Kitco links to a Toronto Globe and Mail article that says that today's fall in the price of gold and the stock market and rise in the dollar is due to a speech by Pen Junming, who works in China Investment Corp., a sovereign asset fund. The Globe and Mail quotes Junming:
“'I think the dollar is at its bottom now. There will be very limited space for the dollar to drop further,' he told an academic forum. 'The yen is what, I think, has the worst outlook. The yen will continue to drop, unlike the dollar, which will not serve for long as a source of funding carry trades.'"
Carry trades involve hedge funds borrowing at low rates in the US and investing around the world at higher rates. Hedge funds have used much of the new money pumped into the economy by the Federal Reserve bank during the Bush and the Obama administrations in this way.
When, later that day Junming said that these views were not official and were strictly personal, the dollar gave back some of its gains. Mr. Peng added:
“'China should have the right attitude about investing in gold. There is no urgent need for China to increase gold buying for now, because prices are high.'”
Yesterday, I bragged of my coin flip method of deciding how to invest in the short term. Today I have a more substantive explanation for staying in dollars for now. Please note, however, that I do not think that Chinese bankers are particularly adept at investment (no more adept than Americans, anyway). They bought into US bonds when the dollar was far stronger than today, and rode a Cyclone roller coaster ride down. The article states that two thirds of China's sovereign assets of 2.27 trillion dollars are invested in dollars.
"Lou Jiwei, CIC's chairman, has been careful not to say much about how the fund invests its money. In October 2009, he said the fund was putting more money into commodities, real estate and infrastructure to hedge against medium- and long-term inflation and a fall in big currencies."
Thus, Pen's statement might reflect a change in position associated with last year's increase in the gold price. The article goes on to say that US asset managers continue to dominate the fluctuations in the dollar. Nevertheless, the Chinese have so entwined themselves in the dollar that their opinion matters. If the US ignores their advice, then we risk a sell off.
I have previously blogged about my fear of a major confrontation with the Chinese occurring in the next (22nd) century. I don't think the dollar will last that long. It should give Americans pause that the purchasing power of their dollars has, under the Federal Reserve Bank's and banking system's regime, become dependent upon the opinions and desires of foreign governments. Unless you idiosyncratically believe that the motives of the Chinese government coincide with your interests, you might wonder about the desirability of a system that has made you dependent on the opinions of a dictatorially and still-communist run nation with a culture very different from our own. I have always loved Chinese culture and the Chinese people, but frankly, I think the Americans have lost their minds.
Tuesday, January 12, 2010
Al Gore Freezes to Death Due to Global Trend
Not really, but the truth is not far off. My former student and currently third year law student at Cardozo Law School, Pini Bohm, sent me this link to David Rose's article in the UK Daily Mail about the current trend toward GLOBAL COOLING. The article states:
"According to the US National Snow and Ice Data Centre in Colorado, Arctic summer sea ice has increased by 409,000 square miles, or 26 per cent, since 2007 – and even the most committed global warming activists do not dispute this."
Apparently, none of the political advocates of the global warming theory care whether the factual evidence supports or refutes their claims. The Mail article quotes Professor Mojib Latif, who has developed evidence that a cooling trend originating from oceanic depths will reduce temperatures. Latif finds that we are now in an incipient global cooling trend:
"Last week, as Britain froze, Climate Change Secretary Ed Miliband maintained in a parliamentary answer that the science of global warming was ‘settled’...
"Prof Latif, who leads a research team at the renowned Leibniz Institute at Germany’s Kiel University, has developed new methods for measuring ocean temperatures 3,000ft beneath the surface, where the cooling and warming cycles start.
"He and his colleagues predicted the new cooling trend in a paper published in 2008 and warned of it again at an IPCC conference in Geneva last September."
As I e-mailed Pinni, I was in the parking lot of the IGA Supermarket in Boiceville, New York this afternoon and someone said aloud "Where's global warming!?#?." It was 28 degrees Farenheit.
About a year ago I blogged that the global warming advocates had not outlined a means by which their theory could be falsified. Falsifiability is the basis of all science. If a theory is not falsifiable it is not science. Ordinarily, falling temperatures as we have seen in the past two years would evidence falsification of the global warming hypothesis, but as the article notes, global warming enthusiasts deny that the presence of global cooling contradicts the claim of global warming.
Perhaps global warming advocates practice a Keynesian version of geology, whereby it can be getting hotter and getting cooler at the same time. According to Keynesian economics we become wealthier by wasting money. There are actually strange people, crackpots, who read the New York Times and believe things like this.
"According to the US National Snow and Ice Data Centre in Colorado, Arctic summer sea ice has increased by 409,000 square miles, or 26 per cent, since 2007 – and even the most committed global warming activists do not dispute this."
Apparently, none of the political advocates of the global warming theory care whether the factual evidence supports or refutes their claims. The Mail article quotes Professor Mojib Latif, who has developed evidence that a cooling trend originating from oceanic depths will reduce temperatures. Latif finds that we are now in an incipient global cooling trend:
"Last week, as Britain froze, Climate Change Secretary Ed Miliband maintained in a parliamentary answer that the science of global warming was ‘settled’...
"Prof Latif, who leads a research team at the renowned Leibniz Institute at Germany’s Kiel University, has developed new methods for measuring ocean temperatures 3,000ft beneath the surface, where the cooling and warming cycles start.
"He and his colleagues predicted the new cooling trend in a paper published in 2008 and warned of it again at an IPCC conference in Geneva last September."
As I e-mailed Pinni, I was in the parking lot of the IGA Supermarket in Boiceville, New York this afternoon and someone said aloud "Where's global warming!?#?." It was 28 degrees Farenheit.
About a year ago I blogged that the global warming advocates had not outlined a means by which their theory could be falsified. Falsifiability is the basis of all science. If a theory is not falsifiable it is not science. Ordinarily, falling temperatures as we have seen in the past two years would evidence falsification of the global warming hypothesis, but as the article notes, global warming enthusiasts deny that the presence of global cooling contradicts the claim of global warming.
Perhaps global warming advocates practice a Keynesian version of geology, whereby it can be getting hotter and getting cooler at the same time. According to Keynesian economics we become wealthier by wasting money. There are actually strange people, crackpots, who read the New York Times and believe things like this.
Whither Gold?
Gold went up today just four days after I blogged that I was mostly in cash. I just wrote a column for a popular local newspaper called the Lincoln Eagle that should come out in a few days and I suggested that there are four scenarios that might evolve: (1) bank failures/inflation; (2) deflation/inflation; (3) inflation/stagflation and (4) steady course. Jon Nadler of Kitco had suggested that we were in for a higher interest rate regime like we saw in the late 1970s and early 1980s, but I do not believe that it will be possible for the Fed to successfully execute a deflation or regime of high interest rates followed by a moderate (by 2010 standards, not by 1950 standards) re-inflation as was done under the Carter and Reagan administrations. It is likely that interest rate hikes will lead to stress on banks and additional unemployment. I do not believe that Obama is naive as was Carter to appoint a Fed chairman with the discipline to raise rates. Paul Volcker was exceptional and has not been equaled in the Fed's history. Even there, he reversed his monetarist policy by the early 1980s.
This time around the scenario is much worse. We are at zero (negative real) interest rates and ten percent unemployment. If the Fed raises interest rates then there will be additional unemployment and the Honorable Barney Frank will blow his stack as well as some other things. Moreover, with less reserves the banks will be expected to earn money like everyone else, by working for it, and that will make them unhappy, and the American public cannot allow bankers to be unhappy. It is not part of the American way.
So which way is gold going to go? In situations like this I use the coin flip test. Heads market up short term, tails market down short term. It kept coming up tails, so I'm staying put for now. But not in the long term.
The time for Obama to demand that the Fed clamp down on interest rates was this year. The Fed could have triggered a recession, higher unemployment and higher welfare payments, and the economy would have had two or three years to improve after a year or two of high rates. Instead, Bush handed the banks nearly a trillion dollars, the Fed tripled the monetary base and the money supply is growing like bamboo. Obama added additional handouts, and the likelihood of any sort of fiscal and monetary discipline is now an impossibility for the Messiah of Bloat.
Although I remain in dollars this week, I am watching this closely as my strategy is not wise for the long term.
This time around the scenario is much worse. We are at zero (negative real) interest rates and ten percent unemployment. If the Fed raises interest rates then there will be additional unemployment and the Honorable Barney Frank will blow his stack as well as some other things. Moreover, with less reserves the banks will be expected to earn money like everyone else, by working for it, and that will make them unhappy, and the American public cannot allow bankers to be unhappy. It is not part of the American way.
So which way is gold going to go? In situations like this I use the coin flip test. Heads market up short term, tails market down short term. It kept coming up tails, so I'm staying put for now. But not in the long term.
The time for Obama to demand that the Fed clamp down on interest rates was this year. The Fed could have triggered a recession, higher unemployment and higher welfare payments, and the economy would have had two or three years to improve after a year or two of high rates. Instead, Bush handed the banks nearly a trillion dollars, the Fed tripled the monetary base and the money supply is growing like bamboo. Obama added additional handouts, and the likelihood of any sort of fiscal and monetary discipline is now an impossibility for the Messiah of Bloat.
Although I remain in dollars this week, I am watching this closely as my strategy is not wise for the long term.
Kingston New York Tea Party Meeting
Monday January 11. The Kingston, New York Tea Party organization headed by Tom Santopietro met to exchange ideas this evening. I had attended a previous meeting in December but was unable to stay for more than a few minutes. The meeting was productive. It was held in the Town of Ulster Town Hall in Lake Katrine, two short left turns off Route 209.
Overall, I would call the meeting a marked success. Between thirty and fifty people were present. For a cold Hudson Valley January evening that is an achievement. I drove there from the Town of Olive, about 25 miles away.
The initiatives of the Tea Party are worthwhile. Several demonstrations in Washington and elsewhere were discussed, and there was discussion of George Phillips's announcement-of-candidacy for Congress meeting this Thursday. Phillips will be initiating a second candidacy against knucklehead-incumbent Maurice Hinchey.
My chief concern about the Tea Party movement is the likelihood of its cooptation by (a) Progressive or Rockefeller Republican types and/or (b) Democratic Party infiltrators. The Republican Party in New York has so far ignored the Tea Party. In appointing Edward F. Cox chair of the state committee the party has confirmed its self-destructive commitment to the Wall Street Republicanism of Newt Gingrich, Theodore Roosevelt and Nelson Rockefeller. I have several times contacted Cox without any kind of response to my inquiries.
I would like to encourage the Tea Party movement to begin to think about concerted infiltration of the Republican Committees at the town, county and state levels. This takes time but it would seem the best way to overthrow the current commitment to special interest corruption, to the failed education system and to big government.
One of the most interesting points of the evening was the discussion of a committee to try to influence public education in a more productive direction. This is a subject of importance to me and I offered a few suggestions.
Overall, I would call the meeting a marked success. Between thirty and fifty people were present. For a cold Hudson Valley January evening that is an achievement. I drove there from the Town of Olive, about 25 miles away.
The initiatives of the Tea Party are worthwhile. Several demonstrations in Washington and elsewhere were discussed, and there was discussion of George Phillips's announcement-of-candidacy for Congress meeting this Thursday. Phillips will be initiating a second candidacy against knucklehead-incumbent Maurice Hinchey.
My chief concern about the Tea Party movement is the likelihood of its cooptation by (a) Progressive or Rockefeller Republican types and/or (b) Democratic Party infiltrators. The Republican Party in New York has so far ignored the Tea Party. In appointing Edward F. Cox chair of the state committee the party has confirmed its self-destructive commitment to the Wall Street Republicanism of Newt Gingrich, Theodore Roosevelt and Nelson Rockefeller. I have several times contacted Cox without any kind of response to my inquiries.
I would like to encourage the Tea Party movement to begin to think about concerted infiltration of the Republican Committees at the town, county and state levels. This takes time but it would seem the best way to overthrow the current commitment to special interest corruption, to the failed education system and to big government.
One of the most interesting points of the evening was the discussion of a committee to try to influence public education in a more productive direction. This is a subject of importance to me and I offered a few suggestions.
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