What is Absolute Freedom?
Absolute Freedom is –
Freedom to Smile & spread Happiness,
Freedom to Live & Respect,
Freedom to give and freedom to share,
Freedom from want and that of despair,
Freedom to think and freedom to know,
Freedom to achieve and freedom to grow,
Freedom to work and freedom to play,
Freedom to believe and freedom to pray,
Freedom to experience a rebirth someday,
Freedom from bondage and freedom of liberation,
Freedom from ignorance and any unknown situation,
Freedom to come and freedom to leave,
Freedom to stay and freedom to conceive,
Freedom to enjoy and the capacity to please,
Freedom to laugh and freedom to cry,
Freedom to speak and freedom to listen,
Freedom to act based on a wise decision,
Freedom from hate and freedom of love
Freedom of the day and freedom of the night,
Freedom to choose and freedom to reject,
Freedom to imagine what there is to expect,
Freedom from lust and freedom from greed,
Freedom from anger and freedom from breed,
Freedom from jealousy and freedom from pride,
Freedom from within and freedom from outside,
Freedom of always not having anything to hide,
Freedom from attachment and freedom from crime,
How can Absolute Freedom be –
Freedom to hurt & freedom to agonize,
Freedom to kill someone’s pride,
Freedom to live & to let someone die,
Freedom to steal & freedom to lie,
Freedom to leer & freedom to lust,
Freedom to have – what you must…
With Freedom of this kind around, there is NO Absolute Freedom at all.
Let’s just once again Think “What Absolute Freedom is” –
With freedom comes recognition,
With recognition comes obligation,
With obligation comes responsibility,
With responsibility comes accountability,
And the end results are not always easily foreseen..
Let Freedom ring – Let Absolute Freedom ring – 2013 & beyond.
How blind we can sometimes be,
Living our life of ease surrounded by many unfortunate,
Secure with the thoughts that nothing Bad’s going to land on our doorstep.
It’s a one world & every one & everything’s linked,
Smiles to Smiles & Tears to Tears.
Punishment for crime may deter a few but not all,
But the divine light of love, understanding & enlightenment, may give deliverance to us all.
Let’s each light a candle in our hearts today,
This one candle will link to other candles,
And create a light so wonderful –
That will lead all of us – Only to the path that’s right & pure.
Until that happens,
Absolute Freedom from pain, for most of us would mean Death-
Freedom from the body and freedom from the pain in the mind & soul…
World Economy Forecast 2013– The year 2013 is a dead end for the “dumb” as there cannot be any more kicking the can down further. A Final War on Wealth is unleashed due to a Global Tsunami of Printed Money & Deep Debt. The Excess Debt situation will balloon exponentially out of control & reach a critical crisis point globally in between 2013 and 2015. Payment will now be demanded. Unemployment, Bank & Insurance frauds will continue to rise above alarming levels. We are due for a change in our Banking & Financial System which has become corrupt, unmanageable and inequitable. Another financial crisis is due. In 1971, Nixon took the US off the Gold Standard so now all fiat currencies globally are linked to nothing. In fact 97% of all financial transactions take place electronically and only 3% is actual cash! All paper money is just figures on a computer screen and is worth nothing! It is created out of thin air. There is almost no substance to our financial system. Over the next four years, revolution and radical changes in the Global landscape (Nature & Man-made) will be a major part of our experience. Catastrophic changes in the Global landscape by nature will be largely triggered by large scale flooding and earthquakes. Hurricanes, tornadoes, typhoons would be seen more often. Radical changes in the Man-made Global landscape will be through Currency Debasement, Collapse & a complete wipe out of the financial systems as well as Business & Political Empires built on massive corruption leading to large scale revolutions, violent at times. In 2013, the people’s credit line for the “Stupid” is up. People’s wealth will be reduced by at least half on major currency debasements. We will all have to pay for our economic, social, religious and political illusions systemically sabotaging our world. Criminal aspirations, Illogical hopes & dreams will collide with downfalls and transformations. People, races, nations, classes, economies, will witness their illusory expectations fall to pieces in front of the grim & ugly face of reality. Taxes will go higher as governments desperately try to repay escalating debts. There will be desperate people who will look for short cuts in order to survive. They will justify stealing & other forms of crime as the only available means to a survival.
World over people will see new laws being enacted quickly to suit purpose and then different ones replacing them just as speedily. Be aware of that and make sure you are not reliant on having the law stay as it is for long. Economic, social, religious and political illusions that are systemically sabotaging our world will be harshly dealt with soon. There will be several bouts of Illusions (as currently being seen)- periods of Economic improvements or utter calm, when it will feel as though everything is fine or improvising and there was really nothing to be deeply concerned about. Do not allow yourself to be lulled into such a false sense of security. Look at the same as the proverbial – “Calm before the Storm”. Employment, Pension & Insurance laws may be the ones that may see a lot of changes to suit the corrupt & greedy. Taxes will be ruthlessly imposed with a view to alleviate the social disasters of the time leading to the further lowering of living standards, a lot of homeless people and huge areas of vacant real estate. The impositions of more and more taxes will finally trigger large & violent revolutions. Excess Government Debt will trigger a huge focus on higher taxes: how much to pay, who should pay it, what is fair and what is not. Governments will want to change the tax structures completely in the name of fairness but there are likely to be hidden agendas. Governments may also impose heavy cuts in public services, giving way to higher unemployment. There will also be large waves of crimes triggered by the hard times. When people have lost everything they take desperate measures because they feel they have nothing to lose. Among these complications, the most dreaded would be of spiraling debt through credit cards which would seem to keep on piling up on the now jobless & also possibly homeless. Today’s Politicians & Central Banks are masters of illusion, so don’t allow your thinking to become unfocused. Last year, I had predicted (Forecast 2012) that we would soon see revolts and large scale civil unrest. We’ve seen demonstrations, riots and discontent all over the Middle East and in Europe & this is just the start. There will be more violence & deaths amid larger protests and it will become more frenzied as the people see that their leaders are not really listening to them, or rather misleading them into more misery. Selfish & unfortunate events will intensify the contrast between the majority of the people who feel they are being unjustly treated and the powers that be trying desperately to stay in control and to suppress the people’s right to well being or even simply live. More people than ever will be affected. Pensions are no longer secure and indeed they may be unable to pay out when the time comes. Insurance companies will go under and people who have paid premiums in good faith may end up with nothing if the company is bankrupt when their house is swept up in a tsunami or a fire burns down everything they own. Some of the very wealthy will also lose almost everything overnight.
Stocks & Commodities Forecast 2013 – Stock Markets may get Buoyant & rise on the avoiding immediate Fiscal pitfalls for sometime in 2013 as some compromises are stuck together to strike a deal to avoid the US going over the Fiscal Cliff. Commodity Markets may also see sharp rises in prices of Raw Commodities. Base Metals may rise on the illusions of improvising economies. Do not be misled by the same. Explained above in this article about the bouts of Illusions in the paragraph – Change is in the Air – Forecast 2013. Copper & other Base Metals may easily see further rises on illusionary Economic growth. Therefore Gold may see restrained rises but Silver will gather excellent momentum as repeatedly alerted since long now. Read more on Debt Darkness of 2013 has a SILVER Lining & for Gold Read more on Gold Traders Cautiously Optimistic – Excess Factor Skews Markets Remember – After the Bout of Illusion is over, there will be very sharp declines also. Do not take upsides for granted. The new sectors which will emerge as winners for the next 15 years will be from the Water related Industries, Pharmacy, Health – care, Power, Education, Entertainment (Films, Music & Arts included), Telecom, Agriculture & Alternate Fuel Industry.
Forecast 2013 – Water Industry: Water related Industries will rule the next 20 years, as did Technology & Software for the previous 20 years until now. The new Microsoft or the new Bill Gates will now emerge from the Water Industry. In 2010 global water generated over a half trillion dollars of revenue. Global world population will explode from 7 billion today to 10 billion by 2050, predicts the United Nations. And over one billion “lack access to clean drinking water.” Climate and weather patterns are changing natural water patterns. And industrial pollution is making water a scarce commodity. So the good news is that huge “opportunities exist for businesses that can figure out how to keep the pipes flowing.” Yes, it’s a hot market. Read more on – Water – The next Big Business Idea
Forecast 2013 – Technology: The aggressive pace of advancements in the Technology sector seen in the past few years will take a hammering due to global economy weakening. People will be forced to cut unnecessary spending on new gadgets. The world will see a fall in the numbers of new models in cell phones, TV’s or even new e-shopping sites.
Forecast 2013 – Pharmaceuticals & Health Care: Natural disasters like flooding, earthquakes along with civil riots & massive unemployment will trigger large scale epidemics. In the long run this influence is sure to bring wonderful advances in medicine. I would surely invest (on dips) in Pharmaceutical & Health Care Industry in view of this factor. There may be some new medical break-through around areas of fertility, cloning, creating “Designer Babies.” Technology, banking, realty, metals, electronics & FMCG sectors expected to decline & will sharply slowdown.
Forecast 2013 – Real Estate: More Real Estate Bubbles may burst in 2013. There will be small pockets of real estate that may not be severely affected by the huge price decreases, but they will be far and few between. Don’t be in too much of a hurry to buy real estate or you might be kicking yourself for not waiting until prices crash. In bad times, property is an illiquid asset you may be stuck with something that you cannot sell and is worth much less than the amount you paid for it, or even worse – Borrowed for it.
Forecast 2013 – Entertainment & Art: The new sectors which will emerge as winners for the next 15 years will be from the Water related Industries, Pharmacy, Health – care, Power, Education, Entertainment (Films, Music & Arts included), Telecom, Agriculture & Alternate Fuel Industry. Artists, musicians, actors, entertainers will gain huge popularity as people seek simpler pleasures and desire to connect on a deeper more meaningful level. The very strongly affected & stressed ones may also seek escapism into a make believe world of films while they reassess their priorities in life. Manual skills will become more prevalent. Handcrafts, drawing, carpentry, typing, music, healing and an increase in people wanting to go back to the land and grow fruits and vegetables and become self-sufficient. I repeat what I forewarned in 2012, to occur in 2013 onward – Putting food on the table will be a more pressing concern than buying luxuries or gifts. Inflation & scarcity of food will be severely felt.
Forecast 2013 – Education: Education and learning will be hot topics 2013 onward. The world will see advances and breakthroughs with those who have difficulty speaking, those with dyslexia, dyspraxia and other learning challenges. There will be a proliferation of creative games especially for the young. These will be used not only for amusement but also for education and learning.
Forecast 2013 – Too Big to Fail Banks & Financial Markets: Banks and financial institutions will continue to have problems and the abuse of other peoples’ money will come to light. Financial Market manipulations may be rampant. There will be a demand for accountability leading to a fall of some very Big Names in the industry. Financial Systems will undergo a massive change, how-much-ever the “Too Big to Fail” Banks may oppose and no matter what the experts think will happen. These “Too Big to Fail” Banks will be reduced to negligible existence due to their own culture of fraud & greed. There will be more fraud than ever before: extensive money laundering, insurance fraud, bank fraud, government fraud. There will be many fraud cases connected with insurance companies, bankruptcies and the inability to pay out in case of disaster. There will be corruption and the rooting out of corruption. Industry barons will do all within their power to maintain their advantages at this time through strong links to government. The awareness of the suffering of the underprivileged has scarcely begun. What we will see over the next few years is the extreme polarization of right-wing solutions. Finally by 2024, there will be little that remains of the autocratic structures that are currently being put in place to safeguard the banks and corporations whose survival is currently threatened.
The big Gold Bull Market of the 1970’s ended harshly in 1980, when then Fed-chairman Paul Volcker stopped printing money, let interest rates shoot up, and looked on as the economy slipped into recession. The paper dollar enjoyed a revival and Gold Prices tanked. The global financial system is considerably more leveraged than it was 32 years ago, and presently much more dependent on never-ending cheap money from the central bank. In 1980, the total debt of the US government was less than $1 trillion; today the annual budget deficits are far bigger than that. The fallout from an end to free money would be huge, and most politicians would deem the consequences unacceptable. Today, there are also no other strategies available that could cushion the impact. In the early 1980’s, then-president Reagan countered hard money with an easy fiscal policy, and simply let the budget deficit balloon throughout his tenure. Today, the bond market would be quickly in trouble without support from the central bank, and the US Government would soon face its very own Greece-moment. Once the Eurozone and U.S. economies gather downward momentum, the export machine’s inefficiencies and malinvestments will catch up with it. And once that happens, the real estate bubble’s inefficiencies and malinvestments will catch up with it. When these financial storms arise and feed each other, Wall Street and New York will experience losses that will exceed the hurricane Sandy damage by an order of magnitude, for the Wall Street Status Quo will crumble under its own dead weight.
This is a powerful time for people of like mind to come together to create huge changes on our planet. If enough people believe that we can be prosperous and we can come through our economic, social and political woes, we can create it. Here, I would like to remind, Governments will also try to regulate and impose taxes and limitations on internet freedoms. The 2013 onward era unleashes the Power of the Mind. Make sure you use it well and to your advantage. There will be formations of several large groups of like minded people who would take it upon themselves to bring about the desired & vital changes to the now decaying Economies, Society & the world overall. Anti-Corruption movements of such groups are sure to pick up Epic sized momentum 2013 onward. These times provide an opportunity for the masses to break out in an uncharted direction which will surely bring about prosperity and fairness for us all. One may not believe this, but there will be a greater focus on the power of the mind and how we can use our minds to heal our bodies in many cases without medical intervention. One serious point of concern is, many youngsters may not be able to differentiate between Virtual Reality & Actual Reality & this will result in some serious social problems. There are millions of people, especially youngsters, who play virtual games and there will be a lot of psychological issues coming up with these people not knowing the difference between right and wrong. They are playing these violent games, they are maiming and killing in a virtual reality and then they will come out into the real world and they won’t know the difference between fantasy and reality. Unemployment & Inflation triggered crime wave will push the more mentally capable (yet unemployed) to invent more invasive measures and it will be harder to protect your identity online & yourself from cyber crime done using your identity. Think very carefully before you give any personal information to anyone as it could have very serious consequences down the line.
Come 2013, people will withdraw from the small comfort of a Facebook universe – and seek privacy and seclusion. Suffering will be too real for dabblers in spirituality, and true solidarity will be found in helping people who are in situations where – but for the grace of God – you could find yourself. The Forecast 2013 could aptly be summed up as “The World being at the Edge of an Abyss” – a Financial Abyss. My sincere advice & wishes for all in 2013 – Wish you all a Debt Free, Safe & Healthy 2013.
Forecast Is Sunnier, but Washington Casts a Big Shadow – New York Times
The economy: What to expect in 2013 – CNN Money
Hunger and Homelessness Rising across America – Global Research
Comex Gold Futures firmed up from recent dips on some short covering and bargain hunting, and even some fresh safe-haven demand, as odds of the US Economy (Though temporarily) going over the so-called Fiscal Cliff have increased, particularly after last week’s failure on a deal. Gold Prices have benefited the most from the ultra loose monetary policy of leading central banks because of Gold’s appeal as a hedge against inflationary fears, which is generally seen after massive money printing. That is why Gold investors are keeping a close eye on talks to avert a fiscal crisis in the United States. Favorable US economic data could signal prospects for an end to the ultra-loose monetary policy that has supported Gold Prices. The better the data the more the fear that monetary easing will ultimately come to an end. The number of Americans filing new claims for unemployment aid fell last week to nearly its lowest level in 4 1/2 years, a possible sign that employers have picked up the pace of hiring.
The United States faces $109 billion in across-the-board spending cuts starting in January unless a deal is reached to either replace or delay them. Democrats want to switch the spending cuts to tax increases for the most part. If the politicians reach an agreement on the fiscal cliff, the dollar could suffer and there could be more investment into Gold. A failure in the fiscal talks could spur safe-haven buying, boosting Gold Prices. Senate Majority Leader Harry Reid on Thursday criticized Republicans in Congress for refusing to go along with any tax increases as part of a fiscal cliff remedy as he sketched out a pessimistic outlook for this week.
As announced at its December meeting, starting in January, the US Federal Reserve will continue its third round of Quantitative Easing – QE3, purchasing $40 billion per month in MBS – Mortgage Backed Securities. Additionally, the Fed will purchase $45 billion of Treasury debt each month (continuation of Operation Twist) to total $85 billion per month. If the US Economy picks up in 2013 (Bouts of Illusion), the Fed could slow down its bond purchases, but I don’t think they will end them anytime soon. The US Federal funds rate, its main policy rate tool, remains at the exceptionally low level of zero to 0.25% and there are no expectations that will shift in 2013. If the US Economy starts slowing down due to the new Fiscal Cliff implications or the new Tax Hikes or if unemployment starts rising, the US Federal Reserve will now have to think hard before adding new QE or printing more money as that would then increase deficit & increase taxes. This in itself will take away the biggest supporter of Gold Prices from the markets as the US will no longer be able to afford new QE or fresh infusion of money. The US Federal Reserve surprised markets at the last meeting for 2012 in mid-December meeting with a change in its communication policy. Instead of a calendar date, the Fed shifted the forward guidance to the conditions needed to keep the federal funds rate at the current exceptionally low levels. The Fed initiated thresholds for unemployment and Inflation expectations. The Fed stated that it plans to keep its low federal funds rate at zero to 0.25% as long as the unemployment rate remains above 6.5%, with 2.5% or lower inflation projections for one to two years out. If the US does go over the Fiscal Cliff, the US Economy will take a hit & unemployment will rise. The Fed may simply continue its currently running QE size & rate policy but will surely defer to increase or introduce fresh QE. Any fresh QE will weaken the already weak US Dollar. The looming Fiscal Cliff and Debt Ceiling are yet additional drivers of downward price action for the dollar. I do not foresee the Fed adding to the already plentiful reasons for the collapse of the US Dollar.
The Fiscal Cliff issue is NOT A DEBT PROBLEM. In fact it is the opposite – A way to reduce Deficit. Gold Prices have always shot up when Debt has been added (QE 1 to QE3) but why should they rise when Debt is being reduced? Lack of rise in Gold Prices & yet the need for a safe-heaven demand will push market participants to Silver Trading & Investments. Silver has all the safe-haven appeal of Gold in addition to its industrial demand, something that Gold sorely lacks. To top it all, the attractive Silver Prices in ratio to Gold, add more appeal to Silver Investment. Gold and Silver have always been an in-separable pair & Silver and Gold Prices have generally moved in tandem historically. But now, markets would witness a new phenomenon – While on the Upswing. Silver Prices would rise more sharply & quickly whereas Gold Prices may see range bound swings. Gold also has a serious upside resistance at $1800 to $1855 range, capable of turning prices movements back. Gold Prices will need gigantic momentum to break through this range. Gold and Silver though will again behave similarly while on the declines. Silver will Outperform Gold on the upside & also on declines.
Interesting points on Silver: Debt Darkness of 2013 has a SILVER Lining
US Fiscal Cliff talks will resume once again as President Barack Obama returns from vacation in Hawaii and make one final attempt at negotiations to avoid huge tax hikes and spending cuts in the New Year. House of Representatives Speaker John Boehner has not yet set a date for bringing House members back to Washington from their Christmas break, reported Reuters. That makes the timing of a vote on any budget deal before December 31 more difficult. In a statement issued by Boehner and his top lieutenants, the Republican leadership team said “the Senate must act first” to revive efforts to avert the $600 billion in automatic tax hikes and spending cuts due to be triggered on January 1. They promised that the House would weigh whatever legislation the Senate produced. Last week, Boehner’s back-up plan to keep most income tax rates low collapsed amid opposition from fellow Republicans who opposed raising taxes on those making more than $1 million a year. The failed effort left uncertainty about what the next steps would be & kept the US in a state of a “Cliff Hanger” before it got tossed over into a deep recession.
The focus in Congress is shifting from broad deficit reduction to narrower efforts to avert the immediate shock of the December 31 Fiscal Cliff dive. There is still just enough time to prevent a fiscal crunch that would upset global financial markets and likely push the United States into recession. Reports of lackluster retail holiday sales added to the urgency for a deal. Shoppers might be spending less this holiday season in fear of looming income tax increases. A modest, last-minute measure in Congress to avoid deep spending cuts set for January 1 and most of the tax hikes could pass the Democratic-controlled Senate by the New Year, although Republicans would need to agree not use a procedural roadblock known as a filibuster. Republican Senator Kay Bailey Hutchison of Texas told MSNBC that $250,000 “is too low of a threshold” for raising income taxes. She said that in conversations she has had with some Senate Democrats, “they are saying maybe more in the $400,000 to $500,000 category.” Obama himself recently offered to raise the threshold to $400,000, before negotiations with Boehner broke off. A Senate Democratic aide downplayed chances for votes this week in the Senate, but suggested there could be legislative movement at the weekend. “We can’t do anything until Republicans either give us the 60 votes,” which are needed to advance legislation without long procedural delays, or allow a short-cut that lets bills pass on a simple majority vote in the 100-member chamber. But even if a handful of Senate Republicans support Democrats on a measure to avoid the worst of the Fiscal Cliff, time is too short. When the Senate returns on Thursday it is due to work on a disaster aid bill to help New York and New Jersey recover from Superstorm Sandy and other measures. In the Republican-controlled House, any bill that raises taxes on anyone would need a rare bipartisan vote to win approval. All 191 Democrats might have to team up with at least 26 Republicans to get a majority if the bill included tax hikes on the wealthiest Americans, as Obama is demanding. Some of those votes could conceivably come from among the 34 Republican members who are either retiring or were defeated in the November elections and no longer have to worry about the political fallout. Republican leaders argued that it was the Senate’s turn to come up with a legislative solution because the House had produced two bills earlier this year to avert the Fiscal Cliff. One would have continued the Bush-era’s low income tax rates for another year, despite strong Democratic opposition to continuing the tax break for household incomes above $250,000. Another bill would have replaced $109 billion in automatic spending cuts due to begin next month by stopping all of the planned military cuts and placing the entire burden on domestic activities, including some social safety net programs funded by the federal government. Those bills were passed by House Republicans knowing they would be stopped in the Democratic-controlled Senate, which is insisting on raising tax revenues to help reduce the federal deficit.
Once the clock ticks past midnight on December 31, no member of Congress would have to vote for a tax increase on anyone – taxes would have got raised automatically – and the only votes would be to decrease tax rates for most Americans back to their 2012 levels. An alternative is for Congress to let income taxes go up on everyone as scheduled. Then, during the first week of January, lawmakers would strike a quick deal to reduce them except on people in the highest brackets. They would also pass a measure putting off the $109 billion in automatic spending cuts that most lawmakers want to avoid. Americans’ optimism that Obama and congressional leaders will reach a budget agreement before January 1 has waned in recent days. “We’re paying attention, we’re greatly disappointed in what’s going on and we deserve better,” Starbucks Chief Executive Howard Schultz told Reuters.
To avoid defaulting on the national debt if the budget crisis spins out of control, the Treasury Department announced measures essentially designed to buy time to allow Congress to resolve its differences and raise the debt borrowing limit. Treasury Secretary Timothy Geithner said yesterday that the US will reach the $16.4 trillion Debt Ceiling at the end of December. Geithner wrote in a letter to Senate and House leaders that the Treasury will soon undertake accounting maneuvers to create $200 billion in “headroom” that will delay a violation. It was unclear how long this headroom would last, he said, because tax and spending policies for 2013 are still under negotiation as part of talks to avert the so-called Fiscal Cliff. Such maneuvers would usually run for about two months, but if a deal on the Fiscal Cliff is not reached, the extraordinary measures could last longer, according to Geithner. “Treasury will provide more guidance regarding the expected duration of these measures when the policy outlook becomes clearer,” he added. Congress must act to raise the Debt Limit. Republicans have said they want to use the Debt Ceiling approval to win concessions on spending from the White House. To summarize: Debt Ceiling hit December 31, just in time for the no deal on the Fiscal Cliff, and then the Treasury will proceed to defund various Government retirement accounts for the next two months or some more, when sometime in March the true deadline to getting a joint solution on both the Fiscal Cliff and the Debt Ceiling will becoming un-extendable as the alternative is truly unthinkable. So the Real & Final Deadline for the Fiscal Cliff is in March when all further Debt Ceiling extension avenues are exhausted. Will the US witness a mini recession till then or will this also lead to some more QE?
Silver – The cheap proxy to Gold or also generally called as “Gold’s Poor Cousin” or the Poor Man’s Gold, will no more get referred to as a second option soon enough. Gold Prices are up 5.9% this year while Silver Prices outperformed & gained 8.1%. Silver is a Precious Metal with a major Industrial demand, unlike Gold which relies mostly on its Safe Haven investment status & thus will make a separate niche for itself soon now. Silver enjoys the benefits of both worlds – the Safe Haven investment demand & the increase in physical demand on Industrial Growth. I expect Silver to gain momentum based on various factors for the first half of 2013 & Silver Investment will gain considerable ground & Investor attention. In fact Silver offers the most attractively priced Safe Haven investment now. With Gold Prices set to rise at the start of 2013, Gold may soon be a costly investment option for the average trader or investor. Higher Gold Prices may drive Investor demand to Silver. Investor attention in Silver is generally in tandem with rises & dips in Gold. But this market ideology may see a sharp contrast in the coming year. A lot of analysts yet are of the view that investment demand in the Precious Metals Group has further room to increase in the coming months if interest in Gold Bullion recovers. I expect industrial demand to pick up in the first half of 2013 by anywhere between 5.5% and 7.75%. Chinese economic growth seems to be rebounding which is a major demand source for Base Metals. A report by the Silver Institute also confirms that industrial demand for Silver is expected to rebound after a decline this year. Thomson Reuters GFMS looks for a bounce by 6.5% to 484 million ounces in 2013 as the global economy recovers. Industrial Silver uses are expected to rise to 57% of total silver fabrication in the next couple of years from 54% last year. Silver ETF demand combined with physical Silver demand will outpace the supply, at least for the next 2 to 3 years. Silver may easily rise to the peak achieved in 2011 at around $50 but investor appetite will ultimately take it further as that will solely be the driver of Silver Prices at that moment. With less than expected movement in Gold, investor appetite may solely remain focused on Silver, taking prices to historic highs. As observed in the past few weeks of 2012, the risk sentiment remains generally buoyant & the same may increase based on the ultra loose monetary policy adopted by the US Federal Reserve & from other key central banks from Japan & China to the US.
Almost every Gold Bull is convinced; Gold will hit $2000 in 2013. Historically, Gold and Silver have shot up in the year next to the one in which the US Presidential Elections are held – that’s 2013. The US risks sovereign credit downgrades if the nation does go over the Fiscal Cliff if the issues are not resolved before year end. The US Dollar index hit a three-month low last week. Gold Bullion investment is fear induced – As a hedge against potential inflation, debasement of major currencies, continued accumulation of Gold by central banks and fears that ratings agencies may downgrade US debt if not satisfied with Washington’s Fiscal restraint. Silver can carry off these responsibilities with equal ease, along with value addition of Industrial demand & attractive pricing, vis-à-vis Gold. Most market analysts expect Gold Prices to hit the $2000 level in 2013. Let’s accept that Gold does hit this level. In that case Gold, now at $1660, gets appreciated by 20 – 25% rising to $2075, beating its earlier lifetime high of $1925. At the same time, Silver, now at $30, needs to rise by a minimum of 70% to rise ONLY to reach its earlier high of $50. Any rises above this will be in ADDITION to 70%. Need I say more? I do not say that Gold does not seem attractive at current lows. Gold will rise & I surely have taken some positions in Gold, but far small & petty in size as compared to Silver. Investors would move out of Gold & enter Silver investments when the huge growth prospects are realized. This would in fact add to the upside ceiling pressure to Gold Prices.
There have been a number of QE programs announced before & in fact limitless QE was in Fashion in 2012. This practice of mindless ultra loose monetary policy will now surely show effects as Hyper Inflation rears its ugly head, amid several nations undergoing Austerity measures & heightened Unemployment. Inflation will boom once this massive Quantum of mindless Solace finds its way into the markets. Raw commodity prices will hit the roof. Prices of Base Metals will shoot up on illusions of a healthily recovering Economy. Gold generally does not pick momentum when economy is accelerating up as the markets are in Risk ON mode. Gold Bullion gets favored when Inflation is rising & at precariously high levels. But this time since Gold Prices will also be at their all time highs and the market would have no other option except Silver to run to. Silver trade has been known to be extremely volatile, but that is so because it is a much smaller market in comparison to Gold. The Silver trading market has never been a fundamentally driven one but a trend follower. When a larger number of trend-following momentum traders come into play, Silver trading movements get exaggerated. With the year close to an end, markets face continued uncertainty & investors hope for a miracle solution to the Fiscal Cliff in the next 3 to 4 days. While uncertainty is in the driver’s seat, there could be some more dramatic downside spikes in Gold and Silver. I would not like to see these go wasted.
Comex Gold Prices have shown some small upside but Gold Bullion Prices stay close to the weakest levels in 4 months as the Fiscal Cliff stalemate drove investors to the sidelines. Gold Prices are up 5.9% this year, set for a 12th straight annual gain, as central banks from the U.S. to China and Europe took action to prop up economies and expanded Gold Reserves. Gold Prices continued gains this year too on rock-bottom interest rates, concerns over the financial stability of the Eurozone and diversification into bullion by central banks. Silver Prices gained 8.1% this year, though Silver Prices dropped 7% last week, the worst week since December 2011. Gold Prices fell 2.3% last week as U.S.budget talks stalled, the biggest loss since the period ended June 22. Gold Bullion for delivery in February declined 0.2% to $1,657 an ounce on the Comex. Gold Futures closed slightly higher than opening on Friday as disappointing US consumer confidence data and a proposal from US Speaker of the House of Representatives John Boehner to avoid the Fiscal Cliff failed to win support from his own party increased the precious metal’s safe-haven appeal. Consumer sentiment index fell to 72.9 from 74.5 according to the report released by University of Michigan. The Fiscal Cliff issues were expected to be resolved last week but since talks were stalled, Gold Markets do not expect to see any resolution to the same before the year end. In the eventuality that if there is any resolution, then there would be some form of a watered down version of the legislation stuck together with spit & glue & put together into place. Holdings in exchange-traded products backed by gold stood at 2,630.89 metric tons on Dec. 21, data tracked by Bloomberg show. Holdings have climbed 12% this year, according to the data. The Dollar Index was little changed today after advancing 0.5% on Dec. 21. Bets on a Gold Rally fell 13% to 112,421 contracts, US CFTC – Commodity Futures Trading Commission data show. Bullish Silver wagers dropped to a five-week low of 30,119 contracts.
Most Gold Trading markets remain closed until Thursday for Christmas holidays therefore trading activity in the markets will be thin. 2013 is almost sure to bring about a complete breakdown in value for paper currencies which may trigger sharp upsides in Gold and Silver for sometime. But overall 2013 will be a year of a lot of pain. Gold and Silver seem to have bottomed out for now but accessing an upside would be really difficult with thin volumes around the world due to Christmas & also the year end when most big traders & hedge funds prefer to remain on cash. Gold producers Stocks advanced today as an impasse in U.S. budget talk’s boosted demand for the precious metal as an investment haven. Alacer Gold surged 4.7% to A$4.71 and Integra Mining Ltd. climbed 2.6% to 49.75 Australian cents. Zijin Mining Group Co.,China’s biggest producer of the metal by market value, gained 2.4% to HK$3.03. US Stock Markets finished lower on Friday after a Republican plan to avoid the Fiscal Cliff failed to gain sufficient support on Thursday night, draining hopes that a deal would be reached before 2013. The Dow Jones industrial average dropped 120.88 points, or 0.91%, to 13,190.84 at the close. The S&P 500 index fell 13.54 points, or 0.94%, to 1,430.15. The Nasdaq Composite Index lost 29.38 points, or 0.96 percent, to 3,021.01.
Central Banks Change Outlook to Inflation:
A subtle shift in monetary policy making is afoot with a new generation of central bankers, striving to secure global economic recovery, prepared to challenge the old doctrine of Inflation-fighting at all costs. Mark Carney, the governor of the Bank of Canada and soon-to-be head of the Bank of England, may or may not have intended to spark a high-level debate last week over how diligently central banks should fend off inflation, reported Reuters. Policymakers from the US Federal Reserve to the Bank of Japan have reconsidered or relaxed their inflation targets — long the raison d’etre of monetary policy — and have given more emphasis to economic growth, even if that is not an official mandate. “They have reduced their slavish devotion to the sole goal of inflation targeting,” said Carl Tannenbaum, a former Fed official who is now chief economist at U.S. asset manager Northern Trust. No central banker is going to tolerate an inflation spike in order to boost employment or foster more growth. Policymakers have also largely dismissed some of the more radical alternatives to achieving their goals, most notably targeting levels of nominal gross domestic product (real GDP plus inflation). Yet with the financial crisis having starkly exposed central banks’ failure to stave off danger, and policymakers having responded by flooding world markets with trillions of dollars in cheap funding, a small run-up in inflation may no longer be the anathema it once was.
In the world’s largest economy, Fed Chairman Ben Bernanke has unleashed some $2.5 trillion in asset purchases in the last few years to boost hiring and economic growth, squarely focusing on the employment side of the U.S. central bank’s dual mandate. His approach differs to that of his veteran predecessor Alan Greenspan. The same goes for Mario Draghi who took over from Jean-Claude Trichet at the ECB and it looks like Carney, replacing Britain’s Mervyn King, fits the same pattern. The Fed last week tied low interest rates to a drop in the jobless rate to 6.5% — it stood at 7.7% last month — as long as inflation did not threaten to top 2.5%. The unprecedented move may represent the culmination of its departure from the inflation-centric model pursued by former Fed chairmen Greenspan and Paul Volcker and gave a clear signal that it would tolerate inflation above its 2% target if that was the cost of getting more Americans back to work. Carney has emphasized the idea of “flexible targeting” in which inflation could be allowed to stray from the target for longer than would normally be tolerated in order to stabilize financial markets or the economy. Carney said earlier this month that the BoC explored the idea of changing its inflation targeting mandate altogether but decided that was too risky. He stressed he was not dropping hints about his plans for Britain yet BoE policymakers were quick to push back on any notion the country should change its approach to policy. Paul Fisher, the BoE’s executive director for markets, said Britain should be wary of changing the central bank’s 2-percent inflation target and had no need to adopt the longer-term commitments its North American counterparts have made on interest rates. But while BoE Chief Economist Spencer Dale warned “there is no free lunch” when it comes to changing the central bank’s target, British finance minister George Osborne surprised some when he welcomed Carney’s opening of the debate. “If you want to change the regime you have to make a pretty strong case for doing so,” Osborne told members of parliament. In July, Carney will replace King, considered among the last of the old guard of inflation-fighting central bankers — despite mixed success in that regard — which also included BoJ Governor Masaaki Shirakawa and former ECB head Trichet. Draghi, who succeeded Trichet last year, has been careful to stick to the ECB’s price stability mantra, which is enshrined in the EU treaty and fiercely defended by Germans who are still haunted by the memory of hyperinflation in the 1920s. Yet he has also flooded the financial sector with more than one trillion euros this year and pledged to buy Eurozone government bonds in whatever amounts are needed to shore up the currency bloc. Two hard-line ECB policymakers, Axel Weber and Juergen Stark, resigned last year over the bank’s previous bond-buying program. The pair said they felt it strayed into the realm of fiscal policy and could ultimately pose inflation risks.
The Myth – Dec 2012 End of the World phenomenon has been discussed or referenced in several media. Several TV documentaries, as well as many contemporary fictional references to the year 2012 refer to 21 Dec 2012 as the day of a cataclysmic event. The Dec 2012 End of the World phenomenon comprises a range of eschatological beliefs according to which cataclysmic or transformative events will occur around 21 Dec 2012. This date is regarded as the end-date of a 5125-year-long cycle in the Mesoamerican Long Count calendar. Various astronomical alignments and numerological formulae have been proposed as pertaining to this date, though none has been accepted by mainstream scholarship. A New Age interpretation of this transition is that the date marks the start of time in which Earth and its inhabitants may undergo a positive physical or spiritual transformation, and that 21 Dec 2012 may mark the beginning of a new era. Others suggest that the date marks the end of the world or a similar catastrophe. Scenarios suggested for the end of the world include the arrival of the next solar maximum, an interaction between Earth and the black hole at the center of the galaxy, or Earth’s collision with a planet called Nibiru. Scholars from various disciplines have dismissed the idea of such cataclysmic events occurring in Dec 2012. Professional Mayanist scholars state that predictions of impending doom are not found in any of the extant classic Maya accounts, and that the idea that the Long Count calendar ends in 2012 misrepresents Maya history and culture, while astronomers have rejected the various proposed doomsday scenarios as pseudoscience, stating that they conflict with simple astronomical observations. In May 2012, an Ipsos poll of 16,000 adults in 21 countries found that 8 percent had experienced fear or anxiety over the possibility of the world ending in Dec 2012, while an average of 10 percent agreed with the statement “the Mayan calendar, which some say ‘ends’ in 2012, marks the end of the world”, with responses as high as 20 percent in China, 13 percent in Russia, Turkey, Japan and Korea, and 12 percent in the United States, where sales of private underground blast shelters have increased noticeably since 2009. This catastrophe was initially predicted for May 2003, but when nothing happened the doomsday date was moved forward to Dec 2012 and linked to the end of one of the cycles in the ancient Mayan calendar at the winter solstice in 2012 – hence the predicted doomsday date of 21 Dec 2012. Just as the calendar you have on your kitchen wall does not cease to exist after December 31, the Mayan calendar does not cease to exist on 21 Dec 2012. This date is the end of the Mayan long-count period but then – just as your calendar begins again on January 1 – another long-count period begins for the Mayan calendar, the next day. ENOUGH said.
We have become used to living in a world of Excess & Immediates. Immediate relief has been sought from problems created by Excess of Greed of money or Power or even both. Moreover, we have been so dumb, that we have added to the problems, rather than resolve them by creating more Excess of something else – Debt. There is Excess of Economic Weakness everywhere & there is no easy solution to this because the problem is Excess Debt! You can print all the money you want but you can’t control where it will end up. The only way to deal with this is to somehow have a debt clean-out, which implies a very long, ugly economic period, which no one is willing to go through, but will have to eventually bear for a prolonged period of time. The point here that I wish to elaborate is that we have seen a phase of Excesses in the past few years. Excess Exuberance, Excess Greed, Excess Debt, Excess Money Printing, Excess Price rises in Gold & Real Estate, Excess Pessimism & now Excess Hope – one leading to the other. Excess Currency debasement WILL soon be followed by Excess of Recession or Depression to complete the circle. The world suddenly realized the Investment value of Gold when in Excess debt. There were many options available then to avoid today’s situations, but Governments sought the easiest road to Instant Cure via Excess Medication. The after effects were to follow naturally. The scene today is way different. Gold may be now sold to overcome some part of debt. Gold may also get heavily into re-cycling mode due to relatively high prices. With excess supply over demand, Gold may not rise as high as markets expect it to. We are already witnessing some unusual happenings now. All things (a few only) that can trigger dips in Gold are working fine, but a very large number of financially & logically sound issues that should send Gold Prices to the sky are also pulling Gold down. The same issues that on happening may crash Gold, are also sending Gold tumbling down when not happening the very same day.
Let’s see what 2013 has in store for us. Will be posting my Forecast for the year 2013 by the next week. Nothing much that the world may not be aware of, except for a few eye openers. Just wish I could genuinely wish a Happy New Year this time.
Comex Gold Futures slipped again for a fourth consecutive day as soon as US markets opened. Gold and Silver Prices tumbled to a 4 month low below the 200-day moving averages following a surprisingly strong reading on third quarter US Gross Domestic Product. Gold Prices have dipped to $1637.5 & Silver to $29.69 (at the time of writing) as alerted repeatedly in the past 4 days. What is most surprising is that all factors that have proven to make Gold and Silver stronger are proving useless. Gold Futures Prices fell on Tuesday when the Democrats & Republicans were rumored to be coming together close to a Fiscal Cliff Deal. The next day Gold and Silver lost more ground despite the fact that the Fiscal Cliff talks were floundering & stalled. Even a fresh monetary stimulus plan by the Bank of Japan did not provide any support. The US Dollar Index is further lower again, which should ideally be bullish for the precious metals, but even that seems of no help. Gold Prices have collapsed even though the very supportive Euro has been on the up move sharply. Even a higher Jobless number today has sent Gold and Silver Prices tumbling. A price manipulation amid an opportune year-end thin volume trade in Gold and Silver, seems obvious now. Fresh open interest in Comex Gold and Silver can climb massively if that is the case. MCX Gold Prices slumped to Rs. 30,433 from a rise earlier in the day to Rs. 30,969. MCX Silver March trade crashed heavily to Rs. 57,272 from Rs. 59,914 as expected after Silver broke strong support levels yesterday.
U.S. third-quarter GDP data showed a surprisingly strong reading of up 3.1%, on an annualized basis, which is the fastest rate of growth since the 4.1% pickup in the final quarter of 2011, while the markets expected a reading of 2.8%.The US Economy grew more quickly than previously stated in the July-to-September quarter due to stronger trade, faster health-care spending and increased local government construction, the Commerce Department estimated. The Labor Department said that Initial (First-time) jobless claims rose 17,000 to a seasonally adjusted 361,000 in the week ended Dec. 15, versus a slightly upwardly revised 343,000 in the prior week. Expectations were for 358,000. The four-week average of claims fell 13,750 to 367,750, a two-month low. Continuing claims in the week ending Dec. 8 rose 12,000 to 3.22 million. Manufacturing in the Philadelphia region unexpectedly expanded in December to an eight-month high. The Federal Reserve Bank of Philadelphia’s general economic index rose to 8.1, from minus 10.7 in November. This report contrasts with data showing New York-area manufacturing shrank for the fifth straight month. Figures from the New York Fed on Dec. 17 showed the so- called Empire State index fell to minus 8.1 this month, from minus 5.2 in November.
Bloomberg – The near-zero interest rate the Federal Reserve charges financial firms, as well as securities purchases that will balloon the central bank’s balance sheet to almost $4 trillion next year, have made it easier for Narula’s $1.6 billion fund to thrive and more difficult for Sanchez, a former college library director, to enjoy retirement. Chairman Ben S. Bernanke’s efforts to energize the US Economy since 2008 have been credited with rousing the housing market from a six-year funk, lowering the jobless rate and putting more money in the pockets of both mortgage lenders and borrowers. At the same time, Fed policy has been blamed for starving money-savers of income and boosting certain asset prices, widening the gap between the rich and the rest of the country. Fed officials declined to comment for this story on whether their policies exacerbated inequality. After two rounds of asset purchases totaling $2.3 trillion through June 2011, the central bank began so-called QE3 in September. The Fed’s mortgage-securities purchases have bolstered demand, and the possibility of profit, for fund managers such as Narula. Hedge funds that handle mortgage securities have a 20 percent gain on average this year, according to data compiled by Bloomberg. With money gained from Fed securities purchases, investors speculated on the future prices of commodities, helping to drive up food and energy prices for consumers, said John Gnuschke, director of the Sparks Bureau of Business & Economic Research at the University of Memphis in Tennessee. After rising and falling independently for decades, prices for stocks and commodities rose “in lockstep” from 2008 through 2011, when the central bank conducted its first series of securities purchases. Twenty-two of the 24 commodities in the S&P GSCI Commodity Spot Index have gained since the recession ended in June 2009, with only natural gas and cocoa lagging. Corn more than doubled in price even before this year’s drought sent values soaring. Heating oil is up 77 percent and wheat 58 percent. That means higher energy and food prices for consumers. Commodity prices are trading above their value according to supply and demand, and the increase is because of excess money. Not everyone agrees. Growing demand in emerging countries, including China, helps explain commodity price increases, said Chris Rupkey, chief financial economist for Bank of Tokyo- Mitsubishi UFJ Ltd. in New York. Still, Sharma said the situation reflects the limits of the Fed’s main tool for influencing the economy — controlling the amount of money in the financial system. “You can print all the money you want but you can’t control where it will end up,” he said. “It ends up in the commodities sector and benefiting the wrong people.” While Higher Commodity Prices can also fuel economic growth, that effect is undercut by the fact that the U.S. is a net importer of commodities, Stiglitz said.
Silver To Gain 29% in 2013 – Analysts, Traders and Investors
Today’s AM fix was USD 1,667.00, EUR 1,259.25 and GBP 1,024.96 per ounce.
Yesterday’s AM fix was USD 1,674.50, EUR 1,261.49 and GBP 1,027.87 per ounce.
Cross Currency Table
Precious metals remained under pressure yesterday and closed with losses for both Gold and Silver. Gold closed down 0.2% or $3.50 to $1669.30/oz. Silver closed with a loss of 1.7% – down 54 cents to $31.10/oz.
GOLD SPOT $/OZ and 100, 200 and 465 Day SMAs– September 2011 To Today
Prices again crept gradually higher in Asian trading prior to some retrenchment in early European trading but dollar weakness was supporting gold and silver.
Further weakness could be seen and it is worth noting that gold and silver saw considerable weakness last December (see chart above) and both bottomed near year end on December 29th prior to strong gains in January 2012.
Support for silver is at $30.67/oz and $30/oz. Gold’s support is at $1,647/oz and below that at $1,600/oz.
Silver will rise as much as 29% to $40.25/oz, from $31.10/oz today, in 2013.
This is based on the median estimate of 49 analysts, traders and investors compiled by Bloomberg.
Global investment through silver backed exchange traded products reached a record 18,854 metric tons in November, or more than nine months of mine output, data compiled by Bloomberg show. Holdings are now valued at about $19.2 billion.
Bullion dealers all over the world report robust demand for silver and there has been a shift in many Asian and Middle Eastern markets from gold to silver – due to silver’s relative cheapness and undervaluation versus gold.
According to Bloomberg, one of Singapore’s largest suppliers of coins and bars to retail investors, says sales tripled since October, part of a global surge in demand for silver that drove holdings to a record.
Silver almost tripled since the end of 2008, lagging behind only platinum in gains for precious metals this year as policy makers from the U.S. to China to Europe pledged more action to boost economies. That’s attracting investors betting that stimulus will stoke inflation and debase currencies. It’s also leading to diversification into silver by some who believe that economic growth will strengthen industrial demand for silver, 53% of which is used in everything from televisions to batteries.
Silver advanced 12% to $31.13 this year, compared with a 6.6% gain for gold and 14% rise for platinum. The Standard & Poor’s GSCI Index of 24 commodities dropped 0.3 percent and the MSCI All-Country World Index of equities jumped 14%. Treasuries returned 1.8%, according to Bloomberg.
Hedge funds and other large speculators increased bets on higher prices 12-fold since the end of June, to a net 34,862 futures and options, U.S. Commodity Futures Trading Commission data show. That’s about 50% higher than the average over the past five years, a period during which traders have never been bearish.
Equity investors also believe higher prices are coming.
Shares of Mexico City-based Fresnillo Plc (FRES), the largest primary silver producer, rose 25% this year. The company will report a 22 percent gain in net income to a record $927.1 million in 2013, according to the mean of seven estimates compiled by Bloomberg. Coeur d’Alene Mines Corp. (CDE) in Idaho, which gets about 65 percent of its revenue from silver, fell 6.3 percent to $22.63 since the start of January and will reach $31.89 in 12 months, the average of analysts’ predictions shows.
Investors bought 1,464 tons through ETPs this year, data compiled by Bloomberg show.
Silver holdings in the IShares Silver Trust, the biggest exchange-traded fund backed by silver, were unchanged at 9,871.29 metric tons as of Dec. 19, according to figures on the company’s website.
Total Known ETF Holdings of Silver
Prices could go lower should economic growth slow because it would curb demand for consumer goods. A car contains as much as 30 grams and a mobile phone about 0.25 gram, according to the Washington-based Silver Institute.
However, investment and store of value demand for silver looks set to continue to grow at a steady rate in 2013 and this should compensate for any decline in silver industrial demand as it has done in recent years.
The silver market remains a very small market and this continuing global investment and store of value demand should lead to silver reaching a real record high, inflation adjusted, of over $140/oz in the coming years.
Courtesy: – Goldcore
Silver Vaults Stuffed Mean Prices Rising 29% in ’13 – BusinessWeek
— Silver Bullion Pte, one of Singapore’s largest suppliers of coins and bars to retail investors, says sales tripled since October, part of a global surge in demand that drove holdings to a record. “Our clients are worried that a major currency crisis or mass bankruptcies would occur,” said Gregor Gregersen, the 36- year-old founder of Silver Bullion, whose sales now average about S$6 million ($4.9 million) a month. “It all has to do with falling confidence in the heavily indebted Western governments and financial institutions.”….
— Brazil has doubled its official gold holdings in just three months since August, as central banks in emerging markets continue to stock up on bullion to diversify their growing international reserves. The nation’s official holdings of gold now stand at 2.16 million troy ounces after the central bank purchased 472,000 ounces in November, marking the highest level since late-2000, new data compiled by the International Monetary Fund showed Thursday…..
— Gold edged up on Thursday, but uncertainty around U.S. budget talks kept investors nervous and Asia’s physical buying interest failed to lift prices substantially from a more than three-month low struck earlier this week. Talks in Washington to avert a fiscal crisis stalled as a deadline approaches for the world’s top economy to avoid $600 billion worth of tax hikes and spending cuts, dubbed the “fiscal cliff”, that could tip it back into recession….
— Gold futures eased Wednesday, settling near a three-month low, as investors looked for progress in U.S. budget talks and took stock of gold’s recent drop….
Asia gold: Physical buying picks up; year-end supply a concern – The Economic Times
— Asia’s physical buying picked up after gold dropped to its lowest in nearly four months earlier this week, while some market participants were concerned about a potential supply shortfall next week as refineries close for holidays….
Gold Loans Hide India Shadow-Banking Risks – BusinessWeek
— When Rashmi Deshmukh needed money for her hand-knit clothing business in Mumbai, she couldn’t wait for bank approval. Instead, she put up her wedding jewelry as collateral at a loan-for-gold company to get cash on the spot. Muthoot Fincorp Ltd., which advertises three-minute gold loans and has 3,125 branches across India, charged 24 percent annual interest. While a bank gets half that rate, it would have loaned her less and required paperwork, she said….
Talks to reach an agreement & avoid the looming Fiscal Cliff crisis of harsh tax hikes and spending cuts that could trigger a recession stalled. Discussions on the Fiscal Cliff crisis soured on Wednesday as President Barack Obama accused Republicans of digging in their heels due to a personal grudge against him, while a top Republican called the president irrational. Obama said he was puzzled over what was holding up the Fiscal Cliff talks and told Republicans to stop worrying about scoring “a point against the president” or forcing him into concessions “just for the heck of it.” “It is very hard for them to say yes to me,” he told a news conference in the White House. “At some point, you know, they’ve got to take me out of it.” The rise in tensions threatens to unravel significant progress made over the last week in the so-called Fiscal Cliff talks, reported Reuters. Boehner and Obama have each offered substantial concessions that have made a deal look within reach. Obama has agreed to cuts in benefits for seniors, while Boehner has conceded to Obama’s demand that taxes rise for the richest Americans. However, the climate of goodwill has evaporated since Republicans announced plans on Tuesday to put an alternative tax plan to a vote in the House this week that would largely disregard the progress made so far in negotiations. Obama threatened to veto the Republican measure, known as “Plan B,” if Congress approved it. Boehner’s office slammed Obama for opposing their plan, which would raise taxes on households making more than $1 million a year and is a concession from longstanding Republican opposition to increasing any tax rates.
“The White House’s opposition to a backup plan … is growing more bizarre and irrational by the day,” Boehner said through his spokesman, Brendan Buck. John Boehner expressed confidence the House would pass the legislation, known as “Plan B,” on Thursday. He urged Obama to “get serious” about a balanced deficit reduction plan. Global investors are on edge over the Fiscal Cliff talks, and U.S. stocks fell on Wednesday following Boehner’s comments. An acrimonious presidential campaign that culminated in Obama’s re-election on November 6 has added to the bad blood in Washington between Obama and congressional Republicans. The two sides also clashed bitterly last year over the government’s limit on borrowing – known as the Debt Ceiling – an episode that nearly led the nation to default on its debt. On Wednesday, Obama said the fiscal cliff must not get bogged down with negotiations over the debt ceiling, an issue that must be dealt with again early next year. Obama and Boehner appear to have bridged their biggest ideological difference but remain hung up on the mix of tax hikes and spending cuts meant to narrow the budget gap. If a Fiscal Cliff deal is not reached soon, some $600 billion in tax hikes and spending cuts are set to begin next month. Senior administration officials described negotiations as at a standstill and Obama warned he would ask everyone involved in the talks, “what it is that’s holding it up?” Still, the top Republican in the Senate said resolution could come by the end of the week. “There’s still enough time for us to finish all of our work before this weekend, if we’re all willing to stay late and work hard,” said Senate Republican leader Mitch McConnell. Any Fiscal Cliff deal by Obama and the Republican leadership would need the support of their parties’ rank and file. Many Democrats dislike the president’s offer to reduce benefits to seniors, although some political allies of Obama have given signs they feel they could swallow this concession.
Renowned Silver Market whistleblower Andrew Maguire spoke with King World News about the state of the physical Gold Market and said that several billion dollars of paper selling from government agents was used to smash the Gold Prices yesterday. Here is what whistleblower Maguire had to say: “Gold is actually a currency, and it’s (the gold market is) intervened (in) by the government agents, which are the bullion banks. Yesterday, clearly they (the bullion banks) sold Gold in defense of the Dollar.”
Maguire continues: “Keep in mind that $3.5 billion of paper Gold was actually cleared in London yesterday. This selling was coordinated by the same bullion banks that are also active in the Comex. At the same time, they are rigging enough of a decline to cover shorts into capitulating longs on the Comex Gold market.
But the Eastern central banks are simply sitting back and allowing this defense of the dollar to occur. They know what’s going on….
“They know that the (US) government is shorting foreign exchange gold and they are long the dollar. So they (the Chinese) simply scoop up what (gold) they can at the resulting discounted price. What is astounding is that the price of world Gold and Silver is actually established in that manner because it has nothing to do with the physical market at all. Essentially what they (the Chinese) are trying to do is divest themselves of their dollars, euros, yen and any other fiat currency as fast as they can. They are not stupid, they are going to sit back and allow the governments to defend these (paper) currencies.
So their bids are in the market and they are totally flexible at every discounted fix price. There does, however, reach a point where these leveraged paper sales simply run out. Physical allocations force the selling bullion banks to actually buy back some of these physical allocations. You just have to look at the current backwardation. It offers a good window into what is actually occurring right now. A lot of people might ask, ‘Where are we?’ It’s just a question of how much physical (gold) is made available, leased to the bullion banks, to meet these allocations. That’s why I monitor this wholesale market so closely and what I see currently is this paper is rapidly being converted into (physical) gold at a totally unsustainable rate. So this stair-step higher (we have been seeing in the gold market for so long) is these Eastern central banks capitalizing on this discount.”
The above information was just a small portion of what whistle blower Maguire had to say. This tremendous segment provides a fascinating look at what is really taking place behind the scenes in the Gold war. Courtesy – Kingworldnews
Ratings firm Fitch said on Wednesday it is more likely to strip the United States of its triple-A status if a political deal on the Fiscal Cliff is not reached to halt $600 billion of spending cuts and tax hikes set for early next year. “Failure to avoid the Fiscal Cliff … would exacerbate rather than diminish the uncertainty over fiscal policy, and tip the U.S. into an avoidable and unnecessary recession,” Fitch said in its 2013 global outlook, published on Wednesday. “That could erode medium-term growth potential and financial stability. In such a scenario, there would be an increased likelihood that the U.S. would lose its AAA status.” Fitch currently assigns the United States its highest rating but with a negative outlook. Peer Standard & Poor’s has already downgraded the world’s biggest economy, lowering the United States to AA+ in August 2011 – a move which appears to have done little to dull the attraction of U.S. bonds for investors. Fitch added that an agreement on a multi-year deficit reduction plan to stabilize U.S. debt and public finances was likely to see the country keep its triple-A rating. However, it went on to say that: “failure to put in place a credible fiscal consolidation strategy during 2013 would be likely to result in the US losing its AAA status.”
Interesting Article: Watching Your Money Disappear
Gold and Silver Prices fell sharply below a three month low while Stock Markets rose. Signs that US lawmakers may be closer to a budget deal boosted Equity Markets and reduced demand for Gold and Silver as an alternative & safe asset. The prospect of a sweeping budget deal takes some of the crisis demand out of Gold. Gold Market traders & investors have been denying all logic lately. The sell off in Gold and Silver (pricing-in the Fiscal Cliff) occurred right about the time that U.S. House Speaker Boehner mentioned a “Plan B” on the Fiscal Cliff negotiations. Virtually everything which is happening in the global economy suggests that the Gold Prices should be rising – and probably rising fast, yet Gold has been unable to move out of a trading range of between around $1680 and $1750, and every time it nears the top of this range it gets knocked back again. The need for a Safe Haven hedge seems to have vanished as markets get optimistic as a deal on the Fiscal Cliff seems close by & also based on the recent addition to the QE by the US Fed combined with positive news from Eurozone, China & Japan. The recent spate of mildly positive economic reports has added to the short sightedness of the markets, which have turned towards riskier assets like stocks and high-beta currencies in anticipation of an Escalating Economy, abandoning the Precious Metals in bargain. A rise in US home-builder confidence, progress in negotiations to avert the Fiscal Cliff and a credit-rating upgrade for Greece has reduced Gold’s safe-haven appeal for the moment. Magically a data report also showed that the U.S. current-account deficit fell sharply to reach its lowest level in nearly two years. Base Metals have not moved down through the sharp declines in Silver & Gold Prices, though their upsides have remained limited. Traders are back into Equity Markets for gains expecting a recovery in the economy & so no need for safe haven hedges. Hedge funds have been focused on Gold of late & have completely avoided Copper & other Base Metals till now. With the illusion of an improvising Economy, money will start flowing into these segments soon & inflate Base Metals Prices. With Stock Market moving higher, consumer confidence would rise also & that in turn will make the consumer take on new debt. Also, businesses love a stock market moving higher as it also inflates the price of their shares after inflating the prices of their products or services. The Market seems to be entering in a Risk On mode – The first sign of Inflation rises being very close by, & with the kind of massive money printing that has been seen lately, I would expect a Hyper – Inflation to hit us very soon. That would make traders again turn to Gold and Silver. The Precious Metal Markets will stabilize sooner rather than later. In the meantime, Gold may see volumes & open position drops. Silver would remain relatively less affected. The Fiscal Cliff issue has been a bearish drag on many markets for quite some time now, especially the Commodity Markets. It would not surprise me if Commodity Markets suddenly reverse their path & swing up after the final announcement of a Budget deal. Eurozone matters have remained relatively silent since finance ministers there reached an emergency loan agreement for Greece, and since Spanish banks requested a bailout.
Gold is such a thinly-traded market right now that big ticket sellers have the ability to push the market around further than it actually should, though they cannot hold markets hostage for long. No one is that Big enough to continue this for a prolonged period in a Global Market. It is common for Big size Market Players (Manipulators) to pull down the market in thin, low-volume conditions so they can have as big of a desired price impact as possible when they execute their bigger trades. Unfortunately, this may continue to happen till the year end as most Gold Investors & traders take a break for the holiday. Such activity is not exclusive to the Gold and Silver markets. It happens in nearly all traded markets, & always will. Technically speaking, Gold Futures can easily slip to $1603 on a close below $1675 & Silver close to $29 on a close below $32 (alerted earlier also), but there will be a huge amount of bottom fishing then making the recovery seem almost vertical.
Economic growth is so anemic that the Fed will be conjuring the sum of $1.02 Trillion into existence over the course of the next year in order to buy mortgage backed securities and US Treasury obligations with the sole purpose of keeping interest rates ultra low so as to encourage additional debt. Yet everything is okay now because Obama and John Boehner are talking and moving closer? The US Economy is on track to have a national debt of over $20 Trillion by the end of the next 4 years and many more trillions in unfunded liabilities. Market algorithms respond to short term signals. Very little to almost none of the strategies are now given due thought & analysis. These are done by machines now by computer algorithms and those things will either buy or sell based on the short term signals that they get. The breakdown in the bond market has sent the price moving down towards the bottom of a 5 month or so trading range. The US Federal Reserve is deliberately pushing rates lower to not only spur more consumer spending but also to keep the US government’s borrowing costs obscenely low.
Just because the future you expect and have prepared for hasn’t yet materialized, don’t think it won’t. The very structure of the world’s financial system has been fractured beyond repair, as have the foundations of the largest economies. The only thing holding it together is the fiat-currency system that was behind the fracturing in the first place and that is now being taken to an extreme and extraordinary level in an attempt to keep the whole shebang from literally collapsing. – David Galland, Casey Research – Read more on, The Gold/Silver Hit Is A Trap.
I read something interesting on Gold Manipulation that caught my eye. Though I do not completely agree to the argument, I find it fascinating as a line of thought. Here is a portion of the same.
“Indeed given the amount of paper gold futures that have been sold, those doing the selling must be wondering how long they can keep this up given they have only managed to knock the price back a few percent. The volume trades, seemingly designed to drive the price down below various stop loss positions and thus make the falls self perpetuating in these days of computer-driven trading, are patently only succeeding to take the price down to another point where perhaps an even bigger position holder is buying. The finger tends to point at China in this respect given a number of statements from various senior officials suggesting that a) China needs to increase its reserve holdings b) that it is buying on dips and c) that it needs to keep the population happy and has been in the persuasion business of telling its rapidly growing middle classes that gold and silver are great assets in which to invest.. This should all be a positive sign for gold’s future advance – it just depends how long the heavy paper gold sellers can keep up their fight to drive the gold price down, and their motives. Could be they are pushing the price down to buy back at lower levels, let the price rise, sell at a profit and start the procedure all over again, although others, notably GATA and its followers ascribe more sinister motives to the manipulation – for manipulation it surely is.” – mineweb.com
“Fiscal Cliff” deal closer, but gaps remain – Reuters
What a new inflation measure would mean for your wallet – President Obama put a new offer on the table in the fiscal cliff negotiations, and it includes a wonky change that may raise your taxes and reduce your Social Security benefits … a little. –CNN Money.
Boehner proposes short-term tax fix; Democrats say no – CNN
China’s role in the global Silver Market has dramatically changed over the past decade. Once a small player in the global market, China today is the world’s leading market for both physical investment and paper trading of silver futures and other similar products, and is the second largest silver fabricator today. Chinese demand for the white metal is expected to achieve further strong growth in the years ahead, according to a report by Thomson Reuters GFMS released today by the Silver Institute.
Total silver demand in China has grown by over 100 million ounces (Moz) in the past ten years, to a record 170.7 Moz. The strength of the Chinese economy, assisted by a boom in the manufacturing sector, along with heavy investment in infrastructure, has boosted domestic demand for silver since the liberalization of the Chinese silver market at the start of 2000. This has propelled China into becoming the world’s second largest silver fabricator, with its share of global demand standing at 17 percent at the end of 2011. Overall silver fabrication demand has grown from 67.1 Moz to 159.5 Moz during the period 2002-2011, a rise of 137 percent.
In the same time period, Chinese industrial silver fabrication experienced an almost uninterrupted period of growth, posting an impressive 135 percent increase. The largest slice of industrial demand has come from the electrical and electronics sector, rising from 17.1 Moz in 2002 to 40 Moz last year. Key to this development has been a rapid expansion in the country’s semi-conductor sector. Similar growth across a wide range of applications has also occurred, including a surge in cell phone and computer production to account for 70 percent and 90 percent, respectively, of the global total last year. Additionally, strong advances have been reported in other personal electronic goods, including tablet computers, notebooks and light emitting diode back-lit televisions.
Moreover, the Chinese silver jewelry market has grown an impressive 211 percent from 2002-2011, to 54.4 Moz, as it enjoys greater exposure across the country’s interior. Further growth is expected in coming years as ongoing urbanization should lead to the expansion of retail jewelry outlets in larger cities.
Chinese Silverware fabrication nearly doubled over the last decade, making China the second largest silverware fabricator globally behind India.
Investment demand from Chinese silver investors has jumped in recent years, making China the world’s biggest market for both physical investment and paper trading of silver futures and other similar contracts. Of note, during the first full year after the liberalization of the Chinese silver investment market in 2009, net demand for silver bars and coins doubled to 9.8 million ounces (Moz). In 2011, the figure soared to 17.0 Moz, accounting for 8 percent of global net purchases of silver bars and coins.
On the supply side, Chinese mine production has almost doubled over the last decade, assisted by the base metals mining sector, leading to a sharp rise in silver produced as a by-product. China’s mine production of silver now accounts for 14 percent of global supply, and it is likely to be recorded as the second largest silver producing country in 2012.
Scrap supply has also risen steadily over the same period, as Chinese industrial fabrication has grown rapidly, lifting supply from this segment to 31.9 Moz last year.
A notable increase in government sales from China was an important feature of the silver market from 1999 to 2003. Thereafter, sales from Chinese official and quasi-official stocks fell markedly, and the country has been essentially absent from the market since 2006.
“This report underscores China’s growing importance to the global silver market,” stated Michael DiRienzo, Executive Director of the Silver Institute. “It is impressive to see the dramatic development in so many sectors of their domestic silver market in the last decade,” he added.
The report gives a historical background of China’s silver industry over the past 30 years. It examines the deregulation of the Chinese silver market and includes chapters on Chinese silver supply, silver fabrication demand and silver investment, as well as silver imports and exports.
A Silver Institute Report:
Gold and Silver Futures Markets seem cautiously optimistic & are expected to witness sharper swings & choppy trade movements as market nervousness increases on the Fiscal Cliff deal uncertainty. The Fiscal Cliff is seen by the Gold Markets as the Biggest Risk Event of the Year. The complexities of this event have lead to the sharp declines last week & the currently seen directionless & small movements in the otherwise more aggressive Precious Metals Group. Gold and Silver generally perform well in adversities but the double whammy nature of the currently faced complex Financial problem seems to keep longer term Gold Futures traders on the sidelines. Whatever be the issues, till date, traders have had biased views & have taken positions accordingly. But this time, Gold market players are playing the wait & watch game, waiting clear signals for fresh entry in either side of the trade. There have been reductions open positions on both sides of the futures trade. Gold and Silver investors remain reluctant to invest because of the uncertainty surrounding potential automatic tax rises and benefit cuts if the U.S. Congress doesn’t agree to a new fiscal program. With minimal economic data to be released in the final weeks of the year, the markets will be particularly sensitive to outcomes from the budget negotiations. The only Good News about this is the emergence of better Physical Demand in Gold around $1685 and Silver around $32, some very crucial support levels in both as expected. Most of the Gold and Silver market Investors & traders have largely been disappointed on their expectations of large upsides after the announcement of the QE extension by the Fed in the FOMC meet last week. But these expectations by the Gold Bulls were wrongly timed & I had warned about the same, a day before the results of this meet were to be announced. There was no concrete reason for Gold and Silver to start upside movements based on the QE extension. Explained: Bearish Short Term Signs for Gold and Silver on FOMC Outcome. The Gold Market is full of expectations of Gold Prices rising above $2000 in Q1 next year. I am yet doubtful about the same. I have repeatedly voiced this doubt of Gold facing a stiff resistance at $ 1855. Gold Prices have dipped thrice from a rise to $1800 & there will be a huge pile of Buy stops beyond this crucial technical resistance. A rise in Gold Futures above $1800 will trigger huge long positions & traders may get disappointed again. I would prefer buy at dips now but remain on side lines then & await a breakout above $1855 for fresh positioning. All said & done, I would place stronger & larger bets on Silver, rather than Gold.
Concern about a speedy resolution to the US Fiscal Cliff seems to be growing, which suggests that the Gold Market may have started to price in the low-growth consequences of the imposition of higher taxes in the US. This would result in a further decline in money velocity within the country and therefore an offset to the growth in money supply implicit in the Fed’s QE announcement. The Gold Market could remain under some pressure until the Fiscal Cliff problems is resolved one way or another. Base Metals retain positive undertones based on the recent spate of positive economic reports from China. Figures from the World Gold Council indicate that Chinese Gold Demand dropped to 176.8 tons in Q3 2012, a fair decrease from Q3 2011’s 191.2 tons. Jewelry Demand fell by 6% and Investment Demand by 12% – largely in response to perceived slowdowns in the Chinese economy. In other news, Shinzo Abe’s Liberal Democratic Party won an outright majority in the lower House and with the New Komeito party, and the new coalition government will have a two-thirds majority which should allow the government to enact new legislation with little resistance. The markets expect Japanese monetary policy to remain largely similar with the BOJ, led by Governor Masaaki Shirakawa, to continue its interpretation of ‘powerful easing’ with incremental increases to the asset purchase program with the aim of achieving the 1% inflation target. With this positive note coming from Japan, with possible stimulus, is keeping short sellers in Gold on a short leash as well. Additional QE support from the FOMC last week, Eurozone’s formal approval of an aid disbursement for Greece, the possibility of the US falling off the Fiscal Cliff (at least temporarily) are some of the supportive factors keeping Gold Prices from simply crashing down. There is reasonable open interest in January Comex Gold Options which expire next Wednesday.
From China Daily:
“Gold is beginning to re-establish itself as part of the fabric of the financial system. In the medium term, the quantitative easing initiatives in the West and the continuing growth in the East, particularly in India and China, coupled with the seasonally strong quarter coming up in Asia, are excellent indicators for further growth in the Gold market,” said Marcus Grubb, managing director of investment at the World Gold Council.
Concerns about resolution of the US Fiscal Cliff issue are growing in the Gold Market. Boehner and Majority Leader Eric Cantor will give House Republicans an update on the negotiations today, said a leadership aide who requested anonymity to discuss the plans. President Barack Obama has lowered his tax revenue demand by $200 billion and offered to start tax rate increases at $400,000 in income instead of $250,000, moving closer to a budget deal with House Speaker John Boehner. Obama wants a large enough Debt Ceiling increase for the next two years and would accept a new inflation yardstick that would reduce Social Security cost-of- living increases. Boehner’s office rejected the offer late yesterday, and the intensifying talks could collapse. Still, a deal about halfway between the most recent offers could include $1 trillion each in tax increases and spending cuts and allow tax rates for top earners to rise in 2013. In exchange, Obama would accept some up-front spending cuts, and other scheduled cuts would be canceled. Congress would pursue broader changes next year against the threat of tax increases and spending cuts in 2014. President Obama and Boehner are still far apart on where to draw the line on tax rates, whether a deal should include economic stimulus spending and how to address the debt limit.
Gold Bulls base their higher price expectations on the catastrophic implications of a world floating on fiat currencies. More debt solutions to already massive debt piles and deficit spending will significantly dilute the value of currencies. The Western nations have an almost insurmountable debt problem that is proving all but impossible to solve, and all efforts to date have revolved around printing more & more money to avoid the monetary system from completely collapsing. A massively growing number of citizens are now finally considering Gold as an important part of their investments. There has been a significant increase in demand in recent months because of worry about actions taken by the ECB – European Central Bank and US Federal Reserve, as the two central banks seek to counter the Eurozone crisis and slow US economic growth. A huge source of Gold Demand from banks could be the change in Basel III regulations. Gold could get promoted to Tier 1 status, meaning it would be considered a “zero-percent risk weighted item. If the Basel Committee decides to grant gold a favorable liquidity profile under its proposed Basel III framework, it will open the door for gold to compete with cash and government bonds on bank balance sheets – and provide banks with an asset that actually has the chance to appreciate. All recent years’ data show that dips in the Gold Prices are being bought and will continue to be bought by central banks around the Globe. And of course there’s China – Little is known, but this World number one Gold producer is yet the World number 2 buyer – Why? I could go on & on about why the world is turning towards buying Gold. But hasn’t it occurred to anyone on why hasn’t Gold broken into new highs, despite enough catalysts to shoot it way above $3000 also – Right now? I have repeatedly clarified this point earlier also.
There is economic weakness everywhere & there is no easy solution to this because the problem is Excess Debt. The only way to deal with this is to somehow have a debt clean-out, which implies a very long, ugly economic period. The point here that I wish to elaborate is that we have seen a phase of Excesses in the past few years. Excess Exuberance, Excess Greed, Excess Debt, Excess Money Printing, Excess Price rises in Gold, Excess Pessimism & now Excess Hope – one leading to the other. Excess Currency debasement may soon be followed by Excess recession or depression to complete the circle. The world suddenly realized the Investment value of Gold when in Excess debt. There were many options available then to avoid today’s situations, but Governments sought the easiest road to Instant Cure via Excess Medication. The after effects were to follow naturally. The scene today is way different. Gold may be now sold to overcome some part of debt. Gold may also get heavily into re-cycling mode due to relatively high prices. With excess supply over demand, Gold may not rise as high as markets expect it to. With a severe need for a secure hedge against Currency debasement & sure-to-shoot Inflation amid a deep recession in the offing, & Gold already at high prices will remain out of reach for most & without the necessary Investor support, may under perform too. With some further Price rises Gold will soon get out of reach for most of the average investors or traders who are nonetheless searching for an Inflation & currency hedge also. While Gold frequently steals the show, Silver till now has tended to be more volatile, leading the rallies as well as the dips in size. It is now a picture perfect opportunity for Silver to outperform all asset classes soon. Silver seems the BEST bet going forward – for some time.
Interesting: Corporate insiders increasingly bullish on Gold
Like the generals of the First World War, Europe’s leaders seem determined to send wave after wave of their youth into the barbed wire of tight money, bank deleveraging, and fiscal austerity a l’outrance.
The strategy of triple-barrelled contraction across a string of inter-linked countries has been the greatest policy debacle since the early 1930s. The outcome over the last three years has been worse than forecast at every stage, and in every key respect.
The Eurozone has crashed back into double-dip recession. It will contract a further 0.3pc next year, according to a chastened European Central Bank. The ECB omitted mention of its own role in this fiasco by allowing all key measures of the money supply to stall in mid-2012, with the time-honored consequences six months to a year later.
The North has been engulfed at last by the contractionary holocaust it imposed on the South. French car sales crashed 19pc last month, even before its fiscal shock therapy — 2pc of GDP next year. The Bundesbank admitted on Friday tore up its forecast on Friday. Germany itself is in recession.
The youth jobless rate has reached 58pc in Greece, 55.8pc in Spain, 39.1pc in Portugal, 36.5pc in Italy, 30.1pc in Slovakia, and 25.5pc in France, with all the known damage this does to the life-trajectory of the victims and the productive dynamism of these economies.
EU policy elites blame “labour rigidities”. The United Nation’s economic arm UNCTAD counters that the EU demand for “wage compression” is itself perpetuating the crisis.The labour share of total income has fallen to a 60-year low, eating away at demand. This is a formula for perma-slump. In a thinly veiled attack on Berlin, Frankfurt, and Brussels, the UN decried the “political blockade” against any solution to the crisis.
It mocked the “discredited mantra” of flexible labour markets. Well, at least somebody is exposing the lie.The International Monetary Fund’s latest work on the `fiscal multipilier’ has largely demolished the credibility of EMU fiscal policy. Austerity takes a greater toll on GDP during a deleveraging crisis than orginally thought, doubly or triply so in countries that cannot devalue or cushion the blow with monetary stimulus. As constructed so far, the policy has been largely self-defeating even on its own terms. Debt dynamics are deteriorating at a frightening pace across half Europe.
The IMF’s Fiscal Monitor says Italy’s public debt (128pc). It will be 4pc of GDP higher next year than estimated as recently as April. It will be 8.4pc for higher in Portugal (124pc), and 12.9pc higher in Spain (97pc).This is what a depression will do to you, and is in fact what happened to Britain in the 1920’s when combined fiscal and monetary tightening pushed public debt to 190pc. The cure was emancipation from the dollar peg (Gold Standard) in 1931, an emancipation that Britain’s status quo elites ruled out as too dangerous to contemplate.The failure of EMU policy is now undeniable. Whole societies have been broken on the wheel. Yet there has not been any substantive shift in strategy. The EU authorities remain adamant that the next bayonet charge will deliver victory.Currency Commissioner Olli Rehn says “the worst is over,” citing a cut in the combined deficits from 6.2pc of GDP to 3pc over the last two years.
The alleged achievement is of course the crime. As the Maynard Keynes wrote in 1931, deficits in a slump are “nature’s remedy from preventing business losses being so great as to bring production altogether to a standstill.”Mr Rehn’s fiscal overkill should not have occured in a balance-sheet crisis when households and companies are deleveraging feverishly. It is being done to meet an arbitary target set by the EU bureaucracy, with no regard for the therapeutic dose.In Britain we at least have a roaring policy debate. Personally, I support the Coalition’s cuts: tightening is well-paced at 1pc of GDP each year. It is cushioned by quantitative easing. Britain has a big current account deficit (unlike Eurozone), and is therefore not morally obliged to offer the world reciprocal demand (unlike Germany with a 6.4pc surplus this year). But I am thankful that we have an opposition Labour Party and the pugnacious Ed Balls fighting the policy every day. The nation can hear the arguments. There is a choice.No such choice yet exists in the Eurozone. EMU strategy has few defenders left on the global stage. There is hardly an economist in Italy, Spain, or even France who believes that health can return under current policies. Yet there is no coherent opposition. No major party in any EMU county is willing to grasp the nettle.Europe’s curse is that Germany has a massively undervalued exchange rate within EMU, and therefore has different needs, and yet controls the policy levers for everybody. We can argue over why this has happened.
The legacy charisma of the D-Mark still counts, and so does sheer power. Creditors always hold the whip hand at the onset of a debt crisis, though not always at the end.A wiser Germany would see that it cannot force the brunt of adjustment on the South without causing a contractionary bias for everybody. But we have a foolish Germany, spouting pre-modern economic quackery, seemingly unwilling to give up the mercantilist advantage it now holds over EMU trade partners. It resists wage inflation to close the North-South gap (understandably). It resists a debt union and fiscal transfers (understandably). Yet it also resists the only other option, which is an orderly break-up of EMU. We have a total impasse.The Latin alliance could force an end to German-imposed contraction policies at any time by marshalling their inherent majority on the EU Council and at the ECB. They could turn the tables, compelling Berlin to yield or to withdraw from EMU. But that would require an entirely new leadership in France, willing to sacrifice the illusion of Franco-German condominium and the foreign policy catechism of the last half century. Francois Hollande dipped his toe in such waters, but recoiled.So an odd fatalism prevails, an acceptance that Germany cannot be resisted. It falls to Italy’s Silvio Berlusconi to fulminate from the sidelines. “I can’t allow my country to plunge into an endless recessionary spiral,” he said last week. He is the court clown, the only who dares to tell the truth that EMU itself is the problem, or mocklingly suggests that Berlin should go back to the D-Mark and let the rest of Europe recover.
The others bite their tongues.It is true that the ECB has removed the “tail-risk” of sovereign default in Portugal, Spain, and Italy by vowing unlimited bond purchases to cap yields, once those countries surrender fiscal sovereignty. Two-year debt spreads have plummeted. Capital flight from Spain has stopped, after bleeding funds worth 40pc of GDP.The ECB could have averted much carnage if it had stepped up to its responsibilities as a lender-of-last-resort a long time ago, but EMU politics prevented Mario Draghi from acting until euro break-up was imminent. What a way to run a railroad.But while Mr Draghi has imposed a beguiling calm on bond markets, the economic crisis grinds deeper. The 20pc currency misalignment between North and South has been disguised by the collapse in demand across Club Med, not closed in any sustainable way. Spanish companies still have to pay twice as much as German rivals to borrow, with the spread on five-year debt at 250 basis points. Standard & Poor’s said in a report last week that companies across Europe are still winding down exposure to Club Med to protect their credit ratings, entrenching the North-South divide.S&P’s Jean-Michel Six said EMU has degenerated into a “customs union”. The collapse of the interbank market has imposed de facto capital controls. “There are two Eurozones, a northern one and a southern one,” he said.The awful risk for Europe is that all these years of EMU pain will achieve nothing, that Eurozone has manouvred into a “bad equilibrium” from which it cannot escape under the current dysfunctional system, that policy paralysis will leave the region trapped in permanent depression as the US, China, and the rest of the world moves on.This is the message in Citigroup’s latest global outlook. Recession will drag on into 2014. “Flawed EMU structures” will hobble the region for years to come. Per capita income in Euroland (and the UK) will remain 3pc-4pc below 2007 levels in 2017.
This is much worse than Japan’s Lost Decade.America will pull further away. The growth gap between the US and EMU is 2.6pc this year, the highest since the 1990s. Citigroup said it will widen to 3.4pc in 2014 and continue at extreme levels through the decade. This will have dramatic compound effects over time. Such is the fruit of Europe’s “policy choices”.Italy faces a slow lingering death. Citigroup says the economy will contract by 1.2pc in 2013, and again by 1.5pc in 2014, with near zero growth thereafter, ending in debt restructuring anyway. France will stagnate until 2016.If this is what lies in store, there is no further reason to hold EMU together. It should be dismantled in an orderly way after Christmas before it does any more damage.Yet no leader seems ready to admit the Europe has been in thrall to a false religion. The grim possibility is that nothing will be done to change course until Europe is already reduced to an economic Passchendaele.Courtesy: Ambrose Evans-Pritchard – International Business Editor of The Daily Telegraph
The looming Fiscal Cliff horror seems to have triggered the Democrats & the Republicans into hyper mode as they seek to iron out differences in a last minute effort to stop automatic tax hikes and spending cuts from going into effect early next year. The rapid developments Monday evening put a Fiscal Cliff deal realistically within reach, anytime soon. Analysts have warned that that abrupt shock could knock the US Economy back into recession. Obama and Boehner met for 45 minutes yesterday at the White House for the third time in nine days in an attempt to prevent the so-called Fiscal Cliff & are still far apart on where to draw the line on tax rates, how to address the debt limit and whether stimulus spending should be included in a budget deal. In its most dramatic change in position yet, a major counteroffer (Not necessarily a Final Fiscal Cliff Offer) on the Fiscal Cliff deal by President Barack Obama moves the White House and Congressional Republicans closer to resolving the standoff. Obama is seeking $1.2 trillion from higher tax revenues, including increased rates on those earning more than $400,000 a year, up from the earlier $250,000. Obama is expected to agree to $1.22 trillion in spending reductions, including some cuts achieved by changing the way cost of living adjustments are made to Social Security retirement benefits and other programs. It would change the inflation measure used to calculate Social Security benefit increases. The Fiscal Cliff offer asks for Congress to increase the national borrowing ceiling for two years using a parliamentary procedure proposed by Senate Republican leader Mitch McConnell. President Obama’s latest offer shows him willing to link Social Security benefit increases to the chained consumer price index, a step that would lead to lower payments, something that few of his supporters had sought to protect. Obama also moved closer to Boehner on the proportion of a ten-year deficit reduction package that should come from increased revenue, as opposed to cuts in government spending. The Fiscal Cliff offer included $1.3 trillion in revenue and $930 billion in spending cuts. That calculation doesn’t count $290 billion in lower interest payments as part of the spending cut. Interest savings are a byproduct of tax and spending decisions.
Obama’s Fiscal Cliff offer would set the top tax rates on dividends and capital gains at 20%, the person said. Combined with tax increases from the 2010 health care law scheduled to take effect in January, the top rates would be 23.8%. Obama would return the estate tax to 2009 parameters, with a $3.5 million per-person exemption and a 45% top rate. The dividend proposal matches the bill Senate Democrats passed in May and would raise less money than Obama’s budget, which called for taxing dividends as ordinary income. The estate proposal is less generous than the parameters backed by many Senate Democrats, who would extend the $5.12 million exemption and 35% top rate. Obama’s offer includes several details that hadn’t previously been publicly under consideration. His proposal would end three recurring debates that occur in Congress over expiring provisions. Obama would permanently extend an annual “patch” that prevents expansion of the reach of the alternative minimum tax. He would end a scheduled payment cut to doctors under Medicare. Also, he would permanently extend dozens of tax breaks that routinely expire, such as the research and development tax credit and the ability to deduct state and local sales taxes. His plan would achieve $400 billion in savings from health programs, $200 billion from other so-called mandatory spending programs and another $200 billion from other programs, half in defense. About $130 billion of the spending savings would come from switching the way that annual inflation increases for Social Security benefits are calculated. Obama’s offer would include protections for the most vulnerable recipients, reported Bloomberg.
Aides to House of Representatives Speaker John Boehner said on Monday the latest White House offer on resolving the Fiscal Cliff impasse is flawed but moves negotiations in a positive direction. “Any movement away from the unrealistic offers the President has made previously is a step in the right direction, but a proposal that includes $1.3 trillion in revenue for only $930 billion in spending cuts cannot be considered balanced,” said Brendan Buck, a Boehner spokesman. – More on Reuters. Obama is now willing to accept a revenue figure of $1.2 trillion, down from his previous $1.4 trillion proposal. Boehner’s latest proposal calls for $1 trillion in new tax revenue, which would come from raising rates and limiting deductions that the wealthiest can take. Boehner faces a crucial test on Tuesday morning when he is expected to brief his party’s lawmakers in the Republican-controlled House. He is not expected to bring any deal up for a vote unless a majority of the 241 House Republicans support it. Republicans want substantial spending cuts in return for increased tax revenue, but any Fiscal Cliff Proposal to trim popular benefit programs like the Medicare health insurance plan for seniors will face fierce resistance from liberal Democrats, whose votes will be needed to get a deal passed. Obama could also face strong opposition from Democrats if he agrees to Boehner’s proposal to slow the growth of Social Security benefits by changing the way the cost-of-living increases are measured against inflation, an approach that could save $200 billion over 10 years. Obama also wants to head off another confrontation over the US Debt Limit, which will need to be raised in the coming months. Republicans insist that any increase in the government’s $16.4 trillion borrowing authority must be paired with an equal reduction in spending. Markets can reasonably expect a deal on the Fiscal Cliff on Wednesday at the earliest.
The Fiscal Cliff cat and mouse game is entering its last two weeks of calendar 2012, with Congress now officially closed for the year. And while we would have expected major updates in the Fiscal Cliff timeline to only hit during trading hours, usually just as AAPL once again threatens to trade with a 4-handle, Reuters reports that out of the blue Boehner, who last we checked is back in Ohio, has made a radical departure with the Norquist pledge status quo, and has offered to raise tax rates on high earners to break the “fiscal cliff” deadlock in exchange for major cuts in entitlement programs, “but President Barack Obama is not ready to accept, a source said late Saturday.“
Which brings us back to political square zero, because at the end of the day none of this is about a fiscally sustainable America, and certainly won’t be until one day the shadow banking mechanism, whereby PDs can extract par cash from custodians for TSYs just issued and purchased and immediately re-pledged, and use said cash to recycle TSYs as effectively infinite collateral, and where more issuance means more demand (which creates a Giffen good perpetual engine which of course works, until suddenly out of the blue, for whatever reason sentiment shifts rapidly and violently, and it no longer does), fails and yields spiral out of control.
In the meantime, both political parties will trundle along pretending a tax hike which covers about a month (max) of government spending is even remotely relevant.
More from Reuters:
While the White House considers Boehner’s offer “progress,” the source said more remained to be worked out between the two.
Tax rates are a major sticking point in negotiations to avert steep automatic tax hikes and budget cuts set for the end of the year if a deal isn’t reached. Republicans have resisted Obama’s demand to extend lower tax rates for everyone except top earners, preferring to extend them for all taxpayers.
The Boehner offer was the first departure from the position the House speaker has held for months.
The question now is whether the GOP can now spin the president’s
negative response to the proposed “compromise” – and it will certainly try – to portray Obama,
instead of themselves, as the entity that wants to push the US over the
cliff in exchange for political brownie points. Because now Boehner will have all the leverage to tell any splinter GOP group in either the Congress or the Senate, that he made a good will offer, and it was the president who refused.
As for the actual Fiscal Cliff, we repeat what we said back on November 13: “once again, it will be up to the market, just like last August, just like October of 2008, to implode and to shock Congress into awakening and coming up with a compromise of sorts. Only this time, now that Bernanke has shown he will “get to work” at a moment’s notice, the impetus to do anything as a result of even a market plunge will be far less. After all why lose face, and put your career in jeopardy when there is the Fed which, supposedly, can offset a market crash, courtesy of the shining example set by Chuck Schumer.”
Nothing has changed since then.
Courtesy: – Zerohedge
Only 17 days to the Fiscal Cliff deadline & before the US plunges over the Cliff into deep recession, but there seems to be no sense of urgency. In all probability, what the Political Leaders & lawmakers may concoct at the last minute in pretense to save the US from immediate Fiscal Cliff pain may turn out to be a more frightening & a more severe strain of the currently looming crisis at the Fiscal Cliff. The US has always preferred massive doses of painkillers, irrespective of its drastic side effects. In my opinion, its time the US faces reality & goes over the Fiscal Cliff. It may open a lot many eyes & minds – Also open more doors rather than the flurry of doors closing rapidly due to the tried & repeatedly failing methods of the past few years. The bad news is, in large part, we’ve seen the market ignore relatively good news in the economic data stream as we focus on the Fiscal Cliff. While a deal is expected to be reached eventually, a drawn-out debate – like the one seen over 2011’s Debt Ceiling – can erode confidence. The divide between Republicans in the House and Senate has become increasingly apparent in recent days. Publicly they say they are still far apart, but that is to be expected: serious negotiations seldom take place in front of cameras. While House leaders have roundly rejected any strategy that would let tax rates rise, the ranks of Senate Republicans who are willing to accept a small tax hike and continue the fight over spending early next year continue to grow. House Speaker & the lead Republican negotiator, John Boehner has drawn a rhetorical line against higher tax rates for top earners, even as he negotiates with President Barack Obama, because he can’t be seen as conceding too much too soon. A slow-walk approach to averting more than $600 billion in tax increases and spending cuts set for January is crucial for Boehner whether the Fiscal Cliff talks succeed, according to Republicans in Congress. Boehner is maintaining a tough posture, saying the President “isn’t serious” about spending cuts, without ruling out a deal on taxes to shield his party from criticism. Almost half of Republicans now say Obama has an election mandate to raise rates on the rich, according to a Bloomberg National Poll. Boehner returns to his home state of Ohio for the weekend but he and the rest of the legislators will return Monday to work the congressional equivalent of overtime on reaching an agreement to reduce the nation’s chronic federal deficits and debt by the end of the year, then less than 14 days away. The inability to reach a deal so far reflects the ideological divide between Democrats and Republicans over the size and role of government. Fears that the Fiscal Cliff negotiations could end without a comprehensive agreement, like the deficit reduction talks between Obama and Boehner in 2011 is causing jitters among consumers and investors. Stock prices fell at Friday’s opening after a down day Thursday as it became clear neither side appeared willing to budge.
The tax rates, lowered temporarily during the administration of former President George W. Bush and extended in 2010, are the major sticking point. Obama insists on raising additional revenue through tax reform and higher rates on top income brackets as part of a package that would include spending cuts and cost savings from entitlement programs. His plan is to extend most of Bush-era tax cuts set to expire as part of the Fiscal Cliff, but letting rates on income over $200,000 for individuals and $250,000 for families return to higher rates of the 1990s. Republicans want them kept in place for all taxpayers while Democrats insist they be raised for high earners. The failure of Democrats and Republicans to break the impasse over the Fiscal Cliff is raising the possibility of Congress going beyond the year-end deadline to agree & implement a plan to avert steep tax hikes and budget cuts that experts fear could push the nation into another recession. The two sides may eventually agree in principle on a Fiscal Cliff deal but run out of time to draft and pass the legislation implementing it. Congress could then pass a temporary measure and work out the details in the following weeks. But a failure to even agree in principle over the Fiscal Cliff would prevent a temporary extension & the US would then run into a hard-and-fast deadline of December 31, when a lot of things expire – And all Hell breaks loose. In mid-2011 amid budget talks with Obama that failed, Boehner faced a rebellion from members of the anti-tax Tea Party wing of the party who warned that they wouldn’t vote for a tax increase as part of a deal to raise the debt ceiling. A deal that includes tax rates “could create more churning in his caucus and mean he doesn’t get the votes necessary” to renew his speakership in January, said Maryland Representative Chris Van Hollen, the top Democrat on the House Budget Committee. Boehner’s removal earlier this month of three Tea Party- backed Republicans from their committee posts is also creating tensions. On Dec. 3, FreedomWorks, a group that supports Tea Party candidates, issued a statement calling the move a “remarkably hostile act” and asking members to call Boehner’s office to “stop the fiscal conservative purge.” By all accounts, Boehner appears to be in a stronger position with his rank-and-file than he was 2011 during the debt-ceiling debate, when it was uncertain whether House Majority Leader Eric Cantor of Virginia would back the speaker in a deal that included new revenue.
Republican reluctance to raise tax rates stems from the conservative quest to shrink government and the percentage of federal spending as part of the overall economy. Traditionally, raising taxes to fund increased spending is much easier than lowering rates to reduce the money feeding the federal belly. Democrats argue that Republican efforts to reduce federal deficits through cost-cutting alone would worsen an already difficult situation for middle-class Americans facing stagnant wages, rising costs and reduced opportunity.
President Barack Obama and House of Representatives Speaker John Boehner held a “frank” meeting Thursday for about 50 minutes at the White House to try to break an impasse in negotiations over the looming Fiscal Cliff, tax hikes and spending cuts set to kick in early in 2013. The meeting, also attended by Treasury Secretary Timothy Geithner, was announced after frustration broke out on both sides at a lack of progress and stocks turned negative due to fears the economy could dip into recession again if politicians fail to break the Fiscal Cliff gridlock in Washington. At a meeting earlier on Thursday, Obama’s top economic adviser, Gene Sperling, delivered a downbeat message to Democratic senators about the status of the Fiscal Cliff talks. A Democratic aide described the presentation as “bleak,” saying Sperling told the senators that “we don’t have anywhere to go until Republicans move on (income tax) rates, reported Reuters.” Republicans offered similar gloom. “Based on the White House’s current approach, it looks like we’re in for a protracted conflict until the snow melts,” Illinois Representative Peter Roskam said in an interview. “They (the White House) are pushing us over the Fiscal Cliff,” said Roskam, a member of Boehner’s leadership team. Before the meeting, Boehner told reporters the president has yet to offer a plan that “is truly balanced and begins to solve our spending problem.” Republicans note that 71% of every tax dollar now goes to support Social Security, Medicare and Medicaid, as well as paying interest on the national debt, and they say the cost of those items would equal all federal tax revenue in 2026 unless changes are made. “The president wants to pretend spending isn’t the problem,” Boehner said. “That’s why we don’t have an agreement.” Obama’s top economic adviser, Gene Sperling, confirmed the gloomy outlook in a closed-door lunch meeting Thursday with Senate Democrats, according to those present. Senior Senate Republicans, meanwhile, were at work on a fallback plan that would not significantly restrain the national debt but would at least avert widespread economic damage by canceling tax increases scheduled to take effect next year for the vast majority of Americans. That strategy calls for Republicans to capitulate to Obama’s demand to let tax rates rise on wage and salary income for the wealthiest 2% of taxpayers. But the approach would also seek to thwart the Democrats by trying to block other steps that would increase taxes paid by wealthy taxpayers, including higher rates on investment income and limits on the value of itemized deductions. This strategy would produce only about $440 billion in new taxes and give the Democrats even less revenue than Republicans had previously put on the table. In his initial offer earlier this month, Boehner had said he could support $800 billion in new tax revenue. With a relatively low price in new taxes, the strategy, if successful, would represent a tactical victory for Republicans and shift the political burden onto Democrats to make greater concessions on federal spending.
“I’m not concerned about my job as speaker,” Boehner said at a news conference yesterday. “What I’m concerned about is doing the right thing for our kids and our grand-kids. And if we don’t fix this spending problem, their future is going to be rather bleak.” The up-to-the-deadline negotiations are also part of the culture on Capitol Hill. Last year, Congress reached an agreement to extend the payroll tax cut days before it was set to expire. In 2009, Senate Democrats passed Obama’s health-care legislation on Christmas Eve. “Ninety percent of lawsuits are settled on the courthouse steps the day of the trial,” said Representative Lynn Westmoreland, a Georgia Republican. “What you are going to look at is a settlement coming around December the 29th.” Nearly half of Americans — 49% — approve the President’s handling of the talks, compared with 25% who say Boehner is doing a good job, according to an ABC News / Washington Post poll released Wednesday. Meanwhile, a Bloomberg National Poll found nearly two-thirds of respondents, including nearly 50% of Republicans; believe Obama’s re-election gave him a mandate to seek higher taxes on the wealthy.
India approved changes to a century-old land law and set up a panel to fast-track infrastructure projects worth 10 billion Rupees or more as Prime Minister Manmohan Singh extends a policy overhaul to revive economic growth. The cabinet approved creation of a special panel yesterday, albeit with watered-down powers to speed up the notoriously slow implementation of big-ticket infrastructure projects. Amendments to the colonial-era Land Acquisition Act may help the government curb often violent protests that have stalled projects for industry and highways. The cabinet committee also allowed the establishment of an infrastructure panel and a 30% reduction in the sale of airwaves. The government hopes the new body will help to increase investment in an economy that is likely to slow in fiscal 2012/13 to its worst pace in a decade. Prime Minister Manmohan Singh’s chief economic adviser sees full-year growth of 5.5% to 6%, reports Reuters. The approvals add momentum to Singh’s policy agenda by addressing transportation and energy bottlenecks that have handicapped growth in Asia’s third-largest economy. The prime minister has already won support to open the economy to overseas retailers, the biggest embrace of foreign investment in a decade, as he bids to repair the government’s reform credentials before national elections in 2014. Prime Minister Manmohan Singh will head a new panel aimed at speeding up approvals of infrastructure projects. The prime minister is seeking $1 trillion in investments for highways, ports and power plants from 2012 to 2017 to spur development. The cabinet approved a 30% cut in the reserve price of mobile phone airwaves in four telecommunication zones, after carriers shunned last month’s auction in those zones saying the prices were too high. The cabinet also approved a ministerial panel’s proposal to set the auction reserve price of more efficient 900 megahertz band airwaves at twice that of the basic phone airwaves in the 1800 megahertz band
India plans to take more steps in the next few weeks, which combined with the measures taken so far will help turn around the economy, the Finance Minister P. Chidambaram said today, however, did not elaborate on the planned measures. India- Asia’s third-largest economy is headed for the weakest full-year growth in a decade, at about 6%, far below the near double-digit pace before the global economic downturn. “I am confident that the steps we have taken, and some more steps that we will take in the next few weeks, will help turn the Indian Economy around,” Mr. Chidambaram said addressing the Delhi Economics Conclave.
Rating agency Standard & Poor’s warned again on Tuesday thatIndia’s credit rating faces a one-in-three chance of being downgraded to junk over next 24 months because of a heavy debt burden and pressure on the fiscal deficit, which is seen overshooting a target of 5.3% in the fiscal year ending in March.
Infrastructure companies have pressed for the creation of such a board to speed up hundreds of delayed projects. Regulatory hurdles, such as delayed land acquisition and environmental clearances, have held up projects worth over 2 trillion rupees in the road, power, coal and mining sectors alone, according to government data. Due to opposition from within the government, the powers of the panel have been diluted and it will not be able to directly clear the projects. It will be up to individual ministries to approve projects, but where there are delays, the new panel will have the authority to intervene. It will not, however, be able to overturn any decisions made by the Environment Ministry. Environment Minister Jayanthi Natarajan had stalled the creation of the panel for months, calling it authoritarian. The watering down of the panel’s powers, which will likely disappoint investors, underscore the government’s struggle to push a reform agenda aimed at reviving growth. Red tape can delay projects for years or, in the worst cases, scupper them altogether. Bureaucracy and fights between industry and farmers over land have prevented India from plugging huge power shortages and upgrading its decrepit transport network. A typical infrastructure project requires clearances from 19 federal ministries and, on average, 56 authorizations on issues ranging from the environment to defense. The whole process takes up to 24 months.
The Reserve Bank of India (RBI) is expected to keep interest rates unchanged on Tuesday, Dec 18, according to a new Reuters poll, with respondents split over whether it will cut the cash reserve ratio (CRR) for banks. The RBI has left rates on hold since a 50 basis point cut in April, and expectations for a further cut have been pushed from December into the first quarter of 2013 following guidance by the central bank in late October. The CRR – a tool the Reserve Bank of India has been using to ease a cash crunch and prod banks to loosen lending rates. At 4.25%, CRR is at its lowest since 1976. RBI Gov. Duvvuri Subbarao said in the October policy review there was a “reasonable likelihood” of further easing in the January-March quarter, when inflation is expected to trend down. The RBI is expected to review monetary policy in January and again in March.
India Stock Market regulator, SEBI – Securities and Exchange Board of India unveiled a new set of measures, including reducing the trading band for a wide category of stocks and capping single orders at nearly $2 million, to prevent future flash crashes. The new set of rules come after an erroneous trade order of more than $125 million from a broker at Emkay Global Financial Services sent shares sharply lower in October. Read more on: Nifty Plunges on Glitch – Spooks Indian Equity Markets Traders
Under new guidelines from SEBI, Stock Exchanges will not be able to accept single orders for stocks, equity derivatives or exchange traded funds of more than 100 million rupees ($1.8 million) in value. The restriction applies to orders for stocks, exchange-traded funds, index futures and equity futures. In addition, the regulator narrowed the trading band for stocks that also trade on derivatives markets to 10% from 20%, although exchanges will be able to adjust the band in increments of 5% depending on market conditions. SEBI also directed brokerages to set internal limits on the cumulative value of un-executed orders, while directing them to reduce risk when 90% of the collateral for margin trading is utilized. All un-executed orders will be canceled once that threshold is reached, and all new orders will be checked for sufficiency of margins. Exchanges have a month to institute the new rules, and can set “more stringent norms based on their assessment,” according to the regulator. The NSE – National Stock Exchange of India Ltd., the nation’s largest bourse, controls more than 90% of India’s $28 billion equity derivatives market including the Nifty Index and handles 75% of stock trades. The exchange began trading equities electronically in 1994, prompting the 137-year-old BSE, which runs the BSE India Sensitive Index BSE-Sensex, to follow suit.
India’s Inflation unexpectedly cooled in November to its weakest pace in 10 months. The wholesale price index (WPI), India’s main Inflation gauge, rose 7.24% from a year earlier, below expectations for a rise of 7.6% and below October’s 7.45%. An easing in annual fuel and manufacturing inflation helped rein in price pressures. The RBI though may not be impressed enough to cut interest rates next week as price gains still remain above its comfort level. The inflation data comes after a spike in industrial output in October and data indicating that infrastructure output and investment is picking up, raising hopes a long slide in India’s economic growth is coming to an end. RBI – Reserve Bank of India Governor Duvvuri Subbarao may wait for more evidence that inflation is on an easing trend before heeding Finance Minister P. Chidambaram’s call for cheaper credit to back a government policy overhaul.
With Gold and Silver down this morning – following a mysterious vertical plunge last night (once again) – we thought ConvergEx’s Nick Colas’ timely discussion of gold was worthwhile. As he notes, Gold is the ultimate personality test for investors. Some hate it, excoriating its adherents for their lack of faith in human ingenuity – gold has been valuable since before humans could write. And some swear by the yellow metal, in the belief that it is the last vestige of rationality in a world of financial assets manipulated by central banks and opaque trading venues. What gets lost in the wash is that gold is a commodity and can be analyzed as such. On that basis, here is the ‘Top 10′ list of real-world fundamentals for gold.
Via Nick Colas and Sarah Millar of ConvergEx,
If you haven’t caught onto the show already, I highly suggest sitting down one night for the National Geographic Channel’s “Doomsday Preppers”. A documentary-style reality TV series shot right here in the US of A, Doomsday Preppers just began its second season following a variety of survivalists preparing for the end of civilization as they know it. From Chris Nyerges in California who prepares to live in the jungle after a massive earthquake to Bruce Beach, who runs drills to prepare his family for nuclear warfare, the show can be quite a hoot. To touch a little closer to home, consider Season One’s Pat Brabble and Doug Huffman: the first, a religious Southern gentleman, believes the world is on the brink of hyperinflation. To prepare, he stocks a room with guns, ammo, and alcohol; not to use, mind you, but to sell. Huffman, on the other hand, has dug holes into the Sierra Nevada Mountains in anticipation of a second Great Depression – he’s stashed away the essentials for survival should the US break into chaos.
My personal favorite “Doomsday Prepper”, though, has yet to appear on the show: the apocalyptic gold buyer. It seems everyone knows one of these guys/gals nowadays, what with the lurking fiscal cliff and continuing worries of an economic slowdown. They warn of inflation, tightening gold supply and growing demand, political risk, you name it. Their solution? Buy gold. Buy as much as you can. Even at $1,700/oz., they say, it’s a bargain when you consider the insurance it provides you.
While I have to agree that gold will be a valuable asset to hold in 2013, I find it hard to sympathize the “end of the world as we know it” logic that drives some to buy. I am not a believer in the world-is-coming-to-an-end mentality, fiscal cliff and Mayan apocalypse or not. And based on the facts we’ve found listed below, it looks like some of the more ominous warnings from the fearful gold buyers are reminiscent of those characters from NGC’s show. Better to know the facts before you buy. So without further ado, we present our “10 Things You (Probably) Didn’t Know About Gold”. These interesting data points come from a variety of sources, including the World Gold Council, bullion firms, the US Geological Society, and mises.org.
1. India is the largest consumer of gold in the world, but Greater China (including China, Hong Kong, and Taiwan) is slowly creeping up on the long-time leader. In Q3 of 2012, according to the World Gold Council, India’s consumer demand was 223.1 tons, while Greater China reached 185.1. This now 38 ton gap (fueled largely by greater Jewelry Demand in Greater China) has narrowed 71% since Q3 of 1997. For Q3 2012, India represented 30% of global consumer demand, while Greater China was 25%. Hong Kong is home to the highest gold consumption per capita in the world: with total consumer demand of 6.4 tons in just the third quarter, there are about 0.03 ounces (or, at today’s prices, about $50 in gold) for each person in the SAR.
Bottom Line: Gold is, at least partially, an emerging markets play.
2. On the production side, South Africa has been ousted as the once gold-mine capital of the world: now China and Australia are the leaders on that front, having produced 335 and 270 tons in Q3 2012, respectively. Interestingly, though, China is still a net importer. However, the singular most productive gold mine in the world wasn’t even in either of those countries: it’s the Grasberg Gold Mine in Papua, which produced more than 63 tons (2 million ounces) in 2011. Uzbekistan holds the next largest, Maruntau Gold Mine, which pushed out 56.3 tons (1.8 million ounces).
Bottom line: Gold is one of those rare products that China actually imports.
3. The IMF has the third largest gold reserves in the world, with 2,814.1 tons. That’s more than India (557.7), the Netherlands (612.5), Japan (765.2), China (1,054.1), and France (2,435.4). If the SPDR GLD ETF was including in the count, it would come fifth in the world with 1,289.8 tons. As many might know, the US has the highest total gold reserves both absolutely (8,333.3 tons) and as a percentage of total foreign reserves (75.4%). 25% of the world’s gold is also located right here in the US at the Federal Reserve Bank of New York – 540,000 gold bars – though most of it belongs to foreign governments.
Bottom line: Even central banks still see the value in having stores of gold.
4. Though jewelry has traditionally been the more popular end use of consumer demand for gold, making up 78.5% of the total in 2002, in Q3 2012 jewelry made up 59.9% while investment (coins, bars) accounted for the other 40.1%. Though the increase in investment demand seems to lend fuel to the argument that consumers are becoming more interested in gold to shore-up against some kind of disaster, the US in fact still favors jewelry as its end-use for gold: 30.8 tons of US gold demand was for jewelry (75% of the total), while only 10.5 tons were in investment. India, China, and the Middle East also still see the majority of demand in jewelry.
European consumers, on the other hand, are buying up coins and bars almost exclusively. According to the World Gold Council, 91% of European demand in Q3 2012 went to physical investment vehicles. Given the uncertainty surrounding the survival of the euro currency, this rush into investment makes sense. As long as the USD is on solid ground, though, I wouldn’t expect US consumers to dive into gold just yet.
Bottom line: Gold is still the Bling King.
5. That said, ETFs are actually the fasting growing market for gold demand, up 56% over the four quarters ending in Q3 2012. As the general appetite for ETFs continues to ripen, this isn’t particularly shocking. But coupled with the fact that total investment demand fell -10.3% over the same period, it looks like investors are more interested in purchasing market vehicles similar to gold rather than physical gold itself.
Bottom line: Gold fans tend to bad mouth “Paper gold.” They shouldn’t – demand here helps the overall investment story for the yellow metal.
6. For those worried about diminishing resources, here’s some relief: according to the WGC, a total of 171,300 tons has been extracted from the earth since mining began, with about 60% of that being done since 1950. The US Geological Society estimates that about 51,000 are still underground, with the WGC reporting that about 730 tons are mined each year. Other estimates put the number at something like 86 million tons still to be tapped. Worst comes to worst, the National Ocean Service reports that there is nearly 20 million tons of gold in the ocean. And the data from the NEAR spacecraft sent in 1999 reports that the amount of gold on the asteroid “Eros” is more than has ever been mined on Earth. Unfortunately, until we find ways to economically extract it from the ocean (or from space), those reserves will remain untapped.
Bottom line: More gold supply is critical to keeping its status as the ultimate story of value. Absent the discovery of legitimate alchemy, gold supplies will remain tight until we lasso that asteroid.
7. Gold has always held governments to account. In CE 211, Roman Emperor Augustus pinned the gold coin (the “aureus”) at 45 coins to a pound of gold (that makes one aureus worth about $500 in today’s prices). In 312, Emperor Constantine revised that figure to 72 to the pound: 60% deflation in just over 100 years. Granted, the current century’s monetary inflation is a bit more shocking: from $18.92 in 1911 to over $1,700 in 2012, the price of gold has inflated more than 9,000%.
Bottom line: With that kind of track record, gold remains a valuable hedge against government-sponsored inflation.
8. The Dow/Gold ratio (how much gold it would take to buy one share of the Dow Jones Industrial Average) has typically been a good indicator of how bad a given recession might be: when the ratio drops below 1 or 2, things are probably pretty bad. This happened in both 1980 and 2009, but today the ratio sits at 7.6. Admittedly, it’s on a downward trend – but things aren’t looking “apocalyptic” quite yet.
Bottom line: Gold is that rare investment product which is historically uncorrelated to financial assets.
9. Almost 40% of total world gold supply is recycled gold in any given quarter in 2012; it was 38.8% in Q3. Recycled gold, which includes melted-down jewelry, bars, coins, and even dental implants, has become a greater part of world supply, even as “new” gold on the market (from mining) has increased year over year. That’s a relatively good sign as well: investors are willing to liquidate their gold (literally) at today’s prices, providing incremental supply and limiting the chance of a “Bubble.”
Bottom line: Every piece of gold jewelry, ever coin, every ingot ever produced still has value. Can you say the same thing about stocks or bonds? No.
10. If all the gold in the world was given to the US and sold at today’s prices, it would be worth about $10 trillion dollars – and that still wouldn’t be enough to pay off our public debt. In fact, the $10 trillion would only cover 60% of the almost $16.5 trillion we owe. Probably better to just keep the dollar going.
Bottom line: Any chatter about a new “Gold standard” is likely premature.
All in all the case for gold in 2013 looks pretty bullish, whether you’re buying for high returns or in preparation for Armageddon. A historical upward trend and increasing demand for the precious metal makes a good case for buying, though I wouldn’t be worried about resource scarcity and the replacement of national currency just yet. For those of you that still aren’t convinced, I can suggest only two things: move to Europe, where you’ll find many like-minded investors, or sign up for an audition for “Doomsday Preppers”
Courtesy: – Zerohedge
European Union finance ministers agreed to put the ECB – European Central Bank in charge of all Eurozone lenders in a landmark deal that paves the way for the Euro-area’s firewall fund to provide direct bailouts to banks. This deal gives EU leaders greater confidence that they are gaining the upper hand over the Eurozone’s debt crisis. The new supervisory mechanism should be fully ready by March 1, 2014, with about 200 banks automatically qualifying for direct ECB oversight, EU Financial Services Commissioner Michel Barnier said today in Brussels after 14 hours of talks. In the interim, the 500 billion-euro ($654 billion) ESM – European Stability Mechanism could aid banks directly using its own procedures and asking ECB supervisors to step in, he said. The ECB- European Central Bank will have total access to banking information and will give equal treatment to non-euro nations that join the oversight system. EU leaders sought common bank oversight to rejuvenate their campaign to end the financial crisis, now heading into its fourth year. After a hectic year of crisis management, during which Greece had a close brush with the Eurozone exit, getting an agreement on the first stage of a banking union is a victory for the EU and represents a bold step towards pooling sovereignty.
Under today’s agreement, Euro-area finance ministers could use the ESM to recapitalize banks directly if they make a unanimous request to the ECB to take over direct oversight of a troubled institution, reported Bloomberg. Finance chiefs will need to develop guidelines for when they might offer aid to banks, instead of going through national governments as they did with Spain’s financial-sector rescue program. The legal framework for the new supervisor could be in place by the end of February, allowing the ECB a full year to prepare before taking on its new duties. Today’s agreement opens the way for negotiations with the European Parliament. The balance of ECB power was a key obstacle during the marathon talks. The final proposal includes a mediation procedure for nations that object to bank oversight positions taken by the ECB’s Governing Council, the Frankfurt-based central bank’s monetary policy committee and senior decision- making body. Monetary Policy and supervision decisions will be separate on a day-to-day basis. The U.K., home to Europe’s biggest financial center and which won’t join the banking union, sought a requirement that EBA decisions be taken by so-called double majority voting, so that nations outside the supervisory mechanism can’t be automatically overruled by those who take part. The oversight deal also lays out size thresholds for banks to get direct ECB supervision once the new system is in place. Ministers agreed on central oversight for banks with more than 30 billion euros in assets or with balance sheets that represent at least 20% of a nation’s economic output. The guidelines include at least the top three biggest banks of every participating nation unless “justified by particular circumstances.” The banking deal is a “good outcome,” said U.K. Chancellor of the Exchequer George Osborne in a statement after the meetings. “It shows that when you go in with a clear and principled argument and you make your case, then you can succeed and that’s what Britain has done tonight.”
With Silvio Berlusconi vowing to contest an Italian election early next year, a full bailout of Spain still on the cards and a German general election in September casting a long shadow, 2013 promises to be the EU’s fourth turbulent year in a row, and that’s without mentioning Greece, Ireland or Portugal. Each step towards closer union means a greater surrender of sovereignty by independent nations and spurs a political backlash, especially in times of economic hardship, social tension and high unemployment. European Council President Herman Van Rompuy and the heads of the European Commission, European Central Bank and Eurogroup have put forward a blueprint for closer Eurozone fiscal, economic and political integration alongside the banking union.
Greece’s successful buying back of its own debt will help reduce its debt burden and will ensure that the next slice of emergency funds is released by the Eurozone and International Monetary Fund, but there is a growing acknowledgement that Athens will need debt forgiveness in the years ahead. In June and July, euro zone leaders came close to letting Greece go from the currency bloc. They resolved to keep it in, doing whatever it would take to get it back on its feet. Having taken that decision, they now have to bear the costs, however large and uncomfortable they may be. European governments geared up to provide extra aid or debt relief for Greece after releasing the country’s first loan payment in six months, signaling renewed battles over how to stabilize the euro economy. Euro-area finance ministers approved the payout of 49.1 billion euros ($64 billion) of loans through March and committed to “additional measures” in case Greece’s debt reduction veers off track. While another cut in bailout-loan rates and an increase in infrastructure funding would top the list of extra measures, the policy makers hinted that outright debt relief, still a taboo topic in creditor countries led by Germany, would be on the table as well. Greece will get 34.3 billion euros in coming days, covering 16 billion euros for bank recapitalization, 7 billion euros for the government’s budget and 11.3 billion euros to finance a bond buyback that was used to retire debt. Another 14.8 billion euros will flow in the first quarter of 2013 as long as Greece meets conditions to be agreed on with creditors. That sum consists of 7.2 billion euros for bank recapitalization in January, plus three monthly tranches for the budget.
The ECB – European Central Bank said that while borrowing costs have dropped, they continue to vary greatly across the euro area and banks remain hesitant to lend to the private sector. “The cost of short-term bank lending to euro area non- financial corporations has declined since early 2012, mainly reflecting the pass-through of reductions in key ECB interest rates and market interest rates,” the Frankfurt-based ECB said in its monthly bulletin today. “Still, borrowing costs continue to vary greatly across Eurozone countries, reflecting differences in banks’ funding conditions and country-specific economic developments affecting the creditworthiness of borrowers,” it said. Lending to the non-financial private sector “remains weak.” ECB President Mario Draghi in September announced an unlimited bond-buying program, saying the bank’s record-low interest rates aren’t reaching borrowers because of unjustified fears of a euro breakup, reported Bloomberg. Since then, bond yields in countries like Spain and Italy have fallen. “In autumn 2012, net issuance of long-term debt securities by banks resident in the euro area was significantly less negative than it had been in previous months,” the central bank said today. “At the same time, interbank trading volumes remain low and concentrated in the shortest maturities.”