Blogs

Golden Myths

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I don't believe there is any investment, outside of a mania, that elicits more emotion, both positive and negative, than gold. People love it or hate it, there isn't much in between. It's because of these strong emotions that there is so many misconceptions about the yellow metal. Emotions tend to cloud normally reasonable minds to the point that they miss either opportunities or dangers.

Which brings us the current bull market in gold. What does gold hitting all-time record highs mean? To answer that you must brush away the myths and misunderstandings of what gold is and why someone would purchase it.
I am going to attempt to do that.

Friday Movie Night - The Yes Men

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hot buttered popcorn It's Friday Night! Party Time!   Time to relax, put your feet up on the couch, lay back, and watch some detailed videos on economic policy!

 

This week's films are by The Yes Men. These guys are a scream. They walk right into organizations like the WTO and give incredible phony presentations, which believe it or not, many in the audience just nod, approve and praise.

The Yes Men Fix the World

China - The Ultimate Protectionist

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When you hear how the United States doesn't want to be protectionist, please remember that's just spin to ensure we do the will of China.

A new 2009 annual report by the U.S.-China Economic and Security Review Commission is out. Below are selected excerpts that should make the hair on your head stand on end in OMG panic.

China encourages foreign manufacturing to relocate to China and uses strict capital controls to keep the value of the RMB artificially low.

Alan Grayson amendment to restrict Federal Reserve on Foreign Currency Swaps

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Update: This amendment passed by voice vote.

Frankly, I just don't understand foreign currency swaps. It's above my pay grade.

Yet, we have an amendment, by Rep. Alan Grayson and Ron Paul, to restrict the Federal Reserve on issuing foreign currency swaps.

The amendment restricts the Federal Reserve by requiring five Federal Reserve members of the board of Governors approve as well as the U.S. Treasury Secretary.

The Bank of International Settlements, Switzerland, has written a paper on the U.S. dollar shortage and the international policy response, from what happened by the fall of 2008. Below is a graph of the sudden increased foreign currency swaps issued by the Federal Reserve:

currency FX swaps fed
Src: Zero Hedge, click on image to enlarge

 

Jukin' The Stats.

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My all time favorite TV series is "The Wire", which ran for 5 years on HBO. Throughout the series, the common thread was the affinity, by the police, the mayor, city politicians and even the drug lords, to "juke the stats". In other words, "tell them what they want to hear", and move on.

In this vein, I've been all over the econoblogosphere today and I'm surprised that this excellent article from Yves Smith hasn't gotten more attention.

Many of us here at EP, and elsewhere, have questioned the veracity of new data eminating from the Census Bureau, the BLS (a.k.a. Bureau of Lying Statistics) and other gov't agencies. In particular, any new reports pertaining to housing, unemployment levels and CPI must be taken with a heavy dose of skepticism.

The Race Continues

The race to the bottom. But this time the supporters of the ideology that is leading the race to the bottom are not hiding behind slogans such as "small government", "government is the problem" or "trickle down economics". No, no, they are coming right out in the open. For example this New York Times article: here.

The authors of this article don't waste any time. Check out the first paragraph:

American workers are overpaid, relative to equally productive employees elsewhere doing the same work. If the global economy is to get into balance, that gap must close.

But it gets better:

The big trade deficit is another sign of excessive pay for Americans. One explanation for the attractive prices of imported goods is that American workers are paid too much relative to their foreign peers.

SIGTARP on AIG

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SIGTARP as released a new study report on AIG. The report found that the AIG 100% CDS payout was a grave mistake.

Guess whose mistake it was? Then New York Fed President Timothy Geithner.

For some background on this payouts, read The Real Screw Job: AIG used as a Funnel of U.S. Taxpayer money.

Here's the money quote from the SIGTARP report, right in the summary:

  1. The original terms of federal assistance to AIG, including the high interest rate it adopted from the private bank’s initial term sheet, inadequately addressed AIG’s long term liquidity concerns, thus requiring further Government support.

Bernanke, the Dollar and Commodities

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Ben Bernanke has come out with a now, now, there, there on the falling dollar:

The Federal Reserve is monitoring currency markets “closely” and will conduct policy in a way that will “help ensure that the dollar is strong”, Ben Bernanke said on Monday in rare comments on the US currency.

The Fed chairman also indicated that the US central bank would not ignore the impact of rising commodity prices when evaluating the outlook for inflation. He said he would not rule out using interest rates to combat new asset price bubbles, even though he did not see obvious mispricing in the US at this stage.

Hmmmm, no obvious mispricing. Does that include the oil speculative bubble of 2008?

Meanwhile Gold is through the roof, in part due to the dollar decoupling.

 

kitco gold

Sunday Morning Comics - Goldman Sachs is the New Religion Edition

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Sponsored by China - Why not? Everything else is.
Cup O' Joe

 

Good Morning! Rise and Shine! Get that Cup O' Joe...
break out the O.J....hang out with the pooch...time to check out the Funnies!

 

.tqn.com/d/politicalhumor/1/0/P/1/3/obama-asia-trip.jpg" alt="Obama visits U.S. economy in China" width="525" />
Src: Mike Keefe

 

"We are all leaders"

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By any standard measure the suicide of Wesley Everest should be considered unusual.
Everest had only recently returned from the front lines of WWI France, so a suicide isn't all that shocking. However, the circumstances of his death on Veterans Day 1919, should have raised questions with the coroner. That is, if the coroner had bothered to examine the body before declaring it a suicide.

Everest's teeth had been knocked out with a rifle butt. He was then tossed over the side of a bridge several times until his neck was broken from the noose tied around it. Afterward his lifeless body had been shot full of bullets, which is very difficult for a dead man to inflict upon himself.

Perhaps the coroner was just stating that Everest's suicidal action happened long before his death. It happened when he decided to become a member of the Industrial Workers of the World.

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