The Economic Outpost

Jon Stewart on Ron Paul Media censorship

2011-09-07T07:07:00.001-07:00

Results of the Iowa Straw Poll

Michelle Bachman - 28%
Ron Paul - 27%
Romney and Perry each received less than 5% of the votes

Watch comedian Jon Stewart's POSITIVELY HILARIOUS take on the media censorship of Ron Paul.

A case of major lending institutions with no respect for the law… Part of the system that destroyed the American economy

2011-05-08T07:08:00.000-07:00

Jeff Thigpen is Guilford County, North Carolina’s Register of Deeds, and I didn’t write the headline above, those are his words used to describe the fraudulent acts of our nation’s major banks, brought to light as part of the robo-signing scandal of last fall. (Hat-tip to reader Catherine for sending this in.)

Thigpen says that a large number of national banks, including Bank of America, Wells Fargo, HSBC and others repeatedly filed documents with forged signatures illegally notarized and other false information, and not only in his Register of Deeds office, but all over the country.

Full Article at Mandelman Matters

We've become a Nation of takers, not makers

2011-04-03T07:24:00.000-07:00

More Americans work for the government than in manufacturing, farming, fishing, forestry, mining and utilities combined..

By STEPHEN MOORE

If you want to understand better why so many states—from New York to Wisconsin to California—are teetering on the brink of bankruptcy, consider this depressing statistic: Today in America there are nearly twice as many people working for the government (22.5 million) than in all of manufacturing (11.5 million). This is an almost exact reversal of the situation in 1960, when there were 15 million workers in manufacturing and 8.7 million collecting a paycheck from the government.

It gets worse. More Americans work for the government than work in construction, farming, fishing, forestry, manufacturing, mining and utilities combined. We have moved decisively from a nation of makers to a nation of takers. Nearly half of the $2.2 trillion cost of state and local governments is the $1 trillion-a-year tab for pay and benefits of state and local employees. Is it any wonder that so many states and cities cannot pay their bills?

We've become a Nation of takers, not makers

How likely is QE-Three?

2011-04-03T07:17:00.000-07:00

By Gonzalo Lira

If foreign sources of funding will not cover the Federal government’s deficit after June 2011, and Washington will definitely not cut spending in any sort of realistic sense, then there really are only two—and only two—possibilities:

• The indefinite continuation of QE by the Federal Reserve.
• Or the requisitioning of private retirement accounts and pension funds.

Don’t dismiss the second possibility out of hand—think it over.

What pool of money is just sitting there, not doing much, while being legally barred from its owners? What pool of money is easily accessed, yet is large enough to fund the deficit?

The retirement accounts of the American people: Both individual private accounts, and pension funds.

After all, the total for all pension monies is roughly 100% of GDP (this includes Social Security). And the Federal government has already raided the “Social Security lock box”—that box is stuffed with Treasury IOU’s.

How likely is QE-Three?

The curious case of Ron Paul

2011-03-13T07:45:00.000-07:00

By Andrew Foy, MD

He is kind of like a rock star, a nerdy professor, and your crazy uncle rolled into one. Ron Paul, a medical doctor and longtime Republican congressman from Texas, is a fundraising machine who, despite his quirkiness, should be considered a serious contender for the GOP presidential nomination in 2012. But according to the mainstream conservative press, he is nowhere in the equation.

American Thinker: The Curious Case of Ron Paul

The Global Debt Prison

2011-02-06T15:32:00.000-08:00

A Good Read!

"The Federal Reserve, with the help of politicians on both sides of the aisle, created a series of illusory incentives (through interest rate cuts) which allowed banks to begin lending almost unlimited fiat at rock bottom prices. America was awash in credit, to the point that it was nearly impossible for the average person to avoid the temptation of borrowing. What we didn’t understand then, but are beginning to grasp now, is that credit derived from fiat is not “capital”, it is NOT wealth. Credit is the creation of an obligation, to be paid at a later date, if it is paid at all, and because there are no rules to tie the debt to any legitimate collateral (at least for banks), there is nothing to back the obligation if it falters. Therefore, fiat induced credit is not the creation of wealth (as Keynesians seem to believe), but the destruction of wealth!"

The Global Debt Prison

Fed passes China in Treasury holdings

2011-02-06T12:23:00.000-08:00

The Federal Reserve has surpassed China as the leading holder of US Treasury securities even though it has yet to reach the halfway mark in its latest round of quantitative easing, according to official figures.

Based on weekly data released on Thursday, the New York Fed’s holdings of Treasuries in its System Open Market Account, known as Soma, total $1,108bn, made up of bills, notes, bonds and Treasury Inflation Protected Securities, or Tips.

According to the most recent US Treasury data on foreign holders of US government paper, China holds $896bn and Japan owns $877bn.

“By June [the Fed] will have accumulated some $1,600bn of Treasury securities, likely to be in the vicinity of China and Japan’s combined holdings,” said Richard Gilhooly, a strategist at TD Securities. “The New York Fed surpassed China in the past month as the largest holder of US Treasury securities,” he noted.

Full Story

Oil and Gas prices continue to rise: What gives?

2010-12-30T08:30:00.000-08:00

Extreme oil prices pummel more than just our wallets; they also strike our cultural psyche. Those people who found a way to ignore the signs of economic collapse until now will discover that they cannot avoid the icy reality of the gas pump. When those digital dials spin past the $5 mark before pouring out even one gallon of unleaded, I suspect people will be generally pissed. This is why the establishment media is oozing with oil disinformation and demand rhetoric now. It is an attempt to “vaccinate” the masses against inflation in the future; to redirect their anger towards a false cause and effect scenario. It has long been my concern that the speculation induced gas spike of 2008 was, in fact, a deliberately engineered event; a staged price vault meant to condition Americans to passively tolerate the very real dollar disintegration and hyperinflation which would eventually occur later down the road. When crude prices race towards $150 a barrel once again, does anyone really doubt that the MSM will bring up “speculators” as the villain? And, more importantly, does anyone doubt that the rest of the world will blame the actual trigger; the fading Greenback?

Oil Juggernaut Unleashed

US Fiscal Health Worse than Europe: China Advisor

2010-12-09T09:14:00.000-08:00

Many currency analysts are purplexed by the mini dollar rally which followed the QE II announcement in early November. At about the same time (another one of) the Fed's bond buying scheme was announced, the strangely coincidental bad news about a debt default came out of Ireland, which trumped the money printing shenanigans of the US Federal Reserve, and the Dollar's imminent decline was eclipsed by a falling Euro. But does a declining Euro make the economic situation in the US any better?

Not according to Li Daokui, an academic member of China's central bank monetary policy committee. He states:

"For now, market attention is still on Europe and for the coming 6-12 months, it will not shift to the United States," Li said, when asked about U.S. President Barack Obama's plan to extend tax cuts for all Americans."

Comment: The tax cut issue is hilarious-- in that while EU nations are facing austerity measures and budget cutbacks, the US is printing money at breakneck speed and extending tax cuts in the face of mammoth spending programs and a future of grossly under-funded programs like Medicare and Social Security-- let's not forget pensions and redlined state budgets while we're at it. While both suffer from the same disease, the EU is attempting to contain the fiscal damage with austerity and cutbacks, while the US is accelerating into the abyss of spending/debt nirvana.

"But we should be clear in our minds that the fiscal situation in the United States is much worse than in Europe. In one or two years, when the European debt situation stabilizes, attention of financial markets will definitely shift to the United States. At that time, U.S. Treasury bonds and the dollar will experience considerable declines."

In other words, at some point the EU austerity measures and budget cutbacks (the economic pain necessary to reign in on years of fraudulent accounting and drunken spending policies) will work to quell the market skepticism and bring to light that the US has neglected to address their fiscal imbalances and remains mired in a sea of red ink. The difference being is that the US is unwilling to accept austerity and instead chose to grease the wheels of an overheated printing press in an effort to hide their problem.

Conclusion? The US cannot forever sell the story of default and a collapsing EU, while continuing to run the same ruinous financial policies here in the states, and not suffer the same- or arguably worse, fate.

U.S. fiscal health worse than Europe's: China adviser

Pssst! Interest rates are rising in spite of QE II

2010-11-21T07:41:00.000-08:00

"The whole point of quantitative easing, in a sense, is to keep interest rates low (by keeping bond prices propped up). Low rates mean lower borrowing costs for businesses and consumers... lower rates of return on savings instruments... and, overall, more "risk appetite" from speculators and investors on the whole."

"So it is surely perplexing to the Fed that, after their big QE2 bond-buying program was unveiled, bonds went down... and rates shot up in the wrong direction!"

An Ominous Rise in Interest Rates -- What Could It Mean?

Bernanke and Geithner, the 'Abbot and Costello' of US Finance

2010-11-21T07:23:00.000-08:00

"Most recently, Geithner stated, "It is very important for people to understand that the United States of America and no country around the world can devalue their way to prosperity, to (be) competitive" and "It is not a viable strategy and we will not engage in it." His ability to voice these words with a straight face, admittedly, was most impressive yet the fact that the Federal Reserve has been employing this strategy for the past 97 years with the American people remaining oblivious, take a little away from his performance. Apparently Americans believe professional wrestling is the real deal also. "

"Bernanke plays the worried public servant, stressing out over deflation while at the same time tripling the money supply over a few years. He keeps a cool front over the pent-up hyperinflation he has been instrumental in achieving. This is because he knows it will not happen yet because the latest $2.5 trillion in deficit spending and $600 billion in quantitative easing (monetization) that he has created has gone straight into the pockets of his crony bankster masters. He knows they will withhold from unleashing their booty until Ben and Timmy have completed their task of complete destruction of the US economic landscape so his masters can be assured of rock bottom prices when they open their wallets."

Perhaps Bernanke And Geithner Should Try Acting?

Open Letter to Ben Bernanke

2010-11-15T15:38:00.000-08:00

We believe the Federal Reserve’s large-scale asset purchase plan (so-called “quantitative easing”) should be reconsidered and discontinued. We do not believe such a plan is necessary or advisable under current circumstances. The planned asset purchases risk currency debasement and inflation, and we do not think they will achieve the Fed’s objective of promoting employment.

Open Letter to Ben Bernanke

Gerald Celente on US Midterms and Globalization

2010-11-14T06:55:00.000-08:00

A Currency war cometh: Backlash builds against the Fed Money Pumping!

2010-11-04T16:07:00.000-07:00

The US Federal Reserve’s decision to pump an extra $600bn into the economy has galvanized emerging market central banks into preparing defensive measures and sparked criticism from leading global economies.

China, Brazil and Germany on Thursday criticised the Fed’s action a day earlier, and a string of east Asian central banks said they were preparing measures to defend their economies against large capital inflows.

Full Story

Why the Fed should forget about the US housing market and work on the REAL economy

2010-10-12T07:35:00.000-07:00

"The property market is a distraction from the work of rebuilding an economy toward one based on manufacturing and exports. And the vast wealth created by the real-estate boom has created social divisions between the young and old, and the middle and working classes."

Comment: Matthew Lynn wrote this article targeting the UK housing market, but the US Fed would DO VERY WELL to listen. Similarly, both a mysteriously rising DOW and the US property market have created HUGE distractions from the work of rebuilding a healthy economy.

"It is time for the British to give up their long, passionate affair with rampant property inflation.... U.K. house prices are still overvalued, and are a threat to the nation’s future."

Comment: Ditto here in the US. The massively wasteful monetary stimulus by the US Fed to bring down mortgage rates, and offer home buyer tax credits, completely misses the mark of rebuilding a "healthy" economy. Indeed it likely only worsens the purchase market, by keeping informed buyers out of the market, due to the skepticism about the true nature of housing prices.

Let's be clear, it was the bubble in residential real estate (thru irresponsible lending and ultra low rates), that distorted the market leading to malinvestment in the first place! Good god, these people have learned nothing. Homes are consumable items-- they do not add to a nations productivity or capital producing capacity. What the US DEFINITELY doesn't need is another stock / real estate boom, but yet thru MORE ultra low interest rates and ballooning the money supply, it is obvious this is precisely what the Fed hopes to (reflating these bubbles) accomplish.

Ultimately, these misguided policies will do three disastrous things:

1). Weaken the purchasing power of the dollar-- so while consumers feel richer (thru climbing asset prices) their pile of money actually loses purchasing power and they can buy less. The rising price of precious metals is screaming this right now.

2). It delays - almost indefinitely, any rebound in the purchase market as homes remain both over-valued and un-affordable. One would think that the stubborn rate of un-employment might tip our policymakers off to this, but they seem to be unable to grasp the idea that over-indebted consumers without jobs don't buy homes, regardless of the interest rate. The Fed is pushing on a string here.

3). When it becomes obvious to foreigners that the feds endless money printing operations jeopardize the value of their vast dollar holdings, the Fed will become the buyer of first, second AND LAST resort of US debt- effectively ballooning it's balance sheet with toxic debt instruments as the world repudiates the US dollar. America will be forced to cede the US dollars currency reserve status - and with it, an end to US financial / global domination.

In effect, the dollar is being sacrificed to prop up a dysfunctional / corrupt system. America went down a very dangerous path when they embraced a 'consumer economy' model-- and until the myth of a 'consumer economy' is dispelled, we can expect no recovery, and likely much more pain.

While this article was aimed at the UK housing market, much could be gained if US policymakers gave it a read.

Home Prices are Love Affair headed for Rocks

Mortgage Title Fraud: A National Catastrophe

2010-10-08T12:22:00.000-07:00

This is the sort of systemic horror-story which we would expect to hear coming out of some tiny, Third World country, with a ‘two-bit’ legal system – not from the Leader of the Free World. The crime-waves being confessed to by JP Morgan and Bank of America follow similar (if not worse) admissions by Ally Financial (GMAC’s mortgage subsidiary).

Naturally, the U.S. propaganda-machine isn’t reporting this mass-fraud as a crime-wave, but merely as “mistakes”. Let me make things clear. Doing something once is a “mistake”. Doing something 10 times is a pattern. Doing something 100 times is serial fraud. Doing something at least 7,000 times a month is a crime-wave. Obviously the banks themselves must have understood they were engaging in fraud.

Mortgage Title Fraud: A National Catastrophe

Fall 2010- Tipping Point?

2010-09-30T09:46:00.000-07:00

This is simply a brilliant article (with multiple resources) that EVERYONE who is concerned about the state of our economy and the welfare of family and loved ones, NEEDS to read.

"Our current economy is a shell game. A grand fraud designed to siphon more and more tangible wealth (not fiat wealth) from the average person and transport it post-haste into the silk lined pockets of a corporate banking minority. The goal? To reduce the self sufficiency of American citizens to the point of total fiscal and social dependence on the top 1% richest men in the world. Conspiracy theory? Not in the slightest. Just a cold hard fact of history. “Feudalism” is, sadly, rampant in the annals of human culture. Anyone who believes that our modern era is somehow different is simply fooling themselves. Elitists seek power over others, they always have and they always will, and, the most efficient way to gain control over the lives of the masses is through engineered imbalances in economy."

Economic Collapse Update: Acceleration In Autumn

When Meredith Whitney Talks-- Smart people listen!

2010-09-29T13:53:00.000-07:00

Gold rifles past $1300!

2010-09-28T13:29:00.000-07:00

Precious metals are an un-exciting investment class-- but they've certainly proven to be a great way to protect your wealth, and a good investment portfolio would have done well to set aside at least a small percentage in precious metals with prevailing (accomodative) monetary policy.

Gold is quite simply a vote of no confidence in the politically motivated Keynesian economists who feel that the public sector is better at creating wealth than the private sector.

Gold rallies to another record high

How to fix the housing market: Let it Crash

2010-09-07T17:21:00.000-07:00

As the economy again sputters and potential buyers flee — July housing sales sank 26 percent from July 2009 — there is a growing sense of exhaustion with government intervention. Some economists and analysts are now urging a dose of shock therapy that would greatly shift the benefits to future homeowners: Let the housing market crash.

When prices are lower, these experts argue, buyers will pour in, creating the elusive stability the government has spent billions upon billions trying to achieve.

This is PRECISELY what needs to happen. In the last decade, home values weren't driven by the fundamentals (wages / incomes etc.), but by easy credit brought to us in large part by vote pandering politicians (think Barney Frank), and the 'something for nothing' crowd who cheered that home-ownership was a birth right, not a responsibility.

This same crowd also saw accumulation of debt as a sign of success, as real estate moguls and crestfallen economists of every stripe, assured us that housing- regardless of market timing, was a one way ticket to wealth. Herd mentality during the mid 2000's reached a feverish pitch. The strangest thing about all of this was the exact same shell game played out in the US equities markets during the dot com fiasco of the late 1990's. Are we really optimists or just blinded by greed?

Celia Farber once wrote; "The truth is like an airplane I think, it can remain suspended in the air for great periods of time, it can even be re-routed, but sooner or later it has has to land". Taken within the context of housing, the truth cannot be ignored indefinitely, the buyers/sellers, the banks and the politicians- regardless of their collective efforts, cannot put off the truth forever. Rather, they are beginning to suffer a credibility crisis for their hollow campaigns.

The US housing market MUST find a bottom, FREE from interference -reflecting market set interest rates, real debt / income affordability as well as the immutable laws of supply and demand. Anything less than this, will prolong - and almost assuredly compound the crisis.

Grim Housing Choice: Help Today’s Owners or Future Ones

China enters the Gold Market

2010-08-13T07:40:00.001-07:00

A short while back, China announced the opening of the Dagong Global Credit Rating Agency-- Asia's answer to the Wests' unfair bias of Moody's, Fitch, and S&P rating agencies. Shortly after opening, Dagong downgraded US debt:

"Chinese president Hu Jintao said in April that the world needs "an objective, fair, and reasonable standard" for rating sovereign debt. Dagong appears to have stepped into the role, saying its objective was to assess countries using methods that would "not be affected by ideology".

"The reason for the global financial crisis and debt crisis in Europe is that the current international credit rating system does not correctly reveal the debtor's repayment ability," said Guan Jianzhong, Dagong's chairman."

More recently, the PBoC (People's Bank of China) has asked the Shanghai Gold Exchange, Shanghai Futures Exchange and commercial banks to become actively engaged in developing a national gold market. According to statements, the implied reasoning for these developments was to "Improve the market system", and "To promote the healthy development of the gold market".

Does anyone else see a pattern forming here?

For many years now, GATA and a number of other credible sources have sought to draw correlation between a (US led) precious metals price suppression scheme and the ENORMOUS short positions held by US banks in both Gold and Silver thru the COMEX. Further, many of these so called short positions, have been characterized as "naked shorts" as the ability of these institutions to fulfill these contracts (as opposed to offering a paper / cash settlement) has been cast in serious doubt.

In contrast to this practice, the US Securities and Exchange Commission banned the practice of "naked short selling" of US financials at the height of the US financial crisis in September of 2008- characterizing the practice as "abusive".

The SEC writes:

In an ordinary short sale, the short seller borrows a stock and sells it, with the understanding that the loan must be repaid by buying the stock in the market (hopefully at a lower price). But in an abusive naked short transaction, the seller doesn't actually borrow the stock, and fails to deliver it to the buyer. For this reason, naked shorting can allow manipulators to force prices down far lower than would be possible in legitimate short-selling conditions.

It could reasonably be assumed that China's recent announcement to "develop a healthy gold market" is 1) a veiled shot at the financial chicanery promoted by Western markets 2) a harbinger of future diversification of it's HUMONGOUS reserves portfolio away from US dollars as they suspect a faultering US economy would lead to more debt monetization and currency devaluation, and 3) along with the opening of its own credit rating agency underscores Asia's growing distrust of Western markets.

Regardless of what one might believe, China appears to be playing lead fiddle in reducing US influence in global markets. In the case of gold, they have promoted gold ownership amongst their citizens. As a nation of savers, this might insulate them against broad currency fluctuations (think US/Euro currencies), bolster their ability to protect their wealth and will likely aid them in transitioning their economy to be more consumer driven and less export driven.

China officially enters the Gold Market

How the Deflationist argument worsens US fiscal status

2010-08-04T07:10:00.000-07:00

I have argued for a number of years, that deflation (in houses and stocks) is being purposefully mis-categorized; what we're really experiencing is "dis-inflation"-- or more specifically, hugely distorted markets attempting to restore sanity and equilibrium.

With the bursting stock bubble- and now collapsing housing prices, Americans watch in horror as their perceived illusory wealth evaporates before their eyes. The unfolding of these collapsing asset "schemes" lies at the very heart of massive govt stimulus programs - including (but not limited to) an alphabet soup of programs (HAMP, TARP, etc). Such midirected efforts have only served to further distort free market economics (and prices), put our currency and credit rating at risk, and finally- ostracize us from our more clear thinking global neighbors seeking to reign in on their deficits and restore confidence to their markets.

Doug Noland NAILS this below:

And I find myself increasingly frustrated by the ongoing “inflation vs. deflation debate.” With today’s low level of consumer price inflation, those arguing that deflationary forces are the paramount systemic risk now dominate policy dialogue. Most tend to be inflationists. Most argue for additional stimulus and see little risk in such activist policymaking.

I see risks altogether differently. We are in the late-phase of a multi-decade historic Credit Bubble. The greatest risk at this point is that massive issuance of non-productive governmental debt forments a crisis of confidence at the very heart of our monetary system. The top priority must be to ensure that such a devastating outcome is avoided – and at significant unavoidable cost. It is imperative that we as a nation come to the recognition that real financial and economic pain must be endured to protect the long-term viability of our monetary system. The inflation rate is not the key issue. And efforts to try to inflate our way out of structural debt problems are a lost cause. We must instead move forcefully to rein in our deficits and avoid further debt monetization in order to protect the soundness of our money and Credit – or else risk a financial crash.

Most regrettably, Washington policymaking (fiscal and monetary) is on a trajectory that will inevitably destroy the creditworthiness of our nation’s vast liabilities. With ominous parallels to the mortgage/Wall Street finance Bubble, Federal Reserve policies have fostered Bubble dynamics throughout our Treasury, agency and debt markets, more generally. Instead of market dynamics working to discipline Washington’s profligate debt expansion, Federal Reserve interventions ensure that a distorted marketplace again accommodates perilous Credit excess. Our central bankers should heed Mr. Trichet’s warning. Additional quantitative ease will only fuel the Bubble and risk calamity.

Doug Noland: “Significant Unavoidable Cost”

China Becomes Second Biggest World Economy

2010-07-30T08:00:00.000-07:00

Depending on how fast its exchange rate rises, China is on course to overtake the United States and vault into the No.1 spot sometime around 2025, according to projections by the World Bank, Goldman Sachs and others.

China came close to surpassing Japan in 2009 and the disclosure by a senior official that it had now done so comes as no surprise. Indeed, Yi Gang, China's chief currency regulator, mentioned the milestone in passing in remarks published on Friday.

China Becomes Second Biggest World Economy

How the housing market will bankrupt the US

2010-07-30T07:54:00.000-07:00

With little fanfare, the U.S. government has rapidly become the nation’s top backer of mortgages that require little or no money down, with taxpayer guarantees on them surpassing $1 trillion earlier this year, a FOX Business analysis shows.

“Zero down” mortgages as high as $1 million have been backed by the Department of Veterans Affairs, which by law offers most of its loans with no down payment required. Such “no money down” jumbo loans were approved in higher-cost housing markets, VA officials said. The average VA loan is $207,000.

Second Housing Crisis? Another $1T in Mortgages Backed by Taxpayers

Why Gold is NOT a bubble

2010-07-14T19:47:00.000-07:00

"Currently some 0.8% of all global financial assets are invested in gold, gold shares, and ETFs. In 1932 the allocation was 20%, and in the last bull market at the beginning of the 1980s it was 26%. Granted, this is only a numeric model, but it illustrates how unfounded the myth of a gold bubble is. According to an old saying, one tends to see the bubbles wherever one is NOT invested."

Why Gold is Definitely NOT a bubble

Bill Black Interview - Economic Collapse

2010-07-13T19:58:00.000-07:00

One of the most riveting aspects of this Bill Black Interview below is how the very architects of the financial crisis of 2008 to present, not only remain in charge, but in many cases have been promoted.

Chinese rating agencies downgrade US debt

2010-07-12T19:48:00.000-07:00

Of course, it was only a matter of time before the defunct US rating agencies (Moody's, Fitch and S&P) - having lost ALL credibility by identifying risk only in hindsight, were disenfranchised. It's not hard to imagine that the same fate likely awaits the US dollar-- which too is flawed given the current fiscal outlook of the US economy.

“This marks a new beginning for reforming the irrational international rating system,” Chairman Guan Jianzhong said in a statement. “The essential reason for the global financial crisis and the Greek crisis is that the current international rating system cannot truly reflect repayment ability.”

China Wins higher rating than US in First Ranking

Niall Ferguson nails it!

2010-07-08T17:19:00.000-07:00

“Fiscal tightening is baked in the cake. Tax increases are coming and coming soon… The US has a kind of stay of execution while the European crisis unfolds, but at some point the nasty fiscal arithmetic will get everyone, including the U.S… Treasuries are a safe haven the way Pearl Harbor was a safe haven in 1941. It’s safe until it’s not safe anymore.”

As deficit countries tighten, the world is losing confidence in American monetary policy

2010-06-28T21:18:00.001-07:00

"While US policymakers like to focus on short-term corrective measures, we take the longer view and are, therefore, more preoccupied with the implications of excessive deficits and the dangers of high inflation..."

"Citigroup chief economist Willem Buiter says that the US fiscal position is worse than Europe's and on a par with that of Britain. As its budget deficit rises above 10 per cent of GDP, it too will fall victim to the "bond market vigilantes" bringing a sharp rise in bond yields, he says."

US-Europe tensions rise as economic tightening causes grief

Canada's economy is suddenly the envy of the world

2010-06-21T21:22:00.000-07:00

Rich in natural resources - and a well managed banking system make Canada an attractive destination for investment dollars.

There was no mortgage meltdown or subprime crisis in Canada. Banks don't package mortgages and sell them to the private market, so they need to be sure their borrowers can pay back the loans.

In Canada's concentrated banking system, five major banks dominate the market and regulators know each of the top bank executives personally.

"Our banks were just better managed and we had better regulation," says former Prime Minister Paul Martin, the man credited with killing off a massive government deficit in the 1990s when he was finance minister, leading to 12 straight years of budget surpluses.

"I was absolutely amazed at senior bankers in the United States and Europe who didn't know the extent of the problem or they didn't know that people in some far-flung division were doing these kinds of things. It's just beyond belief," he told the AP.

Canada's economy is suddenly the envy of the world

Fannie / Freddie DELISTED from NYSE

2010-06-16T11:27:00.000-07:00

“These two entities — Fannie Mae and Freddie Mac — are not facing any kind of financial crisis, the more people exaggerate these problems, the more pressure there is on these companies, the less we will see in terms of affordable housing.”

-Barney Frank 2003 in response to Bush administration overhaul plan.

Fed rip up Fannie-Freddie lottery tickets

Warren Buffett Goes Down With the Credit Ratings Agencies

2010-06-08T19:20:00.000-07:00

Last week, Warren Buffett appeared before a special panel, the Financial Crisis Inquiry Commission, by order of government subpoena. The Oracle of Omaha was required to testify as a major shareholder of Moody's (MCO:NYSE), one of the big three ratings agencies.

It was a sad spectacle. Buffett trashed his own reputation by way of his poor defense of Moody's, and made himself look naïve and incompetent in the process.

This is the second post-crisis episode in which Buffett has flushed a large chunk of reputational capital down the toilet. The first was when he decided to vocally defend Goldman Sachs (or rather, his $5 billion stake in Goldman Sachs) in light of actions that were illegal at worst and shockingly sleazy at best.

Many times over the years, Buffett has referred to derivatives as "weapons of mass destruction." He has also expounded repeatedly and at length on the virtues of reputation, honesty and fair dealing.

So it is truly a rich irony that, if one were to draw up a list of derivative-wielding "mass destruction" finalists whose actions directly facilitated the global financial crisis, Goldman Sachs and Moody's – the very entities Buffett now chooses to defend – would have space near the top.

Warren Buffett Goes Down With the Credit Ratings Agencies

Merkel and Trichet "get it"; Geithner remains clueless

2010-06-08T18:55:00.000-07:00

Defining G-20 Success

- Merkel and Trichet politely told Geithner to go to hell. Given that Geithner needs to be fired, this is a positive event.

- Europe is more concerned about sovereign debt issues than stimulating growth. Only fools like Geither and the IMF would argue against that.

- No one paid any attention to Geithner or the Keynesian clowns at the IMF, most notably, IMF Managing Director Dominique Strauss-Kahn.

- There was no agreement on a universal bank levy. A universal tax is the wrong approach to risk management and it punishes banks with good lending practices.

- Geithner made a complete fool out of himself.

- A dozen cheers for German Chancellor Angela Merkel who said “We can only spend what we receive in income.” Finally someone gets it.

Given that the EU is more concerned about sovereign debt issues, then their US counterparts who continue to spend and borrow heir way to prosperity, at some point the markets will seek stability and that's when they realize the Euro is oversold and the Keynesian bozos running the printing presses in the US will be eyeballs deep in worthless paper.

G20 an amazing success

Behold a Pale Horse: Rand Paul takes Kentucky!

2010-05-18T21:24:00.000-07:00

In his victory speech, Paul applauded the tea party movement and issued a stern warning to the political establishment: "I have a message, a message from the tea party, a message that is loud and clear and does not mince words: We've come to take our government back."

"The tea party movement is about saving the country from a mountain of debt that is devouring our country and that I think could lead to chaos," Paul said grimly, laying in to President Barack Obama for his participation in last year's Copenhagen summit on global warming and accusing Obama of trying to "apologize for the industrial revolution."

Is the US housing market REALLY recovering?

2010-05-14T08:46:00.000-07:00

With the impressive data and charts listed in this article, it would be hard to accept the view that the US housing market is recovering.

"Housing never really improved – 10 charts showing the United States housing market is entering the second wave of problems. 1 out of 4 people with no mortgage payment in the last year are still not in the foreclosure process."

"96.5% of all originated loans are now government backed. Remember Fannie Mae and Freddie Mac and their epic continuing losses? Apparently banks have no problem originating loans as long as they can use the government money to gamble in the stock market."

Full Article

Bank of England: America has the same fiscal problems as Greece

2010-05-14T08:42:00.000-07:00

Someone had to say it!

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"Every country around the world is in a similar position, even the United States; the world’s largest economy has a very large fiscal deficit. And one of the concerns in financial markets is clearly – how will this enormous stock of public debt be reduced over the next few years?"

Greece erupts- Youths blame the Elders for fiscal mismanagement

2010-05-02T08:02:00.001-07:00

In 1997, William Strauss and Neil Howe penned The Fourth Turning -- an exceedingly prophetic book detailing how (American) history moves in recurrent 80-100 year cycles. One of the most interesting features of this book- found in the "Crisis Stage" (the Fourth Turning) bears a striking resemblance to the generational conflicts spreading across Greece (and PIIGS countries) with respect to fiscal imbalances and austerity measures enacted to correct them.

"Some young Greeks prefer to blame their elders for the mountain of debt that has resulted in Greece, like a wayward child, being placed under the tutelage of the men from the IMF."

“I cannot help but blame my parents a little for what’s happened,” said Achilles Zacharoulis, a 36-year-old cardiologist. “They were here all that time,” he added, referring to the past three decades of mismanagement and fiscal insanity. “But what did they do to stop it?”

“We will live much worse than our parents,” he said. “Why should we be made to pay for their mistakes?” (More)

While the US appears un-affected at the moment by the threat of debt default in parts of the EU, it is hard not to imagine - with gargantuan deficits and even larger unfunded liabilities like social security, that the US could escape a similar fate (thru debt downgrade resulting from continued fiscal imbalances)- and a related generational clash.

Indeed, if Strauss and Howe's prophetic view of the history cycle is correct, it would seem almost unavoidable. Definitely worth a read.

Greece erupts as men from IMF prepare to wield axe

Home buyer tax credit expires May 1st

2010-05-01T04:49:00.000-07:00

At the stroke of midnight tonight anyone hoping to cash in on the generous home-buyer tax credit will need to have a signed contract with a seller to qualify or you will have missed one of the best home buying programs in history...

Skeptics say that these measures are an attempt to manipulate market forces and that they are leaving housing vulnerable to a dangerous double dip. And many economists say the main effect of the first-time buyer tax credit was to bring would-be homeowners into the market sooner.

Essex Mortgage Bank Announces That the Home Buyer Tax Credit Expires Tonight at Midnight

SEC reportedly views porn during financial meltdown

2010-04-23T09:14:00.000-07:00

The Securities and Exchange Commission is the sheriff of the financial industry, looking for crimes such as Bernard Madoff's Ponzi scheme, but a new government report obtained by ABC News has concluded that some senior employees spent hours on the agency's computers looking at sites such as naughty.com, skankwire and youporn as the financial crisis was unfolding.

Read More

Is the US Treasury market about to tip over?

2010-03-28T06:25:00.000-07:00

The bond vigilantes are finally flexing their muscles. A long period of stability for the US government bond market showed signs of cracking this week as a lack of investor appetite for new debt sent the benchmark 10-year yield to its highest level since last June.

For more than a year, analysts have been warning that record sized debt sales by the US Treasury were at odds with a 10-year yield sitting comfortably below 4 per cent. This week, the yield on 10-year notes jumped from 3.65 per cent to a peak of 3.92 per cent on Thursday. On Friday it was 3.87 per cent.

Supply Fears Start to Hit Treasuries

America isn't making ideas anymore-- We're Importing them!

2010-03-21T08:11:00.000-07:00

VERY interesting pro-immigration article. Parents should definitely read!

America’s Real Dream Team
By THOMAS L. FRIEDMAN
Published: March 20, 2010

Went to a big Washington dinner last week. You know the kind: Large hall; black ties; long dresses. But this was no ordinary dinner. There were 40 guests of honor. So here’s my Sunday news quiz: I’ll give you the names of most of the honorees, and you tell me what dinner I was at. Ready?

Linda Zhou, Alice Wei Zhao, Lori Ying, Angela Yu-Yun Yeung, Lynnelle Lin Ye, Kevin Young Xu, Benjamin Chang Sun, Jane Yoonhae Suh, Katheryn Cheng Shi, Sunanda Sharma, Sarine Gayaneh Shahmirian, Arjun Ranganath Puranik, Raman Venkat Nelakant, Akhil Mathew, Paul Masih Das, David Chienyun Liu, Elisa Bisi Lin, Yifan Li, Lanair Amaad Lett,...

America's REAL Dream team

Jim Bunning; the last REAL republican

2010-03-13T17:25:00.000-08:00

I have 40 grandchildren, and I want them to grow up in a country where they have all of the same opportunities I had as a child. I fear that they will not have those opportunities if Washington continues on its course of spending without paying for it. We are at over $12 trillion in debt. I know many Americans sit around their kitchen table and make the tough decisions. It is time for the politicians in Washington to do the same. Source

Jim Bunning is a Republican senator from Kentucky. Recently, Mr. Bunning recently singlehandedly stood up to the Senate in refusing to support continued spending (extension of umemployment benefits and highway projects) without a commensurate offset in blatantly wasteful spending. He has been an outspoken critic of the Federal Reserve as well as the nationalizing of Fannie Mae and Freddie Mac with taxpayer money. While the video below is a year or so old, it demonstrates Mr. Bunning's deep concern with respect to protecting the taxpayers and safeguarding future generations from profligate policies in Washington.

China wary on Gold?

2010-03-13T05:43:00.000-08:00

A few days ago, Reuters ran a story on how China was "committed to purchasing more US Debt" and "wary on Gold". On the surface this sounds like great news for profligate US politicians who rely on foreign creditors like China to continue spending, but a quick review of the facts tells us something is amiss.

Consider that Chinese purchases of US debt have essentially fallen off a cliff at recent treasury auctions. In fact, foreign holdings of U.S. Treasury bills fell by a record $53 billion in December alone- this drop was led by China who lost their crown as the world's largest US creditor. In contrast, their Gold accumulation has more than doubled (in tonnage) since 2003. Indeed China seems to have embraced a hidden gold purchase policy so as not to disrupt (price) global gold markets.

How did the Russians used to put it?--- "Nothing is ever official until it is publicly denied". With trade tariffs boiling, and arms sales to Taiwan, the claim that China is "committes to US debt" comes at a very odd time - and does not seemed to be matched in action by their muted purchases of US debt.

Is China REALLY Wary about buying Gold?

American reliance on govt at all-time high!

2010-03-02T08:59:00.000-08:00

Not more than 5 short years ago, economic analysts and politicians alike were re-inventing America as the "ownership society".

"We're creating...an ownership society in this country, where more Americans than ever will be able to open up their door where they live and say, welcome to my house, welcome to my piece of property," stated George Bush in 2004.

Unfortunately, for many Americans who believed in the fantasy of easy credit and no money down home loans, the American Dream morphed into a nightmare. In retrospect, many Americans would later abandon their homes thru short sales and foreclosure notices.

Of course, the "Ownership Society" was little more than a campaign swindle. It was a political "catch phrase" for a party that had abandoned their core beliefs (fiscal responsibility)- and, thru govt subsidies (endorsement of no money down loans and artificially low interest rates), it was a gamble that most Americans would bet their economic interests. And who could blame them? After years of illusory wealth thru bogus stock market valuations, it was a sure bet!

Fast forward to the fall of 2008, where the very leaders that ordered the chips and the drinks for the "ownership society" party years earlier, would appear before Congress "hat in hand" with an enormous unpaid tab. The party goers and the pitboss had a bit too much to drink and got unruly it seemed, or so that was how the red faced chaperones at the Fed would later explain it. Who'd of thought? The US housing casino (Fannie and Freddie) would need to be closed for major renovations.

Amidst all the jubilant talk about the ownership society, it didn't seem to matter to any living economist that adjusted for inflation real wages had been stagnant for decades in the US, and that historically home values tracked with the rate of inflation (2%).

In retrospect, it turns out the "ownership society" didn't own much of anything at all. Indeed they were sold a lemon. Debt accumulation can no more be used as a guage for a person's wealth as spending can be used as a barometer for a nations economic health. Until we face these facts, American reliance on govt to provide a quick fix will remain.

American reliance on government at all time high

Fox News scrambles to discredit CPAC after Ron Paul wins presidential poll

2010-02-22T20:57:00.000-08:00

Red faced politicians in both camps were struggling to make light of Ron Paul's recent CPAC presidential poll victory - where Paul not only won, but did so in in embarrassingly overwhelming fashion (31%).

Even news media outlets were quick to dismiss the results as meaningless and characterize Paul as the 'problem child of the GOP'. Strangely, for such a meaningless event, it featured a sorted cast of 2008 Presidential hopefuls like Mitt Romney (22%) and Mike Huckabee (4%) - even Dick Cheney showed up.

To be clear, the GOP refuses to embrace Ron Paul, because he embarrasses them. You'd be hard pressed to find a more principled man in politics today, much less someone who actually tows the REAL party line of the Grand Ole Party. He's uncompromising and promotes REAL change; staunchly opposed to encroaching govt policies and uncontrolled spending. Dr. Paul has pulled back the curtain of the US voting / political process, revealling that today there exists almost no difference between the two parties (what he refers to as a charade of great proportion) and the illusion of choice with respect to the US political system.

So what does a Paul victory imply? It underscores the growing discontent with the US voting public- who vote for change and get bigger govt, more Wall Street / banker bailouts, towering deficits, reckless money printing and continued lip service by crestfallen (Keynesian clown) academic economists. Dismiss him as a tea party crank if you must, but a poll victory of this magnitude suggests that politicians on both sides of the aisle have a serious credibility problem.

Finally, a Paul victory provides a mortal blow to the increasingly impotent US media outlets who marginalized him during election 2008 for fear of exposing what's really happening in America today. Juxtapose Mr. Pauls mushrooming popularity, with President Obama's shrinking approval rating, and it seems clear that US voters are taking notice and growing impatient in their quest for REAL reform.

Fox News scrambles to discredit CPAC after Ron Paul wins presidential poll

South Carolina Lawmaker Seeks to Ban Federal Currency!

2010-02-18T06:10:00.000-08:00

This article was too good to let slip past. To proponents of paper money, easy credit and asset inflated economies (think US) the gold standard is a barbaric relic; inflexible and downright unforgiving to profligate politicians and their save the world programs.

However one feels about gold and silver, what's becoming increasingly apparent is the credibility crisis our policymakers- as well as our currency, now faces. Furthermore, the author of this article COMPLETELY misses the point when he states:

"In addition, since gold and silver regularly fluctuate in value, they could not easily function as stable currency."

This author has it backwards, it is NOT Gold and Silver that fluctuate, but rather their relationship to paper money. This is the chief reason for years, the US dollar was backed by Gold (and silver)- it served as a benchmark/anchor for the value of a dollar. Anyone who needs proof of the fluctuating value of the dollar should watch the currency market and observe the "fluctuating value" of the US dollar against other worthless currencies. The idea here is that the value of the dollar fluctuates wildly against all currencies, but that doesn't seem to have stopped other countries (or our own govt) from printing their own currency.

Today, the US dollar is not backed by gold, but rather the full faith and credit of the US govt- which is blind faith at best. Gold and Silver are tangible and have historically, universally been accepted as 'sound money' (if this wasn't so, why are foreign Central Banks accumulating it?). Aside from the obvious supply / demand dynamic, they typically fluctuate when confidence in paper currencies (and politicians) erode. Is it any wonder it's value has reached record levels given our current political fiscal situation?

Without any type of tangible item backing a paper currency, history has shown us that politicians will continue to print it, until its value goes to zero. The US dollar will likely be no exception.

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South Carolina Rep. Mike Pitts has introduced legislation that would mandate that gold and silver coins replace federal currency as legal tender in his state.

As the Palmetto Scoop first reported, Pitts, a Republican, introduced legislation this month banning "the unconstitutional substitution of Federal Reserve Notes for silver and gold coin" in South Carolina.

In an interview, Pitts told Hotsheet that he believes that "if the federal government continues to spend money at the rate it's spending money, and if it continues to print money at the rate it's printing money, our economic system is going to collapse."

"The Germans felt their system wouldn't collapse, but it took a wheelbarrow of money to buy a loaf of bread in the 1930s," he said. "The Soviet Union didn't think their system would collapse, but it did. Ours is capable of collapsing also."

Full Story

Mortgage Bankers Association short sells their headquarters!

2010-02-15T10:57:00.000-08:00

This is SIMPLY AMAZING.

The trade group that is ALWAYS parroting about the 'benefits of homeownership", their broken record predictions about how "now is a great time to buy" and the recent public lambasting that CEO John Courson provided to Homeowners who are considering walking away from their property has negotiated a deal to short sell their headquarters, for a $30 million shortfall.

"In an interview late last year, Mr. Courson said he believed mortgage borrowers should keep paying their loans even if that no longer seemed to be in their economic interest. He said paying off a mortgage isn't only a matter of personal interest. Defaults hurt neighborhoods by lowering property values, Mr. Courson said. "What about the message they will send to their family and their kids and their friends?" he asked."

How can it be that a homeowner who walks away from an underwater property is financially irresponsible, but yet here the national trade group that REPRESENTS the mortgage lending industry short sells their headquarters (essentially walks away) because they believe that continuing to pay their un-affordable mortgage would be an economically imprudent decision? Isn't this precisely what an underwater homeowner is saying?

The story actually gets even better! The MBA is reportedly shopping for RENTAL space and in an unusually honest/dumb statement has indicated they believe "they will save tens of millions of dollars over the next decade"? Apparently, the MBA is not hopeful for a real estate recovery any time soon.

Mortgage Bankers Association sells headquarters at big loss

Are the Feds eyeing your 401K to finance the deficit?

2010-01-19T07:44:00.000-08:00

"The U.S. Treasury Department and the Obama administration are exploring ways to encourage U.S. savers to buy more annuities or investment vehicles composed of “safe” assets. What constitutes safe? Why 30-year U.S. government bonds of course! Thus, the government can encourage people to buy what the Chinese and the Japanese and most other U.S. creditors don’t want to touch any longer."

Will the Feds Fund Deficits with 401(k)s?

China! The Elephant in the Room

2010-01-11T11:08:00.000-08:00

Some readers may recall, I was quite bullish on China and their economy a number of years back. Having carefully set a "treasury trap" for the US, and having siphoned off the segment of the economy with the greatest ripple effect (manufacturing), the Chinese have set an impressive record in purchasing autos - edging out even the US in their spending.

For all the idle talk and foolhardy economic blather about how China needs the US consumer, this should be a SERIOUS wake up call. Makes one wonder, with a tapped out US consumer and 1.4 billion wage earners, how long it might be before consumerism moves from West to East?

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Last week, a Chinese trade organization reported that 13.6 million cars were sold in China in 2009, making China the biggest market for autos for the first time. By way of comparison, 10.4 million vehicles were sold in the United States last year.

And on Monday, China said that its exports rose nearly 18% in December. That was the first gain after 13 consecutive year-over-year declines. What's more, the increase allowed China to top Germany as the world's largest exporter of goods in 2009.

China: Too big to ignore

Moving your money to a (safe) local bank

2010-01-11T06:35:00.000-08:00

Great article here on safely moving your money to a local bank. Worth a read!

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Dubbed the “Move Your Money” campaign, it provides one tool to consider when you decide which banks are best equipped to protect your money. According to Salon.com:

“Changing your bank, as Felix Salmon observes, “is hard, and people are lazy.” But plugging your zip code into an online database to see if there is a fiscally sound community bank near you is super-easy. And by that metric, the MoveYourMoney campaign cooked up by the Huffington Post, Institutional Risk Analysis (IRA), and the Roosevelt Institute has been a big success, after just one week of existence. In today’s Huffington Post, Dennis Santiago, CEO of IRA, reports that around 340,000 zip codes have been entered into the IRA bank database.”

Full Article

Gold: The trade of the decade!

2009-12-27T20:15:00.000-08:00

Readers of this blog will note that being an avid reader of contrarian investor articles from people like Peter Schiff, Jim Rogers, Bill Fleckenstein, Mike Shedlock, and Ron Paul to name a few who have long promoted gold ownership.

Now even Bloomberg has been forced to admit the TRADE of the DECADE- has been GOLD!

Gold Beats All in Decade of Fear and Greed

Itulip's Eric Janszen on Gold and Asylum Markets

2009-12-14T13:26:00.000-08:00

The gold market we entered in 2001 was derelict and abandoned. Eight years later I’m supposed to believe that the gold market is over-crowded because a handful of previously oblivious financial market commentators suddenly noticed that gold prices have been rising every year for eight years.

Big deal. So now I don’t have to dig through the Wall Street Journal to find the gold price. As of this year, it’s right on the front page. Fund managers who aren’t gold bugs are buying it. Gold ads bug us from the TV and radio. To the new gold experts this means gold sentiment is now too bullish. We’re due for a crash.

Have they noticed that the gold ads are about selling not buying gold? One of the predictably horrific outcomes of the policies crafted by special interests that created the economic crisis is that 80% of the population doesn’t have any liquid net worth to invest in gold. Instead, they have to sell gold to pay property taxes and repay debt. Ask your local coin dealer when he sees the most customers come in to sell. He’ll tell you quarter end when real estate taxes are due...

Listen to Wall Street’s sales and marketing: Gold doesn’t pay a dividend. Gold doesn’t pay interest. Never mind that gold has not finished one year below its New Year’s opening price in more than eight years. Instead, to get rich go into debt to buy a house. Debt is wealth. According to economists, houses are cheap again three years after the start of the collapse of the housing bubble, a bubble that the very same economists in 2006 claimed didn’t exist.

Asylum Markets of the Post Fire Economy

Who is Brooksley Born?

2009-12-13T12:09:00.000-08:00

"I was very concerned about the dark nature of these markets," Born said. "I didn't think we knew enough about them. I was concerned about the lack of transparency and the lack of any tools for enforcement and the lack of prohibitions against fraud and manipulation."

Brooksley Born - The Cassandra of the Credit Crisis

Is Gold a bubble?

2009-12-01T18:57:00.000-08:00

In recent months the price of gold has soared, prompting a number of media pundits- who can no longer dismiss gold as a barbaric relic of the past, to dismiss it's role as a safe haven currency and instead have resorted to calling this unique asset class a bubble.

So is gold a new bubble much like the tech stock craze of the late 1990's and the real estate mania that swept the nation in the early 2000's? Before pondering this statement, it is probably best to humorously keep in mind that the very same economists (and govt figureheads) who failed to see a bubble in tech stocks and 'flatly denied' a bubble in residential real estate, now seem to have it all figured out with the shiny metal - and for that matter, most commodities in general.

Here are some facts about Gold which may aid us in our quest for an answer to this question.

1). The precious metals market - despite recent interest, is DWARFED by the market for paper equities / stocks and real estate. Indeed, gold is BY FAR, the most under-owned asset class asset in the US today. In fact, gold ownership- prior to 1971, was illegal in the US. It's truly remarkable that even most natural born Americans don't understand the important role of gold (and silver) with respect to monetary history here in the US.

2). Part of gold's popularity has been born out of the paper market for gold thru Exchange Traded Funds (ETF), and or Gold certificate programs. As many are about to find out, owning a piece of paper stating you own gold, is not the same as physically owning the metal. Particular interest should be paid to the recent irregularities in the publication of the gold ETF - "GLD’s bar list from Sept. 25 – Oct.14 where the length of the bar list went from 1,381 pages to under 200 pages and then back up to 800 or so pages." Whatever you may believe, this finding creates a huge potential flash point for the price of gold in the future.

3). Recent purchases of Gold by foreign central banks (think China and India) at these prices have created a paradigm shift in how the world views gold. Many global central banks in the last few decades were net sellers of gold; huge purchases by emerging economies, are a vote of no confidence in paper money - who may be seeking to diversify out of paper currencies - chiefly if they are over weighted in US dollars and they are beginning to question it's reserve currency status.

4). Reports on irregular physical gold settlements on the global market. "Specifically, these settlements involved the inter mediation of at least one Central Bank [The Bank of England] to resolve allocated settlements on behalf of J.P. Morgan and Deutsche Bank – who DID NOT have the gold bullion that they had sold short and were contracted to deliver." These reports would certainly serve to strengthen GATA's claim that the price of gold has been artificially suppressed for years.

5). Barrick Gold - the second largest North American producer has sought to unwind it's maligned Hedge Book position on Gold. The hedge book bet was the source of extreme distaste to shareholders who wanted exposure to the gold price, and was itself a VERY strange bet for a gold miner.

6). Central bankers around the globe have been attempting to inflate away a global downturn by printing paper money ad infinitum. Because of this, gold's value has increased against ALL major currencies. Gold's meteoric rise could be considered the un-intended consequence of loose global monetary policy- a policy that is extremely unlikely to change in the near term.

7). Investor apprehension! For years, many individual investors have remained apprehensive to purchase gold at $400, $500, or even $700 an ounce, as the mainstream financial community decries the metals market as 'too volatile'. A strange if not compelling comparison would be the (volatile) precious metals market and the market for US financial stocks last fall- where the price of Bear Stearns and a number of other financial institutions evaporated overnight. It simply doesn't get any more volatile than that, and gold being a tangible asset, can NEVER go to zero. Best think about that the next time your financial planner tells you to stay away from the metals market.

All told, if you invested in gold in late 1999 at approximately $260 per ounce, you multiplied your wealth by almost 500%. For all the talk about the recent rally in the DOW, it is still below the highs reached a decade ago, and because it is priced in US dollars, investors have LOST significant purchasing power for their faith in these same markets. Despite a MASSIVE govt sponsored campaign to revive the housing market (tax credits, artificial interest rates) prices have either remained flat or continue to decline on a national level.

Will gold eventually reach bubble status? Perhaps-- but adjusted for inflation, the price of gold would need to be more than $2000 per ounce to reach the highs of the early 80's (this statement alone would imply gold is actually grossly undervalued!). This along with the fact that our (national) balance sheet has worsened exponentially since then, would suggest it will be quite some time before any talk of a bubble in the gold market can be taken reasonably seriously.

A pullback is almost assuredly in the cards (nothing goes up in a straight line) but when Central banks are buying at these prices, any pullback will only serve to create another buy opportunity for savvy investors.

Sixty two percent of Americans against a Sub Prime Mortgage Bailout

2007-11-16T05:53:00.000-08:00

A mortgage bailout is a bad idea for two very good reasons.

1). Any bailout that provides govt (taxpayer) money to assist borrowers, in effect helps the lenders-- as they get paid even in the face of their poor decision making. This interferes with the free market dynamic of our economy and removes risk aversion with respect to our banking system.

2). It punishes those who have been financially prudent, and rewards those who have been reckless and greedy. How will the govt distinguish between a 'house flipper' and a legitimate homebuyer?

A bailout equates to the 'socialization' of the US housing market'- and the overwhelming percentage of US citizens believe "borrowers and lenders should take responsibility for the bad loans without government intervention".

Amen!

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62 Percent of Americans Against Subprime Mortgage Bailout

A new survey conducted by Freedom Works, a grassroots advocacy group, found the majority of Americans are against a mortgage bailout for subprime borrowers. Of those surveyed, 62 percent believe borrowers and lenders should take responsibility for the bad loans without government intervention.

'The public does not support a bailout,' said Freedom Works Chief Economist Dr. Wayne Brough in an interview with CNBC. 'This is something that happened in the marketplace and the marketplace is the best place to solve this problem.'

62 Percent of Americans Against Subprime Mortgage Bailout

Mortgage Reform Act: Too little too late?

2007-11-11T15:02:00.000-08:00

The chorus of vote seeking politicians grows, as the housing slump worsens. On November 7th, The House Financial Services Committee passed legislation (HR 3915) that would enact major changes to the mortgage lending industry. Although this article states that the bill aims to 'save homeowners from foreclosure', I fail to see how the highlights of the bill "save homeowners from foreclosure".

Some provisions include:

1). Establishing a nationwide mortgage licensing system - this is probably a good idea, and will provide some much needed legitimacy to an industry that has been largely blamed for the current sinking housing market. While it's a good idea moving forward, I fail to see how establishing a licensing system will 'save (existing) homeowners from foreclosure'.

2). Prohibiting "steering" consumers into loans they may not be qualified to pay back. "Steering" consumers into loans they may not qualify to pay back? Such provisions undermine the role of personal responsibility on the part of the consumer when making financial decisions. It also steals from the concept of free will and choice. For all the noise about brokers and appraisers, the consumer played a VERY willing part in the public spectacle. Again, this provision does not correct the current situation.

3). Creating national mortgage origination standards that require creditors to assess at the time of origination that the borrower can repay the loan, or if it is in their economic interest to refinance. The idea that these two thoughts have to be drafted into law is moronic to say the least. The borrower should understand their economic situation and the lender has a fiduciary responsibility to the note holder (investor, banker, etc.), to verify the borrower can pay it back. A lack of consumer education is largely to blame for the former, and Wall Street financial alchemy and the disappearance of risk aversion created the latter. Whether or not a refinance is in the economic interest of the borrower is purely a free choice.

4). Prohibiting excessive fees or practices that may lead consumers to foreclosure. Prepayment penalties do not lead to foreclosure-- they prohibit a borrower from refinancing within a defined period of time, without paying a fee. Yield Spread Premium is paid by the lender, and although in some cases it may mean a nominally higher rate, these fees do not cause foreclosure. Neither are a feature of all loans. In America we have choices. If you don't like the loan, go to someone else who may offer something more suitable to your financial needs. That's the beauty of a free market.

In summary, while a system of checks and balances is necessary, the hindsight nature of this legislation makes it unlikely it will save current homeowners from foreclosure. The bill seems more designed to remove culpability from brain dead monetary policymakers and a banking industry that sold the public (and Congress) another lemon.

House Committee Passes Mortgage Reform Bill