Central Banks Hedging Their Bets - By John Browne (5/12/12) PDF Print E-mail
John Browne   
Wednesday, 05 December 2012 09:46

Euro Pacific Capital

Gold appears to be headed for an impressive price appreciation for the second half of 2012. Since the beginning of July, gold is up almost 10 over the same time frame. What is noteworthy here is that in recent months, fears of a worldwide recession have increased markedly. It used to be considered axiomatic that recession created adverse conditions for commodities (a reality that has helped push down the price of crude oil thus far in 2012). How then can we understand the movement in gold?

Reports have recently been released that throw particular light on the degree to which central banks around the world are accumulating gold. These activities must be playing a significant role in keeping the heat turned up when it may be otherwise cooling down. Given the extraordinary degree of insight that central bankers are expected to have, what do they see that drives them to buy gold when classically the metal should be falling in times of recession?

As we have said many times, there are two fundamental investment reasons to buy gold. The first is as a hedge against the loss of purchasing power of fiat currency, caused either by inflation or currency debasement. The second is as insurance against political and financial uncertainty or collapse. Central bankers are not giving either scenario much lip service.

By the latest analysis, it appears that the European Union (EU) is headed toward depression. After twelve years of stagnation, the Japanese economy remains flat at best. With an Obama victory at the polls, Obamacare, and massive tax increases threatened, the U.S. economy looks set increasingly for recession. If recession hits the world’s two largest economies, the EU and U.S., the international economy, including that of China and its prime raw material suppliers such as Australia, Brazil and Canada, can’t be expected to grow robustly. Runaway inflation, according to the models to which most central bankers subscribe, would then be considered a distant risk. Is it possible that these individuals, at the apex of the economic and financial worlds, don’t trust their own policy papers?



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BOE's Andy Haldane Finds Impact Of Central Bank Policies As Bad As A "World War" - By Tyler Durden (4/12/12) PDF Print E-mail
Tyler Durden   
Tuesday, 04 December 2012 10:01

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Fed To Commit To A Staggering $1 Trillion Of QE For 2013 - By Dan Norcini (4/12/12) PDF Print E-mail
Dan Norcini   
Tuesday, 04 December 2012 09:59

KingWorldNews

Acclaimed trader Dan Norcini told King World News the Fed is about to commit to more than $1 trillion of QE for 2013. Norcini stated that because of this, “Anyone who does not own physical gold is committing financial suicide.” Here is what the acclaimed trader had to say about this stunning situation and what it will mean for the gold market:

“One of the things that may have been overlooked by a lot of people, but it certainly wasn’t overlooked by some of us in the trade, was a report that was published by Goldman Sachs dealing with the Federal Reserve and its upcoming policy meeting.

“Goldman Sachs expects, next month, for the Fed to come out of their policy meeting announcing QE4. It will be a purchase of $45 billion each month in Treasuries. This number will be in addition to the already existing QE3, which is $40 billion per month in mortgage-backed security debt.

“But in a sense, Eric, QE4 is going to be a replacement for Operation Twist. Operation Twist was designed to push down the long end of the curve in order to keep interest rates artificially low....

“But here we go - now we’re talking about an additional $85 billion each month. This is fresh purchases of Treasuries. Here’s what is interesting, Goldman Sachs expects that to continue all the way through 2013. So do the math, that’s more than $1 trillion worth of QE for 2013.



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Bank Of America CEO Brian Moynihan Apparently Can't Remember Anything - By Matt Taibbi (4/12/12) PDF Print E-mail
Matt Taibbi   
Tuesday, 04 December 2012 09:49

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The Myth Of Austerity - By Philipp Bagus (3/12/12) PDF Print E-mail
Philipp Bagus   
Monday, 03 December 2012 09:19

Mises Daily

Many politicians and commentators such as Paul Krugman claim that Europe's problem is austerity, i.e., there is insufficient government spending. The common argument goes like this: Due to a reduction of government spending, there is insufficient demand in the economy leading to unemployment. The unemployment makes things even worse as aggregate demand falls even more, causing a fall in government revenues and an increase in government deficits. European governments pressured by Germany (which did not learn from the supposedly fateful policies of Chancellor Heinrich Brüning) then reduce government spending even further, lowering demand by laying off public employees and cutting back on government transfers. This reduces demand even more in a never ending downward spiral of misery. What can be done to break out of the spiral? The answer given by commentators is simply to end austerity, boost government spending and aggregate demand. Paul Krugman even argues in favor for a preparation against an alien invasion, which would induce government to spend more. So the story goes. But is it true?

First of all, is there really austerity in the eurozone? One would think that a person is austere when she saves, i.e., if she spends less than she earns. Well, there exists not one country in the eurozone that is austere. They all spend more than they receive in revenues.

In fact, government deficits are extremely high, at unsustainable levels, as can been seen in the following chart that portrays government deficits in percentage of GDP. Note that the figures for 2012 are what governments wish for.

The absolute figures of government deficits in billion euros are even more impressive.

A good picture of "austerity" is also to compare government expenditures and revenues (relation of public expenditures and revenues in percentage).



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