.

God forgive us for what we are about to do to our children.

Department of the Treasury Banana Republic

September 17, 2008
HP-1144

Treasury Announces Supplementary Financing Program

Washington- The Federal Reserve has announced a series of lending and liquidity initiatives during the past several quarters intended to address heightened liquidity pressures in the financial market, including enhancing its liquidity facilities this week.  To manage the balance sheet impact of these efforts, the Federal Reserve has taken a number of actions, including redeeming and selling securities from the System Open Market Account portfolio.

The Treasury Department announced today the initiation of a temporary Supplementary Financing Program at the request of the Federal Reserve.  The program will consist of a series of Treasury bills, apart from Treasury’s current borrowing program, which will provide cash for use in the Federal Reserve initiatives.

Announcements of and participation in auctions conducted under the Supplementary Financing Program will be governed by existing Treasury auction rules.  Treasury will provide as much advance notification as possible regarding the timing, size, and maturity of any bills auctioned for Supplementary Financing Program purposes.

http://www.ustreas.gov/press/releases/hp1144.htm

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Bernanke: ‘We have lost control’

Economist recounts talk with Fed chairman

By Joshua Boak | Chicago Tribune reporter
September 17, 2008

NAPLES, Fla. — Several months ago, economist David Hale had a private meeting with Federal Reserve Chairman Ben Bernanke, who was trying to ward off a recession by lowering interest rates and increasing the money supply in the economy.

“Ben, you are playing a very unique role in world economic history,” Hale recalled telling Bernanke, an expert in the Great Depression. “You are the first central bank governor of the United States to preside over a recession with no decline in commodity prices.”

“We have lost control,” said Hale, quoting Bernanke. “We cannot stabilize the dollar. We cannot control commodity prices.”

http://www.chicagotribune.com/business/chi-wed_oilsep17,0,4833605.story

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Government steps in again, bails out AIG with $85B

By JEANNINE AVERSA, IEVA M. AUGSTUMS and STEPHEN BERNARD, AP Business Writers 1 hour, 30 minutes ago

In the most far-reaching intervention into the private sector ever for the Federal Reserve, the government stepped in Tuesday to rescue American International Group Inc. with an $85 billion injection of taxpayer money. Under the deal, the government will get a 79.9 percent stake in one of the world’s largest insurers and the right to remove senior management.

http://news.yahoo.com/s/ap/20080917/ap_on_bi_ge/aig;_ylt=AonHCCQ2_HZ__h1XWo5HDf2s0NUE

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Global credit system suffers cardiac arrest on US crash

By Ambrose Evans-Pritchard
Last Updated: 11:59pm BST 17/09/2008

The global credit system almost grinds to a halt as yields on US Treasury bills reach zero for the first time since the Great Depression, writes Ambrose Evans-Pritchard

The global credit system came close to total seizure yesterday. Key parts of the derivatives market shut down and a panic flight to safety depressed the yield on three-month US Treasury bills to almost zero for the first since the Great Depression in 1934.

The closely-watched TED-spread measuring stress in the interbanking lending market rocketed to 238 as the share prices of Morgan Stanley, Goldman Sachs, Citigroup, Wachovia, and Bank of America all went into a tailspin yesterday.
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The collapse in investor confidence is a harsh verdict on the judgment of the US Federal Reserve, which chose to ignore market pleas for a rate cut to halt what amounts to a modern-era run on the banking system. Almost none of the current Fed governors have market experience. Most are academic theorists.

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2008/09/18/ccambrose118.xml

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Bright Side of a Total Financial Market Collapse: Michael Lewis 

We’ve just witnessed the largest bankruptcy in U.S. history and we know neither the inciting incident (though there is speculation that sovereign wealth funds decided to stop lending to Lehman Brothers Holdings Inc.), nor the deep cause. But there’s now a pile of assets and liabilities smoldering in New York awaiting inspection.

The assets include subprime mortgage-backed bonds and no doubt many other things that aren’t worth as much as Lehman hoped they might be worth. But it’s the liabilities that are most intriguing, as they include more than $700 billion in notional derivatives contracts. Some of that is insurance sold by Lehman, against the risk of other companies defaulting.

http://www.bloomberg.com/apps/news?pid=20601039&sid=a9xtBHJoZTOw&refer=home

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Panic Is the Word of the Hour

Traders abandoned the NYSE temple visually defeated and immune to the TV crews waiting. The disastrous closing prices were flickering on the ticker above the NYSE entrance: American Express -8.4 percent; Citigroup -10.9 percent; JPMorgan Chase -12.2 percent. American icons, abused like stray dogs. Even Apple took a hit.

“I don’t know what else to say,” stammered one broker, who was consoling himself with white wine and beer along with some colleagues at an outdoor bar called Beckett’s. Ties and jackets were off, but despite the evening breeze, you could still make out the thin film of sweat on his forehead. His words captured the speechlessness of an industry.

http://www.spiegel.de/international/business/0,1518,578944,00.html

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New World Order: Likely Morgan Merger Leaves Goldman Last Man Standing

Posted Sep 18, 2008 10:48am EDT by Aaron Task in Investing, Recession, Banking

As of this writing, the fate of Morgan Stanley remains uncertain although continued independence seems unlikely. The investment bank is having merger talks with a variety of players, including Wachovia and HSBC, while China’s sovereign wealth fund is looking to raise its stake in the firm, according to various reports. (After rallying early Thursday on such reports, Morgan shares recently turned negative, about $2 below its early high of $22.32.

The bigger story is a Morgan merger would leave Goldman Sachs as the last remaining major independent brokerage firm, when four existed a week ago and five were operating at the beginning of 2008.

“A new world order is upon us. A seismic shift that is redefining the brokerage intermediary,” writes Todd Harrison, CEO of Minyanville.com.

http://finance.yahoo.com/tech-ticker/article/62699/New-World-Order-Likely-Morgan-Merger-Leaves-Goldman-Last-Man-Standing?tickers=MS,GS,WB,BAC,XLF,AIG

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In the Military, we called this “going to sleep on watch”, which during wartime was an offense punishable by death.

If we are not currently at war in the most desperate fight for our financial system and form of government, and if Congress is not falling asleep at the watch, then they need to reach down, grab a hold of their manhood, and put a stop to this before its too late.

Our Congress and Senate are the only powers within our laws that have full legal authority over the issuance of currency, and have only temporarily delegated it to the Federal Reserve. It is their DUTY and their RESPONSIBILITY to this generation and every generation of Americans to follow, to ACT and not GO HOME.

This is EXACTLY the reason our country is so incredibly screwed up right now.

Our “Leaders” are basically spineless, ignorant, “politicians” who have no clue as to how we got in this mess, let alone how to fix it.

But most important of all, it appears they do not have the courage to fix it, and that is what saddens me the most.

Democratic Congress May Adjourn, Leave Crisis to Fed, Treasury

By Kristin Jensen
More Photos/Details

Sept. 18 (Bloomberg) — The Democratic-controlled Congress, acknowledging that it isn’t equipped to lead the way to a solution for the financial crisis and can’t agree on a path to follow, is likely to just get out of the way.

Lawmakers say they are unlikely to take action before, or to delay, their planned adjournments — Sept. 26 for the House of Representatives, a week later for the Senate. While they haven’t ruled out returning after the Nov. 4 elections, they would rather wait until next year unless Treasury Secretary Henry Paulson and Federal Reserve Chairman Ben S. Bernanke, who are leading efforts to contain the crisis, call for help.

One reason, Senate Majority Leader Harry Reid said yesterday, is that “no one knows what to do” at the moment.

“When you rush to judgment, you usually make mistakes,” said Sherwood Boehlert, a former Republican congressman from New York. “This is something you can’t go on forever without addressing, but Congress in a short span of time is best served by going home.”

http://www.bloomberg.com/apps/news?pid=washingtonstory&sid=aVPBaUbYV_qQ

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The result?

Gold soars as safe haven from Wall Street

By Alden Bentley

NEW YORK (Reuters) – Gold logged its biggest price advance ever on Wednesday and oil snapped a two-day rout as fears that the bailout of U.S. insurer AIG would not end the turmoil on Wall Street restored the luster of an established safe haven.

Gold’s 8.97 percent futures rally was the largest daily percentage gain in since February 2000. In absolute terms, bullion had a record day, leading a recovery across the commodities asset class after several days of liquidation sales to raise cash.

http://www.reuters.com/article/newsOne/idUSN1724013520080917?sp=true

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Summary: If this thing goes to hell in a handbasket it will happen very quickly.

If that occurs, you will not have time to fix it afterwards.

Anchor your finances in gold and silver now, while you still have time.

Smart Rapid Trenders are already doing this. We may end up taking care of everyone else.

May God watch over us all.


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Gold as Money Means A Potentially Massive Rise In Valuation

One thing that the world has forgotten for the most part, is that gold is money. It has been parroted around for three generations as a commodity only, with little industrial use or demand, and no value as a currency.

Humans have this interesting tendency to forget history, even though through all of time it consistently repeats itself.

The cycle I am speaking of is the one where societies and economies cycle back and forth between paper fiat money backed by nothing but a governments promise that it has value, and currency that is backed by gold and silver.

This is not new, and in my opinion will happen again, as it always has, for thousands of years.

For a while now I have been going on about how the Chinese, OPEC, and other nations that have trillions of USD in their reserves are not going to simply sit on it and watch it devalue by 16%-20% a year because of a rampant monetary inflation policy of the Federal Reserve.

“Dollar crisis looms, says Nobel laureate Mundell
Reuters June 3, 2008 at 8:36 AM EDT

VALENCIA, Spain — A major dollar crisis could come within five years and China is discussing reforms to the global monetary system to protect its $1.6-trillion (U.S.) reserves pile, says Nobel Prize-winning economist Robert Mundell.

Mr. Mundell, who has regular contacts with Beijing officials, said they are considering proposing ways to fix major currencies including the dollar and the euro, in a system similar to the one which operated under the Bretton Woods agreement from the end of World War Two until the 1970s.”

If you were China and seeing this happen to your National Treasury, would you sit there and do nothing or look for a solution?

The answer is obvious.

“China is worried about its pile of about $1.6-trillion in foreign reserves, built up during years of U.S. trade deficits, which loses value as the greenback depreciates. “

The excerpts from the above Reuters article shows that China seems to be interested in a gold backed system. If this were to occur, we need to take a serious look at what it means for the price and demand of gold.

I will give you one simple equation, which you can then apply to any nation, or the economy at large. If the USA were to go to a gold backed standard, that means each dollar in circulation would then have to be redeemable in gold. The current measure of USD in circulation based on private firm analysis is above $14 Trillion USD. The US Treasury claims it has 261,498,899.316 ounces of gold according to its website http://www.fms.treas.gov/GOLD/current.html . If we were to divide the number of USD in circulation by the amount of gold claimed to be on hand in the US Treasury, it would make the price of gold $53,537.00 per ounce.

You can perform this calculation on any nations currency, if you know the amount of currency in circulation and the country’s claimed national reserves in gold.

The bottom line is, if the world heads to any form of gold backed currency system, or any world government chooses to make its own currency backed in gold, then two things would happen:

1. That country will be the best runner up for the next world reserve currency

2. The valuation on gold will skyrocket beyond the angels

“Without reform, the global monetary system is headed for a dollar crisis within years, Mr. Mundell believes. “

I sure hope you own some gold before that happens.


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Simon Heapes: In ages past it was the Byzantine Empire, today is it China and OPEC?

Alex’s Notes: This quick note was fired to me from Simon Heapes, Director and Treasury Officer of The Anglo Far East Bullion Company. This was his comment and response to my post on the possibility of China holding the next world reserve currency:

2,000 yrs ago As Rome debased its currency and expanded via inflationary methods, the question must be asked who was buying the tangible productive assets?

It was the Byzantine Empire! When the Byzantines finally did over run Rome, they did not collapse it, they merely replaced Rome’s leadership with their own leadership, and effectively ran Rome as a defacto Empire keeping all the same systems in place for another 200yrs.

Finally, the Byzantium leadership broke apart from a Moral decay into the nations we call Europe today!

So the Question now, is China & the East going to do the same thing and keep the current system running further expanding globally and running inflation even further sending the cost of tangibles higher for many yrs to come? It certainly looks that way!

– Simon Heapes, The Anglo Far East Bullion Company


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The True Meaning of Inflation

Alex’s notes: This is an outstanding article on inflation. Understanding what inflation truly is holds the key to understanding what is happening in our economy, and how wealth will be transferred to a select few over the next decade.

Inflation Is Baked Into the Cake
By David Galland
17 Mar 2008 at 03:45 PM GMT-04:00

STOWE, Vt. (Casey Research Advertorial) — The word “inflation” covers two different concepts, and it’s important to keep them separate. One concept is monetary inflation, which is when the supply of money increases faster than the supply of goods and services. The other concept is price inflation, which is an increase in the overall level of prices for goods and services.

The relationship between the two is the relationship of cause and effect. Monetary inflation causes price inflation. But while almost everyone sees price inflation when it happens, few people notice the monetary inflation that is causing it. And so they tend to blame the producers of goods and services for higher prices – rather than the money-creating government that is the true culprit.

And make no mistake, as government spending continues on a steep ascent, piling up debt, there is no question that the government has to continue creating money like there’s no tomorrow. This situation is not unique to the U.S. Quite the opposite: the adoption of fiat monetary systems is now universal.

The results of over three decades of unhindered monetary creation are increasingly being felt in a rising tide of price inflation, whether it be the 7.4% increase in producer prices reported by the U.S. in the most recent quarter, or the news just out of China that consumer price inflation now tops 8% and is worsening … or, in the most extreme example, Zimbabwe, where the utter lack of restraint by an insane dictator now burdens that economy with an inflation rate of over 100,000% annually.

The Casey Research Global Inflation Survey

To get a better sense of things, Casey Research recently conducted a survey of the world’s top 30 economies, broken down on a region-by-region basis. The snapshot below offers a glimpse at the big picture.

Commodities on the Rise

Most pundits focus on commodities as a central culprit in today’s higher price inflation. Why are commodity prices rising? There are many reasons, most importantly: supply and demand fundamentals, speculation and a weakening U.S. dollar, the “universal currency” in which oil, gold and many other commodities are priced.

Of those factors, supply and demand and speculation are fairly fluid. Which is to say they can vary over time based on politics (a threat to cut off oil sales by Venezuela, a war in the Middle East, legislation favouring biofuel production) or for more technical reasons (power shortages impacting mining in South Africa, or the shutdown of the Gulf of Mexico during a hurricane). This relatively short-term variability largely neutralizes the value of these factors as predictors of future inflation. Simply put: who can know the unknowable?

Instead, we look to longer-term trends. In that regard, two are apparent. The first has to do with the concept of “peak” commodities. While it has been Marion King Hubbert’s theory of Peak Oil that has received the most attention, credible arguments can also be made for peak metal (the dearth of major new discoveries), and even peak food. While these arguments have merit, they were beyond the scope of our survey, other than noting them as potentially rising in significance over time.

The second long-term trend is, in our view, of immediate consequence and worth a more detailed discussion: per above, the limitations and risks inherent in the fiat monetary systems now in universal favour around the world. It is this fiat monetary regime – the attempt to manage monetary policy based on flexible guidelines, and without the anchor previously provided by a gold standard – that we believe is the single most important driver of the rising price inflation now apparent around the world.

Losing Control

Simply, while the central banks of a handful of countries are (just) managing to contain inflation through restrained monetary and fiscal policy, the vast majority are finding the task politically inexpedient and are losing control. While we may point with some well-deserved derision at Mr. Mugabe’s comedic attempts to paper over his inflation with yet more paper, all nations are currently making the same errors, albeit at differing levels of failure.

To understand this point, we share a simple but accurate way of thinking about inflation as the result of too much money chasing too few goods. On that front, the chart just below paints a picture of the largely unfettered global growth in money since the early 1970s plotted against industrial production, a proxy for “goods” in their many varieties.

That chart begins to get under the hood of the problem, but one further view is necessary to understand what happened in the early 1970s that unleashed the tidal wave of money. The chart below presents a ratio of the above two measures, and includes a marker indicating President Nixon’s cancelling of the link between the U.S. dollar and gold in 1971 as the likely trigger. Once this anchor was removed, all that remained was a pure fiat monetary system.

While cancelling the gold standard was a U.S. policy decision, its impact was felt around the world. That is because of the historic Bretton Woods agreement struck between representatives of over 40 countries in 1944, as World War II came to an end.

Leveraging its position as “last man standing” following the devastating war, the U.S. pushed forward a wide-ranging set of agreements – the net result being that, from that point forward, the U.S. dollar would be the de facto global reserve currency, with all the nations of the world pegging their currencies to the dollar. New institutions, including the International Monetary Fund and the International Bank for Reconstruction and Development, were fathered at Bretton Woods, but they were nothing more than enforcers for the new regime, ensuring that the other countries stayed in line, buying and selling dollars as needed to maintain a stable peg.

For its part, the U.S. guaranteed gold convertibility at $35 “forever.”

But as is inevitable when dealing with governments, “forever” really means “for as long as it is politically expedient.” When it became inconvenient, in the late 1960s when the French under Charles de Gaulle decided that they’d prefer to have the gold, Nixon cancelled convertibility.

Once President Nixon cancelled that convertibility, which took effect in 1971, the world’s central bankers, left with no other immediately obvious or more viable alternative, continued using the U.S. dollar as a key component of their reserves. It also continued to be used in international trade, to price globally traded commodities, such as oil. Yet the end of gold convertibility represented a fundamental change; from that point forward the creation of U.S. dollars and, by extension, all of the world’s currencies, was restrained by nothing more than political expediency.

It is our contention that the size of the politically motivated governmental spending, spending which has no “hard” limiting factor or defined discipline, will continue apace and, in fact, significantly worsen due to compounding interest on government borrowing and the coming wave of irrevocable social commitments – on Social Security and Medicare in the U.S., for example. Against the backdrop of a global fiat monetary regime, the only limitation to government spending is that which the politicians believe will be politically unacceptable to a population. This is, generally speaking, no real limitation at all, given that the public is now apathetic about, and numb to, the real world implications of large numbers.

Inflation: Baked in the Cake

In light of the cause and effect between monetary inflation and price inflation, and given the clear findings in our “Global Inflation Survey,” we can only conclude that inflation in both its commonly understood forms is now baked into the proverbial cake.

As investors, that keeps us focused on gold, the world’s longest-serving form of money and an investment we have been profitably beating the drum about since 1999. Importantly, a quick scan now finds that gold is rising against a large number of currencies. This is a very useful view of the current inflation trend in that it demonstrates that the trend has expanded considerably beyond just a weakening U.S. dollar, and is now affecting fiat currencies around the world, almost without exception.

Are we seeing the end of the experiment in fiat monetary systems? It’s too early to say one way or another, but it’s not too late to shift at least some percentage of your portfolio into gold and, for leverage, gold shares.

© Casey Research, LLC. 2008

David Galland is the managing director of Casey Research. The above was excerpted from the Casey Research Global Inflation Survey. The full 38-page survey, which includes commentary by Casey Research Chairman Doug Casey and an interview on the inflation/deflation debate with Casey Research Chief Economist Bud Conrad, is available on request.


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Jim Rogers claims the US Economy is ‘Out of Control’

Tokyo, Japan

Jim Rogers – co-founder of the Quantum Fund with George Soros, just told 750 global fund managers that, America is “completely out of control”. He also says we are looking at a 20-year bull market in commodities, in addition to claiming that it “made sense” if global competition for resources ended in armed conflict.

Mr Rogers told delegates to the CLSA investment forum that the prices of all agricultural products would “explode” in coming years and that the price of gold, which hit an all-time high of $964 an ounce yesterday, will continue its surge to as much as $3,500 an ounce.

Analyst Christopher Wood told fund managers that gold would continue to rise because, “because it is the exact opposite of a structured finance product”.

In a blistering attack on US monetary policy and the “helicopter cash drop” responses of the Federal Reserve, Mr Rogers described the American dollar as a “terribly flawed currency”.

He said that the plan by Ben Bernanke, the Fed Chairman, to “crank up the money-printing machines and run them until we run out of trees” had exposed America’s weakest point to her rivals and enemies.

The dollar may have declined recently, he added, “but you ain’t seen nothing yet”.

Talking to a room almost exclusively populated with Japan-focused equity investors, Mr Rogers recommended an immediate language course in Mandarin and a switch into commodities — the second-biggest market in the world behind foreign exchange.

Mr Rogers said that historic drains on wheat, corn and other soft commodity inventories have created market dynamics that could lead to severe food shortages.

The outlook over the next two decades would see prices of everything from cotton and sugar to lead and nickel “going through the roof”.


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Oil closes at new high of $94.53 on supplies drop

By Moming Zhou & Polya Lesova, MarketWatch

In after-hours trade, crude climbs to new record high of $95.28 a barrel

SAN FRANCISCO (MarketWatch) — Crude-oil futures closed at a new high of $94.53 a barrel on Wednesday after U.S. crude inventories dropped surprisingly in the latest week to the lowest level in two years and the dollar lost ground on the Federal Reserve’s rate cut.

In after-hours trading, crude-oil futures hit a new record high, surging as high as $95.28 a barrel on the New York Mercantile Exchange. Crude oil for December delivery was last up $4.84, or over 5%, at $95.22 a barrel.

Earlier Wednesday during the regular trading session, crude settled up $4.15, or 4.6%, at $94.53 a barrel, the highest closing price for a front-month contract.

Futures prices of petroleum products also surged.

U.S. commercial crude oil inventories, which are inventories excluding those in the Strategic Petroleum Reserve, fell by 3.9 million barrels to 312.7 million barrels in the week ending Oct. 26, the lowest since October 2005, the Energy Information Administration said Wednesday. Analysts surveyed by Platts expected on Tuesday a build of 1.25 million barrels in stocks.

The dollar hit a record low of $1.4503 per euro after the Federal Open Market Committee, the Fed’s rate-setting arm, cut the fed funds rate by 0.25% to 4.5% on Wednesday afternoon. See The Fed.

“This is another bullish report for crude oil,” said James Williams, an economist at WTRG Economics, an energy research firm. “Since the Fed cut met expectations, this is fairly neutral. The oil stock decline, not the Fed, is ruling today’s market.”

“This market continues to trade on fear and short term news,” Williams added.

Low inventories

EIA’s data showed that out of last week’s 3.9 million barrel drop, 3.1 million barrels were from Cushing, Oklahoma, which is the delivery point for crude traded on Nymex.

“The large decline at Cushing stocks adds to the upward pressure,” said Williams.

Mexico’s oil exporting ports closures will probably affect next week’s import and inventory data, according to WTRG’s Williams.

Crude imports over the last four weeks have averaged 9.7 million barrels per day, or 481,000 barrels per day less than the same period last year, the EIA said. Last week’s imports averaged 9.4 million barrels per day, up 278,000 barrels per day from the previous week.

U.S. imports nearly 70%, or 10 million a day, crude oil. Mexico is the second largest supply country after Canada, shipping 1.66 million a day to the U.S., according to EIA.

Fierce storms in the past few weeks forced Mexico to close its main oil exporting ports in the crude-rich Gulf of Mexico, cutting off most of the country’s crude shipments to the U.S. Over the weekend, Mexico’s state-owned Petroleos Mexicanos, one of the largest crude suppliers to the U.S., halted production of 600,000 barrels a day due to inclement weather.

The impact from Mexico will “be made up in the coming weeks,” said Williams.

Fed rate cut

“The Fed cuts were pretty much as expected, but it’s more bad news for the dollar, which means oil will likely rally even more,” said Kevin Kerr, president of Kerrtrade.com and Editor of Dow Jones MarketWatch’s Global Resources Trader.

A rate cut will weaken the dollar and raise the appeal of oil as an alternative investment. A weaker dollar also undermines the value of crude for its producers since the commodity is priced in the U.S. currency, putting upward pressure on crude prices as producers move to raise prices to limit the impact of the weak dollar.

“With a weaker dollar, one cannot expect prices to decline much if at all this week,” said John Person, president of National Futures Advisory Service, a futures brokerage. In fact, he said, the $100 dollar a barrel oil target becomes more of a reality in this scenario.”

“At this point if there were any news-driven shocks to the market that would indicate a supply disruption, oil would certainly be targeted at $120 per barrel, especially in this environment,” Person added.

Drop in refinery capacity

In the same report, EIA, which is part of the Energy Department, also said refinery capacity utilization fell sharply by 0.9% to 86.2%. Analysts expected a 0.5% point increase. The utilization was at the lowest in more than seven months.

“The severe weakness in the capacity utilization number is shocking,” said Global Resources Trader’s Kerr. “If capacity falls there will be less heating oil or gasoline.”

The EIA reported that gasoline supplies rose by 1.3 million barrels to 195.1 million barrels in the latest week, down from last year’s 206.4 million, while distillate stocks, which include heading oil, diesel and jet fuel, grew by 800,000 barrels to 135.3 million barrels, down from 144.1 million of the same period in last year.

“Without a chance to see oil inventories build we are in for higher prices at the pumps and for home heating costs this winter,” said National Futures Advisory Service’s Person.

In a separate report, the American Petroleum Institute reported that crude supplies fell by 3.3 million barrels to 311 million barrels. Distillate stocks rose by 3.1 million barrels to 136.2 million barrels, while gasoline stocks fell by 800,000 barrels to 196.1 million barrels, the API said.

On Nymex, November reformulated gasoline jumped 3.7%, or 8.29 cents, to $2.3400 a gallon and November heating oil rose 3.4%, or 8.32 cents at $2.5078 a gallon.

The EIA will release data on natural gas supplies at 10:30 a.m. Eastern on Thursday. John Kilduff, an analyst at MF Global, expects an injection of 56 billion cubic feet.

December natural gas surged 4.1%, or 33.1 cents, at $8.352 per million British thermal units.

http://www.marketwatch.com/news/story/oil-closes-new-high-9453/story.aspx?guid=%7BF078CE7B%2D5277%2D4358%2D9356%2D7A049EBBAFA6%7D


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– “10 Reasons Gold Has Farther to Run”

Learn from the fall of Rome, US warned

Financial Times
By Jeremy Grant in Washington

Published: August 14 2007 00:06 | Last updated: August 14 2007 00:06

The US government is on a ‘burning platform’ of unsustainable policies and practices with fiscal deficits, chronic healthcare underfunding, immigration and overseas military commitments threatening a crisis if action is not taken soon, the country’s top government inspector has warned.

David Walker, comptroller general of the US, issued the unusually downbeat assessment of his country’s future in a report that lays out what he called “chilling long-term simulations”.

These include “dramatic” tax rises, slashed government services and the large-scale dumping by foreign governments of holdings of US debt.

Drawing parallels with the end of the Roman empire, Mr Walker warned there were “striking similarities” between America’s current situation and the factors that brought down Rome, including “declining moral values and political civility at home, an over-confident and over-extended military in foreign lands and fiscal irresponsibility by the central government”.

“Sound familiar?” Mr Walker said. “In my view, it’s time to learn from history and take steps to ensure the American Republic is the first to stand the test of time.”

Mr Walker’s views carry weight because he is a non-partisan figure in charge of the Government Accountability Office, often described as the investigative arm of the US Congress.

While most of its studies are commissioned by legislators, about 10 per cent – such as the one containing his latest warnings – are initiated by the comptroller general himself.

In an interview with the Financial Times, Mr Walker said he had mentioned some of the issues before but now wanted to “turn up the volume”. Some of them were too sensitive for others in government to “have their name associated with”.

“I’m trying to sound an alarm and issue a wake-up call,” he said. “As comptroller general I’ve got an ability to look longer-range and take on issues that others may be hesitant, and in many cases may not be in a position, to take on.

“One of the concerns is obviously we are a great country but we face major sustainability challenges that we are not taking seriously enough,” said Mr Walker, who was appointed during the Clinton administration to the post, which carries a 15-year term.

The fiscal imbalance meant the US was “on a path toward an explosion of debt”.

“With the looming retirement of baby boomers, spiralling healthcare costs, plummeting savings rates and increasing reliance on foreign lenders, we face unprecedented fiscal risks,” said Mr Walker, a former senior executive at PwC auditing firm.

Current US policy on education, energy, the environment, immigration and Iraq also was on an “unsustainable path”.

“Our very prosperity is placing greater demands on our physical infrastructure. Billions of dollars will be needed to modernise everything from highways and airports to water and sewage systems. The recent bridge collapse in Minneapolis was a sobering wake-up call.”

Mr Walker said he would offer to brief the would-be presidential candidates next spring.

“They need to make fiscal responsibility and inter-generational equity one of their top priorities. If they do, I think we have a chance to turn this around but if they don’t, I think the risk of a serious crisis rises considerably”.


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