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Posts Tagged ‘president’

The Crunch: “It’s Going to Happen In The Next Administration; Regardless Of Who Wins This Election”

August 31st, 2012

Mac Slavo: Our incumbent President says that things are getting better, jobs are being created, and America is on the road to recovery. His opponent, Governor Mitt Romney, says the opposite, but claims he has a plan that will turn things Read more…

Economy, Financials, Government

Barack Obama: 24 Statistics That Show How Much The Current President Has Messed Up Our Economy

August 22nd, 2012

Michael Snyder: Under Barack Obama, the U.S. economy has performed worse than it did under any other president since the end of the Great Depression.  After every other recession since World War II, the U.S. economy always regained what was lost and got even stronger Read more…

Economy, Government

40 Reasons That Show Barack Obama And Mitt Romney Are Essentially The Same Candidate

August 20th, 2012

Michael Snyder: What a depressing choice the American people are being presented with this year.  We are at a point in our history where we desperately need a change of direction Read more…

Economy, Government

SmartStops.net Teams With TradeKing to Facilitate Risk Management

July 11th, 2012

San Francisco, California, July 11, 2012– SmartStops.net, an online service that helps investors of all levels manage investment risk, announced today that the SmartStops BrokerLink service is now available for clients of online broker Read more…

ETF, Mutual Fund, OPTIONS, Uncategorized

Collapse: It’s Coming! Are You Ready? (Part One of Two)

June 14th, 2011

Everything is not all right. And things are going to get worse … much worse. The economy is on the threshold of calamity. Wars are spreading like wildfires. The world is on a razor’s edge.

Not so, say world leaders and mainstream media experts. Yes, there are problems, but the financiers and politicians are aware of them. Policies are already in place and measures are being taken to correct them.

Whether it’s failing economies, intractable old wars or raging new wars, the word from the top always maintains that steady progress is being made and comforts the populace with assurances that the brightest minds and the sharpest generals are in charge and on the case. On all fronts, success is certain and victory is at hand. Only “patience” is required … along with more men, more time and more money.

As far as these “leaders” and their media are concerned, the only opinions that count come from a stable of thoroughbred experts, official sources and political favorites. Only they have the credentials to speak with authority and provide trustworthy forecasts. That they are consistently, if not invariably, wrong apparently does nothing to diminish their credibility.

How can any thinking adult possibly imagine that the same central bankers, financiers and politicians responsible for creating the economic crisis are capable of resolving it? Within days of its announcement, we predicted that Bush’s TARP (Troubled Asset Relief Program) was destined to fail, and subsequently predicted the same for Obama’s stimulus package (The American Recovery and Reinvestment Act). They were no more than cover-ups; there would be no recovery.

Meet the New Plan, Same as the Old Plan

Democrat or Republican, it makes no difference. Despite the heated rhetoric, solving economic problems had less to do with the party in power and more to do with professional competence. Both sides had their turn in office. Both used their power to initiate policies that created the problems. Both sides had their shot at fixing the messes they were responsible for. Both sides failed, as we predicted. Given who they are and what they’ve done, we confidently predict an unbroken sequence of bipartisan failures in the future.

The Beltway Incompetents are in the driver’s seat. What person with a healthy instinct for self-preservation would believe the promises of politicians or trust the judgment of central bankers or Wall Street financiers whose only real interest is self interest?

Not “Business as Usual”

In the 1920s, US President Calvin Coolidge declared, “The business of America is business.” Four score and 10 years later, the business of America has become war: The forty-year War on Drugs; The ten-year War on Terror; the Afghan War (longest in American history); the eight-years-and-no-end-in-sight Iraq War; the covert wars in Pakistan and Yemen; and most recently, the “time-limited, scope-limited kinetic military action” in Libya.

While the justifications for engaging in these wars were all different, all were murderous, immoral, interminable, ruinously expensive and abject failures. Why would anyone believe the optimistic battle communiqués issued by the “czars” in charge and the battlefield brass who keep reassuring the public that reapplying previously failed strategies would, this time, lead to success?

Yet even in the face of their proven failures and gross incompetence, anyone daring to challenge the party line or the conventional wisdom is dismissed as an “alarmist,” “fear monger,” or “gloom-and-doomer.” However unwelcome our forecasts may be – pessimism, optimism, like or dislike are all irrelevant – only their accuracy counts. We correctly forecast:

  • Afghan and Iraq Wars would be debacles
  • Bursting of the housing bubble
  • The “Gold Bull Run”
  • The “Panic of ’08″
  • European Monetary Union crisis
  • Failure of US bailout/stimulus packages to revive housing and create jobs
  • Falling governments, spreading civil wars and social upheaval on a global scale

We also said that the Federal Reserve’s sighting of economic “green shoots” in March 2009 was a “mirage” and predicted that their much vaunted “recovery” was no more than a temporary solution, a quick-fix to be followed by “The Greatest Depression.” And now, in June 2011, with the Dow on a down trend and the economic data increasingly pointing in the direction of Depression, Washington and Wall Street remain in denial. The only debate among the “experts” is whether or not a “double dip” recession is likely.

However, for the man on the street – pummeled by falling wages, higher prices, intractable unemployment, rising taxes and punitive “austerity measures” – “Depression,” not “recession,” and certainly not “prosperity,” is just around the corner.

To be continued in Part Two.

Regards,

Gerald Celente
for The Daily Reckoning

[Editor's Note: The above Trend Alert is available as part of a subscription to The Trends Journal, which is published by Gerald Celente. The Trends Journal distills the ongoing research of The Trends Research Institute into a concise, readily accessible form. Click here to learn more about and subscribe to The Trends Journal.]

Collapse: It’s Coming! Are You Ready? (Part One of Two) originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Collapse: It’s Coming! Are You Ready? (Part One of Two)




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Gold Soaring In Comparison To Stocks

June 10th, 2011

A seminal speech was delivered a few weeks ago by President Obama at the State Department, in it he outlined a radical switch of policy in the Middle East.  Such an error in judgement was made once before when Jimmy Carter suggested that we democratize Iran.  What occurred was  destruction of an ally in the Shah and replacing him with a purported force for democratization in the persons of the Ayatollah and the Mullahs.

Just look at what we got stuck with.  Our present course in the Middle East may be a repetition of this error.   There is no guarantee that what may be thought to be democratic for Westerners, may be counterproductive in a completely different arena.

Far from there being an Arab Renaissance, we may be witnessing the formation of a Islamist Spring, followed by an Arab Winter.  Hope may rise eternal that American style democracy can emerge from a fundamentalist, theocratic mindset.  This may be a thin blanket for a cold night.  Anti American and Israeli sentiments may not be far from the surface of what is though of as a movement toward Jeffersonian Style Democracy.   Suffice it to say, The U.S. may be imposing Western beliefs on Middle Eastern customs and traditions established for over a thousand years.

Such developments may well constitute exactly the opposite of what our strategists are planning.  Black swan anyone?  Turbulence, instability and uncertainty have usually been a prescription for precious metals and natural resources as a safe haven.

From where is all the money coming to pay for all these planned excursions?  Can an already troubled financial system handle additional burdens that threaten to break the camel’s back?

We read about debt limit, budgetary woes, foreclosures, unemployment, Eurozone debt crisis, the possible loss of a AAA credit rating and a myriad of domestic travails.  Shouldn’t we first repair our own home first?  Sound money and a sound fiscal body is vital for our national health.

Interestingly, the precious metals and mining indices are moving higher, while the equity markets are declining showing relative strength breakouts.  The Dow-Gold Ratio has shown a major breakdown through the 8 to 1 ratio.  We are seeing an eerily similar setup to the Great Depression and the 1970’s where paper money such as equities are seen as less valuable than hard assets.  Investors are seeking protection in precious metals due to this dollar devaluation and disappointing economic recovery.  Despite bailouts, record low interest rates and quantitative easing the Dow-Gold ratio shows that the economic recovery has been ineffective and inflationary.

Gold and Silver are showing signs of fortitude during these equity sell offs maintaing its status as an authentic safe haven .  A significant continuation in trend may be beginning where precious metals may move higher while equities continue to correct as investor look to hold real money over paper.  This breakdown in the Dow Gold Ratio signifies major inflation and economic weakness ahead.

The S&P is showing negative divergences between price and momentum an indication of further price decline.  The absence of relief rallies over five weeks in equities and the outperformance of gold indicates investors are interested to hold hard assets going into the conclusion of QE2.  All eyes are on the financial markets as QE2 expires.  Investors are exiting the dollar as well as equities and moving into hard assets.  The market may be signaling future accommodative measures especially if the equity market continues declining.

I invite you to follow my favorite sectors (precious metals, uranium and rare earths) with me on a daily basis with my technical intelligence reports and intra day chart videos by clicking here.

Read more here:
Gold Soaring In Comparison To Stocks

Commodities

Gold Soaring In Comparison To Stocks

June 10th, 2011

A seminal speech was delivered a few weeks ago by President Obama at the State Department, in it he outlined a radical switch of policy in the Middle East.  Such an error in judgement was made once before when Jimmy Carter suggested that we democratize Iran.  What occurred was  destruction of an ally in the Shah and replacing him with a purported force for democratization in the persons of the Ayatollah and the Mullahs.

Just look at what we got stuck with.  Our present course in the Middle East may be a repetition of this error.   There is no guarantee that what may be thought to be democratic for Westerners, may be counterproductive in a completely different arena.

Far from there being an Arab Renaissance, we may be witnessing the formation of a Islamist Spring, followed by an Arab Winter.  Hope may rise eternal that American style democracy can emerge from a fundamentalist, theocratic mindset.  This may be a thin blanket for a cold night.  Anti American and Israeli sentiments may not be far from the surface of what is though of as a movement toward Jeffersonian Style Democracy.   Suffice it to say, The U.S. may be imposing Western beliefs on Middle Eastern customs and traditions established for over a thousand years.

Such developments may well constitute exactly the opposite of what our strategists are planning.  Black swan anyone?  Turbulence, instability and uncertainty have usually been a prescription for precious metals and natural resources as a safe haven.

From where is all the money coming to pay for all these planned excursions?  Can an already troubled financial system handle additional burdens that threaten to break the camel’s back?

We read about debt limit, budgetary woes, foreclosures, unemployment, Eurozone debt crisis, the possible loss of a AAA credit rating and a myriad of domestic travails.  Shouldn’t we first repair our own home first?  Sound money and a sound fiscal body is vital for our national health.

Interestingly, the precious metals and mining indices are moving higher, while the equity markets are declining showing relative strength breakouts.  The Dow-Gold Ratio has shown a major breakdown through the 8 to 1 ratio.  We are seeing an eerily similar setup to the Great Depression and the 1970’s where paper money such as equities are seen as less valuable than hard assets.  Investors are seeking protection in precious metals due to this dollar devaluation and disappointing economic recovery.  Despite bailouts, record low interest rates and quantitative easing the Dow-Gold ratio shows that the economic recovery has been ineffective and inflationary.

Gold and Silver are showing signs of fortitude during these equity sell offs maintaing its status as an authentic safe haven .  A significant continuation in trend may be beginning where precious metals may move higher while equities continue to correct as investor look to hold real money over paper.  This breakdown in the Dow Gold Ratio signifies major inflation and economic weakness ahead.

The S&P is showing negative divergences between price and momentum an indication of further price decline.  The absence of relief rallies over five weeks in equities and the outperformance of gold indicates investors are interested to hold hard assets going into the conclusion of QE2.  All eyes are on the financial markets as QE2 expires.  Investors are exiting the dollar as well as equities and moving into hard assets.  The market may be signaling future accommodative measures especially if the equity market continues declining.

I invite you to follow my favorite sectors (precious metals, uranium and rare earths) with me on a daily basis with my technical intelligence reports and intra day chart videos by clicking here.

Read more here:
Gold Soaring In Comparison To Stocks

Commodities

Steroids Wearing Off! Key Sectors Slumping! Urgent Action Required!

June 10th, 2011

Mike LarsonI’ve been a huge football fan for years. I started watching Dallas Cowboys games when I was five because I loved the star on the team’s helmets. I cheered for the Miami Dolphins because I live in South Florida. And then after I went to college in Boston, I adopted the New England Patriots as my team — an affiliation that carries to this day.

One thing I’ve always hated to see was when the game would be corrupted by steroids. I remember when Lyle Alzado of the Los Angeles Raiders struck fear into the hearts of opposing teams in the early 1980s. But it turned out his aggressive style of play and incredible strength turned out to stem largely from drug use. He died a broken man of brain cancer at 43.

It’s not just football, either. How many baseball greats are now turning out to be nothing more than juiced-up pretenders? Heck, even cycling great Lance Armstrong is under a cloud today due to doping allegations made by former teammates.

It’s truly sad, and in the end, what’s the point? Why try to get an unfair edge if it just ends up killing you in the end? Or if your medals and rings and trophies just get stripped away?

Why am I bringing this up?

Because we’re seeing the same, sorry thing happen here to the U.S. economy! Washington has been trying to pump the economy full of easy money for the better part of two years now. Yet it hasn’t worked! And despite all that, the addicts on Wall Street are once again jonesing for another hit!

What’s going to happen in the markets as a result? What does this mean for you? And most importantly, what can you DO about it? Here’s my take …

Why You Can’t Keep Propping
up an Ailing “Player” Forever

Beginning in March 2009 and continuing all the way through present day, Washington has been trying to juice the economy. It began with the bogus “stress tests.” They helped spike the value of bank and real estate stocks, allowing companies to sell equity and buy themselves some time.

We were told the trillions in stimulus programs would cure our economic woes.
We were told the trillions in stimulus programs would cure our economic woes.

It continued with the $1.25 trillion QE1 program … the $600 billion QE2 boondoggle … payroll tax cuts … the HAMP mortgage modification effort … an almost-$900 billion economic stimulus bill … and more.

We were told these would drive unemployment down substantially.

We were told these would prevent a double-dip in housing.

We were told these efforts would — for once and for all — plug the massive balance sheet holes in the banking system.

We were told there would be virtually no negative side effects.

And we were told months ago that the economy had entered a self-sustaining, healthy recovery.

But Treasury Secretary Timothy Geithner … Federal Reserve Chairman Ben Bernanke … President Obama’s economic advisors … and virtually all the major Wall Street economists got it wrong. All we did was pump the economy up with monetary steroids — buying us some short-term performance at the cost of long-term health.

We’re now $14.3 trillion in debt, and Geithner is raiding every government account he can to keep us under the debt ceiling. Plus, we’re running up a trillion-dollar deficit for the third straight year, something no country in the history of the world has ever done.

And what do we have to show for it?

  • A confirmed double-dip in housing,
  • A rising cost of living,
  • A renewed jobs market threat, with unemployed Americans taking a record-long amount of time to find work,
  • And a fresh roll over in bank stocks, with companies like Bank of America giving up every penny of gains they’ve made in the last two years.
Advertisement

Wall Street’s Plea: “Brother, Can
You Spare Some More QE?”

Bottom line: The print, borrow, spend program is NOT working! Yet in the wake of the dismal May jobs report, Wall Street is back to begging Helicopter Ben Bernanke for more free money! And when they don’t get it, like some spoiled kid, they take their toys and go home.

On Tuesday, the Fed chairman offered no hint that QE3 would be forthcoming.
On Tuesday, the Fed chairman offered no hint that QE3 would be forthcoming.

Just witness what happened late Tuesday …

Bernanke gave a speech on the economic outlook at the International Monetary Conference in Atlanta. He said the economy appeared to be weakening again, but failed to promise QE3. Result? Stocks rolled over into the close.

Meanwhile, the same economic “experts” like Paul Krugman who told us that if we just borrowed, printed and spent enough money, everything would be fine, are still at it. They’re asking for even more of the same medicine that didn’t work in the past … twice!

Look folks, the plain, unvarnished truth is that our economy needs a long period of convalescence to heal. We need to work off the massive excesses built up during the tech stock and real estate bubbles. All the steroids in the world won’t do the trick!

Fortunately, you CAN take steps to protect yourself. You can avoid losing money if stocks and the economy sink. In fact, you can turn lemons into lemonade and rack up profits from fading sectors like real estate, banking, consumer durables, and more.

That’s what I’m already helping my subscribers do — and if you’d like to join them for just $2.73 per day, click here to learn more.

Your other option?

Sit by and do nothing while Washington and Wall Street sink further into the debt, deficit, and downturn abyss. I trust that sounds as unattractive an option to you as it does to me.

Until next time,

Mike

Read more here:
Steroids Wearing Off! Key Sectors Slumping! Urgent Action Required!

Commodities, ETF, Mutual Fund, Real Estate, Uncategorized

The War on Digital Currency

June 9th, 2011

A joke for you, Fellow Reckoner: How many Senators does it take to change a light bulb? Oh, wait, we’ve got a better one: How many Senators does it take to dismantle a cryptographically secured, completely decentralized, Peer-to-Peer (P2P) network of voluntary, free market traders exchanging goods and services across six continents using tens, perhaps hundreds, of thousands of individual computers and some of the most advanced cyber technology and software coding known to date?

Answer: we don’t know…but Senators Charles Schumer (D, New York) and Joe Manchin (D, West Virginia), seemingly immune to common ignominy, have taken on the challenge anyway.

Your editor has no idea of the cybercryptography aptitude of the two senators but, as with most endeavors undertaken by politicians in the name of “your own damned good,” practical experience and a sufficient understanding of the issue at hand are rarely prerequisites for intervention, again, “on your (unsolicited) behalf.”

The two erstwhile wonks took to the presses this week, demanding something be done about one particular free-market affront to authority.

We are referring, of course, to the latest furor surrounding bitcoin, a P2P cyber currency setting the virtual – and, some would argue, actual – world ablaze. (We first brought you the story a couple of weeks ago, when bitcoins were trading for roughly B$1 = US$7.5. As of this morning, they’ve shot up to B$1 = US$31.5. See “An Emerging Free Market Currency” and “How Governments Distort the Value of Money” for a “bit” of background about them and about the pitfalls of government-backed currencies in general.)

Long story short, bitcoin is a limited supply, decentralized digital currency; a free market alternative to state issued notes and coins. As such, it poses a direct – though entirely non-violent – threat to the state’s monopoly on counterfeiting. This, cry the powers that be, must not be tolerated. Of course, before any politico can act, they must first have a distraction, a fall boy, a pretense, a reason for rescuing us from the horror that is our own decision-making capacity. We picked it in that first column, the relevant portion of which is reprised here:

Another cause for concern among bitcoin skeptics is that, as the economy of the free market currency expands it will inevitably begin posing a threat to the state’s own money-printing racket. It will, thereby, raise the ire of bankers and politicians who will have every incentive to make the currency illegal in order that they may protect their own monopoly and continue cheating their citizens of the value of their president-stamped notes and coins. Given the state’s nature when it comes to these matters (and here we refer readers to the recent and despicable case against Bernard von NotHaus) there is every reason to expect that it will indeed crack down…and hard.

Here we expect all the usual arguments from all the usual suspects: “Bitcoin transactions are anonymous and therefore provide cover for peddlers of child pornography and drug traffickers,” they will contend.

But the astute reader knows in his gut there is something very wrong with this line of thinking right from the beginning. Cash is anonymous too. People by things deemed illegal by the state with state-issued currency all the time. So what? Does this mean US dollars should be banned? Some people drive their cars recklessly, with little or no regard for their own safety or for others’. Should we ban cars?

The question, however, is not whether the Feds should do something (moral considerations have rarely, if ever, stopped them before), but whether they could do something, even if they wanted to…

Now that we have a little background, let’s get back to those busybody senators. As one might imagine, a virtually untraceable currency – such as bitocin or…umm…CASH! – might find use as a medium of exchange to purchase both white and black market products like, say, drugs. Such was the case with Silk Road, a website where users (literally) can buy illegal substances with bitcoin.

Said Senator Chuck of Silk Road and bitcoin in a news conference on Sunday:

“Literally, it allows buyers and users to sell illegal drugs online, including heroin, cocaine, and meth, and users do sell by hiding their identities through a program that makes them virtually untraceable.” Apparently, the senator wants Silk Road shut down immediately with bitcoin, no doubt, soon to follow. The pair have written to Attorney General Eric Holder and the DEA asking that action be taken to crackdown on Silk Road.

Now that the pair have their straw man, we can be sure it will be used as a pretense to attack free-market currencies themselves. Stay tuned as the story unfolds on that front…

For now, we wonder what users of bitcoin are to do now that the self-appointed invigilators of free market activity are on their case? Well, for the past few weeks at least, they’ve been rejoicing. The currency has almost quadrupled in value since the Silk Road issue came to the fore.

Bitcoin enthusiasts may wish, therefore, to thank Senators Schumer and Manchin for, without their commitment to proffering illogical, largely ignorant remarks in the nation’s mainstream press, bitcoin might have taken a while longer to reach the critical mass on which it must now surely be verging. “Bravo, Senators,” we can almost here the cyber underground chorus, “Thanks for the free publicity!”

Joel Bowman
for The Daily Reckoning

The War on Digital Currency originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
The War on Digital Currency




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

US Trade Deficit Takes on a Life of its Own

June 9th, 2011

The week of “non-data” here in the US continued on Wednesday, with the markets searching for a clue as to which direction to go, and the only news they had to work with was from Greece, which didn’t bode well for the currencies, yesterday.

But the lack-o-data ends today, with the Weekly Initial Jobless Claims, and… The April US trade deficit… This trade deficit has taken on a life of its own, in that we had a recession (I call an ongoing depression) and a financial meltdown, which one would think would bring this trade deficit in line… But NOOOOOOO! That’s not happening, folks, and why? Ahhh grasshopper, this has been discussed so many times in the past, but the point here is that the manufacturing in this country has gone the way of the Pony Express… Sure, it still exists, and in some countries would be great! But for a country our size, it has wasted away in Margaritaville! And it’s not enough to offset the imports…

But then, if consumers weren’t given stimulus checks in the mail, and other forms of steal-like measures to get us to spend, then imports wouldn’t be so huge… But then because we import so much oil, one would think we would be foreign oil independent by now…

So… The currency and metals traders will get some direction today, and maybe take their collective minds off of Greece… We might also get a sniff of what the European Central Bank (ECB) is thinking, as they’re meeting as I type this morning. Remember on Monday, I told you that we would be looking for the use of the word “vigilance” and mention of the need to provide “price stability” from ECB President, Trichet. So… Any mention of those two things, and I would think the euro (EUR) gets a good push higher versus the dollar today. You see, by mentioning those two things, Trichet, cracks open Pandora’s Box of rate hikes… Now, I’ve gone on record as saying that I thought the ECB would hike rates again in July… If the statement following the meeting today goes the way I believe it will go, then you can almost “book ’em Danno” for that rate hike in July…

Speaking of central banks… The Reserve Bank of New Zealand (RBNZ) met last night, and left rates unchanged. (Remember, that back in March, the RBNZ cut rates to accommodate the economy after the earthquake.) The RBNZ was quite upbeat in their statement following the meeting… You know, when New Zealand suffered that earthquake, I said then that I thought the Kiwi people would bounce back quickly… And the RBNZ admitted last night that they underestimated the speed and momentum that the rebuilding has taken on… That’s key, folks… Because those words would lead me, or a trader to believe that it won’t be long until the RBNZ is back at the rate hike table… (I’m betting that free undercoat that it comes in the fourth quarter of this year.) The New Zealand dollar/kiwi (NZD), took the statement and ran! Kiwi has outperformed all currencies overnight!

Of course, RBNZ Governor Bollard, who I’m no fan of, had to take his usual shot at kiwi strength, saying that it was ahead of itself… Hmmm… But then he did say that he would not be intervening, as intervention cannot move a trend… WOW! Love to hear a central banker say those words! Are you listening, Japan? How about you, Brazil? Or Switzerland? And over in the US with all your back-door intervention to keep the dollar weak?

OK… Did you see the results of the OPEC meeting? Well, if you haven’t, just me telling you that the price of oil is up about $2 this morning would tell you it didn’t go well, right? Yes, our friends (NOT!) over at OPEC now have problems… I mean these guys all cheated with production levels before, but now you’ve got a real problem in the fact that not all these guys like each other. In fact some countries are joining the rebels to defeat another country, and now they must all sit down together and make policy? I laugh, because that just cracks me up! That’s not going to happen now, and it won’t happen probably ever again… That’s right, OPEC could be on the way out… And so… Oil is up $2 this morning…to $101.

Down in Brazil, the country continues to fight inflation, and at the same time, stem the currency’s gains… I don’t see that working out too well for them! Yesterday, the Brazilian Central Bank raised their internal rate 25 basis points (1/4%), which surprised the markets. You see the markets had fallen into the trap of thinking that since the government wanted to stem the currency’s gains, that they wouldn’t hike rates further for that would attract investors and push the real (BRL) higher… Gotcha! It’s one of those things like the entertainer that puts one hand out to signal to the audience to stop the applause, but the other hand is signaling for them to continue the applause…

The Brazilian government sees inflation rising and reacts with rate hikes… Inflation by the way rose to just above 6.5% in April, which is the ceiling target for the central bank. So… Once again, the need to fight inflation was greater than the government’s desire to have the real weaker… Which I might add is stupid… If they want to fight inflation, allow their currency to gain!

Well… Gold and silver continue to get sold this week… I don’t get it, but momma said there would be days like this, my momma said… Cheaper levels to buy, is the only thing I can think of… The demand for the metals remains strong… Did you hear that the US mint in San Francisco was told to take the dust covers off their presses? Yes, for quite a few decades now, all the minting of silver coins has been done in Annapolis, (I believe), but with demand for Silver Eagle Coins so high, it looks like another mint will begin to push out coins again…

So… With all this demand, why isn’t silver at $50 again? And gold heading toward $2,000? If you really want to do something about it, contact Bart Chilton at the CFTC, and ask him… Maybe he can shed some light on this…

The Aussie dollar (AUD) saw some selling after a weaker-than-expected jobs report, last night. The unemployment rate remained at 4.9%, but the job creation was lackluster, especially for a county that had been knocking the ball out of the park, when it came to job creation… Looks like a cheaper level to buy, this morning…

And the Polish Central Bank raised rates 25 basis points (1/4%) in a surprise move yesterday… The Polish zloty performed nicely after the rate announcement… I know that I don’t talk about the “Euro Wanna-Be’s” very often, so I thought I would mention that there was a rate hike in Poland yesterday! The “Euro Wanna-Be’s” is a named that I coined for the countries that were thought to be on the “fast track” to joining the euro (back in 2003!): Poland, Hungary, and the Czech Republic…

OK… Most of you know that I have long called for Treasuries to be the next asset bubble… Of course, that was long before the Fed Reserve bought about $2.7 trillion worth of Treasuries in their two rounds of quantitative easing (QE)! But, I still think that we’ll see this happen in the long run… You know, Bill Gross, manager of the world’s largest bond fund (PIMCO) also is not a fan of US Treasuries, and has made investments accordingly… Right now, he and I look like we have egg on our respective faces, because the 10-year Treasury yield has fallen to 2.94%… But, historically speaking, history shows that Gross’s calls often seem wrong before proving accurate.

“I certainly don’t have any regrets,” Gross said.

As far as myself… I feel as though I let people down that shorted Treasuries with TBT… But, like I said the other day… I normally see things long before they happen, and in the meantime people think I’m nuts for having said what I saw… So… Patience…

Now… Before I head to the Big Finish, I have to get this off my chest… OK… I want to first say that I in no way was referring or instigating anyone to shoot Ben Bernanke yesterday when I said that no one in Atlanta had gone “John Wilkes Booth” on him during his speech… Believe or not, I actually had someone accuse me of instigating a shooting of Big Ben… Geez Louise! You know… If you want me to be bland like most newsletter writers, and not have fun with people, their statements, and policies, then… No wait! I can’t change! I guess you’ll just have to leave us…

I even had a guy tell me he was unsubscribing because of that statement… I told him, fine! I guess now you’ll have to find some other place to learn about all these things for free!

Then there was this… According to a Washington Post poll… Barely half of the people surveyed support raising the debt ceiling… WOW! Do you think that people are finally getting a clue? The problem here is that a substantial number of the respondents think the US will be seriously harmed if Congress doesn’t increase the debt limit… So, just like the many times before (and there have been 80 times before that the debt limit has been raised since 1920), nobody wants to do it, but it has to be done to keep us from going into default…

OK… I don’t know where to start with this… No wait! I do know where to start! Start at the spending… Reduce the spending and you won’t need to add to the debt or raise the debt limit! Spend, spend, spend, is what we’re all about and have been for a while…

Shoot Rudy… Once again yesterday someone accused me of being political in the letter… Apparently, a newcomer to the letter… For had they been around for a while they would recall me banging on the previous administration for their deficit spending too! I am adamant about this, folks… If I banged on the previous president for his $450 billion budget deficits, I don’t see how I can let this current president skate free with is $1.5 trillion budget deficits! So… Get your facts straight before you play that politics card with me!

To recap… The week of no-data ends today, and the markets can get some direction from the US trade deficit, and weekly jobs data. They can also see the color of the ECB’s thoughts, when ECB President Trichet speaks after leaving their rates unchanged this morning. The New Zealand dollar was the best performer overnight, after the RBNZ left the door open to re-enter the rate hike room (probably in the fourth quarter). Brazil did hike 1/4%, and gold and silver continue to weaken, even with strong demand…

Chuck Butler
for The Daily Reckoning

US Trade Deficit Takes on a Life of its Own originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
US Trade Deficit Takes on a Life of its Own




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

When Gas Prices Lead to Cutbacks

June 8th, 2011

Stocks fell again yesterday, down another 20 points or so. That’s six for six sessions in the red. And they’re down again, if only modestly, this morning. Gold is down too, off 8 bucks and change over the past 24 hours. But oil…oil is up big after, as one of the papers announced, “OPEC talks broke down in acrimony on Wednesday after Saudi Arabia failed to convince the cartel to lift production, sparking a rebound in global oil prices.” A “larger than forecast” drop in US inventories also helped push the price higher.

So let’s see… That’s a flat line for oil output, less in the reserve tank, increased global demand and more and more freshly-inked bills chasing the stuff. Seems only natural the price would eventually resume its skyward trajectory.

As you would expect, all these factors are colluding to hit American motorists rather hard this driving season. According to a new Harris Poll, 51% of Americans say they’ve cut back on other products and/or services in order to cope with higher prices at the pump. We probably didn’t need a poll to tell us that higher prices mean tougher decisions, of course, but it is interesting to see where the family budget is taking the biggest knock.

According to the poll, as cited in a riveting issue of Tire Review, “28% have cut back on dining out while 24% have cut back on groceries, 18% say they have cut back on entertainment, 11% have reduced driving, and 10% have cut back on clothing purchases.”

Of course, if you’re cruising to the local Dean & Deluca in your pimped-out Maybach, you’re probably not too worried about burning a few hundred extra dollars per week or per month on fuel. But if, as is the case for millions of workaday Americans, you’re struggling to keep/find work and living on a restricted budget, every dollar counts.

“Those with lower household income are more impacted,” the article continues, “with 65% of those with a household income of less than $35,000 a year having cut back on products or services because of higher gas prices compared to 38% of those who have household income of $100,000 or more.”

We wonder what this means for the government’s growing fleet of limousines that Eric brought to our attention yesterday. Here’s the chart again, in case you missed it the first time around:

The Number of Limousines Owned by the Federal Government

And we wonder, too, what effect this will have on “The Recovery.” Our guess is it will have no effect on it…because there was never a recovery to begin with. It was a sham…a prestidigitation…and hoax, wrapped in a con, wrapped in a scheme. Of course, you wouldn’t know that if you got your information from Whitehouse.gov. An article that appeared almost exactly a year ago (June 17, 2010) on that site reads (try not to laugh and/or cry):

“With tens of thousands of projects funded and millions of Americans on the job today, it’s hard to believe that it’s only been 16 months since President Obama signed the American Recovery and Reinvestment Act. And with so many jobs saved and created already, you might think that the Recovery Act’s greatest impact is behind us. But it’s not.”

Well, at least they were right about the last part: the “American Recovery and Reinvestment Act,” will probably do much more damage before it’s replaced by some other, equally moronic plan by the Feds to “do something.”

Joel Bowman
for The Daily Reckoning

When Gas Prices Lead to Cutbacks originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
When Gas Prices Lead to Cutbacks




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

Bernanke Describes US Economic Growth as “Frustratingly Slow”

June 8th, 2011

Well… Big Ben Bernanke said the economy was “frustratingly slow”… So… For once, he agrees with me, for I said it long before he ever admitted it! So, we’ve got that to talk about this morning, and a few other things.

Well… As I walked out of the door yesterday, Big Ben Bernanke was speaking to the good people in Atlanta… I say they are good people, because they sat and listened, and didn’t pull a John Wilkes Booth on Big Ben! But, just like politicians who like to pat their own backs when something goes right, even though it had nothing to do with them, Big Ben is touting the “necessity” of his stimulus or quantitative easing (QE)… He told the audience yesterday that his stimulus was “warranted” because the economy is “frustratingly slow”… Hmmm… Yes the second part of that statement is correct; it is “slow”… But, unless you are trying to emulate the Japanese, shouldn’t you have just let the economy bottom out, and by now we would be moving in the right direction, instead of these starts and stops caused by your stimulus, Mr. Bernanke?

Hey… Did you hear that White House Chief Economist, Goolsby, is leaving his job? I find this very suspicious, considering that the other day, I told you how he had downplayed last week’s jobs data, and called it a “freak report” and merely a “bump in the road”… And now he’s gone… Oh well, he was as useless as a pay toilet in a diarrhea ward to me, or the US as a whole, given that he was so removed from reality…

So… The currencies rallied throughout the day and, as I left for the day, the euro (EUR) was nearing 1.47 (1.4690), and I was all prepared to talk about how the guys that have been calling for an end of the euro for over a year now, had to be squirming with the single unit gaining about 1-cent a day lately… But, the media decided to bring up the Eurozone debt problems again… And soon the euro was scrambling in the overnight markets.

With the euro scrambling, the other currencies were dragged down, along with gold and silver, which again, makes me scratch my balding head, for if there is uncertainty (Eurozone) then gold and silver should be soaring… But, let me bring something to your attention… Yesterday, gold was moving higher, and then within a couple of minutes gold fell $13! Now, how does that happen, you might ask, as I did… Ahhh grasshopper, this is the stuff that the GATA people have been talking about for years… I suggest you go check them out here

So… We had some strange occurrence move gold down $13 in a matter of minutes… I’m sure the boys and girls over at the CFTC (Commodities, Futures, Trading Commission) will tell you that it was just a co-inky-dink! But I’m not buying that swampland they are trying to sell… And it just ticks me off to no end that nothing is done about this stuff!

OK… So, we’re weaker in the currencies and metals this morning than we were yesterday morning… You know, I had a reader send me a note yesterday that pretty much said that I should write about opportunities in currencies before it’s too late, and they are already rallying… Hmmm… Sorry… Thought I already did that… Now, I do admit that sometimes I’m so far ahead of the market with a call, that people begin to question the call before it comes to fruition… And I do admit that sometimes you have to read between the lines, because the Legal Beagles would give me a swift boot if I actually “recommended” something, besides diversifying your portfolio!

The boys and girls over at Citicorp must be reading the Pfennig these days… Let’s listen in… “Over the last two years when you did have US economic weakness, you also had a policy response.” Ahhh… They’re talking about the prospects of more stimulus…

And the US President was doing his best to help out Greece yesterday… He said that the US stands ready to assist Greece through the IMF, to avoid a disaster… That’s nice, and makes sense on the side of the coin that calls for the US/IMF to keep another financial meltdown from happening in the world… But doesn’t make sense on the side of the coin that says the US is in no position to prop up other countries, when all it would do is add to their debt…

So… Like I said above, the media decided to drag the Eurozone debt problems out of the closet again, and hang on the clothesline so all the neighbors can see… And whenever that happens, the Swiss franc (CHF) goes on a tear, along with Japanese yen (JPY), (now that the coordinated effort to stem the yen’s weakness is a fading memory to traders). Yen is actually trading with a 79 figure this morning…

It used to be that the dollar would be the king pin safe haven currency… But, think about that for a minute… My colleague and friend over at the Sovereign Society, Jeff Opdyke, shows a slide during one of his presentations that lists all the things that have happened in the past year that would normally have seen a rush to the dollar… But NOOOOOOOOO! It didn’t happen…

So… I ask the question: Has the dollar already begun to lose its reserve currency status?

Well… All you have to do is ask that question in: Asia, Belarus, Argentina, Russia, and Brazil… For these countries have signed currency swap agreements with China, which removes dollars from the trade between China and each respective country on their currency swap roster… Oh, and China is currently working on an agreement with Japan and Korea, and there are rumors that the Arab nations are interested in a swap agreement with China…

So, if you asked these countries, they would say “yes” to that question. And it will continue like this from here on out, until the dollar is no longer the reserve currency… You might think that’s no big deal… But ask the people of the UK if it was a big deal after World War II, when they lost that reserve status for their currency… It’s a BIG DEAL, folks…

And it will come about mainly because of our deficit spending, and resulting national debt. Things like this story from yesterday’s USA Today (thanks Scott!)… “The federal government’s financial condition deteriorated rapidly last year, far beyond the $1.5 trillion in new debt taken on to finance the budget deficit, a USA TODAY analysis shows. The government added $5.3 trillion in new financial obligations in 2010, largely for retirement programs such as Medicare and Social Security.”

OK… I can’t blame all of the euro’s backing off of its assault on 1.47 on the media… German Industrial Production fell 0.6% in April… March’s number was revised upward, though, so the combining of the two months isn’t as bleak as a 0.6% fall would normally look…

And then on the Greek news… German Finance Minister, Schaeuble, sent a letter explaining his position, which just so happens to be in alignment with the story I told you about on Monday from the news agency Die Welt… Here’s what I said on Monday in the Pfennig

The German newspaper, Die Welt, reported that the plan the Germans have come up with for Greek debt maturing 2012-14, is to have them volunteer to exchange this debt for new 7-year bonds… With all sorts of bells and whistles attached to the bonds to make them attractive…

You all may recall that I made this same suggestion a couple of months ago… To simply exchange present maturing bonds for longer term bonds… The only thing the holder would be out was the interest, but there could be some makeup applied to smooth out the wrinkles here… So, it’s nice to see that these guys took my suggestion!

So… It looks as though this is the route that will be taken… All it does is kick the can further down the road, but the way today’s markets and consumers see the world… “Let’s party today, and not worry about tomorrow”… Almost sounds like a song, eh? This plan would allow some breathing room for the euro… But, in reality, the debt is still there… And unless Greece, Portugal, and Ireland all take the necessary steps to cut spending, we’ll be right back here in a few years…

Then there was this… Do you know what a “High Frequency Trader” (HFT) is? Well, it is was it says it is… But, when it becomes large institutions, it becomes a problem… Here’s the famous, and well respected, Ted Butler on HFT’s trading in Silver… (I had to remove references to specific companies that Ted feels are responsible, but most of you know who he’s talking about)

Ted Butler on High Frequency Traders in Silver…

Who are these HFT traders? You guessed it – mostly the big silver shorts, led by dominant CME Group members. Only these big traders can afford the million-dollar computer hardware and software to run the HFT algorithms. How has it come to the point where giant traders with documented concentrated silver short positions have been further allowed to dominate daily trading volume that causes sharp dives in the price of silver? It is so crazy and outrageous that it should make your blood boil. Believe it or not, I’m trying to contain my outrage. These HFT traders, led by the silver crooks, are like a band of outlaws in the old West who have come to control and terrorize a town and its citizens.

To recap… Eurozone debt fears came back to the markets overnight, and have pushed the euro down from yesterday’s high of near 1.47. That has taken most of the other currencies lower too, with the removal of the risk appetite. Gold and silver saw huge gaps down on the day within minutes of trading, and Big Ben Bernanke described the economy as “frustratingly slow”…

Chuck Butler
for The Daily Reckoning

Bernanke Describes US Economic Growth as “Frustratingly Slow” originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
Bernanke Describes US Economic Growth as “Frustratingly Slow”




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

US Jobs Report: More than Just a “Bump in the Road”

June 6th, 2011

Last week I was talking about how the euro (EUR) would move past 1.45 if the Jobs Jamboree was disappointing… I guess it was disappointing, because the euro is well into the 1.46 handle this morning! So… For more on the Jobs data from last Friday, here are some thoughts I had right after the number was announced…

The Jobs Jamboree last Friday was very disappointing, not just “disappointing” as I had called for ahead of time. It was so bad that without the McDonald’s hiring of 60,000 workers announced in April, the number would have been negative… But I’ve got an even larger mark against the number of jobs created in May reported by the BLS of 54,000… The BLS added 206,000 jobs in their birth/death model! Oh… But you didn’t hear about any of this on the cable news, did you? Of course not! They wouldn’t know how to investigate a government report if it was right in front of their eyes!

So… Only 54,000 new jobs created in May (and that’s not even really correct!) and at first the currencies didn’t react the way they had recently, with a disappointing jobs jamboree number… But, then the dollar was sent for a ride on the slippery slope, and the currencies got to the business at hand of taking liberties against the dollar… Did you see that guy, Goolsby (the White House Chief Economist, or something like that)? This guy continues to be the flag waver for the economy, when stuff like this gets up and smacks him in the face… Anyway… The guy I’m talking about, said that the Jobs report was a “fluke”…and a measly little bump in the road…

That’s sad, folks… Very sad, because when the government is in denial about an economy, we’re in for a bad run… Growth is slowing… The ISM said so… The leading indicators have said so… The Housing data said so, and the jobs data has said so… I guess it will be “big surprise” to the government officials when Big Ben Bernanke says this fall, that the economy needs more stimulus… They’ll still be in denial, folks… But you don’t have to be!

The thing that you normally see when a country begins to show signs of a double dip (or just a general slowing), is that interest rates will go nowhere for some time… And that’s what we have going on here in the US. Interest rates are not going higher…not now, not tomorrow, next month, or even next quarter. And if I’m right, and in the fourth quarter we see QE3, (although I’m sure the Fed will not call it that) then rates aren’t going higher the rest of this year! That gives the currencies from countries that already enjoy a rate differential to the positive, in their favor, a good bit of attractiveness. Yes… Dress them all up in their red dresses, cause we’re going out on the town!

So, that would be a currency like the Australian dollar (AUD)… that already enjoys a nice wide differential of yields (rates), and is one of the main reasons the Aussie dollar is $1.0750… Like I said the other day, though, I really feel that until the Reserve Bank of Australia (RBA) hikes rates in August, and the Fed implements whatever form of stimulus/QE this fall, the Aussie dollar will probably range trade… But that’s not so bad! Think about it… You have a currency that pays you 300 basis points (3%) more than the dollar or yen (JPY) in deposit rates, and in bond yields, you get more than 200 basis points more in a 10-year Aussie government bond versus a US Treasury 10-year bond… So… For just having funds on deposit, you’re rewarded with greater interest than you can get in the US or Japan…or even in Europe! OK… Where do I sign up? HA!

OK… I’m watching the euro actually lose some ground as I type away with my fat fingers… Seems that a German Finance Minister took it upon himself to make sure that everyone knew that the a second bailout for Greece was not certain, and that right now it’s only “suggestions”…

This guy is simply trying to throw the markets off the scent of a much stronger euro, based on a Greek bailout. I still believe that this will all be put to bed, and the can sufficiently kicked further down the road by the end of this month. The Germans don’t want to see the euro get “ahead of itself” here…

I saw this news this past weekend, while everyone was sleeping… The German newspaper, Die Welt, reported that the plan the Germans have come up with for Greek debt maturing 2012-14, is to have them volunteer to exchange this debt for new 7-year bonds… With all sorts of bells and whistles attached to the bonds to make them attractive…

You all may recall that I made this same suggestion a couple of months ago… To simply exchange present maturing bonds for longer term bonds… The only thing the holder would be out was the interest, but there could be some makeup applied to smooth out the wrinkles here… So, it’s nice to see that these guys took my suggestion!

And then later this week, in the Eurozone, the European Central Bank (ECB) will meet to discuss rates, among other things… The markets will want ECB President, Trichet, to throw them a bone, and I think that this is the meeting that Trichet puts down the tracks for a rate hike next month… Look for the words that usually signal such things from Trichet, like “vigilance” and “maintaining price stability”… If you see those, then the fix is in for a rate hike next month… Of course, ECB officials will do their best to downplay this pending rate hike, for once again they don’t want the euro getting “ahead of itself”…

Talk about a bare data cupboard! That’s what we have here in the US, this week… So, for a week, the markets are going to have to chew on the Jobs Jamboree… YUCH! … That doesn’t taste good! Not until Thursday will we see April’s trade deficit probably widen further… So, any further direction in the currencies this week will have to come from Greek Developments…

The Swiss franc (CHF) just has to be one big pain in the neck for the boys and girls over at the Swiss National Bank (SNB)… The franc is like the Energizer Bunny, and just keeps going on and on, and on, and… Well, you get the picture. The currency has no yield… But it has that “perceived title” of safe haven, which people flock to when there are geopolitical problems… Well, we’ve had more geopolitical problems in the past six months than you can shake a stick at, and the franc goes on, and on, and on…

Speaking of having a pain in the neck from a currency that just won’t behave… The boys and girls in the Brazilian government have thrown everything but the kitchen sink at the Brazilian real (BRL) to keep it from getting stronger, but to no avail… The real is back on the rally tracks and feeling stronger every day!

The Canadian dollar/loonie (CAD) continues to get dragged down by government claims that interest rates aren’t going higher… I find this to be strange, because oil is still around $100, gold is still above $1,500, and commodities, while getting whacked by claims that China would slow down, are still on the rally tracks… I think the markets are growing tired of the babble that the Bank of Canada (BOC) isn’t going to hike rates… We all know that to be a non-truth, that the BOC will hike rates again, probably when the kids go back to school!

Then there was this… Talk about geopolitical problems… This week, our friends (NOT!) over at OPEC will meet… That should be quite interesting! OPEC oil ministers brace for a stormy meeting…

Libya’s conflict likely will produce a fiery and highly politicized meeting when oil ministers of the Organization of Petroleum Exporting Countries gather Wednesday in Vienna, industry sources said. Qatar has openly sided with Libyan rebels, but other OPEC members are reluctant to follow suit because the EU hasn’t granted diplomatic recognition to the opposition government. Oil ministers are divided on whether to comply with requests from Western countries to increase production.

To recap… The Jobs Jamboree was not just disappointing, it was very disappointing, and that was even after some “adjustments” to the numbers… The weak jobs data put further question marks on the economy, and what I’ve said would happen – a call for further stimulus – comes along… That sent the dollar on a ride on the slippery slope, and the euro has traded all the way up to 1.46 this morning.

Chuck Butler
for The Daily Reckoning

US Jobs Report: More than Just a “Bump in the Road” originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
US Jobs Report: More than Just a “Bump in the Road”




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Commodities, Uncategorized

An Emerging Free Market Currency

June 3rd, 2011

“I’d feel a little stupid buying these things,” a dear friend of your editor’s recently remarked. “But that’s probably not, in and of itself, a bad thing. After all, I felt pretty stupid buying gold back when it was still $250 per ounce.”

Our friend was referring to a peer-to-peer (P2P) cybercrypto currency called bitcoin. What is bitcoin? How is it used? What are the risks? Let’s begin where all good non-Tarantino stories begin…at the beginning.

The demand for a totally free market currency arose, naturally, out of the dismal state of the current monetary environment, in which governments around the world systematically debase the value of their printed monies in order to pay for the various welfare-warfare states they promised but can’t possibly afford. The resulting inflation is sometimes referred to as a “sneaky tax,” one that silently, insidiously infiltrates the marketplace, with each freshly-inked dollar compromising the value and integrity of each and every currency unit already in circulation.

This is by no means a new phenomenon, as we remarked in this space last Friday:

“The history of centrally controlled monies is a history of theft, inflation and, eventually and invariably, defaults. From coin clippings during the Roman Empire through to debasement of German marks under the Weimar Republic…to hyperinflationary corruption of, in no particular order, Hungarian pengÅ‘s…Zimbabwean dollars…Greek drachmai…Brazilian cruzeiros…Polish zlotych…Chinese yuan…Nicaraguan córdobas…US continentals…Peruvian soles…Angolan kwanzas…Russian rubles…Argentine pesos…

“…and the list goes on (and on…and on…).”

It is hardly a surprise, therefore, that after having labored under the state’s unquestionable, unchallengeable monopoly on counterfeiting, and enduring the capricious, inflationary whims of the central banker class, the free market would demand – and will eventually provide – a superior alternative.

At various times throughout history, this has meant chaining the Feds to a gold and/or bimetal standard. Alas, as we know too well thanks to the likes of FDR and Nixon, the temptation to inflate is matched only by politicians’ reliable tendency to make promises they can’t keep. And so, gold standards are frequently tossed out the window at moments of manufactured convenience, proving further that entrusting the state to maintain the integrity of its currency is about as effective as locking them in a cell and giving them the key.

The free market requires something better, something beyond the grasp of the state and its many and varied manipulators and do-good meddlers. So, what’s the solution? Again, from this space last week:

“Advocates of a small but fast-growing digital currency network called bitcoin think they’ve found the answer (or, at the very least, an answer). If it is successful, claim its adherents, this totally-decentralized, peer-to-peer (P2P) currency could supplant the world’s central bank-issued money, potentially providing savvy speculators with an opportunity to cash in on the greatest politically motivated market distortion of our time.”

Which brings us back to our original questions. First, what is bitcoin? An article that appeared on Yahoo! News this morning provides as good a definition as any (and a hint that the mainstream is catching on). Bitcoin is “a peer-to-peer system of electronic money that allows payments to be sent directly between two parties without the need for a financial institution.”

The currency also makes redundant the concept of a central bank, Federal Reserve or any other such easily corruptible nonsense institutions. For starters, bitcoins are not generated, but rather awarded to miners – individual computers participating in the network – as a reward for processing transactions and securing the bitcoin currency network, thus providing an entirely decentralized, highly competitive marketplace, much like the Internet itself. What’s more, the amount of bitcoins is strictly (mathematically) limited to 21 million coins. There are currently about 6.5 million coins in circulation and anywhere up to half a million dollars worth (at today’s exchange rate) changes hands daily. As more and more coins are mined, the difficulty (amount of CPU required to mine each coin) increases exponentially, ensuring a steady (though ultimately finite) supply.

As more and more vendors begin accepting bitcoins as form of payment for goods and services, the universe expands against the number of available coins in circulation, thereby driving the value of the currency ever higher. (When we mentioned bitcoin last Friday, it was trading for about B$1 = US$8. Today it hit B$1 = US$14.25.)

As you might expect, bitcoin has its fair share of skeptics; maybe even more than its fair share. Bitcoin has appreciated at an incredible rate since it “took hold” in the online community, especially over the past few months. One of the first ever transactions using bitcoin, according to the forums, involved a consumer who paid B$10,000 for a pizza online one year ago. Those same bitcoins are today worth about US$140,000. Not a bad tip for the delivery guy. Still, such phenomenal currency appreciation has led many to assert that bitcoins are in a “bubble.” And maybe they are…but not for the simple reason that they have appreciated against other currencies.

Value, as Ludwig von Mises described it, is not determined by the nature of objects themselves, but through our interactions with and appreciation for them. “Value is not intrinsic, it is not in things,” he wrote in Human Action. “It is within us; it is the way in which man reacts to the conditions of his environment.”

Is Google Inc., to take a real world example, in a bubble because it has more or less quintupled since IPOing in 2004? Or is it fairly priced at US$525 (or one third an ounce of gold…or B$37.5) because buyers and sellers of the stock agree, in this moment, that’s what it is worth?

Another cause for concern among bitcoin skeptics is that, as the economy of the free market currency expands it will inevitably begin posing a threat to the state’s own money-printing racket. It will, thereby, raise the ire of bankers and politicians who will have every incentive to make the currency illegal in order that they may protect their own monopoly and continue cheating their citizens of the value of their president-stamped notes and coins. Given the state’s nature when it comes to these matters (and here we refer readers to the recent and despicable case against Bernard von NotHaus) there is every reason to expect that it will indeed crack down…and hard.

Here we expect all the usual arguments from all the usual suspects: Bitcoin transactions are anonymous and therefore provide cover for peddlers of child pornography and drug traffickers, they will contend.

But the astute reader knows in his gut there is something very wrong with this line of thinking right from the beginning. Cash is anonymous too. People by things deemed illegal by the state with state-issued currency all the time. So what? Does this mean US dollars should be banned? Some people drive their cars recklessly, with little or no regard for their own safety or for others’. Should we ban cars?

The question, however, is not whether the Feds should do something (moral considerations have rarely, if ever, stopped them before), but whether they could do something, even if they wanted to…

Whether or not you agree with the organization itself, the WikiLeaks scandal did nothing if not expose the limited power of government when it comes to policing the cyber world. Presented with every motivation to “take down” the WikiLeaks site, the Feds went after them in typically cumbersome fashion. Within a few days of the attack on their site, 10,000 WikiLeaks mirror pages had sprung up around the world. Six months after the largest leak of sensitive, highly-classified and obviously embarrassing state documents found its way into the light of virtual day, the organization now has more followers and supporters than ever before. Go figure.

Your editor has no idea whether bitcoin is a great idea or simply a great scam. Maybe it’s both. And maybe it is in a bubble of epic proportions due to implode promptly at high noon tomorrow. And maybe the Feds can and will crush its rapidly expanding base of freely associating participants. Who knows?

In any case, the fact that the market has demonstrated the motivation and, arguably, the means to challenge state-sponsored currency manipulation is good news for freedom lovers everywhere. Bravo!

Joel Bowman
for The Daily Reckoning

An Emerging Free Market Currency originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
An Emerging Free Market Currency




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

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An Emerging Free Market Currency

June 3rd, 2011

“I’d feel a little stupid buying these things,” a dear friend of your editor’s recently remarked. “But that’s probably not, in and of itself, a bad thing. After all, I felt pretty stupid buying gold back when it was still $250 per ounce.”

Our friend was referring to a peer-to-peer (P2P) cybercrypto currency called bitcoin. What is bitcoin? How is it used? What are the risks? Let’s begin where all good non-Tarantino stories begin…at the beginning.

The demand for a totally free market currency arose, naturally, out of the dismal state of the current monetary environment, in which governments around the world systematically debase the value of their printed monies in order to pay for the various welfare-warfare states they promised but can’t possibly afford. The resulting inflation is sometimes referred to as a “sneaky tax,” one that silently, insidiously infiltrates the marketplace, with each freshly-inked dollar compromising the value and integrity of each and every currency unit already in circulation.

This is by no means a new phenomenon, as we remarked in this space last Friday:

“The history of centrally controlled monies is a history of theft, inflation and, eventually and invariably, defaults. From coin clippings during the Roman Empire through to debasement of German marks under the Weimar Republic…to hyperinflationary corruption of, in no particular order, Hungarian pengÅ‘s…Zimbabwean dollars…Greek drachmai…Brazilian cruzeiros…Polish zlotych…Chinese yuan…Nicaraguan córdobas…US continentals…Peruvian soles…Angolan kwanzas…Russian rubles…Argentine pesos…

“…and the list goes on (and on…and on…).”

It is hardly a surprise, therefore, that after having labored under the state’s unquestionable, unchallengeable monopoly on counterfeiting, and enduring the capricious, inflationary whims of the central banker class, the free market would demand – and will eventually provide – a superior alternative.

At various times throughout history, this has meant chaining the Feds to a gold and/or bimetal standard. Alas, as we know too well thanks to the likes of FDR and Nixon, the temptation to inflate is matched only by politicians’ reliable tendency to make promises they can’t keep. And so, gold standards are frequently tossed out the window at moments of manufactured convenience, proving further that entrusting the state to maintain the integrity of its currency is about as effective as locking them in a cell and giving them the key.

The free market requires something better, something beyond the grasp of the state and its many and varied manipulators and do-good meddlers. So, what’s the solution? Again, from this space last week:

“Advocates of a small but fast-growing digital currency network called bitcoin think they’ve found the answer (or, at the very least, an answer). If it is successful, claim its adherents, this totally-decentralized, peer-to-peer (P2P) currency could supplant the world’s central bank-issued money, potentially providing savvy speculators with an opportunity to cash in on the greatest politically motivated market distortion of our time.”

Which brings us back to our original questions. First, what is bitcoin? An article that appeared on Yahoo! News this morning provides as good a definition as any (and a hint that the mainstream is catching on). Bitcoin is “a peer-to-peer system of electronic money that allows payments to be sent directly between two parties without the need for a financial institution.”

The currency also makes redundant the concept of a central bank, Federal Reserve or any other such easily corruptible nonsense institutions. For starters, bitcoins are not generated, but rather awarded to miners – individual computers participating in the network – as a reward for processing transactions and securing the bitcoin currency network, thus providing an entirely decentralized, highly competitive marketplace, much like the Internet itself. What’s more, the amount of bitcoins is strictly (mathematically) limited to 21 million coins. There are currently about 6.5 million coins in circulation and anywhere up to half a million dollars worth (at today’s exchange rate) changes hands daily. As more and more coins are mined, the difficulty (amount of CPU required to mine each coin) increases exponentially, ensuring a steady (though ultimately finite) supply.

As more and more vendors begin accepting bitcoins as form of payment for goods and services, the universe expands against the number of available coins in circulation, thereby driving the value of the currency ever higher. (When we mentioned bitcoin last Friday, it was trading for about B$1 = US$8. Today it hit B$1 = US$14.25.)

As you might expect, bitcoin has its fair share of skeptics; maybe even more than its fair share. Bitcoin has appreciated at an incredible rate since it “took hold” in the online community, especially over the past few months. One of the first ever transactions using bitcoin, according to the forums, involved a consumer who paid B$10,000 for a pizza online one year ago. Those same bitcoins are today worth about US$140,000. Not a bad tip for the delivery guy. Still, such phenomenal currency appreciation has led many to assert that bitcoins are in a “bubble.” And maybe they are…but not for the simple reason that they have appreciated against other currencies.

Value, as Ludwig von Mises described it, is not determined by the nature of objects themselves, but through our interactions with and appreciation for them. “Value is not intrinsic, it is not in things,” he wrote in Human Action. “It is within us; it is the way in which man reacts to the conditions of his environment.”

Is Google Inc., to take a real world example, in a bubble because it has more or less quintupled since IPOing in 2004? Or is it fairly priced at US$525 (or one third an ounce of gold…or B$37.5) because buyers and sellers of the stock agree, in this moment, that’s what it is worth?

Another cause for concern among bitcoin skeptics is that, as the economy of the free market currency expands it will inevitably begin posing a threat to the state’s own money-printing racket. It will, thereby, raise the ire of bankers and politicians who will have every incentive to make the currency illegal in order that they may protect their own monopoly and continue cheating their citizens of the value of their president-stamped notes and coins. Given the state’s nature when it comes to these matters (and here we refer readers to the recent and despicable case against Bernard von NotHaus) there is every reason to expect that it will indeed crack down…and hard.

Here we expect all the usual arguments from all the usual suspects: Bitcoin transactions are anonymous and therefore provide cover for peddlers of child pornography and drug traffickers, they will contend.

But the astute reader knows in his gut there is something very wrong with this line of thinking right from the beginning. Cash is anonymous too. People by things deemed illegal by the state with state-issued currency all the time. So what? Does this mean US dollars should be banned? Some people drive their cars recklessly, with little or no regard for their own safety or for others’. Should we ban cars?

The question, however, is not whether the Feds should do something (moral considerations have rarely, if ever, stopped them before), but whether they could do something, even if they wanted to…

Whether or not you agree with the organization itself, the WikiLeaks scandal did nothing if not expose the limited power of government when it comes to policing the cyber world. Presented with every motivation to “take down” the WikiLeaks site, the Feds went after them in typically cumbersome fashion. Within a few days of the attack on their site, 10,000 WikiLeaks mirror pages had sprung up around the world. Six months after the largest leak of sensitive, highly-classified and obviously embarrassing state documents found its way into the light of virtual day, the organization now has more followers and supporters than ever before. Go figure.

Your editor has no idea whether bitcoin is a great idea or simply a great scam. Maybe it’s both. And maybe it is in a bubble of epic proportions due to implode promptly at high noon tomorrow. And maybe the Feds can and will crush its rapidly expanding base of freely associating participants. Who knows?

In any case, the fact that the market has demonstrated the motivation and, arguably, the means to challenge state-sponsored currency manipulation is good news for freedom lovers everywhere. Bravo!

Joel Bowman
for The Daily Reckoning

An Emerging Free Market Currency originally appeared in the Daily Reckoning. The Daily Reckoning provides over half a million subscribers with literary economic perspective, global market analysis, and contrarian investment ideas.

Read more here:
An Emerging Free Market Currency




The Daily Reckoning is a contrarian e-letter, brought to you by New York Times best-selling authors Bill Bonner and Addison Wiggin since 1999. The DR looks at the economic world-at-large and offers its major players – investors, politicians, economists and the average consumer – some much-needed constructive criticism.

Uncategorized

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