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USAGOLD NewsGroup Alert
April 16th: Gold Reacts
to Soaring Inflation - A Little Fundamental Reality...
Introduction: Good endings
tend to come from good beginnings. And to start right one needs
to be properly informed. Let's take our understanding of the
inflation rate as an example. If one were to believe inflation
was running at 4%, as the government suggests, it would encourage
one set of portfolio decisions. If, however, one were to believe
that the inflation rate was running at 12% as Shadow Government
Statistics suggests, a wholly different set of decisions might
be made. The primary goal of all investing is to provide a real
rate of return after inflation and taxes -- something gold has
more consistently achieved over the past seven years than any
other major asset grouping.
Read on, fellow seekers of
wisdom. . . .
"Why is now an appropriate
time to drink to gold? Because gold is possibly near to shaking-off
a sustained and coordinated attack on its monetary credibility
by some of the world's most powerful central banks. Investors
could win back an asset that offers protection against the financial
abuse of governments." -- John Brown, financial analyst
and former member of Britain's parliament
The fading
American economy
Paul Craig Roberts - April 9, 2008
"Government employs 22,387,000
Americans, 8,744,000 more than manufacturing. Even the category
leisure and hospitality employs 13,682,000 Americans, slightly
more than manufacturing. There are as many waitresses and bartenders
as production workers. . .Is this a portrait of a super economy?"
USAGOLD Comment: Every once in a while it pays to step
back and make an assessment where we have been and where we are
going as an economy and a country. Paul Craig Roberts, a former
assistant secretary of the Treasury, does a very good job of
that in the article linked above. He concludes darkly that the
United States "has been in a recession for most of the 21st
century."
__________________________
Government stats and the shadow reality
John Williams' Shadow Government Statistics
"Have you ever wondered
why the CPI, GDP and employment numbers run counter to your personal
and business experiences? The problem lies in biased and often-manipulated
government reporting. We offer an exposé of the problems
within the reporting system, and an assessment of underlying
economic reality. . ."
USAGOLD Comment: What is the M3 number since the Fed
abandoned reporting on it? What is the real inflation rate? The
real unemployment rate? Real GDP? The answers, contained in the
group of graphs linked above, amount to a wake-up call. Williams,
as Paul Craig Roberts points out, employs the methodology used
by government agencies "prior to decades of spin."
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The Black Death
of financial collapse
James Cumes - 4/10/08/ - Asia Times
The financial and economic
crisis now upon us is by far the most menacing of the past century
- even more so than the Great Depression of the 1930s. It is
not just a 'subprime' crisis; it is systemic -- affecting the
entire financial system. It is also global, affecting various
countries in various ways but affecting them all.
USAGOLD Comment: Though written to an Australian audience,
this article resonates to America, Europe and beyond. It also
challenges the growing consensus, and perhaps wishful thinking,
on Wall Street that somehow we are out of the woods on the credit
crisis.
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Wholesale prices
soared in March
AP - April 15, 2008
"Inflation at the wholesale
level soared in March at nearly triple the rate that had been
forecast as energy prices kept rising and food costs posted a
much bigger jump than anticipated."
"The Labor Department
reported Tuesday that wholesale prices rose by 1.1 percent last
month, the largest increase since a 2.6 percent rise last November.
The November gain in the Producer Price Index was the biggest
one-month jump in 33 years."
"Analysts had expected
a much more moderate 0.4 percent rise in wholesale prices for
the month. However, food costs, which had fallen by 0.5 percent
in February, leapt by 1.2 percent last month, propelled upward
by big gains in vegetables and beef and the biggest increase
in rice prices in more than five years. Those were far higher
increases in food prices than expected."
USAGOLD Comment: After a little while, fundamental
reality asserts itself no matter what. Just as this NewsGroup
was being prepared for mailing, the Labor Department published
its latest wholesale inflation numbers. A rise of 1.1% translates
to 13.2% annualized. Double digit inflation has arrived even
by Labor Department standards! The inflation news explains in
a large measure gold's performance today -- up $20 at this writing.
Note, too, the unpleasant side bar that the components which
pushed the rate to this level -- rice, vegetables, beef, et al,
(and let's not forget about oil) -- are unlikely to stabilize
any time soon. In fact nation states are acting to restrict the
flow of key food commodities as a matter of self-defense. This
will only add to the problem.
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 European NewsGroup April 16th:
Banking system bailouts and positive fundamentals bode well for
gold
Taxpayers Forced
to Cover Risk of Banks' Folly
Wolfgang Reuter - Der Spiegel - 10-Apr-08
"Writedowns from the global
financial crisis spurred by the American subprime meltdown are
mounting in Germany, causing the deepest financial crisis seen
here in decades."
"The writedowns continue
to mount and, in a worst case scenario, could leave taxpayers
with a bill as high as ?30 billion."
"In the end, the taxpayers
always get stuck with the bill."
USAGOLD Comment: That last statement says it all. The
German government has continued to offer guarantees to banks
taking writedowns that stem from losses that are ultimately traceable
back to the American subprime crisis. The central banks appear
prepared to do whatever it takes to prevent a major bank from
collapsing. If that first domino were to fall, there's no telling
where it might end. Efforts to bail out the banks are leading
to global currency devaluations. While a little relief in the
form of a weaker euro might be viewed as a good thing within
the Eurozone, the dollar is being debased at a much faster rate.
Nonetheless, the purchasing power of the euro is being eroded
as evidenced by the recent gains above ?600 per ounce versus
gold. Gold offers a liquid and convenient hedge against inflation
and debasement of the euro. This article also highlights the
systemic risks to the European banking system.
______________________________________
Why the euro
is unlikely to eclipse the dollar
Barry Eichengreen and Marc Flandreau - Financial Times - 02-Apr-08
"Theoretical models of
network externalities are in fact wholly inappropriate to our
21st-century world. The advantages to an individual central bank
of holding its reserves in the same currency as other central
banks range from slim to none. The real reason the dollar so
dominated reserve holdings after the second world war was that
only the US had liquid financial markets. Only the US market
was free of capital controls. The dollar dominated foreign exchange
reserves simply because there were no alternatives."
"The dollar lost its role
as a reserve currency in the 1930s, albeit temporarily, because
of disastrous mismanagement of the US economy. Equally disastrous
mismanagement today would certainly cause the dollar to disappear
from the international scene, leaving the euro as the only international
currency standing. That said, no matter how difficult the current
situation and how contentious the US policy response to the crisis
could prove to be, we are still very far from that point."
USAGOLD Comment: An interesting theory, suggesting
that in today's day and age there are no real advantages for
a particular central bank to hold its reserves in the same currency
as other central banks. The "exorbitant privilege"
has its costs, so it is doubtful that the powers-that-be in the
Eurozone would even want the euro to become the world's next
reserve currency. Nonetheless, as the dollar becomes increasingly
less attractive, the euro and gold do offer an alternative. Some
central banks have made no secret about their desires to acquire
gold and euros as reserve assets and this reallocation is generally
coming at the expense of the dollar.
______________________________________
Golden Gut Check
Mike Kosares - USAGOLD.com - 07-Apr-08
"I cannot remember a time
when the fundamentals have lined up more favorably for gold."
"Demand, as reported copiously
by the mainstream financial press, continues to grow steadily
on a global basis. It is on the supply side of the equation,
however, where we now find the strongest arguments for resumption
of the bull market. To come to the point, fundamental trends
suggest that the gold market may be moving from a period of general
scarcity to outright shortages. Unless some formidable source
for gold is suddenly found, the period of shortages could come
to full flower as early as 2008."
USAGOLD Comment: At the risk of sounding like a sycophant;
this article written by the President of USAGOLD is about as
good an article as you will find highlighting the supply/demand
dynamics for gold. Mike builds a very strong case for a potential
gold shortage. This article is a must read for any gold owner
and anyone considering becoming a gold owner.
--
Regards, Pete Grant
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April 7th: Market Update
-- Golden Gut Check
Clients & Friends,
This link takes you to the
latest USAGOLD Market Update featuring "Golden Gut Check:
Why gold is likely to keep moving higher over the long
run" by Michael J. Kosares, founder of the firm and
author of "The ABCs of Gold Investing: How to Protect
and Build Your Wealth with Gold."
Golden Gut Check
Michael J. Kosares - April 7, 2008
USAGOLD Comment: Remember the golden rule!
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