Of mice and men
While the US dollar is weakening, by design, Greece, Ireland, Portugal and Spain are being bankrupted by a deliberately overvalued Euro.
an unexpected $7.3 billion trade deficit, the biggest in seven years. The nation’s (China’s) exports rose at the slowest pace since November 2009.
For Europe, the grand prix is to replace the dollar as the currency of international trade – especially oil trade. Euro as a international trade-currency-of-choice, will give the Euro region access to more than 1 trillion euros in zero-cost floating balances.
China is expecting the yuan to play a similar role. Such are plans made by mice and men.
Monsieur Murphy says
What can go wrong with these plans? Plenty.
The eternal enemy of currency manipulation – gold. As a million bureaucrats work on the mechanics of their plans,
Sales of gold coins are on track for the best month in a year amid the worst commodities rout since 2008, a sign that bullion’s longest bull market in nine decades has further to run, if history is a guide.
The U.S. Mint sold 85,000 ounces of American Eagle coins since May 1 as the Standard & Poor’s GSCI Index of 24 raw materials fell 9.9 percent. The last time sales reached that level, bullion rose 21 percent in the next year. Gold will advance 17 percent to a record $1,750 an ounce by Dec. 31 and keep gaining in 2012, the median estimate in a Bloomberg survey of 31 analysts, traders and investors shows.
UBS AG, Switzerland’s biggest bank, had its second-best day this year for physical sales on May 9, according to a report the following day. The bank’s sales to India, the world’s top bullion consumer, are more than 10 percent higher than in 2010. (via Gold Coins Show Bull Market Unbowed in Commodities Decline – Bloomberg).
You take free advice …?
Back in late January, as the world’s important people rubbed elbows in Davos, billionaire investor George Soros had some rather definitive thoughts to offer on gold, which he called “the ultimate asset bubble,” according to reports.
However, he neglected to mention that his hedge fund had been buying.
Another report points out that the liquidation (by people like Soros) of investments in public investment vehicles may be replaced by private investments.
The new filings from funds “may show that big names exited ETPs and this news may cause prices to slip in the very short term,” said Bayram Dincer, an analyst at LGT Capital Management in Pfaeffikon, Switzerland. Some funds switched to holding gold directly so they wouldn’t have to announce it publicly, he said.
Is gold a bubble?
A rather disbelieving journalist writes of the situation in the West
Gold is in a bubble. Anyone will tell you that. They’ve been saying it since gold was about, oh, $500 an ounce. But it’s a funny kind of a bubble. It’s the only one I’ve encountered where so few people seem to own the asset in question.
During the dot-com bubble, you met lots of people with tech stocks. Taxi drivers told you what dot-coms they owned. During the housing bubble you met normal, ordinary people who were trading up to expensive homes using adjustable-rate mortgages, buying new condos off plan to flip, and cashing out their fictional “equity” through a refinance mortgage.
But who actually owns gold? I keep hearing about the gold bubble, but every time I ask people if they own any themselves, they say, “no, no, of course not, it’s a bubble.”
Central banks around the world are printing more dollars, euros, pounds and yen. Gold may simply be a less awful currency than all the others. Banks can’t print any more of it, so its price should probably rise while other currencies fall.
For this year, the question in India seems to be, “Will gold cross Rs.25000, by 2011 Diwali?”
- Gold Coins Show Bull Market Unbowed in Commodities Decline (businessweek.com)
- Soros Sells Most of Gold ETP Holdings During First Quarter (businessweek.com)
- A closer look at George Soros’ big quarter of selling gold (financialpost.com)
- Why is George Soros selling gold, but John Paulson not? (theglobeandmail.com)
- China Is Now Top Gold Bug (online.wsj.com)
- Gold Investment Demand in China (lonerangersilver.wordpress.com)
- Chinese set new standard in buying gold (ft.com)
- Gold grand prix – The Chinese challenge (quicktake.wordpress.com)
- Shanghai Planning Gold Exchange-Traded Funds as Demand Jumps (businessweek.com)
- Oil, gold back in demand (news.theage.com.au)
Things go bump in the night
In the early hours of 2nd May, 2011, an obscure twitter-user started tweeting about the US raid on Osama Bin Laden’s safe-house – 35 km from Islamabad, 200 miles south of the Afghanistan border, in Abbottabad. In a city, which houses Pakistan’s equivalent of Indian Military Academy.
But Pakistan’s police, para-military, military forces claimed ignorance, showed surprise, feigned outrage. Par for the course. Was it abject failure or a cover-up in Pakistan , by the powers-that-be?
Afraid of the mullah-madrasa-mujahid combine, predictably, Pakistan started denying any role in the killing of Osama Bin Laden. Truly Pakistan ‘doth protest too much, methinks’. Secret deal or not, in the past or post-facto, a deal around killing Osama could have been easily hammered out between Pakistan and USA.
It suited both the leaderships.
It is election time in USA
Pakistan was not alone in using Osama. Osama alive was source of US funds for Pakistan. Osama dead is an election ticket and a feel-good factor for the a USA being battered by the Great Recession. As Rajiv Dogra points out, on the opposite side of the world,
The timing suited Obama well. It had long been speculated that Osama would be killed around the time Obama’s re-election campaign kicked off.
Predictably, the US made a song-and-dance about the annual aid of US$3 billion that they dole out to Pakistan. Compared to the US$3 trillion that the US Department of Defence is unable to account for, this talk of US$3 billion makes for poor form.
On a lighter – and logical side
Famous for the song केम छे ‘kem che, kem che’ from the film जिस देश में गंगा रहता है Jis Desh Mein Ganga Rahta Hain, a Bollywood songwriter confidently predicted, soon after 9/11, that Bin Laden would be found near the White House or Islamabad!
Coming to India
Memories dimmed, history forgotten, India draws wrong conclusions from these Western adventures in our neighbourhood.
After WWII, as British, French and Dutch colonialists were being thrown out of Asia, in country after country, the West was in real danger of losing markets and raw material sources.
A new power, fueled by a growing migrant population, USA, took the place of tired, old powers – Britain, France and the Dutch. Instead of the openly exploitative system of European powers directly running colonial governments in these Asian countries, the US installed an opaque system – which is equally exploitative. To impose its writ on the newly independent Asian countries, the US simply destroyed their economies by war. The USA, then instituted the innovative USCAP Program and ‘helped’ these countries. These countries (Taiwan, Singapore, Japan, South Korea, Indonesia, Malaysia, et al) were now ruled by overtly independent regimes – but covertly, client states of the USA.
US multinationals and home-grown oligarchs (keiretsus, chaebols, etc.) took over the economy – and sidelined British, French and Dutch companies. To impose this economic model, US armies, using nearly 1 million troops, killed 50 lakh Asians. The takeover of European colonial possessions by the USA was handled over 3 regimes of Eisenhower-Kennedy-Johnson seamlessly.
Between a rampant USA, behind biggest terror spots of the world, and a nuclear-armed, imploding Pakistan, India’s choices are difficult – and reactive policies inadequate.
Once more, Osama’s death and Obama’s antics bring out India’s policy inadequacy in sharp relief.
- Cable: Pakistan military learn anti-Americanism (cbsnews.com)
- Bin Laden’s Pakistan villa: Tourist destination? (cbsnews.com)
- Osama bin Laden dead: Pakistan returns helicopter wreckage (telegraph.co.uk)
- You: Drones hurting national integrity (nation.com.pk)
Environmental writer and activist Bill McKibben of 350.org voiced his disapproval. (and) summarized what Obama accomplished:
He formed a league of super-polluters, and would-be super-polluters. China, the U.S., and India don’t want anyone controlling their use of coal in any meaningful way.
On Aug 14, 2009, a Quicktake post wondered if this entire climate change and global warming had something to do with coal-fired power plants.
Bill McKibben’s peeve does prove that this is indeed the case.
Now, coal is the cheapest way to generate electricity. Looking at the shortfall in electricity, and Indian consumers’ ability to pay, coal is the answer.
To low costs, add the fact that India has coal reserves that will last for the next 100 years – at least. But, coal-generated electricity, will also makes India industrially competitive.
And we don’t want that, do we? Right, Billy Boy!
Inside Indian bedrooms
60years ago, an assault was made by foreign ‘observers’ into Indian bedrooms. Foreign ‘observers’
- Tied ‘development aid’ to India’s population control.
- Trained Indian ‘health workers’ to control India’s human reproductive behaviour.
- Paid for by Western Governments, soon after that, we had ‘health workers’ fanning out across the Indian country-side, conducting vasectomies /tubectomies on India’s (especially poor) population.
It did not matter then, who the ‘observers’ were – foreign or Indian. Neither does it matter now. What matters is someone’s monitoring. And I don’t like that at all.
Even if the monitors have brown skins (my liking for brown skin notwithstanding). Even if it comes with a recommendation from Nobel prize winner, Amartya Sen. How Indian power producers generate electricity is our business.
Getting a handle on the Indian economy is the second and related part of the agenda.
An agenda, I don’t like.
All that nice, fresh, white newsprint …
Just the amount of newsprint that has been devoted to climate change and global warming must have raised temperatures (going by the ‘warmers’ calculations and estimates) enough to make this debate of questionable value. To that add, the amount of gimmickry and media overdrive (through slick PR) that raises many doubts and questions.
Hush, boy! Do not even mention ‘scientific manipulation’.
Just look at the record.
The most prominent and vocal votary of Climate Change was Al Gore – who was promptly awarded the Nobel Prize. The recruitment of Maldives and the positioning of President Mohammed Nasheed was again a very slick operation. The underwater Maldives cabinet meeting had a interesting story.
Maldivian officials said the idea to hold the attention-grabbing underwater cabinet meeting came from President Mohamed Nasheed when he was asked by an activist group to support its “environmental day” action on October 24.
“The 350.org group asked if the Maldives can hold an underwater banner supporting environmental day,” an official from the president’s office said.
“The president thought for a while and then came up with the idea to have an underwater cabinet meeting.” (via Maldives cabinet rehearses underwater meeting).
Propping up Maldives as ‘fifth’ column was done over the last more than 20 years. Based on excellent PR and media management skills, the Maldives was the trojan horse loosed on the G77+Basic grouping.
350.org is rather well armed on the PR front – with a specific agency for South Asia itself. The PR agency for the Maldives Travel and Tourism Authority McCluskey International does seem to either bask in reflected glory – or is hinting at the authorship of this stunt. The Maldives climate change campaign seems to be headquarted in Britain also.
Been there and done that
The hallmark of the Maldives’ climate change campaign has been it slick PR. Dramatic statements, intriguing sound bites, the Maldives’ campaign was beyond the common bureaucratic ‘creature’ – much less a Maldives’ bureaucrat. This is consistent and in line with Al Gore’s media and public relations management – which won the PR agency, the campaign of the year award. And Al Gore the Nobel Prize.
All this is much like, how from the early 1950’s to the late eighties, the Western world created hysteria regarding ‘population explosion’ in India and China. Enormous pressures were brought onto the Chinese and Indian Governments to ‘control’ their populations.
Same game, different name! Doesn’t wash. Just like last time.
- Climate change – How India is falling for propaganda
- Climate Change at Copenhagen – Britain mounts a Trojan operation
- Indian cows were blamed for global warming!
- US Euro Clubs hobble Third Wold
- Climate head steps down over e-mail leak
- NASSCOM wakes after 15 months
- PR Stunts – The Maldives underwater meeting
RBI’s decision to shore up its gold reserves needs to be seen in the context of other central banks across the globe increasing their gold reserves. Among them are the central banks of China, Russia and a few countries in the European Union.
In the last one year, China has increased its gold holdings, by weight, by 75.69%, Russia by 18.78%, the Philippines by 18.50% and Mexico by 108.91%.
Compared with this, India’s central bank did not add anything to its gold reserves in the last one year, according to Bloomberg data. (via RBI to buy 200 tonnes of IMF gold – Home – livemint.com).
Two years ago …
its (gold) reserves by 454 tons to 1,054 tons through domestic purchases and refining scrap metal, Hu Xiaolian, head of the State Administration of Foreign Exchange, said in an interview with the Xinhua News Agency today. China, the world’s biggest gold producer, has increased its holdings before, Hu said in the interview carried on the administration Web Site. They rose from 394 tons to 500 tons in 2001 and to 600 tons in 2003. The U.S. has the world’s biggest gold holdings at 8,134 tons, followed by Germany with 3,413 tons, World Gold Council data show. France has 2,487 tons and Italy 2,452 tons, while the IMF has 3,217 tons, according to the council.
Another report, from Market Watch, a WSJ web publication added,
The increase makes China the world’s fifth-largest holder of gold, just ahead of Switzerland, and among the six nations plus the International Monetary Fund that have reserves of more than 1,000 metric tons. Although Hu did not elaborate on where China had sourced the additional bullion, her comments were interpreted as meaning they came from domestic sources and may included refining of scrap metal. Traders also say the gold was accumulated systematically over a number of years. Last year China ranked as the world’s largest gold producer with 12.2% of world output, equivalent to 288 metric tons. The U.S. ranked second with a 9.9% share, or 234 metric tons.
What are the future plans of the Chinese? A report quotes an analyst
China should increase its gold reserve from 600 tons to about 2,500 tons in a short term and to 3,000 tons in a long term to cope with the versatile exchange rate risks, said Teng Tai, an economist of China Galaxy Securities Company.
This really does not mean much – except that it may keep gold prices on boil. Whether a currency is backed by 5% or a 10% gold reserve makes no material difference, especially in this era of rampant use of (not just by the US of A) “a technology, called a printing press” as an economic tool. For long term economic stability, gold needs to be in the hands of individuals – and not Governments.
Since China is a significant gold producer by itself, it may not get a shot at buying IMF gold. India has negligible domestic gold production -and was possibly therefore given preference by the IMF. Of course, preference may have been given to RBI’s purchase, given its ‘responsible’ and ‘mature’ behaviour during the current Great Recession.
What does RBI’s gold purchase mean
RBI’s gold purchase means two things.
The Indian Government which has had a rather low percentage of gold holdings as their currency reserves will now bolster these reserves. Even after this purchase, Indian official reserves, will only be the ninth largest in the world in absolute terms.
On average, countries hold about 12.6% of their reserves in gold, up from 9.9% a year ago. Some of this represents an increase in gold holdings, but another driver of the increased proportion is the rise in the value of gold. (from India propels gold to new high.)
The overhanging threat of open market sales by the IMF, speculated by many and discounted by 2ndlook, now stands neutralized. This will be a kicker to gold prices in the short term.
The ideal thing …
Sell gold to individuals. Governments should not have such large holdings of gold. Gold in the hands of Governments is the prime cause of war. Gold holding should be widely dispersed, as widely as possible, amongst individuals – like the Indian gold possession model. No national government, in the new financial architecture should be allowed to have more than 250 tons of gold – to progressively reduce to 50 tons.
Citing a congressional study released on Friday, the Times said the United States was involved in 68.4 percent of the global sales of arms.
U.S. weapons sales jumped nearly 50 percent in 2008 despite the global economic recession to $37.8 billion from $25.4 billion the year before.
The jump defied worldwide trends as global arms sales fell 7.6 percent to $55.2 billion in 2008, the report said. Global weapons agreements were at their lowest level since 2005. (via U.S. Leads World In Foreign Weapons Sales – Report – NYTimes.com).
US in the Post WW2 world
In South East Asia from 1950-1975, Israel from the 1960 onwards and now in Iraq, Afghanistan, the US has been the in the middle of most expensive conflicts (measured in terms of lives lost) in post WW2 world.
This model of international relations is something that needs to change. The poor in this world has not become much safer, seen more democratic or significantly more richer. What justification does this policy have – apart from “I have muscles and can you stop me from flexing them” logic?
Gold – a non-military solution
As I see it, there are two simple solutions. One – everyone who disagrees with (or even if you are worried about the economic consequences of) the US foreign policy should go out and buy gold. This will surely trigger a collapse of the US dollar. Just a 100,000 people buying a 100gm of of gold in the next 1 year will trigger the dollar collapse.
Drill for oil
The second solution will need more time and will need co-operation foron the BRIC Governments. The BRIC Governments must go out and drill oil wells all over the developing world. The collapse in oil prices will remove the petro-dollar funding of the US and simultaneously eliminate /reduce the trade deficit of the developing world.
For Bernanke, central bankers were the heroes. In the face of irrational hordes, they offered liquidity and a host of innovative policies, ensuring that financial panic did not lead to a new Great Depression. In Bernanke’s word, “the outcome could have been decidedly worse”.
His assessment isn’t exactly wrong. But as a historical record it is incomplete and far too generous to central bankers. (via Ben Bernanke’s version of history is incomplete – Telegraph).
It ain’t the first time
“a significant increase in the global supply of saving–a global saving glut–which helps to explain both the increase in the U.S. current account deficit and the relatively low level of long-term real interest rates in the world today.”
This time around he was congratulating Central Bankers and policymakers
“in the United States and around the globe responded with speed and force to arrest a rapidly deteriorating and dangerous situation.”
Awesome! The man is so brazen! He has no shame!!
Of course, he makes no mention how the current Great Recession first came about by printing too much money – and then keeping interests low. Edward Hadas is right in one thing at least! He says, “Those who spread kerosene should not take too much credit for putting out fires.”
Benny Boy – That is good advice. Take it.