Famous last words

| author: NZ_Andy |

Alan Bollard reserve back governor of New Zealand said on 14th July 09: "Early signs of global recovery have now emerged. We have avoided a repeat of the Great Depression,"


That sounds like a famous quote in the making, and this week AMP Capital Investors head of investment strategy, Jason Wong said "It has been a pretty mild recession in New Zealand," and "On balance, we think the recession is pretty much over,".


Could the above quotes become famous (or infamous) like these statements made not long after the crash of 1929:


"Financial storm definitely passed."
- Bernard Baruch, cablegram to Winston Churchill, November 15, 1929


"I see nothing in the present situation that is either menacing or warrants pessimism... I have every confidence that there will be a revival of activity in the spring, and that during this coming year the country will make steady progress."
- Andrew W. Mellon, U.S. Secretary of the Treasury December 31, 1929


"I am convinced that through these measures we have re-established confidence."
- Herbert Hoover, December 1929

"...there are indications that the severest phase of the recession is over..."
- Harvard Economic Society (HES) Jan 18, 1930


"While the crash only took place six months ago, I am convinced we have now passed through the worst -- and with continued unity of effort we shall rapidly recover. There has been no significant bank or industrial failure. That danger, too, is safely behind us."
- Herbert Hoover, President of the United States, May 1, 1930
"...by May or June the spring recovery forecast in our letters of last December and November should clearly be apparent..."
- HES May 17, 1930


In the New Zealand context of this global recession why do people think a problem 36 years in the making will be over in 1-2 years?

(http://www.goldmeasures.co.nz/2009_07_01_archive.html)

Moody's cuts New Zealand banks' ratings by one notch

NZPA | Friday May 27, 2011

(http://www.nbr.co.nz/article/moodys-cuts-new-zealand-banks-ratings-one-notch-nn-94331)

Credit rating company Moody's Investors Service has cut the ratings of the four major New Zealand banks by a notch, citing the state of the economy.

The ratings of ANZ National Bank, BNZ, ASB and Westpac have been cut to Aa3 from Aa2.

"The strong message here is that, as a nation, New Zealanders need to save more and be less reliant on overseas borrowing," BNZ Treasurer Tim Main said.

The cut comes after a review of bank ratings by Moody's and after the ratings of the Australian parent banks were cut a notch on May 18. The outlook of the ratings is now stable.

A challenging economic environment in New Zealand was one of the reasons the rating company gave for cutting the New Zealand banks' ratings.

"The local economy remains subdued, with gross domestic product growth now forecast to show stronger growth in the year to March 2013, a year later than forecast last year," said Marina Ip, an analyst in Moody's Sydney office.

ANZ National maintained a concentration in rural lending and Westpac had a concentration in commercial property, two sectors which were experiencing stress.

Moody's also noted the impact of recent natural disasters in parts of the country, including the Christchurch earthquakes.

The major banks source about 40 percent of their total funding from wholesale funding, with around two-thirds of this being sourced offshore.

"Over the past six months, the major banks have enjoyed relief in funding pressure due to slower loan growth and higher customer deposit growth," Moody's said.

But Moody's expressed doubt that the trends would continue.

Mr Main said the one notch reduction in BNZ’s long-term rating was expected given the structural reliance of both Australian and New Zealand banks’ had on overseas wholesale funding, and given the changes to overseas capital markets since the global financial crisis.

"Access to offshore funding will be more challenging, and the cost of funding will increase, and this is a global trend that all banks have had to adjust to. The rating announcement however will not materially impact our access to wholesale funding given our continued very strong capacity to meet our financial commitments."

Headed for a ‘Gold Standard System' by 2014 - Ian Gordon

80 Years on from the Great Depression, Ian Gordon reckons financial cycles suggest we are due for another collapse, but this time even worse. Gold and gold stocks may provide protection. Gold Report interview.

Author: Zig Lambo

Posted: Wednesday , 25 May 2011

KENWOOD, CA (THE GOLD REPORT) -

The Gold Report: Good morning Ian. Thanks for taking the time to bring us up to date with your current thoughts about the economic situation and on specific companies you think our readers might be interested in learning about today. When you spoke with The Gold Report in January, you expressed your thoughts on where things were headed. Can you give us an idea of what you think people should do with their financial investments now in order to protect their assets? What changes do you see, and what do you think now in light of what's happened since January?

Ian Gordon: I think things are actually getting worse. Basically, the currencies of the world are under fire right now. I'm not sure that the euro will even survive this year. All it will take will be one country, like Greece, to leave it, and then the whole thing will probably collapse like a house of cards. Of course, the U.S. dollar, as the reserve currency, has been under fire, as well. So, I think things are coming to a head here, which is something we anticipated in our own work because it's based on the Long (Kondratiev) Wave Theory.

In 2011, we see parallels to 1931 because we're 80 years beyond that time. We believe 20-year cycles are important anniversaries, and this is just four twenties. In 1931, the whole world monetary system effectively collapsed. We've been long anticipating a collapse in the current world monetary system based on the collapse of 1931. However, we see that the current collapse is going to have far more significant and devastating implications than the collapse between 1931 and 1933 simply because it's the collapse of the paper-money system now. Essentially, paper money is credit money. When paper money fails, credit fails. Effectively, the economy will fail on credit.

TGR: So, given what could be a major upheaval in the way the global economic cycle works, if this all comes to pass, what sort of system will we end up with? Are we going back to the gold standard or something similar to it? How is this going to happen, how long is it going to take and what are the implications for investors?

IG: I'm pretty sure that we will go back to a gold standard system. Paper-money systems have never survived throughout history. Generally, they've been set around a one-country experiment. And when those have failed, as in France after John Law's paper-money scheme failed in 1720 or the Assignat failed in about 1798, there was tremendous upheaval. And, following these failures, the country resumed gold as the backing for its currency. So, I think we have to go back to something like that because, in essence, gold enforces discipline on governments. We've seen a complete lack of discipline in the paper-money system that's been ongoing since the 1931 collapse of the world monetary system. Paper-money printing has just gotten out of control; and now, parallel to the paper-money printing is the debt. They go hand in hand.

We've built massive debt worldwide, which, in total, is probably well in excess of $100 trillion. In the U.S. alone, the total debt is something like $57 trillion. So, that debt is starting to be wrung out of the world's economies and everybody is facing a pretty frightening depression.

As investors, we have to protect ourselves as best we can. We've long been advocating positions in gold and gold stocks. In fact, we've been 100% positioned in both of those-physical and gold stocks-since 2000 because our cycle told us that that's where we should put our assets. So, that's what we've done. I think investors have to do that and they have to be out of the general stock market because, eventually, the stock market has to reflect the realities of the economy. The current U.S. stock market has been propped up by quantitative easing (QE) with massive amounts of money injected into the banking system. That banking system is not putting that money back into the economy because consumers are completely tapped out; they can't borrow any more money. So, much of the money the Federal Reserve is putting into the banks is being used for speculation.

TGR: Can we pursue the mechanics of this a bit further before we get into more-specific investing ideas? Given the internationalization of the world economy and money being just electronic numbers on computer systems, how does the world get back on some sort of a hard-money standard without years of turmoil?

IG: When the global monetary system started to collapse in 1931, it began with the failure of the Austrian Creditanstalt Bank in Europe. Everyone was trying to bail out this large bank. The Fed was trying to bail it out, the Bank of England was trying to bail it out and JP Morgan also was in there trying to bail it out. They all knew the implications of the failure of this one bank would cause the bankruptcy of Austria and the failure of many other banks plagued with rotten paper money on their books. So, when this bank collapsed in May 1931, it was the beginning of the end of the world monetary system. A bankrupted Austria was forced out of the gold exchange standard system and was soon followed by Germany. Great Britain was forced out of the monetary system in September 1931, which effectively brought down the entire world monetary system. A new monetary system didn't evolve until 1944 when the Bretton Woods system was signed into law. It was a long hiatus. The parallels with the current evolving monetary system collapse are pretty plain to see.

After 1931, America was pretty self-sufficient, had all the oil and food it needed and became very isolationist. Great Britain traded within its then-empire. World trade collapsed following 1931 and 2011 may well be a repeat of that tragic year, with the collapse of the euro and the unraveling of the entire global monetary system. It could be a long hiatus before a new system is developed. It goes back to that 20-year anniversary cycle I mentioned. The pure gold standard system that had evolved initially in Great Britain in 1821 collapsed in 1914 because the combatants in World War I couldn't remain on a gold standard system and print the money they needed to fight the war. So, I would say that we will likely return to a gold standard in 2014-100 years after the gold standard collapsed in 1914.

TGR: So, you're saying investors have a two- to three-year window to position themselves and their investments to profit from what's going to happen when this is all turns around.

IG: Right.

TGR: We've had all this volatility in the metals prices over the past year and some substantial gains. How is this affecting companies in the mining business?

IG: For the main part, I've positioned myself in either new producing companies or companies that have gold assets in the ground. I'm principally more disposed to investing in gold than I am in silver. I think these assets are going to be extremely valuable. I met with one of my website subscribers just yesterday and said it's quite possible that there won't be enough physical gold available on the market to supply the demand. We produce only 80 million ounces (Moz.) of gold a year from existing mines. I think, eventually, the demand for gold will become so extreme that the producers won't want to be paid in paper money because the paper system is collapsing. So, gold may well be taken out of the market, that's why it is important to get the physical bullion now rather than later. Of course, gold company stocks that produce physical gold are going to be extremely valuable, as well.

TGR: Obviously, you're quite selective about which companies you decide to invest your own money in and suggest that other people do the same with their money. What criteria do you use in selecting companies for your portfolios?

IG: First, I have to meet with management before I ever put my money into a company. I realize that a lot of investors can't do that, but they can certainly talk to management. On the junior side, management is usually very disposed to talking with perspective shareholders. It's just a matter of picking up the phone and asking the president of a company why it is a good investment, and then listening to the answers. I have to feel confident that a company's management will be able to produce what they say they're going to produce on behalf of the shareholders.

Another criterion that I use is geopolitical risk. I want to invest only in companies that I am confident are in politically secure jurisdictions. I have been bitten in the past by investing in companies in countries that I thought were politically secure, which became insecure. In Ecuador, the rules changed and mining almost ceased to function in that country. So, I particularly like companies that have assets in Canada, which I think is a very safe jurisdiction. Many of the companies that I've selected for my own portfolio have assets in Canada. I also like Mexico.

I think the U.S. is ok, but I'm a bit worried about what might happen when the whole system starts to collapse. After 9/11, I remember when an unnamed Federal Reserve spokesman said in an interview that it looked at many ways to avert a panic. One of the things he mentioned was buying gold mines. If the U.S. doesn't have the gold it purports to have, it could well be that the country could nationalize gold companies. I do have investments in companies that are exploring for gold in the U.S., but not a lot. I particularly like companies in Canada.

TGR: There was a little fear recently about the possibility that the New Democratic Party (NDP) may be coming back into power in British Columbia. Its administration had a devastating effect a generation ago, when it caused the whole BC mining industry to retrench. I guess that's probably not going to happen at this point; but if something like that was to happen, would that possibly have a negative effect at least on BC?

IG: Well, it might. If the NDP does win in British Columbia, I think it probably learned from past experience. Under recent governments, there's been a tremendous amount of exploration and a lot of companies going into production in the Province. It's going to be very hard to shut those down because they're all permitted under present mining laws. So, if the NDP was to win in BC, it's not something that I would be in favor of because I live in the Province and know what negative effect it had on the region's mining not long ago. I think most of the companies in BC now are sufficiently advanced in terms of their exploration, and some have gone into production. So, all the permitting is in place and it's going to be very difficult to rescind it.


TGR: Did you have any last thoughts about the future of the economy you'd like to share?

IG: Unfortunately, I'm very pessimistic about the economy. If paper money, which is credit money, collapses, then, essentially, credit collapses and the economy grinds to a halt. Quite a scary scenario could evolve from a collapse in the paper-money system. We almost had a major credit failure in 2008. What happens if credit does that again? Everything stops-trucking stops, the movement of goods stops and it becomes a very difficult time for everyone. I think people have to prepare for the worst.

TGR: We've certainly gotten used to a system that is automated and electronic. People press buttons and expect results. If things start falling apart as you predict, we could see some real turmoil-financial and possibly even physical.

IG: Investors need to keep those possibilities in mind and protect their assets as best as they can. I'm a little reluctant to admit it, but one of the things I keep on hand is a one-year supply of food. It's a relatively inexpensive way of protecting your food source. If the system falls apart, as it could, you won't be able to run down to the store and get what you want when you need it.

TGR: Thank you very much, Ian, for your valuable insights and recommendations.

IG: Thank you very much.

A globally renowned economic forecaster, author and speaker, Ian Gordonis founder and chairman of the Longwave Group, comprising two companies-Longwave Analytics and Longwave Strategies. The former specializes in Ian's ongoing study and analysis of the Longwave Principle originally expounded by Nikolai Kondratiev. With Longwave Strategies, Ian assists select precious metal companies in financings. Educated in England, Ian graduated from the Royal Military Academy, Sandhurst. After a few years serving as a platoon commander in a Scottish regiment, Ian moved to Canada in 1967 and entered the University of Manitoba's History Department. Taking that step has had a profound impact because, during this period, he began to study the historical trends that ultimately provided the foundation for his Long Wave theory. Ian has been publishing his Long Wave Analyst website since 1998. Eric Sprott, chairman, CEO and portfolio manager at Sprott Asset Management, describes Ian as "a rare breed in the investment-advisor arena." He notes that Ian's forecasts "have taken on a life force of their own and if you care to listen, Ian will tell you how it will all end."

Article published courtesy of The Gold Report - www.theaureport.com

http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=127849&sn=Detail&pid=110649

What happens when Greece defaults

By Andrew Lilico Economics Last updated: May 20th, 2011

http://blogs.telegraph.co.uk/finance/andrewlilico/100010332/what-happens-when-greece-defaults/#dsq-content

It is when, not if. Financial markets merely aren’t sure whether it’ll be tomorrow, a month’s time, a year’s time, or two years’ time (it won’t be longer than that). Given that the ECB has played the “final card” it employed to force a bailout upon the Irish – threatening to bankrupt the country’s banking sector – presumably we will now see either another Greek bailout or default within days.

What happens when Greece defaults. Here are a few things:

- Every bank in Greece will instantly go insolvent.

- The Greek government will nationalise every bank in Greece.

- The Greek government will forbid withdrawals from Greek banks.

- To prevent Greek depositors from rioting on the streets, Argentina-2002-style (when the Argentinian president had to flee by helicopter from the roof of the presidential palace to evade a mob of such depositors), the Greek government will declare a curfew, perhaps even general martial law.

- Greece will redenominate all its debts into “New Drachmas” or whatever it calls the new currency (this is a classic ploy of countries defaulting)

- The New Drachma will devalue by some 30-70 per cent (probably around 50 per cent, though perhaps more), effectively defaulting 0n 50 per cent or more of all Greek euro-denominated debts.

- The Irish will, within a few days, walk away from the debts of its banking system.

- The Portuguese government will wait to see whether there is chaos in Greece before deciding whether to default in turn.

- A number of French and German banks will make sufficient losses that they no longer meet regulatory capital adequacy requirements.

- The European Central Bank will become insolvent, given its very high exposure to Greek government debt, and to Greek banking sector and Irish banking sector debt.

- The French and German governments will meet to decide whether (a) to recapitalise the ECB, or (b) to allow the ECB to print money to restore its solvency. (Because the ECB has relatively little foreign currency-denominated exposure, it could in principle print its way out, but this is forbidden by its founding charter. On the other hand, the EU Treaty explicitly, and in terms, forbids the form of bailouts used for Greece, Portugal and Ireland, but a little thing like their being blatantly illegal hasn’t prevented that from happening, so it’s not intrinsically obvious that its being illegal for the ECB to print its way out will prove much of a hurdle.)

- They will recapitalise, and recapitalise their own banks, but declare an end to all bailouts.

- There will be carnage in the market for Spanish banking sector bonds, as bondholders anticipate imposed debt-equity swaps.

- This assumption will prove justified, as the Spaniards choose to over-ride the structure of current bond contracts in the Spanish banking sector, recapitalising a number of banks via debt-equity swaps.

- Bondholders will take the Spanish Banking Sector to the European Court of Human Rights (and probably other courts, also), claiming violations of property rights. These cases won’t be heard for years. By the time they are finally heard, no-one will care.

- Attention will turn to the British banks. Then we shall see…

The European Gold Confiscation Scheme Unfolds: European Parliament Approves Use Of Gold As Collateral

Submitted by Tyler Durden on 05/25/2011 07:04 -0400

Wonder why Europe is pressing so hard for Greece (and soon the other PIIGS) to collateralize its pre-petition loans on a Debtor in Possession basis? Here is your answer: "Yesterday’s unanimous agreement by the European Parliament’s Committee on Economic and Monetary Affairs (ECON) to allow central counterparties to accept gold as collateral, under the European Market Infrastructure Regulation (EMIR), is further recognition of gold’s growing relevance as a high quality liquid asset. This vote reinforces market demand for a greater choice of assets that can be used as collateral to meet margin liabilities." Luckily for Greece, it has 111.5 tons of gold in storage (somewhere at the New York Fed most likely). Looking down the road, Portugal has 382.5 tons, Spain 281.6, and Italy leads the pack with 2,451.8 tons.

Complete press release:

The Economic and Monetary Affairs Committee of the European Parliament has approved gold to be used as collateral confirming its status as a high-quality liquid asset

Yesterday’s unanimous agreement by the European Parliament’s Committee on Economic and Monetary Affairs (ECON) to allow central counterparties to accept gold as collateral, under the European Market Infrastructure Regulation (EMIR), is further recognition of gold’s growing relevance as a high quality liquid asset.

This vote reinforces market demand for a greater choice of assets that can be used as collateral to meet margin liabilities.

Natalie Dempster, Director of Government Affairs at the World Gold Council said:

“It is very significant that the European Parliament is putting its weight behind the argument that the unique characteristics of gold make it an ideal form of high quality liquid collateral.

“We now look forward to the European Parliament and Council of the European Union upholding the inclusion of gold in the next stage of negotiations around EMIR which will now take place after the July plenary vote. The ratification would mark a significant step forward in redefining what constitutes a highly liquid asset under the Capital Requirements IV Directive, due in the coming month, from the European Commission.”

Market demand for gold to be used as a high quality liquid asset and as collateral has been building for some time. In late 2010, ICE Clear Europe, a leading European derivatives clearing house, became the first clearing house in Europe to accept gold as collateral. In February 2011, JP Morgan became the first bank to accept gold bullion as collateral via its tri-party collateral management arm. Exchanges across the world, such as Chicago Mercantile Exchange, are now accepting gold as collateral for certain trades and London-based clearing house LCH Clearnet has said that it also plans to start accepting gold as collateral later this year, subject to regulatory approval.

The World Gold Council has examined this trend and has defined the characteristics that make gold an excellent form of collateral in its study “Gold as a source of collateral”. The report includes a case study on ICE Clear Europe, explaining why the central counterparty clearing house has started to accept gold as collateral and how this operates in practice.

“As regulators, from G20 countries, demand that more OTC trading is cleared on exchanges and with the ongoing world economic difficulties further eroding the credit worthiness of other forms of collateral, we expect to see increasing demand by clearing houses, exchanges and investment banks to use gold as collateral,” says Natalie Dempster.

(http://www.zerohedge.com/article/european-gold-confiscation-sceme-unfolds-european-parliament-approves-use-gold-collateral)

James Turk - Gold to Have a Staggering Up-Move This Summer

Turk: “This year it is not Mexico in the headlines, but rather Greece that is ready to default. Of course the other big news item coming up this summer is the Federal Reserve’s announced intention to end QE2. It’s amazing that so many market participants are taking the Federal Reserve at their word.

All one has to do is look at how much money the US government is borrowing and what they intend to borrow in the future to meet their spending needs to clearly understand that the Federal Reserve is going to keep buying the US government’s paper. This is the point that John Williams made clear in his KWN interview.

I think we have to be prepared for tremendous volatility and the possibility that this summer could be a repeat of 1982 where gold took off to the upside in a major way. Gold became the go to asset in the summer of ’82 that everyone wanted to own.

The extraordinary rally in the summer of 1982 began in the second week of June and by the first week of September gold has risen 50%. That’s a 50% move in less than three months!”

When asked about silver specifically Turk replied, “The gold/silver ratio has climbed back into the 40’s, and from a technical point of view is very close to achieving my mid-40’s target. That suggests to me that silver’s low is in place. My only concern here Eric is that this is options expiry week. We know from past experience that the shorts try to keep precious metals prices from rising to have as many possible calls expire out of the money.

Full article at:

http://kingworldnews.com/kingworldnews/KWN_DailyWeb/Entries/2011/5/23_James_Turk_-_Gold_to_Have_a_Staggering_Up-Move_This_Summer.html

Belarus Just Devalued Its Currency By 56%

Submitted by Tyler Durden on 05/23/2011 14:23 -0400

(http://www.zerohedge.com/article/belarus-just-devalued-its-currency-56)

When it comes to currency warfare, one can be polite and gentlemanly about it, like Brazil for instance, which every day, and sometimes on several occasions during the day, will proceed to buy dollars in an attempt to keep one's own currency lower. Or one can do what the Belarus central bank just did, and officially devalue one's currency, in this case the Belarus ruble, by 56% overnight, against every currency out there.

At this point, it sucks (that is a technical term) to be holding any exposure in BYR. Luckily for those who held their "money" in the form of gold and silver, they just got an instantaneous 56% value preservation and a relative boost in their purchasing power with just one central bank announcement. Also, any and all indebted parties who have BYR-denominated debts are throwing one big party tonight, as their debt was just cut by more than half. And yes, the Greeks are jealous with envy.

From Kommersant.ru:

The National Bank of Belarus (NBB) is sharply devaluing the official rate of Belarusian ruble. The exchange rate as of May 24 was set at 4,930 rubles per dollar. a decrease of 56% from the 23 May.

The National Bank of Belarus has officially confirmed a sharp depreciation of the currency. On its website it has published the official exchange rate of Belarusian ruble: $ 1 - Br4930 (a decrease of 56,3% to the rate on 23 May), 1 Euro - Br6914, 82 (a decrease of 53,1%), 1 Russian ruble - Br173 , 95 (a decrease of 53,9%). The official rate for May 23 was set at 3,155 rubles per dollar.

Earlier, the Belarusian authorities stated that in the near future a unification of the national currency will occur in two phases. "In the first stage decisions will be made to bring down the increased demand, and upon receipt of the loan rate will be formed on the basis of supply and demand, thus lowering the expectations today are still there," - said on May 20, Prime Minister of Belarus Mikhail Myasnikovich.

Meanwhile, representatives of Belarusian banks have criticized the mechanism of devaluation. "The problem is not in the specific value of the exchange rate and in the mechanism. The question is: under whose speculative decisions did the National Bank make this choice?" - Said the agency "Interfax-West" management representative of a bank with Russian capital. In this case, the representative of a state bank believes that "this decision should be viewed as an interim measure." According to him, "the trend is obvious: the official exchange rate will move in the direction of the OTC exchange rate, rather than vice versa."

Earlier, BNB announced the termination of containment of the Belarusian ruble to the retail market: from May 12 to lift restrictions on banks to buy and sell currencies population - 2% of the official rate.

黃金 vs 鉑金 (article copied from a forum)

首先講一點，其實大部份在金行買到所謂白金首飾，只是將黃金混合其他金屬製成，寫出來是「白金」，而不是「鉑金」，真正在「鉑金首飾」會刻上「PT」字樣，這點大家要留意啊！老美曾因鉑金有很重要的軍事用途而嚴謹以鉑金做首飾，首飾商才推出「白金」。

言歸正傳，點解黃金的貨幣性會比鉑金強呢？我之前都講過了，作為貨幣，最重要是匯率要穩定，好方便買賣雙方計算成本。

鉑金的藏量遠遠不及黃金，照計應更稀有更珍貴，更適合做貨幣才對，差別就在匯率的穩定上，鉑金的蘊藏主要集中俄羅斯及南非，兩地已佔去全球90%以上。若果兩國有甚麼事，如戰爭、天災、礦場意外等，一停產，價格就會很波動。

而 更重輸給黃金的原因是其用途更多，鉑金的熔點是攝氐1768度，黃金只有1065度，所以鉑金的工業用途比黃金強許多，特別是汽車觸媒轉換器的需求為最 大，約佔總需求量的43%，黃金根本難以相比。但多用途亦代表其匯率會非常受到供求的影響。匯率波動及不可預測成為鉑金作為貨幣的致命傷！

黃 金真是一樣很奇怪的東西，藏量有限得來又唔會太多，又很多國家都有蘊藏，供應相對穩定，但又無咩特別用途喎，硬唔夠人硬，受熱力又唔夠人高，簡值係廢中之 廢，偏偏因為咁，千百年來，產量及匯率都相當穩定，天生就注定要做貨幣(馬克斯說的)，其他更稀有的金屬只能望塵莫及了！

這是很多人不懂分析黃金的原因，因為難以用實際用途的供求去分析價格走勢，而更再乎人們對貨幣信任程度，對前境及政府的信心，對通賬及物價走勢的看法等等，而這些東西都是難以用數字量化的。

那些財演最鍾意用甚麼工業需求下降，嫁娶淡季等去看淡黃金，而乏略了「即使沒有金本位，黃金仍然在人類心目中有貨幣地位這一重要原因」，結果全部錯晒，實在比黃金還要廢！

Interview: Jim Sinclair on Gold and the World Financial System

By Ron Hera04/20/2011

The Hera Research Newsletter (HRN) is pleased to present an in-depth interview with Jim Sinclair, Chairman and CEO of Tanzanian Royalty Exploration and founder of Jim Sinclair’s MineSet, which hosts his gold commentary as a free service to the gold investment community.

Jim Sinclair is primarily a precious metals specialist and a commodities and foreign currency trader. He founded the Sinclair Group of Companies in 1977, which offered full brokerage services in stocks, bonds, and other investment vehicles. The companies, which operated branches in New York, Kansas City, Toronto, Chicago, London and Geneva, were sold in 1983.

From 1981 to 1984, Mr. Sinclair served as a Precious Metals Advisor to Hunt Oil and the Hunt family for the liquidation of their silver position as a prerequisite for the $1 billion loan arranged by the Chairman of the Federal Reserve, Paul Volcker.

He was also a General Partner and Member of the Executive Committee of two New York Stock Exchange firms and President of Sinclair Global Clearing Corporation (a commodity clearing firm) and Global Arbitrage (a derivative dealer in metals and currencies).

In April 2002, shareholders of Tanzanian Royalty Exploration (formerly Tan Range Exploration) approved the acquisition of a Sinclair managed private company, Tanzania American International, and its exploration assets in Tanzania. Subsequently, Mr. Sinclair became Chairman of Tanzanian Royalty and now leads its efforts to become a gold royalty and development company.

He has authored three books and numerous magazine articles dealing with a variety of investment subjects, including precious metals, trading strategies and geopolitical events and their relationship to world economics and the markets. He is a frequent and popular commentator on financial and market related issues in various news publications and has been profiled in the New York Times.

In January 2003 Mr. Sinclair launched, Jim Sinclair’s MineSet, which now hosts his gold commentary and is intended as a free service to the gold community.

Hera Research Newsletter (HRN): Thank you for speaking with us today. You are one of very few people who have tried to warn investors about OTC derivatives. Why are OTC derivatives a problem in your opinion?

Jim Sinclair: Over the counter (OTC) derivatives are the reason we are going through what we are going through now. An OTC derivative is a kind of wager on what something will do. Up until 2009, most of these wagers had very little, if any, money behind them and, if the direction you bet on didn’t come to fruition, the amount of leverage resulted in extraordinary losses. There was a major rollover in derivatives tied to real estate in 2008, as well as in other types, such as those tied to sub-prime auto loans.

HRN: Did OTC derivatives destabilize the financial system in 2008?

Jim Sinclair: Absolutely.

HRN: Don’t financial institutions use risk cancellation models to hedge risks using OTC derivatives?

Jim Sinclair: Before the failure of Lehman Brothers, OTC derivatives losses would have almost netted out to zero. You can consider derivatives like a string in a circle with various knots representing all the derivatives transactions. When Lehman went broke, the string broke. When Lehman couldn’t meet its obligations on derivatives, they could no longer be netted out to zero. That’s why the banks went down, and that’s why you had the government bailouts and quantitative easing (QE).

HRN: OTC derivatives are the real reason for the bank bailouts?

Jim Sinclair: That is a fact which can in no way be argued away.

HRN: Hasn’t the problem been cleaned up by the Dodd–Frank Wall Street Reform and Consumer Protection Act?

Jim Sinclair: The pile of OTC derivatives is over $1 quadrillion. After 2008, the International Monetary Fund (IMF) adopted a new method of valuing them called value to maturity. Value to maturity assumes all of them will function, which is a cartoon. The derivatives pile hasn’t contracted. Basically, it has expanded, but value to maturity reduced the notional value from over $1 quadrillion to under $700 trillion. The amount outstanding is the same as it was in the first place.

The flavor of the present moment is credit default swaps against the solvency, or lack thereof, of sovereign nations. New derivatives have some margin behind them, but they only work if they are not called upon. If a nation’s debt was in fact to default, it would happen very quickly without a great deal of run up before. Most people would expect a rescue to be coming. Let’s say a rescue didn’t come, those credit default swaps would simply not be able to function and down again would come the banking system.

HRN: Are you saying that the financial system is less stable today than it was in 2008?

Jim Sinclair: It appears more stable but that’s only an appearance. The entire equity rally took place almost to the day from when the Financial Accounting Standards Board (FASB) relaxed the mark to market rule. It allowed financial institutions to make up whatever value they wanted for their worthless pieces of paper. If they used the real values, the banks would have come down.

HRN: Wasn’t the FASB change a temporary measure to halt the decline in mortgage-backed securities?

Jim Sinclair: It wasn’t just mortgage-backed securities. It was all the paper on bank balance sheets. The balance sheets of banks appear to be in good shape but they’re not. In fact, they will need a lot more funds.

HRN: Then the financial system is still vulnerable?

Jim Sinclair: They’ve kicked the can down the road. The purpose of QE, in other words the printing of money, is to maintain some degree of integrity in the financial system. Bear in mind that the grease for the wheels of equity markets is liquidity, meaning that if you create a lot of money, it goes into the hands of banking institutions and international investment houses. So, the equity out of thin air market has been sustained by QE.

HRN: What can the government do to prevent another crisis?

Jim Sinclair: You can assume that what’s been done already will be done again. There are no other tools in a practical sense. The idea that there won’t be a continuation of QE is nonsense.

HRN: Can the government bail out the banks again?

Jim Sinclair: The central banks will buy the government debt. That’s called quantitative easing.

HRN: Doesn’t QE undermine the dollar?

Jim Sinclair: The dollar is an exercise in psychology. It’s a piece of paper with a promise to pay but there’s nothing in which it can be paid. It’s legal settlement for debt but there’s nothing that it’s convertible into. To maintain confidence, it’s necessary to maintain the stature of a currency. In an arithmetic sense, if you go into a market to sell a supply of apples, and if you’re the only seller, you can get a nice price. If more sellers, meaning more apples, come into the market, there goes the price of apples. QE creates more dollars, which increases the supply.

HRN: If the dollar is loosing value because of QE, what about the Euro?

Jim Sinclair: If you look at the dollar or the Euro or the Yen, or even the Swiss franc, it’s a race to the bottom amongst all currencies. All countries everywhere are creating more paper every day. It’s a relative valuation, rather than a valuation based on an objective reference. What happens in the European Union immediately affects the dollar.

HRN: You mean the sovereign debt crisis?

Jim Sinclair: There’s too much focus on the Euro countries. There’s no difference between the economic union of Europe and the union of the states in the United States. The states of Europe have been revealed to be insolvent. How about the states of the United States? Out of New York, Illinois, California, etc., how many are solvent? The focus of the media has been on the Euro. The U.S. should stand in front of a mirror. The states of the economic union of America are in no better shape.

HRN: The news media is ignoring the U.S. sovereign debt crisis?

Jim Sinclair: In George Orwell’s Nineteen Eighty-Four, there were loud speakers constantly teaching the people what Big Brother wanted. The loudspeakers today are financial television. How much attention has financial TV put on the insolvency of U.S. states? It’s been mentioned, but not like the solvency problems of Portugal, Greece, Spain and Ireland, which have gotten hours, days, weeks and months of constant coverage. The solvency of New York, Illinois and California has been brought up but fleetingly at best.

HRN: So, the solvency problems of U.S. states are like an elephant in the room that no one is talking about?

Jim Sinclair: How can you say that the Euro is a disaster based on the financial condition of the states of the economic union of Europe, when the states of the economic union of the United States are in equally bad shape and in some cases worse? There’s no difference. If you want to analyze the Euro based on the weakness of its member states, how can the dollar be strong when the states of the United States are as weak or weaker?

HRN: So, the Euro could rise against the U.S. dollar, despite the European sovereign debt crisis?

Jim Sinclair: Sure it can. The question is, can the dollar go lower? The Euro could go to $1.50 or higher.

HRN: But the U.S. dollar is the world reserve currency. Doesn’t that guarantee its value?

Jim Sinclair: Only by default. It remains so because central banks own dollars. If central banks could exchange them for gold or other currencies without a major dislocation, they would.

HRN: Then, as a practical matter, central banks can’t get out of the dollar?

Jim Sinclair: The only one that’s gotten out of it is China. They’ve made deals all around the world for metals, materials, energy and manufacturing. If you add it all up, China is no more stuck in the dollar than the man in the moon.

HRN: Doesn’t the U.S. maintain a strong dollar policy?

Jim Sinclair: The strong dollar policy has only been a moderate, long-term downtrend that continues lower.

HRN: Don’t central banks manage currency exchange rates to prevent disruptive changes, like the recent Japanese Yen intervention?

Jim Sinclair: In the Japanese yen intervention, the central banks intervened but how long can they intervene? They have to create money to intervene, which comes back to QE.

HRN: Do you mean the overall affect of currency interventions is to create new money?

Jim Sinclair: Anything that happens around the world, for instance, the Bank of Japan’s response to the horrible disaster in Japan, was to go straight to QE. Money is being created everywhere without any discipline but the problems of financial institutions remain because they have make-believe balance sheets with improper values for their OTC derivatives.

HRN: Doesn’t the suspension of the FASB mark to market rule buy time for banks to repair their balance sheets?

Jim Sinclair: There are five million homes for sale in the United States if you include the off-market shadow inventory, which is a real inventory. There’s no repair coming in the real estate market, therefore, there’s no repair coming in the OTC derivatives based on that. That means there’s no repair coming in the underlying paper that the banks now value at much higher levels than they could possibly sell them for, if they could sell them at all.

HRN: Will bank balance sheets eventually get better?

Jim Sinclair: As long as confidence remains in place, which depends on the equity market and that comes back to QE.

HRN: Are you saying that the U.S. stock market rally is driven by QE?

Jim Sinclair: There’s an inability to stop QE without the whole house of cards coming down on itself. There’s no other choice. It’s the only tool left. The Federal Reserve can’t take a hawkish position on monetary policy and interest rates without this whole thing rolling over. They can talk about it constantly and might have more back door QE than front door QE.

HRN: If QE doesn’t stop soon, what will happen?

Jim Sinclair: The end game is a virtual reserve currency linked to gold. It will be based on an average of major currencies, which will slow down the movement in the index. The International Monetary Fund (IMF) is moving in that direction with Special Drawing Rights (SDRs). The dollar will be just another currency. The dollar’s not going to zero. It could loose a significant part of its buying power, which it already has and could again.

HRN: How would a virtual currency work?

Jim Sinclair: There would have to be a broad measure of the money supply, such as M3 used to be for the U.S. dollar, but on an international basis. The price of gold would be related to that measure. Central banks would have to value their gold according to their contribution to or extraction of international liquidity, so the price of gold would rise or fall on its own.

HRN: Wouldn’t that be a gold standard?

Jim Sinclair: There’ll never be a return to a gold standard in my opinion. The end of all hyperinflations has been a commodity currency. That’s exactly what happened in Germany, for example. Gold has the capacity to give confidence to people if there’s some relationship between the currency and gold. The virtual currency will be linked to gold but not convertible into gold.

HRN: So, a gold component will restore confidence?

Jim Sinclair: The answer is a commodity currency. That’s what happened every time there was this type of situation in monetary history. The rentenmark, which ended the German hyperinflation in 1923, was supposedly backed by all the real estate in Germany, but the government didn’t own that real estate. The point is that it wasn’t true. There was no great commodity backing for the rentenmark, but it was enough. It was a period when people were searching for anything to restore confidence in the currency.

HRN: Do you expect high inflation in U.S. dollar terms?

Jim Sinclair: The deed is done. Inflation is a pregnancy. The conception has already taken place. There’s a delayed effect but if you do the crime, you do the time. The Federal Reserve could stop QE tomorrow and it wouldn’t stop what’s going to happen because of what they’ve already done.

HRN: Won’t inflation reduce the real value of debt and help to repair bank balance sheets?

Jim Sinclair: Inflation is the way debt will be taken care of. The value of the currency will be so reduced as to reduce the debt load. It will also change the political scene. Whoever has power going into this will not have power coming out of it.

HRN: In other words, inflation is politically destabilizing?

Jim Sinclair: People really haven’t seen the big picture. Currency induced cost push inflation is already here. Look at what’s going on right now in the Middle East. We are moving from order to lack of order.

HRN: Would you say that inflation in food prices is indirectly driving oil prices higher?

Jim Sinclair: Oil goes right through from fertilizers to farm equipment to transportation and to food prices. The price of food is going to go even higher than we are seeing this year. The price of oil is headed decidedly higher. Peak Oil was a concept of the future. Now it’s a concept of now. A car getting 25 miles per gallon will probably be too expensive for the average person to drive.

HRN: How will high oil prices affect the prices of other things?

Jim Sinclair: There will be dislocation in the means of delivery of products. There may be shortages of goods, not because there are no available goods but because the means of distribution breaks down. It’s not that there won’t be corn or wheat, but the fuel needed to deliver it will be too expensive and people who work in transportation will demand higher pay so they can live. That’s where hyperinflation comes in.

HRN: And money to maintain the distribution of goods will be printed out of thin air?

Jim Sinclair: Every nation that has ever done this has turned into a banana republic. People can live in banana republics but there will be few wealthy people. There will be a few super wealthy people and an enormous amount of poverty. You can see it across the border in Nogales, Mexico, where people continue to live in extreme poverty.

HRN: America is becoming like Mexico?

Jim Sinclair: The standard of living is going much lower. People have to realize that the damage is already done. It’s not a question of whether the U.S. can be pushed over the edge. We are over the edge. We are watching the consequences play out now.

HRN: What can people do to protect their wealth from inflation?

Jim Sinclair: People have to try to maintain their buying power. Each person can become their own central bank and, to the best of their abilities, focus on the assets that benefit from the disorder that’s taking place and that will continue to take place.

HRN: Do you mean buying precious metals or commodities?

Jim Sinclair: I’ve spoken to people who, over the last ten years, have had this perspective. They have done very well. Even doing it now could protect your wealth.

HRN: What about gold? Do you see gold as a currency that can’t be debased?

Jim Sinclair: What is real money? Gold is a currency that has no liability attached to it. It’s a measure of value and a store of wealth that’s universally acceptable.

HRN: So, gold is an alternative to dollars or Euros?

Jim Sinclair: Physical gold is the answer. An individual who holds gold will have more time and ability to function.

HRN: How much higher do you think the price of gold could go?

Jim Sinclair: What’s the exchange rate of a currency with no liability attached to it? Gold is going much higher. We could see shocking gold prices, maybe Alf Fields’ target of $10,000 per ounce or Martin Armstrong’s target of $12,000 per ounce. I think that my price target of $1,650 per ounce gold is going to be so low it will be considered silly.

HRN: Thank you for your time today.

Jim Sinclair: It was my pleasure.

(http://www.financialsense.com/contributors/ron-hera/interview-jim-sinclair-on-gold-and-the-world-financial-system)

An Interview With Hugo Salinas Price on a Return to a Silver Mexican Peso

Commodities / Gold and Silver 2011 May 19, 2011 - 02:17 AM

By: Jeff_Berwick

We, here at The Dollar Vigilante (TDV), have been big supporters of Hugo Salinas Price for years. Not just for his business exploits, which have made him a billionaire, but because he now spends a significant portion of his time trying to return silver as a monetary medium in his home country of Mexico.

He recently was quoted by King World News, stating that silver could be monetized as early as this year in Mexico and so we reached out to Hugo to get some clarification of what he believes may occur and what some of the repurcussions could be.

We'll let Hugo introduce himself, for those that don't know him, but to give you some background, Mr. Salinas Price founded Elektra, a multi-billion dollar electronics retailer which employs more than 37,000 people with more than 1,000 stores in Mexico, Guatemala, Honduras and Peru.

The Dollar Vigilante (TDV): Thank you very much for taking the time to speak with us today! Please introduce yourself and give some background on yourself to our audience.

Hugo Salinas Price (HSP): I am 79 years old, son of a Mexican father from the city of Monterrey, Mexico, and of an American mother from Bryn Athyn, Pa., where I was born. My education was largely in English-speaking schools. I married early, at 22, and my wife and I are looking forward to our 57th Anniversary later this year. I did not finish any college course for a BA (Editor's Note: Yet another "uneducated" billionaire as per our recent blog post: Debtucation);

I decided to devote myself to some productive work at age 20 and so I am mostly self-educated. As luck would have it, I managed to build a tiny company building radios into a chain of small stores selling durable consumer goods in installments to the public. After 38 years of one single job, I turned over management entirely to my eldest son, and he has been very successful, indeed. It's certainly not my fault I am considered a "billionaire" - this was my eldest son's doing, he is to blame for it entirely.

However, monetary affairs have always fascinated me, and in "retirement" I was able to devote myself to thinking through the problem of instability in modern society. Thus, I arrived at the question of silver money, in 1995, when I wrote a little book "Silver - The Road for Mexico" (available only in Spanish). Thus began the long journey which has given meaning and purpose to my old age.

TDV: Where in Mexico do you live?

HSP: I live in Mexico City, same house since 1959.

TDV: You have been very active in lobbying the Mexican Government to integrate silver into the money system. Could you please expand on this?

HSP: First, I want to make it clear that my campaign for silver does NOT mean backing the Mexican peso with silver. I am not proposing anything so radical as a general reform of the Mexican monetary system - simply because such a program would cause so much disruption and grief while people adapted to it, that it is politically impossible; and so it is useless to spend time working on something so "far out".

What I propose is simply to give a quoted monetary value to a one-ounce pure silver coin which already exists, the "Libertad" ounce (editors note: Libertad means freedom in Spanish). This coin has no engraved value upon it, and it would be given a QUOTED monetary value by the Central Bank; the quoted monetary value would always be slightly higher than the market price of a silver ounce, and when the price of silver rises, the Central Bank is to adapt to that situation by giving the coin a higher price. When the price of silver falls, the last quote remains in place, so that the quoted value can never diminish, only rise to accommodate the higher market price of silver.

By this means, something very important would happen: the silver coin would remain permanently in circulation with paper money; the silver coin would never be melted down, because higher prices of silver would simply mean a higher monetary value for the coin. Of course, people would save these coins, the demand for them would be enormous. But they could also use these coins for payments in emergencies or for investments. An excellent and simple way to save!

There is in the world today, no real alternative to fiat money - fake money. All currencies of the world are equally void of any intrinsic worth. Monetizing the "Libertad" ounce would give Mexicans an alternative and simple way of saving, in money that is truly money, because it is made of silver. Savings in "Libertad" ounces would provide every family with a nest-egg of great importance, as it would consist of coins which cannot be devalued by the State, with a totally liquid value.

TDV: OK, this clarifies things a lot. So, your goal here is not to fully back the Peso with silver.

HSP: Yes, as I said before, I am NOT for "backing the Peso with silver". I am striving to have a single silver coin, the one-ounce pure silver "Libertad", MONETIZED by means of a monetary quote to be issued by the Central Bank.

The Government of Mexico, just like the Governments of every single country in the world today, allows the Central Bank to inflate the money supply through the banking system. Not one of the world's governments is ever going to willingly stop inflating!

The monetized one-ounce pure silver "Libertad" will provide an excellent refuge for savers who want to preserve the value of their savings for their old age, for the education of their children, or simply to eat when hard times strike. It would be the first and (for a time) the only true alternative money in the world of the 21st Century.

TDV: In other words, the Mexican central bank can keep inflating under this proposal.

HSP: Neither the Mexican government nor ANY GOVERNMENT IN THE WORLD will ever swear off of inflating the money supply and expanding credit when it can be done. That's why we need the alternative money, which can be said to be "indexed" to the market price of silver.

TDV: Why would the Mexican government give the "Libertad" a quoted monetary value? Does this mean that someone can pay a certain amount of pesos for the coin and then, if the peso value of silver halves, they can sell it back to the Central Back for the same price that they purchased it for? Wouldn't the Central Bank have an incentive to print enough money so that the peso value of silver never falls?

HSP: The institution giving the coin a quoted monetary value would not be the Mexican government, it would be the Central Bank, in obedience to Legislation passed by the Mexican Congress, which has the constitutional authority to instruct the Central Bank on this matter.

About "selling the coin back to the Central Bank" for the same price they paid for it, when silver has fallen in bullion value: Yes, they could, but no one in his right mind would do this. The Mexican peso which circulated for 25 years (1920-1945), of which 458 million were minted, contained silver which fell in value sharply during the Depression, yet not one of those pesos was ever returned for PAPER. Gresham's Law, you know. No one ever exchanges better money for worse money.

Printing pesos to keep the peso price of silver up, means inflating and devaluing the peso against the dollar, in which currency silver is quoted in world markets. The Central Bank would have no reason to do this.

TDV: We have been debating your proposal amongst some members of the Austrian economics community. Some state that silver is too volatile to use as an alternative currency at this time... they prefer gold. What are your thoughts on using silver versus gold?

HSP: The monetization of the silver ounce would cause a demand for it that would tend to smooth out the volatility, which I suspect in any case is due to manipulation of the silver market. The best way to combat that manipulation is to create a great demand for physical silver which would put the shorts out of business.

Talk of a return to gold is important, as it fosters a re-orientation of thinking which is indispensable - from the paper of the last 40 years, to gold, that will give more long-lasting benefits to humanity. Eventually, we'll have to get past the "talking" stage and move on to action; however, no one has a clue, at this point, on how to get from paper to gold!

Monetizing the silver "Libertad" coin is a FIRST STEP IN THE RIGHT DIRECTION. It does not fix everything, it does not reform everything, it is painless and it is very, very attractive to people. This, my friends, is the only practical way to get anywhere in life!

To quote an old, old song, "I don't want to set the world on fire, No baby, I'm contented - with a flame in your heart".

TDV: Nice touch. Just for the record, we here at TDV are fully in favor of setting the monetary world on fire if need be to rid ourselves of these central banks and governments! But we also appreciate the prudence in taking it one step at a time as you are attempting to do with the silver Libertad.

On other matters, we recently wrote a blog piece about the vibrancy of the Mexican economy (The Rumors of Mexico's Death Have Been Greatly Exaggerated). What are your overall thoughts about the state of Mexico and it's economy?

HSP: We're looking great, considering the fiscal chaos in the USA with its $1 Trillion-plus budget deficits as far as the eye can see. We need to have our people save lots of silver, to face the coming readjustments in the US economy, which will be very painful, indeed.

TDV: Thank you very much sir for your time and your efforts to try to bring some sort of sanity to the monetary system.

In closing, this is a small but potentially inspiring move to bring something solid into the monetary system. It could set off a rush, even by the neighboring Americans, to get their hands on the silver Peso, which could even lead to the US Government having to do something it is supposed to do in the Constitution but hasn't done for decades: coin money in gold and silver through a "silver dollar".

We wish Mr. Salinas Price the best of luck and thank him for his work in this field.


(http://www.marketoracle.co.uk/Article28214.html)

Worthwhile Canadian Initiative

Canadian banks are typically leveraged at 18 to 1--compared with U.S. banks at 26 to 1.

by Fareed ZakariaFebruary 07, 2009

(Page 1 of 2)

The legendary editor of The New Republic, Michael Kinsley, once held a "Boring Headline Contest" and decided that the winner was "Worthwhile Canadian Initiative." Twenty-two years later, the magazine was rescued from its economic troubles by a Canadian media company, which should have taught us Americans to be a bit more humble. Now there is even more striking evidence of Canada's virtues. Guess which country, alone in the industrialized world, has not faced a single bank failure, calls for bailouts or government intervention in the financial or mortgage sectors. Yup, it's Canada. In 2008, the World Economic Forum ranked Canada's banking system the healthiest in the world. America's ranked 40th, Britain's 44th.

Canada has done more than survive this financial crisis. The country is positively thriving in it. Canadian banks are well capitalized and poised to take advantage of opportunities that American and European banks cannot seize. The Toronto Dominion Bank, for example, was the 15th-largest bank in North America one year ago. Now it is the fifth-largest. It hasn't grown in size; the others have all shrunk.

So what accounts for the genius of the Canadians? Common sense. Over the past 15 years, as the United States and Europe loosened regulations on their financial industries, the Canadians refused to follow suit, seeing the old rules as useful shock absorbers. Canadian banks are typically leveraged at 18 to 1—compared with U.S. banks at 26 to 1 and European banks at a frightening 61 to 1. Partly this reflects Canada's more risk-averse business culture, but it is also a product of old-fashioned rules on banking.

Canada has also been shielded from the worst aspects of this crisis because its housing prices have not fluctuated as wildly as those in the United States. Home prices are down 25 percent in the United States, but only half as much in Canada. Why? Well, the Canadian tax code does not provide the massive incentive for overconsumption that the U.S. code does: interest on your mortgage isn't deductible up north. In addition, home loans in the United States are "non-recourse," which basically means that if you go belly up on a bad mortgage, it's mostly the bank's problem. In Canada, it's yours. Ah, but you've heard American politicians wax eloquent on the need for these expensive programs—interest deductibility alone costs the federal government $100 billion a year—because they allow the average Joe to fulfill the American Dream of owning a home. Sixty-eight percent of Americans own their own homes. And the rate of Canadian homeownership? It's 68.4 percent.

Canada has been remarkably responsible over the past decade or so. It has had 12 years of budget surpluses, and can now spend money to fuel a recovery from a strong position. The government has restructured the national pension system, placing it on a firm fiscal footing, unlike our own insolvent Social Security. Its health-care system is cheaper than America's by far (accounting for 9.7 percent of GDP, versus 15.2 percent here), and yet does better on all major indexes. Life expectancy in Canada is 81 years, versus 78 in the United States; "healthy life expectancy" is 72 years, versus 69. American car companies have moved so many jobs to Canada to take advantage of lower health-care costs that since 2004, Ontario and not Michigan has been North America's largest car-producing region.

I could go on. The U.S. currently has a brain-dead immigration system. We issue a small number of work visas and green cards, turning away from our shores thousands of talented students who want to stay and work here. Canada, by contrast, has no limit on the number of skilled migrants who can move to the country. They can apply on their own for a Canadian Skilled Worker Visa, which allows them to become perfectly legal "permanent residents" in Canada—no need for a sponsoring employer, or even a job. Visas are awarded based on education level, work experience, age and language abilities. If a prospective immigrant earns 67 points out of 100 total (holding a Ph.D. is worth 25 points, for instance), he or she can become a full-time, legal resident of Canada.

Companies are noticing. In 2007 Microsoft, frustrated by its inability to hire foreign graduate students in the United States, decided to open a research center in Vancouver. The company's announcement noted that it would staff the center with "highly skilled people affected by immigration issues in the U.S." So the brightest Chinese and Indian software engineers are attracted to the United States, trained by American universities, then thrown out of the country and picked up by Canada—where most of them will work, innovate and pay taxes for the rest of their lives.

If President Obama is looking for smart government, there is much he, and all of us, could learn from our quiet—OK, sometimes boring—neighbor to the north. Meanwhile, in the councils of the financial world, Canada is pushing for new rules for financial institutions that would reflect its approach. This strikes me as, well, a worthwhile Canadian initiative.

(http://www.newsweek.com/2009/02/06/worthwhile-canadian-initiative.html)

Now Zimbabwe talks of a gold standard while warning of U.S. dollar devaluation

Zimbabwe's Central Bank governor has gone on record as warning about the fall in value of the U.S. dollar while suggesting that his country should move towards a gold backing for its own currency.

Author: Lawrence Williams
Posted: Monday , 16 May 2011

LONDON -

The southern African state of Zimbabwe, where President Robert Mugabe's dogmatic pursuit of white controlled farms, and now the mining industry, coupled perhaps with a serious degree of ineptitude and corruption, brought the country's economy to its knees, is now doubting the future value of the U.S. dollar - a currency which it has relied upon to end its disastrous hyperinflationary episode.

According to New Zimbabwe.com - a U.K.-based Zimbabwe news portal - the Reserve Bank of Zimbabwe's Governor, Gideon Gono, is reported as saying:

"There is a need for us to begin thinking seriously and urgently about introducing a gold-backed Zimbabwe currency that will not only be stable but internationally acceptable," Gono said in an interview with state media. "We need to rethink our gold-mining strategy, our gold-liberalisation and marketing strategies as a country. The world needs to and will most certainly move to a gold standard and Zimbabwe must lead the way."

Gono reportedly said the inflationary effects of United States' deficit financing of its budget were likely to impact other countries, leading to resistance of the greenback as a base currency.

"The events of the 2008 global financial crisis demand a new approach to self-reliance and a stable mineral-backed currency, and to me gold has proven over the years that it is a stable and most desired precious metal," Gono said. "Zimbabwe is sitting on trillions worth of gold reserves and it is time we start thinking outside the box, for our survival and prosperity."

When a country like Zimbabwe, which has experienced one of the worst hyperinflationary episodes ever with multi-billion Zimbabwe dollar notes being virtually worthless (the country even printed a 100 trillion dollar note at its inflationary peak), starts casting doubts on U.S. dollar inflation, perhaps we should start to worry a little, although one has to say Gono's financial credentials are shaky, to say the least. He presided over an inflationary period when at one time Zimbabwean inflation was said to be running at over a billion percent a month!

But he may have a point. Zimbabwe does have excellent gold reserves, although the country has seen its annual production decimated due to its financial policies and, at one time, withholding payment to its gold mines which have to sell to the Central Bank. As a consequence Zimbabwe's gold production dropped over a period of years to a low of 4 tonnes in 2008. At peak the country's gold output neared 30 tonnes. Since 2008, a relaxation on gold sales allowing mines to sell at global market prices has led to a revival, but still remains at less than half peak production levels.

Gono and Mugabe's money printing policy in Zimbabwe is the prime cause of the country's descent into the world's second worst ever hyperinflationary episode, so he has a strong personal knowledge of what can happen to a currency if the Central Bank keeps on churning out more and more paper money. Maybe he recognises in Ben Bernanke a man after his own heart!

Source: http://www.mineweb.com/mineweb/view/mineweb/en/page72068?oid=127101&sn=Detail

投資或成為通漲的犧牲品

2011-04-29 09:45:36 張化橋的Blog

上周，我到澳大利亞度假。按照老習慣，我買來兩份報紙：金融評論（AFR), 和澳大利亞人。一看價格，我大吃一驚：分別3澳元和2.60澳元（澳元比美元略貴）。1991－1994年，我在坎培拉大學當金融學講師時在那裏"爬過格子"。這兩份報紙我太熟悉了。它們當時都是70到80分錢的報紙。我當時的年薪大約4.2萬澳元，現在同樣職位的人賺8.4萬澳元。但今天的講師可比二十年前的講師窮多了。

國人對通脹相當熟悉，每個人都會講幾個有趣的故事。通脹也是一個全球的現象。當然，中國過去三十多年的通脹超過世界上絕大多數國家。可笑的是，我們一直到八十年代底甚至九十年代初還在堅守"社會主義國家不會出現通脹"的舊棺材。

我們的通脹究竟會有何等結局呢？在我斗膽做幾個長期的，模糊的和方向性的猜測之前，我想回顧過去三十多年中國通脹。

在一個理想的世界，通脹是沒有利或弊的：把一元的鈔票變成一元七角或者五元三 角，就好象上市公司最愛玩的遊戲一樣，把股票拆細，一拆五，甚至一拆十。這都不影響任何人的利益（正面負面影響都沒有）。當然，送紅股也是完全一樣，把公 司的資本儲備轉變為股本之類的小把戲也屬此類。以後，股數太多了，大家的算術不夠好，還可以再把股數縮小，比如每七股合成一股，等等。

對於政府來說，通脹就是把紙幣拆細。等到通脹太嚴重時，大家買一斤大蔥要支付幾百萬元時，對大家的算術水準要求太高了，我們還可以刪掉後面幾個零，美其名曰"貨幣改革"。舊中國和世界上很多國家都幹過這類事。不過，遺憾的是，通脹和"貨幣改革"不象股票數量的增減那樣中性，可能會導致利益轉送，巨痛，恐懼，社會不公平，乃至動亂。為什麼？

過去三十多年，中國的通脹是信貸高速擴張的直接結果。銀行業作為一個系統（特 別是包括中央銀行）在沒有錢的情況下也是可以貸款的，當然也可以在錢少的時候貸很多的款。在背後的支撐是公眾對政府和銀行的信任。還是讓我們看看結果。過 去三十多年，中國的廣義貨幣供應量每年的複合增長率超過20％。貨幣供應量是什麼？它就是所有中國企業和家庭的存款總和加上流通中現金。這也就是購買力。這些錢是怎麼來的呢？

首先，中央銀行可以無錢放款（印鈔票）。貸款會直接轉成受貸人的存款，他如果使用這筆款項，另外的人就有了存款，銀行又可以以此存款為基礎發放下一筆貸款（當然要先扣除一點存款準備金）。然後，某些人又有了存款，銀行又可以再放更多的貸款。如此迴圈。

這麼多年，政府在扶持經濟發展的名義下，把銀行利率人為地壓低，低於通脹水 準，所以真實利率為負數，也就創造了對受款人的一種補貼。同時人為地刺激了對貸款的需求。三種人獲得的補貼最多：企業主，負債投資者，負債投機者。誰吃虧 了呢？存款人，老老實實拿固定工資的人們，沒有資格或者沒有關係獲取貸款的人們。當然，社會的公平公正成了犧牲品。

很多人憑直覺認為，通脹期間企業的名義利潤被誇大，所以股票市場應該走好。我 認為這種一個錯誤。錯誤的根源在於它有一個隱含的假定：市盈率會保持不變。但是市盈率可以再跌一半或者更多。為什麼？在通脹期間，即使中央銀行不做貨幣緊 縮，資金也會更加短缺：工廠和商店為了完成同樣多的經濟活動，需要更多的鋪底資金，地產商需要更多資金做土地儲備。居民腰包裏也需要更多的周轉金。在資金 緊張時，資本市場首當其衝。當然，不管中央銀行是否緊縮，名義利率也會上升。而股市的市盈率不過是利率的倒數而已。1968年到1982年，美國的通脹很高，道鐘斯指數幾乎跌了一半，如果考慮到通脹因素，它實際下跌了80％。雖然公司整體上名義的利潤還算可以，但是市盈率從18倍跌倒了6倍。這15年讓美國股民痛苦萬分，雖然1982年以後股市又經歷了17年的大牛市。

在看中國。2000到2004年，股市不聽政府的話，連跌了五年。雖然官方的通漲資料不很高，但是你想想吧，煤炭，礦石，銅，鋁，鋼鐵，糧食和土地價格在那五年漲得空前劇烈。雖然貨幣供應量每年增長20％以上，但是資金還是很緊張，股市奄奄一息。即使每一個股民都是傻瓜，他們合起來一定是不傻的。

大家再想想中國從1992年以來市盈率的下降的趨勢吧。中間雖然有幾次短暫的牛市，但估值水準的下降趨勢是很明顯的。你也許會說，這種下移主要是因為股票供應量的增加，但我敢預言未來十年市盈率下移的推動力會是過去十年建立起來的貨幣供應量的高臺階，通漲，以及中央銀行未來的信貸控制。

如果未來通脹確實難免，那麼我們如何自保呢？很多人似乎直到最近兩年才發現過 去三十年來的嚴重通脹，所以，急不可耐亂抓機會，以規避通脹。這是不理智的。我認為，股市很可能成為通脹的犧牲品。債券市場更是如此。債券價格與名義利率 成反比。房地產市場也許好一些，但是未來幾年內情勢不妙，投資者必須有長遠的眼光才行。

通脹是國難，也是人禍。控制通脹會需要付出很大的代價：緊縮信貸，提高利率，放慢經濟增長，犧牲大量的就業機會。政府會猶豫和徘徊，政策會隨著失業壓力和銀行壞帳的增加而反復。

如果說過去的通脹年代裏，中國人寅吃卯糧，那麼可以預見未來幾年的緊縮可能需要把虛假的"財富"還給未來。金融市場的減肥會很痛苦，更多的投資機會可能在金融市場之外，即在實體經濟。

我給我弟弟的投資建議如下：

（1）買一塊農地，種蔬菜和瓜果；

（2）參股隔壁阿三大叔的汽車修理站，並且晚上和週末多去幫忙；

（3）支持他失業多年的老婆辦一個幼童上學和放學的接送服務社。再請幾個幫手。工商局肯定會刁難，但是，多忍耐吧。我也沒辦法。

（4）投資他老同學的棉花採購站。

（5）如果有餘錢，買點銀行的股票，準備持有十年以上。

通漲是國難。國難當頭，大家只圖保值和日子過得去，不要妄想有很大的利潤。 （本文不代表作者的雇主的觀點。）

美國猶他州正式確立金銀幣為法定貨幣

2011/04/01 22:42

據報導稱，美國猶他州參眾兩院已經通過金銀幣法案，正式確立金銀幣為該州的法定貨幣。 鹽湖城的商店很快就將開始接受水牛金幣和雄鷹金幣。
猶他州州長上週簽署這項新法案，成為該州稅典的一部分，確立聯邦發行的金銀幣為該州法定貨幣。 該州州議會的委員會也受命研究“ 其他形式法定貨幣”的可能性。
報導指出，此舉對美聯儲(Fed)有點諷刺，因為保守派人士憂心美聯儲向市場注入數以萬億美元，已經永久性地令美元價值縮水。 猶他州是美國保守派茶黨的大本營之一，在反對美聯儲主席伯南克(Ben Bernanke)方面，也居於領導地位。
保守遊說團體美國原則項目(American Principles Project)政策總監Jeff Bell表示，“他們一直都是災星。自從本伯南克入主美聯儲以來，一直致力於抵禦通縮，並將利率壓低到極限水平。”
保守派智庫美國企業研究所(American Enterprise Institute)的前美聯儲官員Vincent Reinhart表示，“目前美聯儲面臨著很大的公憤，政客們在努力疏導​​這種憤怒，不過他們不是始終能做到前後一致。 ”
當然，猶他州的行動並非是孤獨的，已經有其他幾個州正在考慮是否也通過這一法案，讓金銀復本位回歸。
美國聯邦發行的金銀幣，本來就已經是法定貨幣，但實際上並沒有人真正把它們當成貨幣或硬幣來使用，而將之視為投資工具或財產。 面額50美元金幣，目前市值約為1400美元，但就純貨幣的交換價值而言，它仍然只值50美元。

因此，這項新法律的真正意義，在於它讓金銀幣從此在猶他州成為“通貨”而非“資產”，因此當交易轉手時，就可以免除稅收。 不過，仍要繳納聯邦稅。
帶頭促成猶他州州議會通過這項新法的律師Larry Hilton也表示，並不認為大家會真的用金銀幣去一般商店買東西。 但他稱，去除交換這些硬幣時的稅負，將讓這些硬幣等同於紙幣，則銀行就可能創設以金銀幣為擔保的賬戶。

Gold Investments Market Update (2011/05/12)

Thu, May 12 2011, 13:48 GMT by Mark O'Byrne - GoldCore

Gold and silver’s recovery in recent days proved to be temporary and further falls were seen yesterday (sharply in silver) prior to a tentative recovery overnight and then more falls again this morning. The euro has stabilized after recent sharp falls and euro gold at €1,050/oz remains comfortably above €1,000/oz after a period of correction and consolidation. Euro gold looks like it is set to break above record highs of €1,072/oz (12/28/10) and target €1,100/oz as the European debt crisis deepens.

Cross Currency Rates at 1030 (London AM Fix)

The massive disconnect between the COMEX spot and futures prices and the physical market continues with leveraged, powerful players on Wall Street (primarily hedge funds and Wall Street banks) able to effect short term sell offs in the paper market despite the very strong supply, demand fundamentals in the physical bullion market.

Euro Gold – 1 Year (Daily)

Simplistic assertions that gold and silver are asset bubbles and that silver’s bubble has burst continue.

Those who have been wrongly calling gold and silver bubbles in recent years fail to realize that gold and silver are no ordinary assets, indeed many contend that they are not assets at all, rather they are money. The precious metals were demonetized in the second half of the 20th century as unbacked paper currencies (fiat money) became accepted globally.

USD Gold – 1 Year (Daily)

Those continuing to call gold a bubble do not understand monetary economics and the growing trend towards the gradual remonetisation of gold. This is due to the unstable nature of the global financial system and markets and growing concerns about all fiat currencies including the international reserve currency, the U.S. dollar and major reserve currencies such as the British pound, the Japanese yen and the euro.

Ultra loose monetary policies and global currency debasement renders confident assertions of gold and silver being bubbles simplistic and naïve.

Indeed, with growing calls for a return to the Gold Standard, the latest from billionaire media magnate Steve Forbes (see news), gold looks set to at least rise to its 1980 adjusted high of $2,400/oz.

Forbes said in an interview that “people know that something is wrong with the dollar."

“What seems astonishing today could become conventional wisdom in a short period of time,” Forbes said. He concluded that "you cannot trash your money without repercussions.”

He thus echoes long term gold standard advocate Representative Ron Paul and the recent advocation of a return to some form of Gold Standard by World Bank President Robert Zoellick.

A return to a Gold Standard would likely see gold revalued to thousands of dollars per ounce.

(http://www.fxstreet.com/fundamental/analysis-reports/gold-investments-market-update/2011/05/12/)