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  • Terror Cover-Up Scandal In Argentina: Investment Implications Of Prosecutor Nisman's Death [View article]
    We are not quite Argentina yet but we are catching up.

    We ran guns to Mexico (Fast&Furious), Benghazi Gate - provided/providing weapons to Al Qaeda (ISIS?) in Iraq and Syria, wiretapping reporters (AP, FOX's James Rosen and CBS's Sharyl Attkisson), IRS targeting political opponents, staged civil wars in Syria, Iraq, Libya and Ukraine ( for geo-political influence ....................

    We are turning, we are turning Argentinians.
    Jan 30, 2015. 12:11 PM | 9 Likes Like |Link to Comment
  • Is Post-Keynesian Economics Catching On? [View article]
    FCX down ~ 14%, XOM down ~ 2.5%, ECA down ~ 4% and GLD up ~ 10% since Dec. 26.
    World economy didn't recover because of the republicans? Boy, I truly wish that is what is holding up the economic recovery of the world. I wish life could be that simple.
    Jan 20, 2015. 08:00 PM | Likes Like |Link to Comment
  • 2015 Predictions For Gold And Silver [View article]

    I'll sell the miners at around $2000 to $3000, CEF, GTU and PSLV from $3000 to $5000. I will not sell the physical until the dollar is no longer the reserve currency. I suspect euro would have to be sacrificed before the dollar losing the reserve status. Since euro is mini-multilateral, it cannot coexist within a global multilateral framework. After the breakup, the Deutsche Mark and the Swiss Franc may be included in the SDR basket.
    Jan 20, 2015. 03:09 PM | 1 Like Like |Link to Comment
  • 2015 Predictions For Gold And Silver [View article]
    Most goldbugs who have weathered the storm from $1900 to $1150 are not going to be flushed out by any storm. Traders and owners of paper gold will sell but they will also likely start buying at around $850 to $950 as Doug had suggested.
    I suspect most owners of physical are not selling no matter how powerful the fall and are waiting for price below $1000 to add more to their stash.
    I wonder what is the objective of the market maker. If they were hoping to retrieve physical from the east, they need to bankrupt the Chinese and Indians. A powerful price drop will not do.
    Personally, I'll not sell until Christine Lagarde gets the U.S. to embrace the "New Multilateralism".
    Jan 20, 2015. 09:44 AM | 1 Like Like |Link to Comment
  • Signs Of Stress [View article]
    That is what the Treasury Secretary said to the world just before the closing of the gold window. John Connelly said "The dollar is our currency but it's your problem."
    The rest of the world has been eating cake for more than 40 plus years.
    Jan 13, 2015. 07:51 AM | Likes Like |Link to Comment
  • Linn Energy: Surprising Strength In The Face Of Sub-$50 Oil [View article]

    Oil tankers have been loaded and parked for almost a year. The big boys managed to keep the oil price elevated by warehousing the excess supplies like they did with the aluminum in Detroit.

    I guess the supplies have exceeded the warehouse capacity and they can't hide the oil anymore unless they dump it into the ocean.
    Jan 10, 2015. 11:51 AM | 1 Like Like |Link to Comment
  • Risk Of Germany, Spain And Greece Pushing Europe Into Hyperinflation [View article]
    It's a catch 22 which the fed has to face now, "reduce interest rate further" or QE again to bring the exchange rate down.
    Jan 8, 2015. 12:37 PM | Likes Like |Link to Comment
  • Risk Of Germany, Spain And Greece Pushing Europe Into Hyperinflation [View article]
    QE seems to be the backup plan when there is lack of Foreign Central Banks support when the private sector flees the dollar. It's the backup plan of the backup plan, so to speak. So, it is supporting the USD exchange rate.

    That being said, the Fed's job with QE is to ensure that there's enough base money available to support asset prices. But any capital flow in/out of the US for pure financial reasons counts because those are the things that matter most. The strengthening exchange rate is rather the unintended consequence which is not always beneficial. King dollar kills jobs. It's a catch 22 which the fed has to face now, rise interest rate or QE again to bring the exchange rate down. However, the next QE will likely fail because unlike the current QE, the next major outflow without support from foreign governments, QE will morph into an outright front-lawn dump of asset purchases - a very different beast for from what we've seen so far.

    Ones have to focus on the trade deficit because that's the "real world" and that's the "junkie fix" that we cannot get away from. Our dependency on that flow of goods shows that at least that much capital inflow is due to the trade deficit. But that doesn't mean that that's all there is! And if there is more then obviously less intervention is required, and vice versa.

    As for the budget deficit, its importance is in the relative size to the trade deficit in order to show that the public sector/USGov is the one causing driving the trade deficit demand exclusively.

    And why does that matter? Because the public sector/USGov is the only one that can and politically has to keep its promises and spend until it cannot do it no more and trashes the currency. The private sector cannot do that, it does not have a printer, it can only produce more or raise prices - no hyperinflation spark from here! Ever. So the connection to the hyper-inflation spiral is what this difference points to.

    Come to think of it, since the US dollar requires a constant inflow of capital to maintain its status quo, an outflow may be unnecessary. Right now we getting more than enough inflow because the dollar's exchange rate is steadily rising, and it is coming from the foreign private sector right now. What is frightening is that an outflow may not be necessary, just a reduction in the inflow may do the trick. If the dollar's exchange rate starts declining, then we can know that the inflow is lower than the trade deficit which means foreigners stopped hoarding our dollar outflow.

    Now, imagine that the $40B per month capital inflow suddenly stopped. It doesn't even need to reverse and become a capital outflow, so you can imagine the money that's "already inside the US" running to the safety of Treasuries. There's your "money sloshing over to US debt."

    Right now, the rising dollar is encouraging foreigners to buy more dollars, a positive feedback loop. When the dollar starts declining due to a capital inflow lower than the trade deficit, that will encourage foreigners to buy fewer dollars, which will turn the vicious cycle downward, unless the foreign public sector steps in to stop it like in the past.

    Now, imagine the dollar's exchange rate plunging just like the ruble. Many would say that can't happen, or that if it did the US is in a better position to weather it than Russia. But I would argue that the US is in a much worse position simply because we run a perpetual trade deficit that has become structural to our national status quo, and Russia runs a trade surplus.

    Russia runs a trade surplus, so if, hypothetically, its trade flow stayed the same in real terms while the ruble's exchange rate was plunging, then we should see its trade surplus decline nominally as its imports became more expensive relative to its exports. In reality, however, relative prices do have an effect on the trade flow in real terms, so we should see its trade surplus increase in real terms as it reduces real imports, counteracting the nominal reduction.

    The US, on the other hand, runs a trade deficit, so if, hypothetically, our trade flow stayed the same in real terms while the dollar's exchange rate was plunging, then we should see our trade deficit increase nominally as our imports become more expensive relative to our exports. Normally, however, relative prices should have an effect on the trade flow in real terms, so we should see our trade deficit decrease in real terms as we crash our lifestyle by reducing our imports in real terms, counterbalancing the nominal increase.

    The problem, however, is that when we take the two US sectors as a whole (public + private), our total deficit is roughly the same size as our public sector deficit, which means that if we could eliminate the US public sector, we'd actually have balanced trade with the rest of the world since 2009. In other words, the entire imbalance right now is attributable to the US public sector, and that's the one sector that will not voluntarily crash its lifestyle simply because the dollar's exchange rate is declining and US imports are becoming relatively more expensive.

    Instead, we will print to maintain its status quo in real terms. I know, everyone's more worried about deflation than inflation right now, but bear in mind that exchange rate movements easily overpower deflationary forces on imports, just ask a Russian, and that's how we can have global stagnation/deflation and USD inflation/hyperinflation at the same time.
    Jan 8, 2015. 11:39 AM | Likes Like |Link to Comment
  • Risk Of Germany, Spain And Greece Pushing Europe Into Hyperinflation [View article]
    QE has nothing to do with stimulating the economy. Its real purpose is to fill the hole when the US budget deficit exceeds the trade deficit.

    When we have more Treasuries being issued than the world is looking for at the moment (the greater the trade deficit, the more the rest of the world would buy US financial assets). When there is temporarily no money left over from the RoW, QE comes into the picture until that reverses (instead of new taxes or austerity for example).

    The Treasuries have been issued, the budgeted money has been spent, but the issuance of these extra Treasuries are draining the base money pool on which the entire banking system is built on. Now, a little draining of the base money pool is ok once in a while, but it's definitely not ok when we're trying to keep up the nominal price of all those financial assets out there.

    All those financial assets out there have a price, but are not money. A lot of them are near money, but you still need to go through actual money when selling and buying them. And the higher the nominal price of those assets, the more credit and base money is needed to make sure that those prices don't decline because of a lack of liquidity.

    So, QE, is simply the FED ensuring that there is enough base money to cover the difference between our budget deficit and the trade deficit (which as we've seed is the amount of financial assets sought by the rest of the world). It does not need to be exact, just an approximation, but that's really the role of QE. A number of Treasuries roughly equal to the amount above and beyond the amount that the trade deficit covers is purchased by the Fed, and therefore the base money that was "lost" when a primary dealer bought that Treasury is restored when the Fed buys the equivalent amount from the banking system and restores that amount of base money.

    QE = Budget deficit - Trade deficit (which is highly correlated to supports from foreign governments and private investments)

    At this moment, Budget deficit + 0 (QE) = Trade deficit (mostly private investments at this junction)

    QE will not create hyperinflation until we have zero trade deficit or zero foreign public/private supports while the budget deficit remains constant.

    Budget deficit = QE + 0 (Trade deficit/foreign supports)

    I think not having this perspective on QE causes a lot of confusion.
    Jan 6, 2015. 10:52 AM | Likes Like |Link to Comment
  • Is Post-Keynesian Economics Catching On? [View article]

    Ocean always recede before the tsunami hits the shore. Severe disinflation is the prelude to hyperinflation. If you jump out of your boat preceding the tsunami just because you don't see any water, it would be like selling your gold right before the biggest global currency crisis.
    Dec 29, 2014. 12:45 PM | 1 Like Like |Link to Comment
  • Is Post-Keynesian Economics Catching On? [View article]

    You need to understand the different between hyperinflation and inflation. The next crisis will be in the FX which will likely cause hyperinflation which is what is going to happen in Japan in the very near future.

    Owning properties in a country ravaged by hyperinflation is not a good option. You want to own hard assets which you can put in a bag to get out of Dodge. Btw, I already own properties to generate incomes to keep up with everyday ordinary inflation. I think for the ones who are out of debt and worries of meeting everyday expenses, saving their excess in physical gold in the current financial uncertainty is prudent.
    Dec 29, 2014. 12:27 PM | Likes Like |Link to Comment
  • What Is The Gold-Oil Ratio Telling Us? [View article]
    There was correlation between the two until around 1990's when the Chinese became the main supporters of the U.S. dollar.

    Dollar was back by gold, then it was back by petro, then Chinese slave labours, then wars by proxy in Syria, Ukraine .......
    Dec 18, 2014. 09:33 AM | Likes Like |Link to Comment
  • Gold Will Remain Weak On Stronger Dollar [View article]
    It was reported earlier that the Central Bank's gold reserves decreased by $4.3 billion, according to Vesti Finance. However, in actuality, it is international reserves assets that have decreased — not gold.

    Russian international reserves assets decreased from $420.5 billion to $416.2 billion, according to the central bank. This is down, following a slight increase the week before — when they inched up from $420.5 from $420.4.

    Gold reserves, which are included in international reserves, have remained unchanged — despite the drop in international reserves.

    I don't think any central banks will part from their gold reserve in this uncertain time with the exception of Ukrain. However, Ukrainians' gold wasn't sold, it was stolen.
    Dec 13, 2014. 06:31 AM | 1 Like Like |Link to Comment
  • Oil’s slide could become a positive for coal miners, J.P. Morgan says [View news story]

    "Some how the lower price for natural gas is going to increase the price of coal is the thesis of the day."

    Liquid natural gas price will likely be lower for at least 6 months to 2 years due to lower oil price. Natural gas is a byproduct of liquid natural gas. If the lower oil price were to cause curtailments of further shale gas/liquid natural gas developments. There will be less natural gas production which will likely push up the price of natural gas. When the price of natural gas goes up, coal price will go up.

    However, most of the shale gas companies are hedged and they can stay on course regardless of the price for at least 6 months.
    Dec 12, 2014. 06:39 PM | Likes Like |Link to Comment
  • Oil’s slide could become a positive for coal miners, J.P. Morgan says [View news story]
    Fi by,

    Which major coal stock? Is it ACi or BtU?
    Dec 12, 2014. 09:02 AM | Likes Like |Link to Comment