Friday, June 25, 2010

Pulling the cart is a job

The Financial Reform Bill has been passed by Senate-House Conference Committee and was hailed by the President as 90% of what he wanted. He didn’t want much and he got that - not much. Bank stocks went up immediately on the news that most meaningful reforms had been stripped out of the bill and plenty of loopholes had been cemented into place to keep the remainder of reforms from having any effect.

The big banks will not be broken up even though they are much bigger now than they were when their failure in 2008 threatened the end of civilization.
Let’s be clear, these behemoth banks have been insolvent for many years, probability since the Reagan Recession in the 1980’s. The entire ponzi scheme of financial services that they portray as an “industry” produces nothing and exists only to pump up their balance sheets so the people at the top can take trillions for themselves.

They don’t even make a pretense of doing banking anymore but simply harvest the wealth of the middle class. As the money comes into 401k’s and pension plans it goes straight into their pockets. What they are doing is no different than what Bernie Madoff did except that they had Reagan, Bush and Clinton decriminalize their activities first.

Today’s bill did little if anything to change the nature of this ongoing criminal conspiracy and it won’t mitigate the damage that they’ve done. It would be far cheaper to pay these parasites billions each year to sit around the pool like some sort of Royal Family than to let them continue to meddle in the economy and our government. But like feudal lords they scramble and jostle for more wealth and power. Some lords who wear a “D” on their coat of arms believe in treating the peasants humanely most of the time but none hesitate to sacrifice peasants by the millions for the “good” of the kingdom. (that would be for the good of the lords, not for the good of the peasants)

The whole concept of the “straw man” comes from the practice of using a dummy stuffed with straw to frighten the villagers into hating and fearing the people just like themselves who live in the next baronage. These little wars were staged events that rarely changed anything but it kept the lords in wealth and power.

The newest straw man is the looming debt, debt is an artificial construct, it does not exist, it‘s a mythical dragon we sacrifice our children to. It is even less real than paper money, but the barons and earls have their town criers on the corporate media calling “Austerity, Austerity!” Fear of the debt dragon is being used to justify more and more sacrifices from the peasants.
The Lords who say “NO” have decreed that the out of work peasants will no longer get any gruel to live on and “NO” to paying the wise women that teach the peasants’ children, the little spear carriers just need to know which end is sharp and how to march toward the cannons. These Lords who wear “R” also told the healers who help the poor that they will get no raise in fees from the Lords and the healers can just let the peasants die. It is a subtle thing, none but the passengers will care that the death cart is more crowded.

We hailed our new King as the Champion of the People who would slay the dragons and bring back the Magna Carta. He promised to stop sending peasants to fight in distant lands (except for the “good” war, you know, we saw the straw man show in the village square)

Now our King has gone to Canada to meet with the representatives of the other peerages at the G-20 to discuss how the peasants will be brought into line. Austerity, Austerity is the cry, peasants must die or the dragon will get us all. If you need a job, you can pull the death cart.

Tuesday, June 22, 2010

The patient is anemic so lets bleed him

World markets fell today including in New York, this was reportedly on further consideration of the new floating Chinese Yuan. But the continuing decline in the world’s confidence in the USD must also be having an effect.
In a poll just released by Swiss bank UBS that they did of central banks‘ reserve managers, sovereign wealth funds and multi-lateral institutions (development banks) found that 25% of managers think gold will be the most important reserve asset going into the future. Fifty percent of bankers still picked the USD but that is a huge shift in sentiment from people whose attitude simply doesn’t change much. This may reflect how individual institutions are invested in the USD instead of their real outlook.

It’s been revealed that Saudi Arabia is not the only country that has dramatically increased its buying of gold. Basically anybody who can afford it is trading dollars for bullion. Russia is leading the pack by buying 16% of the world’s mining production of gold which is three times their previous monthly purchase.

Russia might be the single biggest gold buyer but India, China and the Philippines have been making large purchases since the first of the year. It’s difficult to know where China ranks in the gold race since they don’t reveal anything about their domestic gold production. They don’t talk about foreign purchases either, so much of what we believe about China is a combination of detective work and just plain guessing.

Budget cutting is catching on in Europe and this is another nail in the coffin of the world economy. The European Central Bank (ECB) is continuing to push austerity despite a direct apply from President Obama to not pull back too quickly on their stimulus programs.

Incredibly the ECB is taking the position that budget cutting will stimulate growth. Nobody really seems to believe this but European politicians are using it for political cover in order to avoid raising taxes on the rich. The talking point is that everybody must lower expectations. That is unless you’re rich. Like in the US, the rich in Europe expect government to make sure the they are protected from the “free” market that is eating everybody else alive.

Monday, June 21, 2010

Should you put your savings in Rounds?

Obama came eye to eye with China over the value of the Renminbi and China blinked. Okay, really they said they are going to blink sometime in the future. The Obama administration is sending signals that they are a bit skeptical of this “none movement” movement saying that how much China actually revalues the Yuan is what matters. World markets are all up on the promise just the same.

If you have wondered why Chinese currency has two names, Renminbi means “the peoples currency” (they are communists you know) and Yuan is the old name for money and literally means “round”. Yuan used to have modifiers attached like gold or silver. So what they use now is the Renminbi Yuan.

China has a fantastically high savings rate running 40% of income. China has put a lot of emphasis on gold mining and has over 1100 tons in the government vaults but they also encourage the people to put part of their savings into gold, silver and copper coins or rounds.

It seems that the Saudis have quietly bought 180 tons of gold over last two years, more than doubling their holdings and that is not counting privately held bullion. This is according to a international trade group made up of the big gold mining companies that tries to track who is holding what. Precious metals are doing a gold rush business as the wealthy stock their private vaults with a few pounds now and then which adds up to more than the occasional 100 ton purchase by governments.

I’m not advocating buying gold unless you really have a lot of wealth to protect, it’s a Libertarian talking point that everybody should buy gold and like everything that they say there is kernel of truth buried in a pile of horse apples. If things get so bad that nobody will take currency then they won’t be selling you anything for gold either.

Gold doesn’t make a good hedge against inflation since the price can run counter to inflation unless you can afford to hold it for twenty years. It always balances out, you could buy an excellent man’s suit of clothes for an ounce of gold four hundred years ago and that has been true ever since. You won’t make money buying gold now, the people making money are telling you to buy it now and they are selling. But if your floor is starting to sag from the stacks of canned goods and you still have money burning a hole in your mattress, then gold does take up less space.