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Top 10 at 10: ETS another burden for young; Peak Gold?; Call to boycott big US banks; Dilbert
Here are my Top 10 links from around the Internet at 10am. I welcome your additions and comments below or please email your suggestions for Friday's Top 10 at 10 to bernard.hickey@interest.co.nz Are the baby-boomers the greatest generation?
1. Don't worry, the kids will pay - Brian Fallow has written another excellent column in the NZHerald on how the government is choosing to shuffle on today's costs to our children and young workers. It's not just super and health. Now it's the Emissions Trading Scheme, which exempts today's farmers and pushes the costs onto tomorrow's workers. Plus ca change.
It is clearly craven and irresponsible for the Government to refuse to even discuss a reduction in the entitlement parameters of the scheme, such as pushing xeback the age of eligibility. Instead it plans to just pass on the now much larger bill to future taxpayers.
It is the same story with the costs of the Emissions Trading Scheme (ETS), the cornerstone of the official response to the challenge of climate change: a multibillion-dollar post-dated cheque on future taxpayers.
The Sustainability Council's executive director Simon Terry and economist Geoff Bertram have analysed the Government's planned changes to the scheme which was enacted late last year in the dying days of the previous Government's ninth year in office.
The questions they ask are basic: Who pays the charges the ETS imposes? How big are the subsidies to the trade-exposed sectors? And who pays the ultimate bill, New Zealand's Kyoto liability?
The answers they come up with make it clear today's emitters are on the bludger's end of a transfer from future taxpayers.
2. Peak gold? - Ambrose Evans Pritchard at The Telegraph has another cracker that might affect global commodity markets. He cites the world's biggest gold producer Barrick Gold saying gold production is in terminal decline. HT Steven Jones via email. Gold hit a fresh record over US$1,100 an ounce overnight.
Aaron Regent, president of the Canadian gold giant, said that global output has been falling by roughly 1m ounces a year since the start of the decade. Total mine supply has dropped by 10pc as ore quality erodes, implying that the roaring bull market of the last eight years may have further to run.
"There is a strong case to be made that we are already at 'peak gold'," he told The Daily Telegraph at the RBC's annual gold conference in London.
"Production peaked around 2000 and it has been in decline ever since, and we forecast that decline to continue. It is increasingly difficult to find ore," he said.
Ross Norman, director of theBullionDesk.com, said exploration budgets had tripled since the start of the decade with stubbornly disappointing results so far.
Output fell a further 14pc in South Africa last year as companies were forced to dig ever deeper - at greater cost - to replace depleted reserves, not helped by "social uplift" rules and power cuts. Harmony Gold said yesterday that it may close two more mines over coming months due to poor ore grades.
Mr Norman said the "false mine of central banks" had been the only new source of gold supply this decade as they auction off reserves, but they are switching sides to become net buyers.
3. Boycott call - Karl Denninger at The Market Ticker has called on US savers to withdraw their money from the 'Too big to fail' banks, which include Bank of America, Wells Fargo/Wachovia, Citibank and JP Morgan/Chase. Denninger is very grumpy about these banks taking government guarantees, borrowing printed money at zero cost, paying themselves massive bonuses and then hiking fees for customers. Fair enough. HT Gertraud via email.
Place your business with a local community bank or credit union in their place, and tell the above four institutions to "piss off." I've resisted doing this, but the idea that banks are now going to try to penalize those who do not carry balances or pay late fees is the last straw. This is a call for a boycott.
A call to break these institutions by destroying their deposit base and "net interest margin", one consumer at a time, as a protest against the outrageous actions these firms have taken in terms of risk and their shifting of the costs of that risk, which should have resulted in their failure and closure by The FDIC and OCC, onto the backs of their customers via outrageous fees, interest rates and costs, along with the direct subsidy being paid by all taxpayers generally.
Are not 30% credit card interest rates enough, while these four banks all can and do borrow at near-zero from The Fed and have issued debt with an FDIC guarantee (that is, funded by you)?
If that is not enough to dissuade you, how about Wells Fargo holding an unknown amount of Wachovia "off-balance sheet assets" at god-knows-what in terms of valuations - and justification for same - while cutting back HELOC lines and credit cards?
4. Food scraps for fuel - This is a curious report from USAToday about how one San Francisco waste treatment plant is turning food scraps into methane to generate electricity. Anything similar happening here? HT Gertraud.
While a handful of utilities, companies and universities nationwide have attempted to recycle food scraps into energy, less than 3% of those scraps are diverted from landfills, the EPA says. Most often, food waste that doesn't go to landfills is composted for use in fertilizers. Every year, more than 30 million tons of food waste goes to landfills, the EPA says, accounting for about 20% of landfill waste.
The San Francisco-area utility district powers its wastewater plant, which serves about 650,000 Bay Area homes, by capturing methane gas by processing many kinds of waste, starting with wastewater. To take up excess capacity, the utility started collecting other waste in 2001, including that from wineries, dairies and chicken processors, says David Williams, director of wastewater for the utility. Food scraps from restaurants and hotels were added in 2004.
The plant now processes 100 to 200 tons of food scraps a week. The goal is to do 100 to 200 tons a day "“ enough to power the equivalent of 1,300 to 2,600 homes "“ and rapid expansion is now expected. By the end of next year, the district expects to create so much power from non-traditional waste that it'll be able to sell excess power to Pacific Gas & Electric, a local electricity supplier, Williams says. If 50% of the USA's food waste went through a similar process as the one here, there'd be enough power for 2.5 million homes a year, the EPA says.
5. Chinese bubble - FTAlphaville points to evidence from RBC Capital Markets of a bubble building in China's property market, fuelled by easy and cheap lending. Will anyone ever learn?
China Real estate data showed continued strong growth, with investment +18.9% y/y YTD in Oct, property sales +48.4% y/y YTD and urban property prices +3.9% y/y. This is further evidence that strong bank lending and easy liquidity conditions are creating an overheated property market.
6. Inflation time bomb - Rolfe Winkler at Reuters points out that the US public debt will pass US$12 trillion this week and is up US$1 trillion since March. He says this is inflationary.
With Obama's left flank calling for a second stimulus "“ which is really a third stimulus if you count George Bush's tax rebates "“ there's still no serious discussion about how to deal with debt. The bond market is telling us not to worry. But if history is any guide, the bond market is wrong. 'm referring to Treasury Inflation Protected Securities, TIPS for short,in particular those that reflect long-run inflation expectations.
The current spread tells us to expect annual inflation averaging a bit over 2 percent for the next 30 years. That would be fairly benign. And fairly wrong. Why? Because it assumes U.S. political leadership will put the country on a sustainable fiscal path. I highly doubt it will happen.
In a note to clients last month, Société Générale strategist Dylan Grice explained the connection between debt and inflation. Turning Milton Friedman on his head, Grice argued that "inflation is always and everywhere a fiscal phenomenon." Money printing may be the vehicle, but the "root cause" of inflation tends to be "a government unable to pay its way." You see the real inflationary threat isn't the $12 trillion public debt, which on its own is serviceable. The problem is $63 trillion worth of unfunded obligations for healthcare and social security.
Putting these figures in context, the U.S. government's total liabilities are 19 times current tax receipts. "Bear in mind that the U.S. consumer is widely seen as dead in the water with debt at 1.3 times income," says Grice.
7. It might not work - Caroline Baum at Bloomberg has a useful column on the challenges facing central bankers who pump up asset bubbles with unusually low interest rates. It's all very deja-vu. HT Gertraud via email.
"It's 2003 all over again," says William White, chairman of the Economic Development and Review Committee at the Organization for Economic Co-Operation and Development in Paris.
White was referring to the "inflection point" in 2003 when, following an extended period of ultra-low interest rates - - 1 percent in the U.S., 2 percent in Europe, close to 0 percent in Japan -- monetary stimulus ignited a rally in asset prices, the mother of all housing bubbles and a crisis that brought the financial system close to the brink of collapse.
It's very tempting to do what's worked before, even if it makes things worse in the long run, White says. "We're at the end of the road we embarked on in 1987, if not before, relying on credit bubbles, associated increases in asset prices and unwise spending every time there was a problem."
Lowering interest rates, expanding the federal deficit: It may work in the short run but in the long run (yes, we're all dead, but our children aren't) it creates a mountain of debt and a lot of stuff no one needs or wants.
No central banker or government official is brave enough to look the public in the eye and speak the truth, especially when presenting two, unappealing options: Either we suffer through a long period of stagnation, with easy money and government spending cushioning the fallout, even at the risk of creating new imbalances; or we take our medicine in one large dose and suffer a shorter, more painful period of contraction and restructuring that wrings the excesses out of the system.
"It takes a very brave man if the choices are stagnation versus a painful adjustment," White says. "I suspect there are no takers for the second one."Zero percent interest rates and quantitative easing can work in one of two ways, White says. Either they have a direct effect on inflation expectations, prompting the public to spend today in order to front-run tomorrow's higher prices; or they raise asset prices, which makes people feel wealthier and want to spend more.
Both channels pose obvious risks, but "it's so simple it might just work," White says, with a nod to Monty Python. It might. On the other hand, it could end badly. Bubbles usually do.
8. Finally - US Senator Chris Dodd's new bill to control the US Federal Reserve finally seems to taking some control back, Bloomberg reports.
The Federal Reserve faces the biggest blows to its authority and independence in five decades under legislation championed by its lead overseer in the U.S. Senate. The financial-regulation overhaul proposed yesterday by Senator Christopher Dodd would strip the Fed of its role as a bank supervisor and give Congress a greater voice in naming the officials who set interest rates.
The measure opens the door to interference from politicians who might disagree with any move by the Fed to raise rates from record lows, former central bank officials said. Dodd's measure would also curb the Fed's ability to make emergency loans to individual companies. The Fed's response to the financial crisis prompted increased scrutiny of the central bank, especially after it used its emergency powers to bail out Bear Stearns Cos. and American International Group Inc.
9. The Asian mystery - Close watchers of the imbalances in global capital markets have always wondered why North Asian consumers and corporates (particularly in China) seem so keen on building up savings and not consuming.
Anoop Singh at IMFDirect has a useful piece that concludes China needs better corporate governance and capital markets to encourage companies to hand back their cash piles to consumers and so they can trust that financial markets will work when needed. Hmmm. I wonder. New Zealand's corporate governance is arguably better than China's and our financial markets are more open and liquid, which would prove the point given our low savings ratio. But New Zealand consumers also lack faith in their own capital markets, so maybe it doesn't prove the point. HT David Chaston via IM.
We tried to analyze this mystery in Chapter III of the Asia-Pacific Regional Economic Outlook.
We discovered two vital clues:
Corporate governance. The higher the level governance, the more shareholders are able to exercise their rights and prevent firms from hoarding cash.
Financial sector development. The more liberalized the financial market, the less firms hoard cash, because they have easier access to funding and are less worried about being shut out of financial markets. Financial liberalization also allows households to consume against their corporate wealth, because they can borrow using their financial assets as collateral.
These finding have profound implications for policy. For example, the econometric estimates imply that if Asia were to reach the average level of corporate governance in advanced economies, it would be able to lessen corporate savings by as much as 2½ percent of GDP. Similar advances in financial sector liberalization could reduce savings by 5 percentage points.
Resolving the conundrum of firms that save but do not invest, and households that hold this wealth but cannot consume may enable Asia to finally catalyze domestic demand. It could help to restore rapid growth, even in a "new world" of softer advanced country demand. Improved corporate governance and further financial sector development may be two remedies worth exploring.
10. For no relevant reason - The Onion reports on a new trend: US workers outsourcing their own jobs.
61 Comments
Gold production on the decline
Gold production on the decline and more expensive to mine. Reserve banks now buyers of the stuff. This is starting to look very promising.
Love that bit on the
Love that bit on the clip pic..."traced back to paper jam at the mint"
Can we out-source milking the
Can we out-source milking the cows to some street guys , in a squatters settlement , near Smokey Mountain, Manila ? They'll do anything for some rice and a bottle of Tanduay Rum ........Getting up at 4.oo a.m. is such a chore .
@Wally I think it was
@Wally I think it was Jim Rodgers who said gold shares looked more (or equally) promising than gold...
The interesting statement was "Ross Norman, director of theBullionDesk.com, said exploration budgets had tripled since the start of the decade with stubbornly disappointing results so far."
Further,
"Output fell a further 14pc in South Africa last year as companies were forced to dig ever deeper - at greater cost - to replace depleted reserves, not helped by "social uplift" rules and power cuts. Harmony Gold said yesterday that it may close two more mines over coming months due to poor ore grades. "
The same with peak coal in the UK....so why is peak oil is hard to believe in by some?
regards
Well stated, Brian Fallow. Good
Well stated, Brian Fallow. Good to see we have at least the remnant of a thoughtful, investigative media.
On behalf of my kids - well said, that man!
@Crafar R: isnt that what
@Crafar R: isnt that what the grape/wine industry do? get cheap labour in on temp work permits?
regards
Do you really want senators/politicians
Do you really want senators/politicians manipulating monetary policy to assist with the re-election hopes?
Interesting. This Aussie MP has
Interesting. This Aussie MP has worked it out - Aussie needs to stablise its population rather than increase immigration:
http://www.stuff.co.nz/world/australia/3056785/Shut-door-on-Kiwis-Austra...
Yep, it reads well to
Yep, it reads well to me Steven. Love the bit about the Res bank buying picking up. Must send Ben a xmas card with gold and copper frilly work on the front. Encourage him to get the paper jam at the mint sorted and the presses back on line.
Steven - if Rogers did
Steven - if Rogers did say that he was stating the bleeding obvious. Gold producers have always been in effect a magnified play on the price of gold (in both directions).
Just check the percentage gains on the 2 gold indexes (HUI and XAU) relative to the POG percentage change on an up day (or a down day).
As a gold bull market rolls on interest typically moves from producers to junior explorers etc - if you want the higher risk/reward ratios as a gold bull matures you need to have some juniors in your portfolio.
Conversely as a gold bull pulls back it is the junior explorers which get hammered first and most.........
That's true AH but you
That's true AH but you have to be dam good to identify the winners in that pot. I'll stick with pna since they have a mountain loaded with gold and soon to be opened up, plus they have a huge tenement with identified hot spots to drill. ASX listed but always the chance they will list in HongKong since Gram now own 20%. I think there are over 100 junior explorers in aus alone...try sorting that lot.
For a small fee Wally
For a small fee Wally I will provide you with a list of 5 sure fire Aussie gold junior winners.....*
*Conditions apply.
**The term 'winners' is at Andy Hamilton's discretion.
***Guarantee maybe invalid in NZ
Point 4 --this is not
Point 4 --this is not uncommon. Wellington's tip does it. I think Palmerston North has a plant. I'm sure others around the country would as well.
Nah....I'll stick with stuff that
Nah....I'll stick with stuff that sticks out. Must ask Ben to tell me when he plans to pull the plug...a chance to sell me copper quick and not end up a mug.
Related to point 4, wasn't
Related to point 4, wasn't it on 60Minutes or something similar a while back, the absurdity of nearly every state in America, you aren't allowed to dry your washing outside on a line (aesthetically not very pleasing). They could close down a couple of reactor generators if people were allowed to and didn't need to use electric dryer.
@Andy H: Not really the
@Andy H: Not really the Aussie MP wants to stop skilled Kiwi's so OZ can take more refugees....like duh....
"Mr Thomson also wants to cut the skilled migration and family reunion programmes, allowing Australia to boost its refugee intake from 13,750 to 20,000 a year."
The guy's a loon...
regards
#1 "It is clearly craven
#1
"It is clearly craven and irresponsible for the Government to refuse to even discuss a reduction in the entitlement parameters of the scheme, such as pushing back the age of eligibility. Instead it plans to just pass on the now much larger bill to future taxpayers.
It is the same story with the costs of the Emissions Trading Scheme (ETS), the cornerstone of the official response to the challenge of climate change: a multibillion-dollar post-dated cheque on future taxpayers."
Time for a new political movement aimed at the under forties (and those sympathetic to their future) Problem is too many have been sucked into the consumerism/debt trap already and I don't know if they are ready to agitate the way they did in the 60's and 70's. Personally I'd like to see some mass protests a la Springbok Tour, a riot or two and the burning of effigies of Key and co to put the fear of god up the beehive and the banks. The economy might have to get a bit worse first. "Sheeple" was invented for New Zealanders I think.
As Ross said re: point
As Ross said re: point 4. Nova Gas have a generator at Wellington landfill. Is owned by Todd Energy - with electricity from the landfill and the Maui gas that Todd already owned they were canvassing for customers a year or 2 back in Wellington. Was compartivle cheaper than the Big 5 electricity retailers. If I didn't have my meter indoors and the key already with the meter reader, then I would have swapped.
ZOMG Peak gold!! Head for
ZOMG Peak gold!!
Head for the hills!!
*cowers in the comer in the fetal position and awaits the end of civilization as we know it*
@Andy H: I think he
@Andy H: I think he was asked by a presenter on buying gold or gold shares....it might indeed seem obvious but in fact ordinary ppl are buying gold and not gold shares...
@Hamish: Yes there are "obligations" on some properties when you buy the land in a development in order to keep up "everybodies" valuations....we have them here, for myself when I see them on the sale documents I run a mile, its not really a freehold to my mind.
regards
@Troy: I thought you could
@Troy: I thought you could make a mint on that tip....(oops pun)...
@stevek: "Time for a new political movement aimed at the under forties" isnt there the "Bill and Ben" party...
;]
I agree, National, labour etc are all old codgers living in yesterday...I think its amoral myself....but then I shouldn't be surprised these are Pollies after all.
regards
@Steven I already saw over
@Steven
I already saw over a 100% return in that market. Seeing more return on gold (barring a crises of extra ordinary magnitude) will be like squeezing blood from a stone"¦(pun intended). Platinum and Palladium still have a ways to go. Platinum/Gold ratio is nearing 1.0.
Steven - Bill and Ben
Steven - Bill and Ben make way more sense than Bill and John. Way funnier too, although Key's pathetic attempts to pretend he's in charge of NZ and not the big four is mildly amusing
Only 100% return on the
Only 100% return on the gold market/shares Troy?
Jeez now I KNOW your an amateur...........
@Troy: Possibly silver as well?
@Troy: Possibly silver as well?
Bill and Ben party "In
Bill and Ben party
"In the 2008 general election the party secured 0.56% of the votes cast, outpolling every other party not in parliament at the time (New Zealand First, a party in parliament prior to 2008 failed to gain representation in the subsequent parliament).[1] Overall, they gained the ninth highest number of votes out of the nineteen parties standing for election."
"They stood on a "no policies, no promises, no disappointment" platform and had the slogan "We're putting the party back in political party"."
Well at least the are honest about it...
Interesting that they beat "Destiny Church party (known as family party)" in their results "to poll a final total electorate vote of only 0.37%" now that's funny and we wont mention the Libertarian's party's %....
regards
@Andy I’ll take 100% increasing
@Andy
I'll take 100% increasing in any investment all day. Also I wasn't leveraged...so there's nothing wrong with a single doubling in a few months.
@Steven
Silver is 50/50. It's finding it difficult to break 18"¦you could hold and hope for 20"¦but I don't see it past 22. A gold put would be to exchange for platinum at 1:1.
@Andy I never claimed to
@Andy
I never claimed to be a professional. I can list a pile of dead hedge funds and counties that were once run by "professions". And If your definition of "professional" means drinking the kool-aid, then I will happily stay "armature". Also, anyone that claims to be a profession on this blog runs the risk of full disclosure. Since I'm not eliciting or calming to provide profession investment advice (which i would never do on a blog) I don't see your point?
If you are attempting to discredit me or otherwise engaging in an ad hominem attack, let me remind you this is just a blog and to do so would make you look more foolish then I.
http://www.theonion.com/content/video/victim_in_fatal_car_accide
http://www.theonion.com/content/video/victim_in_fatal_car_accident
What happened to Troy anyway?
What happened to Troy anyway? Any lessons to be learned?
lets stay on a roll...
lets stay on a roll...
peak Uranium.
http://europe.theoildrum.com/node/5631
"More interesting questions should come up when one considers that currently about 50% of the nuclear reactors in the USA are operated with excess military uranium stockpiles from Russia. As the bilateral contract between the USA and Russia ends in 2013 and as Russia has currently very ambitious plans to enlarge their own nuclear energy sector, it is unlikely that Russia will renew this contract in 2013. Consequently, the stability of the electric grid in the United States now depends on the friendship with their former archenemy and possibly today's and tomorrow's most important economic competitor"
So all those worried about NZ having nuclear power can rest easy, the chances of us getting any uranium seem about zero.
So after uranium is eliminated and rare metals for wind and solar....we come back to fossil fuels....so coal as there will be shortages of oil and gas....dealing with AGW looks like a pipe dream...
regards
Sorry to puncture your balloon
Sorry to puncture your balloon Steven..."the chances of us getting any uranium seem about zero"...we already have some! Heaps of Kiwis and tourists drive past our very own uranium deposit every day. It's a secret!
This chart is freaking a
This chart is freaking a few people out!
It is rock music quality charted against US oil production
http://www.overthinkingit.com/wp-content/uploads/2008/09/rs-500-us-oil-p...
@Wally: refined uranium suitable to
@Wally: refined uranium suitable to put in a reactor....but we should consider mining it if its viable...the difference between the "red book" and actual production let alone demand and actual production seems substantial...I thought our deposits were too small and poor to bother with?
We are not allowed nuclear power but what about raw mineral extraction, is that blocked as well?
regards
Wally - the chances of
Wally - the chances of us getting nuclear before the balloon goes up are structurally nil.
It's a red herring.
Lead times, demand, and expertise constraints make it so.
Best energy is solar - one kilowatt lands on every square metre in the sunshine, and it needs no transmission.
Living on solar is one of the reasons I'm retired at 54. Beats trading in gold - which is just gambling in a zero-sum game anyway - hardly socially productive.
As with peak oil and peak gold, there is peak uranium. Along with peak arable land, peak depletable aquifers, peak Hoki catchable......
Kim Hill is going to interview Orlov this Saturday - will be well worth the cornucopians listening to! The ultimate end-of-growth guru.
Can't say Steven. Might be
Can't say Steven. Might be poor Q resource but when they found it, that was a long time back and who knows. I don't expect it will ever be mined. I packed it in at 51 powerdownkiwi. What kept you?
Powerdownkiwi I thought Orlov was
Powerdownkiwi
I thought Orlov was going to be talking to Chris Laidlaw on Sunday? RNZ haven't posted the programmes yet so I can't check.
Whatever - it will a good listen.
The Lower Hutt Landfill at
The Lower Hutt Landfill at Silverstream also generates electricity from the methane.
If you have yourself a
If you have yourself a natural bog, you got gas. No big deal to collect it. Run the generator with it. Heat the house. Best kept secret.
I'm worried about peak toilet
I'm worried about peak toilet paper. But if we all use five sheets less a day we can save the planet so that's OK. :roll:
You just recycle it. Or
You just recycle it. Or you could share - kind of Mad Hatters pee party. When you're on a roll.....
Wally, I get gas when I go to the bog, but never thought of using it....
And sorry, I must be slow. I'll just live three years longer..
It was very funny, watching
It was very funny, watching the parody on outsourcing personal jobs.
But on a different note, it seems like America could do well if it outsources the running of Treasury and Federal Reserve to India, don't you think ?
I loved this quote today
I loved this quote today from Peter Schiff. Every politician should read it:
THE GOLD STANDARD..
Well, the gold standard works. What we have now does not. Our founding fathers put us on a gold standard for a good reason, because paper currency existed around that time. It had existed in the past. And they were familiar with how miserably it had failed. So they wanted to set us on a gold standard. And we became the world's wealthiest nation while on the gold standard.
We were on the gold standard for all of the 19th century, which was our fastest-growing century (more so than the 20th century). We had the Industrial Revolution; we built up our arsenals and our democracy"”we won World War II on the gold standard. We were actually on the gold standard up until Richard Nixon ended it in 1971. So to say that the gold standard is somehow arcane, or that you can't have economic growth on the gold standard"”that's all nonsense.
It's the politicians who don't like gold, because gold imposes discipline on politicians. It keeps them honest, and politicians don't want to be honest. They want to get elected."
OECD rank 22 kiwi -
OECD rank 22 kiwi - Harden up... my ol'man was in the military. When I was a kid I was told you could wipe your arse on 3 squares of toilet paper... and that was all that was needed... ONE WET, ONE DRY, ONE POLISH!
Rank 22... get a life or you will never get beyond #2's.
Ludwig - um, no. Economic
Ludwig - um, no. Economic growth is nothing to do with gold, except that it is a physical resource. Gold did indeed underpin paper money fully, but after a while it couldn't. So they had a wee talk about it (Bretton Woods) in the '40's, and decided only to underwrite the 'fractional reserve'. Thats the bit the bank has to have in hand, the bit that isn't smoke and mirrors.
What Tricky Dicky did in 1970, was to unpin even the fractional reserve from the gold. Interestingly, up until 1970, USA was presumed to be able to pay her way, although she hadn't quite for most of the 'sixties'.
What happened in quick succession was the Hubbert Peak hit for the 'lower 48', and she became a permanent energy importer.
The Arabs then had a lever - which they had not had in the Six-day war, as USA was self-sufficient back then. So the '72/3 oil embargo - brinkmanship - which had an effect.
The USA has only declined in net oil production, and increased in debt, since.
Which is why some of us have tracked global supply rates for the last three decades.
Economic growth needs exponential growth of supply of materials - read resources - and it was always up against a finite planet. Separate issue.
It was Hunter Thompson who said " History is hard to know, because of all the hired bullshit". He would have known.... :)
powerdownkiwi Excellent synopsis, its of
powerdownkiwi
Excellent synopsis, its of course interesting that the US hijacked BW and made the USD the reserve currency, its taken 40 years past the US peak for this "bubble" to burst Since most bloggers here are fascinated by bubbles that is what the US is.
The only point i'll debate with you is Bernards idiotic get X/Y v BB argument, If biology is correct most geny have bb parents so will inherit this wealth, unless people looking for a scapegoat listen to Hickey and get the state involved (again) in which case this wealth will disappear into a great bureaucratic hole.
Neven
Yeah - I forgot to
Yeah - I forgot to add that Henry K swung the USD as the oil-trading currency - smart move. I think of him every time I got out of a morning and find the grass wet. A heavy dew...
Powerdownkiwi - unless I am
Powerdownkiwi - unless I am much mistaken, even under the halcyon days of the Victorian gold standard, gold did not "underpin paper money fully". However, the yellow metal acted as a stabilizer preventing politicians, and the bankers that command them, from excessive money supply expansion. You're assertion that "after a while gold could no longer underpin paper money" is utter nonsense. The simple fact is, that after world war one, the great powers of Europe had been fatally wounded relative to Winston Churchill's "Antonine age" under Queen Victoria. In consequence, attempts to 're-back' money with gold failed because a Pound post 1918 was no longer what it had been pre 1914. Rather than allowing gold to expose this truth - to accept that Pound Sterling and the other European currencies were much weakened monies - it was easier to largely abandon the remaining vestiges of the gold standard. Thus the stage was set for irredeemable debt and the explosion of debt financed consumption that you seem so concerned about.
Contrary to your opinion economic growth, and more importantly liberty, has much to do with gold - because the yellow metal fulfills the criteria for money laid down by Aristotle, whereas fiat money does not. There is nothing magical about gold, it is simply the monetary medium of history that is substantially outside the control of politicians. Thus, it allows for rational exchange between buyer and seller. The great irony is, that had we remained on a classical gold standard, consumption would probably have been lower because it would not have been possible to 'forward consume' via instruments of irredeemable debt. Nor would it have been possible for the combatants in both world wars to have overseen such carnage - since they would soon have run out of the yellow metal to pay the bills.
The fact that the United States has moved to a point of not being able to "pay its way" is utterly unremarkable - if you are conversant with William Playfair's 1805 "Inquiry into the Permanent Causes of the Decline and Fall of Powerful and Wealthy Nations". As he noted:
"From this almost universal picture, we learn that the greatness of nations is but of short duration. We learn, also, that the state of a fallen people is infinitely more wretched and miserable than that of those who have never risen from their original state of poverty. It is then well worth while to inquire into the causes of so terrible a reverse, that we may discover whether they are necessary, or only natural; and endeavour, if possible, to find the means by which prosperity may be lengthened out, and the period of humiliation procrastinated to a distant day".
"The history of three thousand years, and of nations that have risen to wealth and
power, in a great variety of situations, all terminating with a considerable degree of similarity, discovers the great outline of the causes that invigorate or degrade the human mind, and thereby raise or ruin states and empires".
One sometimes suspects that the real issue for the 'hairshirts' is not that they care about the planet. Rather, their intellectual conceit is so absolute that they must believe in their omnipotence and omnipresence. Hence they are consumed with guilt for the distant past - because they were there! As to the future, they are consumed with righteous indignation - because they have been there too. So powerful are they that they can even control the weather. A price must be paid, and they are supremely adroit at handing the bill to someone else whilst the first class travel, expensive resort conferences, fine wines, and canapes are indulged in.
Assuming the global money supply
Assuming the global money supply continues to be increased and the proxy store of vallue the USD declines in value correspondingly then the value of assets that have an intrinsic value such as gold should rise against the USD. In my imprecise understanding anyway, maybe someone more educated in the field could comment?
expat - I think you
expat - I think you are right but the only 'trouble' is that most of the money supply increase in recent years has been via instruments of credit - not actual cash. Thus credit could implode which would tend to make cash more valuable. Theoretically the authorities could monetize everyone's debts, which ought to deliver something akin to Weimar Germany - but this may not be possible. As I have said before - "is there someone out there with a crystal ball"?
If you have listened to
If you have listened to Ben Bernanke Malcolm you would know the answer to your question. Bernanke thinks he understands the great depression and therefore his answer to credit deflation is monetary expansion.
He's called Helicopter Ben for a reason and if he has to he will fly around America dropping bags full of one hundred dollar bills.
Chq this http://www.guardian.co.uk/environment/cif-green/2009/no
Chq this http://www.guardian.co.uk/environment/cif-green/2009/nov/12/new-zealand-...
Looks like the POMs are on to us.
Malcolm - interesting and thoughtful
Malcolm - interesting and thoughtful comments. Playfair only had to ask his contemporary Thomas Malthus, who could have solved William's problem with a single sentence!
Seriously, from a physics point of view, all declines represent an exhaustion of resources. Often the exponential obliterating the arithmetic, too....
If not, no country would ever go to the effort of invading another. Cecil Rhodes could have gotten rich at home, the Herrenfolk wouldn't have need liebensraum, we wouldn't have supplied wool to the dark satanic mills, and the US wouldn't have to have a presence in any country with oil under it's soil.
Fiat doesnt work when you've overrun your extractive ability, and we're running the experiment on a global scale - no extractive 'doubling' left. Which raises the question - how do you address the unrepayable debt?
Currently, all the effort is going into kick-starting the dead motorbike, but that's doomed. Given that unsustainable regimes are unsustainable, it takes a bear of very little brain to work out that we need a sustainable regime, and exponential growth doesn't qualify.
Just remember that when you're poor, you canape.
go well.
ps: it IS Chris Laidlaw/Sunday that has Orlov - thanks whoever mentioned that. Don't miss it Malcolm - I thought I was a doomer till I heard him....
Powerdownkiwi - I shall attempt
Powerdownkiwi - I shall attempt to listen, as suggested, on my valve radio (which I have recently repaired/recycled). A gentleman, in my view, should always listen to serious matters on something powered by valves - much nicer sound!
As to unrepayable debt one assumes it will either have to be liquidated - with massive demand destruction - or it must be inflated away. Either way, it infers that a huge collapse in demand for 'things' is a possibility and this should not be ignored. Clearly, exponential growth is a nonsense and that is why we have recessions/depressions - in order to cleanse the excess! Trouble is politicians and bankers have assumed such horrific liabilities that they must believe they can interfere in natural economic cycles. Otherwise they must end up telling the truth as per Playfair - "all national prosperity is fleeting" (as, I suspect, New Zealand is going to discover).
@Mouse: This comes from 2
@Mouse: This comes from 2 directions, we have indeed failed to reduce emissions but there is also a commercial pressure in the EU to penalise NZ due to simple "carbon miles"....rather than true carbon cost.
"And, with more cows than people, the country's i[NZ] ncreasingly intensive agricultural sector is responsible for approaching half the greenhouse gas emissions."
Of course we need to compare NZ's total CO2/methane emissions per kilo of (say) butter with European producers....and also consumption of indirectly damaging products eg palm kernels (which our stupid farmers union says ig a great idea) as these are also used elsewhere in quantity.
So if (say) the world consumes 1million tonnes of butter per annum, in terms of climate damage overall NZ probably does the least so should produce it all.
"The government's national marketing strategy is underpinned by a survey showing that tourism would be reduced by 68% if the country lost its prized "clean, green image", and even international purchases of its dairy products could halve."
So the National Govn (and Labour before it) risks a catastrophic collapse in the demand for our products...if that happens who will beheld accountable I wonder? The Pollies or the interest groups they listened to, the very ones who will suffer directly.
@powerdownkiwi: "how do you address the unrepayable debt? " indeed as Steve Keen says its the root cause....
http://www.debtdeflation.com/blogs/
Until its removed it will way us down....you just have to look at Japan...and that started 19 years ago, is still going, and oil prices etc was sane...
For me the crazy thing is this debt isnt real money....it was paper/credit invented out of thin air to inflate asset bubbles like housing and shares (so its a bit thicker air) that isnt a real economy, so its make believe air....yet we treat it like real.
regards
So we all run up
So we all run up debt knowing it will be forgiven.... I'm not that brave..... knowing my luck, they'd foreclose on me the day before the general forgiveness announcement.
Malcolm - you'd have enjoyed being here yesterday - we just commissioned our (attempt number three) pelton-wheel generator, using a 'gentle annie' (not the usual 'smart drive'), and an Australian control kit, all slung on an old ladder across the creek. Not quite valves, but.... I'll get it on you-tube next week.
Steven - I'm at the end of 400 metres of thin copper (don't tell Wally where) which goes to an exchange which doesn't even run 'caller ID'. So I can't wait long enough for video here - will look in town later!
i bought into gold with
i bought into gold with ncm and lgl on the asx back in '04 so am now up by close to 400%.
if you want to get on before it's too late have a look at igr on the asx.
i also believe uranium is a good long term hold.
pdn on the asx is probably about the best bet.
rock on elves
Deleveraging puts pricing pressure on
Deleveraging puts pricing pressure on leveraged assets. Banks must raise capital, diluting their shareholders and hurting their stock prices. Real estate owners must sell property to raise capital to defend other properties, thus putting pricing pressures on real estate assets. And so on...
So as an investor, it will pay better to stick with the unlevered assets, which face no such head winds. After all, there is no pressure to sell an asset with no debt, no ticking clock. "What are the most underleveraged assets?" you ask. QB Partners gives the answer: hard assets and natural resources.
The ultimate unlevered hard asset may be humble old gold.
In fact, something important is happening in the gold markets right now. All through the 1990s to the present day, the world's central banks were net sellers of gold. Europe's central banks, for instance, have sold 3,800 tonnes of gold in the last 10 years. According to The Financial Times, this move has cost them $40 billion, and that's with gold at $900 an ounce.
Well, too bad for them. But suddenly, that recent habit of selling gold is changing. Last year, central banks sold only 46 tonnes, which was the lowest amount in 10 years.
As the FT reports: "Sales in Europe have slowed to a crawl and fresh demand is emerging elsewhere and the financial crisis has helped to highlight gold's value in turbulent times." In fact, we may soon see central banks flip to net buyers of gold.
China has doubled its holdings of gold this year and is now the world's fifth largest holder of the metal. China is likely to be a buyer of gold for years because its gold holdings are still very small relative to the size of its total reserves. Gold represents only 1.6% of China's reserves, versus a global average of nearly 11%. To further diversify its reserves - just to get to average - would require significant amounts of gold.
In a post-2008, deleveraging world, it is the unleveraged assets that will outperform against those saddled with debt. It's another plank in the case for gold, which just seems to get stronger with each passing month. "A new chapter has begun in the gold market," the FT opines. Indeed, it has.
The International Monetary Fund, never known as a wise handler of money, is selling a bunch of gold. India bought half of it. A number of emerging market central banks are also upping their gold exposure. Maybe these CBs are onto something.
Russia's gold holdings now make up 4% of its foreign reserves, compared with only 2.2% at the beginning of the year. Smaller central banks are also being crafty. Ecuador's gold holdings have more than doubled since the start of the year - to 54.7 tons, from only 26.3 tons. Gold now represents 32% of that country's reserves. Even Venezuela is buying gold. Gold now makes up 36% of its reserves, compared with only 23% in 2009.
So who is the sucker here?
Perhaps central bankers see more clearly than most what the effect of all their money creation will be. In recent months, we've seen a truly unprecedented boom in bank reserves. Bank reserves drive money creation. More money means money buys less - and the gold price should rise.
In the old days of the Bretton Woods Agreement, countries had to maintain certain ratios of gold against their currencies. The Shadow Gold Price aims to replicate this discipline. So for the US, the Shadow Gold Price is Federal Reserve Bank liabilities (bank reserves) plus money in circulation divided by US gold holdings. Also on the chart, you can see the spot price of gold.
The important thing here is that you see how massive amounts of money creation have barely made an impact at all in the gold price - so far. Gold is fundamentally cheap compared with all the money added to the system in recent months.
As Paul Brodsky and Lee Quaintance of the hedge fund QB Partners writes:
"If one allows for even a small probability of a future monetary system that reflects more honest/tangible money, then a quick glance at the graph above makes it easy to conclude that spot gold is fundamentally cheap. Even if this is too far a stretch for market participants skeptical of such a radical change in monetary policy, it is reasonable to conclude that the prices of spot gold and the Shadow Gold Price should converge somewhat over time."
They note that the spot gold price has never been so cheap compared with the Shadow Gold Price. For parity to set in, gold would have to trade for $16,000 per ounce! No one is predicting $16,000 per ounce gold. In any case, it shows you the risk of holding paper - and bonds - on the eve of a massive devaluation of the dollar. Maybe the central bankers of Russia, Venezuela and Ecuador understand all of this better than they let on and that's why they are buyers of gold.
elves of world...go golden...it's mac time dawgs!
Play in a zero sum
Play in a zero sum game? Nah, I gotta life. My yardsticks are that whatever you do shouldn't be a debt on somebody else (including future generations) and that it should be socially constructive.
Snow White was a groupie...
oh that's right, they weren't elves - he's left the building - how dopey of me.... I'm off to whistle while I don't work. :)
almost pulled the trigger on
almost pulled the trigger on centamin. I'm quite certain if you look at their gold values out of the ground it isn't that bad. Should've pulled in at 0.60, but I thought they were over-valued!
In fact this is really
In fact this is really a useful post for me thanks for sharing...........
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