JB Slear, a gold and silver broker based in Arizona specialises in helping high net worth clients take physical delivery of gold and silver futures contracts. He said "we're finding more restrictions being applied to overseas buyers, one Comex warehouse will not allow overseas deliveries."
Slear tells his clients that they may have to wait more than two weeks to take delivery as delays and complications in the process have become increasingly commonplace. In some cases this has fueled concern that stockpiles are running out.
So much has been made of the subprime mortgage meltdown that you would think it was almost totally responsible for the economic collapse, and that once the subprime problem was fixed then the worst would be over.
Unfortunately nothing could be further from the truth, despite hitting new highs in foreclosure listing. Instead it was the first round of a three part collapse, and we are on the edge of the second round.
I will demonstrate with a fantastic series of charts below, most of them were created by the T2 Partners.
For about two years I'm writing about Kondratieff wave. This theory must be familiar to any inquiring mind, essentially it boils down to the huge credit cycle that takes a generation to build and unwind.
My posts posts on the topic are organized in this table of content: Kondratieff wave.
While my previous postings were made in an attempt to abstract the theory to the extend it works equally well for any advanced economy it just doesn't work this way. The cycle is the most pronounced in few economies, like USA, Japan and soon to be China, while other countries are synchronizing in "sympathy" with the one of them.
Often times, non-economists attribute much more confusion to the ideas of Keynesian economics than is really the case. Take for example the idea of smoothing out business cycles. Anyone who's ever tried to keep to an exercise regime understands the concept intuitively. The fancy graph way of making the case looks like this:
The idea here is simple. The black line is the boom and bust cycle that characterizes un-managed markets. The red line is what happens when the government or private actors step in to manage the economy to smooth out these business cycles. Note that while at any one point, the black line may show a much higher rate of growth than the red over the long run, it ends higher.
As Calculated Risk points out, economic cycles typically run in an order. The first portions of the economy to turn positive are typically personal consumption expenditures and residential investment -- even during the recession. Afterward, investment in durable goods such as equipment and software. Finally, after the recession (in terms of GDP bottom), unemployment and non-residential investment.
In April, Leading Economic Indicators surged 1% as 8 out of the 10 turned positive or at least neutral. With May over, let's take a preliminary look at what those indicators might show.
Brad Delong "hoists the jolly roger" posting a pdf of an entire speech given by Jacob Viner, one of the original economics professors at the Chicago School. He needn't have done so, since the essence of Viner's argument (that deficit spending + deliberately-caused inflation was the correct way to fight the Great Depression) has already been discussed within the realm of fair use by others. The brain-teaser is, who is the person who cites Viner approvingly? Here's the quote:
Even more pertinent is a talk Viner delivered in Minneapolis on February 20, 1933, on 'Balanced Deflation, Inflation, or More Depression' (Viner 1933). While agreeing with Robbins on the harm done by wage and price rigidity, and in particular by the Hoover Administration pressure against wage reductions, he also spoke vigorously against letting the cure take its course:
'We have already had three years of patient waiting, probably three years too much. It is arguable that even dangerous remedies now threaten less risk of disaster than does continuance of inaction.'
Confidence among U.S. consumers rose this month to the highest level since September, reinforcing signs that the worst recession in half a century is abating.
….
“Consumers are looking at things like the rise in stocks, they are listening to reports talking abut ‘green shoots’ and they believe it,” Chris Low, chief economist at FTN Financial in New York said in an interview with Bloomberg Television. “They believe that a recovery is coming but they don’t see it in their current job prospects.”
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The Reuters/University of Michigan index of consumer expectations for six months from now, which more closely projects the direction of consumer spending, rose to 69.4 in May from 63.1 the prior month.
Andy Bebut, a/k/a Theroxylandr, has this post at his blog describing an important relationship between stocks and bonds:
Back in 2007 I was writing that during the Kondratieff Spring, Summer and Autumn Treasury bonds and stocks are trading generally in the same direction, with bonds leading. During the Winter they are trading in opposite direction.
Andy's full blog is as always well worth reading, but I wanted to elaborate on the important difference in how stocks and bonds have behaved during the last 10+ years, vs. how they behaved during the great bull market of the 1980s and 1990s.
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!
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