Category: Politics

Lew Issues Debt-Ceiling Warning

25-Sep (The Wall Street Journal) — The U.S. Treasury Department on Wednesday said it would exhaust emergency measures to avoid falling behind on government obligations no later than Oct. 17 and would be left with $30 billion in cash to run the government, a warning that could hasten fiscal discussions on Capitol Hill.

Treasury Secretary Jacob Lew, in a letter to Congress, said the $30 billion in cash would “be far short of net expenditures on certain days, which can be as high as $60 billion.” He called on Congress to raise the nation’s borrowing limit immediately to prevent the country from falling behind on its bills.

…Because the government runs a deficit and spends more money than it brings in through revenue, analysts believe it would only be a matter of days, or perhaps weeks, before that cash ran out and triggered what is known as a “technical default” because some payments wouldn’t be met.

In the letter, Mr. Lew said Republican proposals to “prioritize” Treasury’s payments after this time, such as by making interest payments to bondholders before making other payments, is “simply default by another name.”


Posted in Debt, Fiscal Cliff, Politics |

Triumph Confirms ‘Era of Merkelism’

ngela Merkel is at the zenith of her power. Her historic election win on Sunday reflects how deeply Germans appreciate her no-nonsense, frugal Hausfrau style of governing, say editorials. But she now needs to address domestic reforms to secure her legacy.

German Chancellor Angela Merkel won a stunning victory in Sunday’s election, leading her conservatives to their best result in two decades following a campaign that focused almost entirely on her rather than on policies.

The election result, which puts her on a similar footing with Christian Democratic Union (CDU) party heavyweights like Konrad Adenauer and Helmut Kohl, but she won’t have much time to savor it. She faces difficult coalition talks with the opposition Social Democrats and possibly with the Greens.


Posted in Politics |

Shutdown Prospects Soar as Obama, GOP Square Off

18-Sep (RollCall) — The prospect of a partial government shutdown increased significantly this morning.

President Barack Obama made it emphatically clear that he is not in any way open to negotiating a delay or a weakening of his health care law. He spoke just minutes after House GOP leaders announced plans to pass legislation this week that would make defunding Obamacare their condition for stopgap spending until December and an increase in the debt limit good for at least a year.

The president, in remarks to corporate executives at the Business Roundtable, said he won’t allow a “faction” of the most conservative Republicans to “extort” such a concession from him because that “would fundamentally change how American government functions.”

“We will blow the whole thing up unless you do what we want? That can’t be our recipe for governing,” he said in characterizing the Republican plan. He also contended that this could jeopardize the economic recovery by rattling financial markets close to the next two budget deadlines — the start of the fiscal year in a dozen days and the Treasury’s need to borrow money beyond the legal limit sometime in the middle of October.

…At least for today, though, the atmospherics on both sides suggest that a government shutdown lasting at least a few days might be required to focus the negotiators’ minds.


Posted in Debt, Politics |


26-Jul (Politico) — The campaign by liberals against Larry Summers as Fed Chair gathered pace yesterday with a letter circulating among some Senate Democrats backing Fed Vice Chair Janet Yellen and a number of critical op-eds and blog posts (see below). Complaints about Summers mainly focus on issues other than his views on monetary policy, such as his investment record at Harvard and treatment of women both inside and outside government. But the biggest risk of a Summers nomination is that it could create market uncertainty this fall at the worst possible time.

Pantheon’s Ian Shepherdson on this point: “The danger for the market … is not that the next Chairman is likely to change the policy course dramatically, but that an attempt to appoint Mr. Summers backfires and his nomination is held up for an extended period. That means the Fed could find itself rudderless at the same time Congressional fighting over the debt ceiling reaches its peak.


Posted in Central Banks, Politics |

A Day of Friction Notable Even for a Fractious Congress

12-Jul (New York Times) — — Even in a Congress where bipartisanship and comity are now officially the exceptions to the regular order, the near implosion on Capitol Hill on Thursday was notable, as both chambers erupted in a furor that went on for much of the day.

…The chaos reflects the reality that Congress has largely been reduced from a lawmaking entity to a political operation, in which positions are taken and fermented largely in the name of maintaining party unity rather than attracting votes from the other side. In both the Senate, controlled by Democrats, and the House, under the rule of Republicans, the minority is largely powerless to do anything but protest.


PG View: Fed chairman Bernanke has lamented the “fiscal headwinds” in recent months, but as this article illustrates, Congress is showing no signs whatsoever that they can come together to address the serious fiscal issues facing our nation. That leaves the economy in the hands of the Fed, to do what it can to keep it sputtering along through expansive monetary policy…

Posted in Politics |

Japan is not ready for the fourth of Shinzo Abe’s arrows

03-Jul (Financial Times) — Is it the right time to fire Shinzo Abe’s fourth arrow? There has been so much emphasis on arrows number one to three that many have forgotten about the fourth altogether. This entails doubling the consumption tax in two stages, starting in April next year, to 10 per cent. By some accounts, the fourth arrow, the opening shot in an effort to repair Japan’s finances after years of deficits, is the most important of all. Deciding when to fire it could be the trickiest decision the prime minister has had to make.

…bond markets are watching closely. If they sense a lack of resolve, they could become jittery. That could push interest rates up sharply, raising the cost of debt service, or provoke capital flight.


PG View: So let me see if I have this correct: Pump the economy full of yen under the guise of stimulus and deflation fighting, and then suck ’em all out again through higher taxes? It’s sounding more and more like the real purpose of QE is to simply finance massive deficit spending by governments…

Posted in Central Banks, Monetary Policy, Politics, QE |

Morsi and Egyptian Generals Edge Closer to Conflict

03-Jul (The New York Times) — Egypt’s top generals summoned civilian political leaders to an emergency meeting Wednesday just hours before the deadline they have set for President Mohamed Morsi to leave power.

Among those called to the meeting was Mohamed ElBaradei, the former United Nations diplomat protesters demanding Mr. Morsi’s ouster have tapped as one of their negotiators over a new interim government, Reuters reported, citing unnamed official sources.

Mr. ElBaradei has been an outspoken critic of Mr. Morsi and his allies in the Muslim Brotherhood, the constitution they pushed to a referendum and the previous period of military rule. He has declined to comment in his current position. News agencies reported that top Muslim and Christian religious authorities were invited as well.

The escalating tensions between Mr. Morsi’s Islamist supporters and their opponents continued to spur street violence overnight.


Posted in Politics |

The Economic and Political Decline of France

05-Jun (Der Spiegel) — France is in the grip of a crisis. As both its economy and European influence weaken, scandal has hobbled its political elite. The country needs drastic overhaul, but President Hollande does nothing but waver and hesitate.

…France’s plight was initially apparent in the economy, which has been stagnating for five years, because French state capitalism no longer works. But the crisis reaches deeper than that. At issue is a political class that more than three quarters of the population considers corrupt, and a president who, this early in his term, is already more unpopular than any of his predecessors. At issue is a society that is more irreconcilably divided into left and right than in almost any other part of Europe. And, finally, at issue is the identity crisis of a historically dominant nation that struggles with the fact that its neighbor, Germany, now sets the tone on the continent.

The French economy has been in gradual decline for years, without any president or administration having done anything decisive about it. But now, ignoring the problems is no longer an option. The economy hasn’t grown in five years and will even contract slightly this year. A record 3.26 million Frenchmen are unemployed, youth unemployment is at 26.5 percent, consumer purchasing power has declined, and consumption, which drives the French economy, is beginning to slow down, as well.

…This mixture of factors could jeopardize the entire European structure. For one thing, if France continues to decline, more and more responsibility will be shifted to Germany. “Germany cannot carry the euro on its shoulders alone indefinitely,” writes Harvard University economist Kenneth Rogoff. “France needs to become a second anchor of growth and stability.”


Posted in Economy, European Debt Crisis, Politics |

McConnell: GOP won’t vote to raise debt limits without concessions

07-May (TheHill) — Senate Minority Leader Mitch McConnell (R-Ky.) said Tuesday that Republicans will not vote to increase the nation’s debt limit this summer if it is not attached to legislation to reduce the federal deficit.

“I can tell you with certainty I think it’s extremely unlikely that any Republican is going to vote to raise the debt ceiling without doing something about the debt,” he told reporters.

McConnell said he is in discussions with Speaker John Boehner (R-Ohio) and other House leaders about the possibility of adding tax reform or a deficit-reduction plan to the debt limit.


PG View: Here we go again…

Posted in Debt, Politics |

Shutdown averted: Congress passes 2013 spending bill

21-Mar (Washington Times) — Acting with striking unity, Congress on Thursday passed a $1 trillion spending bill to fund the government for the rest of the fiscal year, heading off a government shutdown showdown and beginning to rearrange some of the sequester cuts.

The 318-109 vote in the House, following a similarly easy vote in the Senate on Wednesday, could signal the beginning of a new determination in both parties to avoid the kinds of bitter last-minute showdowns that dominated the previous two years.

President Obama has signaled he’ll sign the measure into law.


PG View: Sequester reaffirmed, but another $1 trillion in spending approved to get us to 30-Sep.

Posted in Economy, Politics |

No Agreement on $1.2 Trillion in Cuts as Deadline Nears

13-Feb (Bloomberg) — Democrats and Republicans in the U.S. Congress are nowhere near a plan to avert $1.2 trillion in spending cuts about two weeks before they are set to begin.

It’s the latest in a series of fiscal deadlines created by Congress that in the past two years took the U.S. to the brink of a debt default, a government shutdown and middle-class tax increases that neither party wanted. Unless lawmakers act, the across-the-board spending reductions will begin March 1.

Leaving the cuts in place would shave U.S. economic growth this year by 0.6 percent and cost 750,000 jobs by the fourth quarter, Congressional Budget Office Director Doug Elmendorf said yesterday at a hearing.


Posted in Politics |

House approves debt-limit extension, presses Senate to pass budget

23-Jan (The Hill) — The House on Wednesday approved a bill extending the nation’s debt limit, raising pressure on the Senate to pass its first budget in nearly four years.

The House approved the No Budget, No Pay Act, which also includes a measure withholding senators’ pay until they complete that work, in a 285-144 vote.

Among Republicans, 33 voted against it to protest the absence of specific spending cuts alongside suspending the nation’s borrowing limit. But they were more than offset by the 86 Democrats who voted for the measure.

The bill extends the debt ceiling through May 18, and requires each chamber to pass a budget by April 15 or have its members face a suspension of pay. Republicans are hoping the bill gives Congress a few months to find a longer-term debt-ceiling agreement that includes significant spending cuts.


PG View: The latest punt on the debt ceiling is weighing on gold this morning.

Posted in Debt, Politics |

Obama Vows No Negotiations on Debt as Deficit Talks Loom

15-Jan (Bloomberg) — President Barack Obama vowed he won’t negotiate over raising the government’s debt ceiling even as he offered to deal on a separate track with the deficit reduction demanded by Republicans.
Enlarge image President Barack Obama

Warning of economic calamity and stalled payments to Social Security recipients, military personnel and government creditors if the $16.4 trillion debt limit isn’t lifted, Obama accused Republicans of holding the nation hostage as he sought to push Congress toward action to avoid.

“What I will not do is to have that negotiation with a gun at the head of the American people,” Obama said at a White House news conference yesterday, referring to the Republican linkage of increasing the debt limit with deficit reduction.

“They will not collect a ransom in exchange for not crashing the American economy,” he said.


Posted in Debt, Politics |

The Education of John Boehner

06-Jan (The Wall Street Journal) — What stunned House Speaker John Boehner more than anything else during his prolonged closed-door budget negotiations with Barack Obama was this revelation: “At one point several weeks ago,” Mr. Boehner says, “the president said to me, ‘We don’t have a spending problem.’ ”

I am talking to Mr. Boehner in his office on the second floor of the Capitol, 72 hours after the historic House vote to take America off the so-called fiscal cliff by making permanent the Bush tax cuts on most Americans, but also to raise taxes on high earners. In the interim, Mr. Boehner had been elected to serve his second term as speaker of the House. Throughout our hourlong conversation, as is his custom, he takes long drags on one cigarette after another.

Mr. Boehner looks battle weary from five weeks of grappling with the White House. He’s frustrated that the final deal failed to make progress toward his primary goal of “making a down payment on solving the debt crisis and setting a path to get real entitlement reform.” At one point he grimly says: “I need this job like I need a hole in the head.”

…With the two sides so far from agreeing even on the nature of the country’s fiscal challenge, making progress on how to address it was difficult.


Posted in Debt, Politics |

New Congress Faces Same Partisan Divisions

04-Jan (The Wall Street Journal) — The new Congress convened Thursday to an all-too-familiar backdrop of looming fiscal showdowns, leaving incoming members to ready themselves for the same kind of divisive battles faced by the last Congress.

…The new Congress will soon be confronted with difficult votes on raising the government’s borrowing limit, as well as on measures to deal with across-the-board spending cuts that are now scheduled to take effect on March 1 and a stopgap spending bill to fund the federal government that expires in late March.


Posted in Politics |

The real winner: Inflation

By Matthew Stevenson
10-Nov (Reuters) — I buy none of the post-election, prime-time hokum that what decided the presidential race was the Latino vote, women’s issues, the next Supreme Court justices, the view from the fiscal cliff or how drones are winning the War on Terror. This presidential election was, as always, a contest between gold standardists and inflationists.

The victors were the forces of cheap money. William Jennings Bryan would be proud ‑ as would bimetalists and Weimar Republicans.

Inflation won because it is the panacea for all that ails the body politic: a short-term cure-all that promises economic growth, the possibility of paying off runaway national and international debts, new-found prosperity for the middle classes and liquidity for the impoverished, who otherwise would be voting in the streets with rocks and burning tires.

Think of it as doping for those wanting to win political races.


Posted in inflation, Monetary Policy, Politics |

The Daily Market Report

Gold Regains $1700 on Election Day and is Holding Those Gains

07-Nov (USAGOLD) — Gold rebounded sharply in the midst of Tuesday’s US elections, retracing all of last Friday’s post jobs report losses and then some. It was widely perceived that the re-election of President Obama would be good for gold, so maybe investors in the yellow metal were the first to concede that even though the popular vote was pretty evenly split, the realities of the Electoral College simply did not bode well for Mr. Romney.

However, as Mike Kosares wrote before the election, “the history of post-election years since 1971 suggests that the gold market is decidedly indifferent, or apolitical, if you will, about the outcome of presidential elections.” Since Richard Nixon ended convertibility between the dollar and gold in August of 1971, there have been eleven Presidential elections. Here is how gold performed in the years immediately following those elections:

1973 after Republican victory: +73%.

1977 after Democrat victory: +21%.

1981 after Republican victory: -32%.

1985 after Republican victory: +7%.

1989 after Republican victory: -3%.

1993 after Democrat victory: +20%.

1997 after Democrat victory: -21%.

2001 after Republican victory: 0%.

2005 after Republican victory: +20%.

2009 after Democrat victory: +24%.

2013 after Democrat victory: ??

To summarize: The six “up” years, were evenly split; three when Republicans won the White House and three when the Democrats triumphed. Of the three “down” years, two occurred following a Republican victory and one when the Democrats won. There was one year the price of gold was essentially unchanged after a Republican victory and then of course it remains to be seen what the price of gold will do in 2013, now that Barack Obama has been re-elected.

Now the market’s attention turns to weighty matters such as the ‘fiscal cliff’ and an impending battle over yet another debt ceiling hike. The Fed will maintain their super-easy policy stance, and may still heap additional accommodations on top of the already unprecedented measures, as the U.S. economy continues to sputter. The eurozone remains a mess with the Greeks voting on further austerity measures later this evening. Central bank gold demand, mainly for the purposes of reserve diversification is expected to remain robust, even amid rising supply concerns.

Gold extended gains in overseas trading today, establishing a new three-week high at 1731.38. Despite a subsequent intraday pullback, the yellow metal is maintaining gains above $1700, even though the dollar index snapped back to set new nine-week highs. The rise in the dollar is more a function of renewed euro weakness, yet traders continue to pay attention to the recent inverse correlation between the dollar and gold.

Our clients however are not traders. They buy gold as wealth preservation, portfolio diversification and for hedging purposes. They don’t make their buying decisions based on who sits in the oval office, but rather based on the aforementioned reasons, like the ‘fiscal cliff’ and the ever-rising debt ceiling.

Posted in Daily Market Report, Gold News, Gold Views, Politics |

World leaders welcome Obama’s 2nd term – but many challenges wait on his doorstep

07-Nov (NBCnews) — World leaders from Mexico City to Beijing were quick to congratulate Barack Obama on his victory early Wednesday – but the re-elected president faces a slew of foreign policy challenges in his second term.

…However, NBC News’ Chief Foreign Correspondent Richard Engel said Obama should “enjoy his victory” now, adding:”Starting very soon, the rest of the world will be crashing down on the president’s doorstep.”

“You have the issue of Syria – a county that is imploding, and a conflict that could quickly spread to other countries in the region. You have the issue of Afghanistan, the war that is still ongoing. The expectation now is there will have to be a refocusing on Afghanistan to try and end that conflict.

“There are many Israelis who are not keen on Barack Obama – they did not want to see him elected,” Engel added.


Posted in Politics |

The Daily Market Report

Gold Firms on Election Day

06-Nov (USAGOLD) — Election day…at last. An end to the incessant political ads and robo-calls. So whatever the outcome, at least we have that to look forward to…

Perhaps we will have some resolution in the gold market as well. While the yellow metal has been edging higher in the wake of Friday’s sharp losses, it remains to be seen if today’s election will be the catalyst to push the market one way or another. UBS analyst Edel Tully says, “An Obama win would be the best-case scenario for gold, both from its implications for both monetary and fiscal policy.” Tully seems to believe that a reelection of President Obama essentially assures ‘more of the same’: More expansive monetary policy. More deficit spending and greater debt.

Conversely, “If Romney wins, we expect gold’s knee-jerk reaction to be negative, and we look towards $1,647 for initial support, the Aug. 31 low, with the potential for a deeper follow-through,” says Tully. Presumably, a Romney win would signal that Ben Bernanke’s days as the Fed chief are numbered, although he reportedly may not seek reappointment no matter who wins today. Yet, given the state of the economy, Romney would be very unlikely to appoint a monetary hawk to run the Fed.

Not to beat a dead horse, but the President has very little influence on the operations of the central bank, beyond appointing someone to run it with a particular bias. As for fiscal matters, that is the realm of Congress. And Congress is expected to remain divided.

On inauguration day in January, whomever takes the oath of office of the President of the United Sates, they will still be faced with a moribund economy, stubbornly high unemployment and a debt load near the $16.4 trillion limit. Europe will remain mired in its own debt crisis, that continues to threaten the very foundations of the EU. Countries around the world will continue to head the siren-song of competitive currency devaluation, in the hopes of an export edge that will reinvigorate flagging economies. This will in turn continue to prompt reserve diversification out of these debased currencies and into hard assets.

These are the reasons to own and to buy gold…not who will sit in the Oval Office for the next four years.

Posted in Daily Market Report, Gold News, Gold Views, Politics |

The Daily Market Report

Debt Ceiling Threatens to Add Insult to Fiscal Cliff Injury

01-Nov (USAGOLD) — Gold edged modestly higher in overseas trading, setting a new high for the week at 1727.03. While these gains improved the short-term technical picture, they proved unsustainable, and the yellow metal has retreated into the range.

As suggested in yesterday’s comment, the market is unlikely to take gold decisively one direction or another ahead of tomorrow’s October jobs data (barring any major surprises) and next week’s election. Investors as usual will be well served by tuning out the noise and remaining focused on the underlying reasons that they own gold n the first place. I would wager that who sits in the Oval Office doesn’t even register for most.

Whomever is sworn in as President in January is going to face all the same problems that we are currently facing: A sluggish economy, chronically high unemployment and an absolute mountain of debt. And despite what seems to be the conventional wisdom, the President has little control over such matters. The power to change the trajectory in these critical areas really lies with Congress; although Congress’s inability (or refusal) to act has foisted much of the responsibility onto the Fed.

As if the impending ‘fiscal cliff’ wasn’t troubling enough, it has now become evident that the United States will butt up against it’s $16.4 trillion debt ceiling at the end of the year as well. If you recall the partisan mayhem of the last debt ceiling debate, the added turmoil provided by the automatic sequestration spending cuts and the expiration of the extended Bush-era tax cuts threatens to weigh heavily on our already vulnerable economy as 2013 commences.

Treasury has said it is prepared to employ “extraordinary measures” to prevent a default, saying, “We continue to expect that these extraordinary measures would provide sufficient ‘headroom’ under the debt limit to allow the government to continue to meet its obligations until early in 2013.” However, the fact that we’re even talking about a potential default again — just 15-months after the last debt ceiling crisis, that nearly shut down the Federal government and ultimately led to a downgrade of US sovereign debt — should be extraordinarily troubling to every American.

These are the kinds of things that illicit action from real gold buyers, not who may or may not win an election. Because, as the sub-headline on Matthew Lynn’s MarketWatch piece on Germany’s gold reserves pointed out yesterday, “There’s something reassuring about physical money.”

Posted in all posts, Daily Market Report, Fiscal Cliff, Gold News, Gold Views, Politics |

The Daily Market Report

Gold Stabilizes Ahead of FOMC Meeting

22-Oct (USAGOLD) — Gold has stabilized somewhat in the wake of last week’s retreat, as market focus shifts to the FOMC meeting that commences tomorrow. Some better than expected economic news was a contributing factor to the yellow metal’s drop last week, amid speculation that the Fed might be able to ease-up on accommodations.

However, the Fed was quite adamant after the last FOMC meeting that they would keep their foot on the monetary gas-pedal, even if there were encouraging data, suggestive of a recovery. In fact, a Bloomberg News survey last week revealed that all 21 primary dealers believe that QE3 will be expanded to include renewed direct Fed buying of Treasurys. While that may not be announced on Wednesday, many believe such a move is inevitable before year-end, to provide some kind of cushion against the tax hikes and spending cuts that are collectively known as the ‘fiscal cliff’.

There has also been some speculation about a less-dovish Fed if Republican Presidential candidate Mitt Romney were to win the November election. Romney has pledged to replace Fed chairman Bernanke, whose term ends in January 2014. Interestingly, Romney himself provides a pretty compelling offset to the possibility of a more centrist Fed chairman, in his seeming interest in escalating the global currency war by naming China a currency manipulator as one of the first orders of business for a Romney presidency.

If the Fed itself is less inclined to employ the extraordinary measures that have become synonymous with the Bernanke Fed, and China retaliates against being named a currency manipulator by reducing US bond purchases (or worse yet, selling Treasurys), the US could see interest rates start to rise. Higher rates would be a drag on any potential economic recovery. Romney should think long and hard about how to balance these realities if he is successful in his bid to be the President.

Posted in Daily Market Report, Gold News, Gold Views, Politics |

Morning Snapshot

15-Oct (USAGOLD) — Gold has fallen to a new 4-week low at 1728.76 as corrective pressures that emerged last week persist. Essentially gold has returned to the level it was at when Fed chairman Bernanke announced QE3 on 13-Sep. Global growth concerns are ascendent once again, despite massive monetary stimulus from central banks around the world; amid a growing realization that monetary policy is not a panacea.

This is a sentiment reiterated by Bernanke in Tokyo over the weekend: “As I have said many times, however, monetary policy is not a panacea.” And while the Fed is not likely dismayed by softer gold prices, US equities has also retraced all of their QE3 related gains. A weak stock market is a problem for the Fed as the diminished wealth effect that results tends to have negative impact on consumption; and consumption of course is the life blood of the US economy.

What does the Fed do from here? Well, I doubt they throw up their hands and say there’s nothing more they can do. More growth risks and declines in stocks may well lead to an increasing expectation that QE3 will be expanded to include more outright Treasury purchases. We’re arguably too far down the path to turn back now. So the best hope perhaps is that rather than back-track, we find a new path that will ultimately address some of the underlying fiscal problems that are the root causes of the economic malaise that we find ourselves in.

In that vein, Presidential candidate Mitt Romney has pledged to dump Fed chairman Ben Bernanke. The recent narrowing of Presidential race polls, in the wake of Romney’s Denver debate performance, have raised the odds that he just might get that opportunity to sack Bernanke. That uptick in uncertainty is causing some short-term duress in the market.

Make no mistake though, a President Romney would be very unlikely to appoint a true monetary hawk to head the Fed. Instead, he would likely look for someone who would alter course gradually. That would likely mean that even under new leadership, the Fed’s balance sheet would continue to grow for some time, although perhaps at a slower pace.

• US business inventories +0.6% in Aug, near expectations of +0.5%, vs +0.8% in Jul; sales +0.5%.
• Canada existing home sales surprise at +2.5% in Sep, on expectations of -5.0%; -15.1% y/y.
• US Empire State Index rebounded to -6.2 in Oct, below expectations of -5.0, vs -10.4 in Sep.
• US retail sales +1.1% in Sep, above expectations of +0.8%, vs positive revised +1.2% in Aug; ex-auto +1.1%.
• Turkey unemployment rate (nsa) rose to 8.4% in Jul, vs 8.0% in Jun.
• Switzerland PPI +0.3% m/m in Sep, vs +0.5% in Aug; +0.3% y/y.
• China CPI +1.9% y/y in Sep, vs +2.0% y/y in Aug.
• China PPI -3.6% y/y in Sep, vs -3.5% y/y in Aug.
• Japan industrial production (sa) revised down to -1.6% in Aug, vs -1.3% previously.

Posted in all posts, Daily Market Report, Economy, Gold News, Gold Views, Monetary Policy, Politics, QE |

Fiscal Cliff Poses Significant Risk to U.S. Outlook

25-Sep (Bloomberg) — The so-called ‘fiscal cliff,’ the confluence of $607 billion in expiring tax and expenditure policies set to take effect at the end of 2012, poses a significantrisk to the U.S. economic outlook. Unlesslawmakers reach a compromise to extend some or all of the temporary tax cuts and postpone mandatory spending cuts, the hit to the economy would translate into about 4 percent of gross domestic product.

The current Bloomberg consensus forecast is for a growth rate of 2 percent in 2013, with 1.9 and 2.3 percent rates of expansion in the first two quarters of next year. Should Congress delay acting until early 2013 to address these issues, growth will likely slow to less than 1 percent during the first half of next year. Persistance of financial gridlock would probably push the economy into recession in the first half of 2013.

…The economic impact of permitting the combined tax and spending measures to expire is stark. First, firms are already paring back investment and hiring, and households have stepped up their rate of savings, most likely to smooth out consumption to account for reduced after-tax income next year, and thereby contributing to the current slow pace of growth.

Second, real GDP will likely show negative growth rates of minus 2.2 percent in the first quarter and minus 1.3 percent in the second quarter, with a modest recovery in the second half of the year. The result will be higher unemployment, falling taxable income and a mild recession in early 2013.


PG View: A comprehensive examination of the impending “fiscal cliff’ and the possible fall-out.

Posted in Economy, Politics |

Romney or Obama Win Means No Escape From Fiscal Crisis of Debt

28-Sep (Bloomberg) — Consumers, banks and businesses have been busy getting their balance sheets into better shape since the U.S. economic recovery began more than three years ago. Now, it’s the government’s turn.

Whoever wins the presidency will contend with a budget on a trajectory dubbed unsustainable by Federal Reserve Chairman Ben S. Bernanke. Barack Obama or Mitt Romney will have to tame a deficit that has topped $1 trillion in each of the past three years, Bloomberg Markets magazine reports in its November issue. How the new president goes about it will influence the direction of financial markets and define the economy and society for his four-year term and beyond.

“We’ve made a lot of progress getting the private-sector balance sheet in order,” says Mark Zandi, chief economist at Moody’s Analytics in West Chester, Pennsylvania. “Where we’ve got a lot of work to do is on the public side.”


PG View: Whomever wins the Presidency, both parties are still likely to have their heels dug in on higher taxes and spending cuts, meaning that unless one party wins the
Presidency and both Houses of Congress, Washington is still going to mired in gridlock and the status quo of mounting debt will prevail.

Posted in Debt, Politics |

What if Israel bombed Iran? The view from Washington.

21-Sep (Washington Post) — For months, Israel has threatened to strike Iran’s nuclear sites. The United States has urged restraint. If such an operation were launched, how might Washington react?

President Obama is enjoying a quiet dinner with Michelle, Sasha and Malia at the White House residence on a Thursday evening in October when he gets the call.

Two dozen Israeli fighter jets have just entered Jordanian airspace, apparently en route to Iran, chief of staff Jack Lew tells him. They will enter Iranian airspace, via Iraq, in approximately 85 minutes.

“Damn it,” Obama says under his breath. “Bibi told me he was going to hold off.”


Posted in Politics |

Currency Wars: Move to Make Treasury’s Geithner a Permanent Member of US National Security Council

06-Aug (JessesCafeAmericain) —

“To put it crudely, the US wants to inflate the rest of the world, while the latter is trying to deflate the US. The US must win, since it has infinite ammunition: there is no limit to the dollars the Federal Reserve can create.

What needs to be discussed is the terms of the world’s surrender: the needed changes in nominal exchange rates and domestic policies around the world.”
Martin Wolf, Financial Times, 12 Oct 2010

“…the Treasury secretary, who has primary authority on economic and financial issues in the cabinet, should be at every meeting to advise on how economic and security issues intersect, and to ensure that the United States is using its economic and financial strength in the most effective way.”
Robert Kimmitt, NY Times, 23 July 2012

Looks like the US is getting ready to flex its financial muscle. I don’t think the Anglo-American banking cartel will relinquish the dollar reserve currency supremacy easily. This is currency war.


Posted in Economy, Politics |

The Libor Scandal In Full Perspective

by Paul Craig Roberts
19-Jul (Institute for Political Economy) — The article about the Libor scandal, coauthored with Nomi Prins, received much attention, with Internet repostings, foreign translation, and video interviews. To further clarify the situation, this article brings to the forefront implications that might not be obvious to those without insider experience and knowledge.

The price of Treasury bonds is supported by the Federal Reserve’s large purchases. The Federal Reserve’s purchases are often misread as demand arising from a “flight to quality” due to concern about the EU sovereign debt problem and possible failure of the euro.

…The lower is Libor, the higher is the price or evaluations of floating-rate debt instruments, such as CDOs, and thus the stronger the banks’ balance sheets appear.

Does this mean that the US and UK financial systems can only be kept afloat by fraud that harms purchasers of interest rate swaps, which include municipalities advised by sellers of interest rate swaps, and those with saving accounts?

The answer is yes, but the Libor scandal is only a small part of the interest rate rigging scandal. The Federal Reserve itself has been rigging interest rates. How else could debt issued in profusion be bearing negative interest rates?

…How long can the regime of negative interest rates continue while debt explodes upward? Currently, everyone in the US who counts and most who don’t have an interest in holding off armageddon. No one wants to tip over the boat. If the banks are sued for damages and lack the money to pay, the Federal Reserve can create the money for the banks to pay.

…To sum up, what has happened is that irresponsible and thoughtless–in fact, ideological–deregulation of the financial sector has caused a financial crisis that can only be managed by fraud. Civil damages might be paid, but to halt the fraud itself would mean the collapse of the financial system. Those in charge of the system would prefer the collapse to come from outside, such as from a collapse in the value of the dollar that could be blamed on foreigners, because an outside cause gives them something to blame other than themselves.


PG View: An excellent article that illustrates just how far beyond the Libor scandal the “fraud” seems to extend. Discussions about the manipulation of global financial markets are no longer relegated to just the tin-hat crowd, and Roberts calls the Fed’s zero interest rate policy what it is: “Rigging interest rates”, which is fundamentally little different from what Barclays and the other setters of Libor where engaged in.

Perhaps now is a good opportunity to take a portion of your assets outside of the traditional financial markets, which are increasingly acknowledged as being “rigged.”

Posted in Economy, Gold News, investments, Politics, U.S. Dollar |

Wall Street Trims Early Gains After Bernanke Dashes Easing Hopes

07-Jun (MoneyNews) — Stocks rose on Wall Street Thursday after China cut its benchmark lending rate in another bid to boost its slowing economy, but an early rally faded after Federal Reserve Chairman Ben Bernanke gave no signal of immediate action to prop up the U.S. economy.

The Dow Jones Industrial Average was up 80 points at 12,494 shortly after noon. It had been up as much as 140 points earlier. On Wednesday the stock market had its biggest gain of the year on hopes that more economic stimulus might be on the way in the U.S. and Europe.

China cut its benchmark lending rate for the first time in nearly four years, adding to efforts to reverse a sharp economic downturn. It was the first rate cut since November 2008.

“Markets received a near-term shot of adrenalin from China,” said Matthew Kaufler, portfolio manager at mutual fund group Federated Investors. “China is the world’s economic locomotive at the moment and it can’t afford to slow down at a time when other major economies are in precarious positions.”


Posted in all posts, Economy, Politics |

Bernanke: Fed Ready to Act if Europe Hits U.S.

07-Jun (The Wall Street Journal) — The U.S. economic recovery faces significant risks, including from the European sovereign debt crisis and uncertain U.S. fiscal policy, Federal Reserve Chairman Ben Bernanke said in testimony prepared for a congressional hearing on Thursday.

Still, the Fed chairman stopped short of signaling Fed action to combat these risks, other than to say that the Fed remained “prepared to take action” to protect the U.S. economy and financial system if stresses on the financial system escalate.

In all, Mr. Bernanke’s testimony was more restrained than comments offered this week by other Fed officials, including Wednesday evening comments by vice chairwoman Janet Yellen, which laid out detailed arguments for why the Fed might to take new actions to bolster the economy and protect it from risks to growth.


Transcript of Chairman Bernanke’s opening statement:

Posted in all posts, Gold News, Politics |

US initial jobless claims -12k to 377k for the week ended 02-Jun, below expectations of 380k, vs upward revised 389k in previous week.

Posted in all posts, Economy, Politics |