Archive for August, 2011

Chinese Global Times- August 29, 2011- By Reuters

The new head of the IMF on Saturday called on global policymakers to pursue urgent action, including forcing European banks to bulk up their capital, to prevent a descent into a renewed world recession.

“Developments this summer have indicated we are in a dangerous new phase,” International Monetary Fund Managing Director Christine Lagarde said at a conference for top officials and leading economists from around the globe.

“The stakes are clear; we risk seeing the fragile recovery derailed. So we must act now,” she said.

Two years after the end of the worst of the financial crisis, growth in the United States and Europe is sputtering as government debt burdens surge.

Borrowing costs for European banks are rising as lenders balk at providing any but the shortest maturity funds on fears over bank exposure to shaky eurozone sovereign debts. Sharp swings in global financial markets have intensified strains.

Complicating the picture is policymaker indecision on both sides of the Atlantic. European leaders are fighting over who should pay the bill for taming a raging sovereign debt crisis.

In the United States, lawmakers and President Barack Obama fought a contentious budget battle earlier this summer that resulted in the loss of the nation’s coveted “AAA” debt rating from Standard & Poor’s.

Federal Reserve Chairman Ben Bernanke warned here on Friday that the fight had shaken confidence and sapped US growth. Lagarde said the Group of 20 leading economies should use a meeting in November to address the global economy’s woes in a convincing fashion, and she used her speech – her first major policy address since taking the helm at the IMF in July – to open a new front in dealing with strains at European banks.

She called for a “mandatory substantial recapitalization,” through private channels if possible, but otherwise through some form of public, Europe-wide funding, such as the European Financial Stability Facility.

Lagarde also warned advanced economies away from tightening their belts so fast that it imperils recovery.

“Put simply, macroeconomic policies must support growth,” the former French economy minister said.

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Bernanke Stays Course, Says Fed Will Consider Move in Sept- CNBC- 8/26/2011 

Published: Friday, 26 Aug 2011 | 10:00 AM ET By: Jeff Cox CNBC.com Senior Writer    http://www.cnbc.com/id/44286314/ 

Federal Reserve Chairman Ben Bernanke said the Federal Reserve stands ready to use additional tools to help the US economy in its nascent recovery, but he stopped short of explicit talk that another round of monetary easing is forthcoming.

The central bank chief’s hotly anticipated remarks at Jackson Hole, Wyo., did not entail promises of more quantitative easing—QE3 in market parlance—nor did he discuss specific measures on whether the Fed will make any other attempts at intervention.

Citing “a range of tools that could be used to provide additional monetary stimulus,” he said the Fed “will continue to consider those and other pertinent issues, including of course economic and financial developments, at our meeting in September, which has been scheduled for two days instead of one to allow a fuller discussion,” Bernanke said in the speech.

As the economy languishes in low growth and stock market endures a summer correction, Bernanke’s speech was considered a bellwether for what will lie ahead.

Instead, he mostly reiterated language already used by the Federal Reserve, in which it expressed concern about the pace of economic recovery.

“It is clear that the recovery from the crisis has been much less robust than we had hoped,” he said.

But the chairman seemed to put an end to talk that the Fed was willing to react simply because the stock market was in correction mode and worries have intensified that the economy could be heading for another recession.

“We heard from Gentle Ben rather than Hurricane Ben,” Robert McTeer, former Dallas Fed president and distinguished fellow at the National Center for Policy Analysis. “The choice in monetary policy isn’t between QE3 and doing nothing…No QE3 does not mean the Fed is just backing away and not doing anything.”

Bernanke also said he expects growth to pick up in the second half. Should signs fail to materialize soon, the Fed’s Open Market Committee will consider additional policy tools at its September 20-21 meeting.

He said inflation is likely to stay below 2 percent, which would meet expectations. Dissenters on the Fed in part fear that the Fed’s policies, which have driven down the US dollar against the world’s currencies, are driving inflation higher.

Markets sold off sharply following word that the Fed would not deliver on QE3 expectations, with the Dow industrials sinking more than 150 points. The dollar was down slightly against a basket of global currencies.

However, the selloff was short and orderly and quickly calmed—the Nasdaq tech gauge actually turned positive—indicating that the market was far from unanimous in its quest for QE3.

“Bernanke didn’t play the panic card and throw another QE program at the economy,” said Keith Springer, president of Springer Financial Advisory in Sacramento, Calif. “This will ultimately instill confidence in investors as they will be pleased by his non-action because if more stimulus was needed he would have applied it.”

Bernanke used his Jackson Hole speech last year to tip his hand about QE2, sparking a sharp move higher in the stock market. The Fed did not actually begin the round of easing in November with a series of monthly purchases amounting to $600 billion in Treasurys.

On the jobs front, Bernanke said economic growth is not sufficient to bring down the 9.1 percent unemployment rate. He called on Washington to develop “good proactive housing policies” to address a real estate market at depression levels.

“Even as tight credit for some borrowers has been one of the factors restraining housing recovery, the weakness of the housing sector has in turn had adverse effects on financial markets and on the flow of credit,” he said.

But when it came to specific language regarding Fed action, he remained vague.

“The Committee will continue to assess the economic outlook in light of incoming information and is prepared to employ its tools as appropriate to promote a stronger economic recovery in a context of price stability,” he said.

© 2011 CNBC.com

As most will notice, the expected gold correction is well under way, especially with the help of CME Group.  Today, they raised the margin requirements for gold for a second time this month by 27%.  This will prove to squeeze out smaller investors for the time being.  As mentioned in my previous post, I expect the correction to be between 10-15% when it’s all said and done.  We will probably see a bottom in the $1,650 to $1,700 range, before gold continues its rally upwards again towards $2,000.  For those that are holding gold- DO NOT SELL at a loss.  Hold your gold investments, allow them to correct, and watch them soar to $2,000 later this year.  My advice to anyone that isn’t in the gold market- once you see a firm bottom to the gold correction- buy, buy, buy!  You won’t have an opportunity to buy gold at this low price probably for a very long time.  This is a tremendous buying opportunity for those that have been waiting to get into the gold market. 

As mentioned many times in past blogs, the market atmosphere has not changed, which is why gold will continue to march upwards.  With the Federal Reserve’s promise to keep interest rates at 0% until 2013, we are sure to see considerable monetary easing for the next two years.  Regardless of what Bernanke says this Friday, the QE will continue as a part of this interest rates policy.  That means higher prices for agricultural commodities, energy commodities, and of course precious metals.  There is no end in sight when looking to Gold’s rise.  Remember, not long ago when gold was at $1,400 the mainstream news media declared there was “a bubble.”  But interesting isn’t it, that gold continues its rise.  There is no bubble here, only a correction that was far overdue.  Once this healthy correction is complete, gold will again march towards the sky. 

Also remember, silver too is poised for a huge rally soon.  It is extremely undervalued at this point, especially with the recent surge in gold prices, and will rally past $50/ounce soon.  It would be wise for investors with less capital lying around, to take advantage of some silver purchases while prices are reasonable. 

You may also notice, Adding Up The Facts has endorsed Congressman Ron Paul for the Republican Nomination.  It is my belief after hearing all of the candidates speak, and after reading up on the voting records of all of the candidates, that Ron Paul is the best choice in a candidate that possesses the knowledge and understanding of our economy to fix the incredible mess that has been created by the Federal Reserve.  I have posted voting records for Michele Bachmann, Mitt Romney, Rick Perry, and Ron Paul on my site so that you, my readers, can research the facts and come to your own conclusions.  I’m confident that you will see that Ron Paul has separated himself from the others, setting politics aside and attacking the real issues by educating the public at every turn.  He has a 30 year track record of voting the same way, and representing the same values and ideals. 

In the past, Presidential elections have been like a box of chocolates, and I don’t know about you, but I’m tired of not knowing what I’m going to get.  That’s why I’m voting Ron Paul.  Educate yourself on economics, learn from history, and vote on facts-not emotion this time around.  The mainstream news media has made a concerted effort to ignore Paul’s accomplishments at the polls, and even in fundraising.  My question to them is- what are you guys afraid of?  I’d argue that the mainstream still hasn’t figured out what the right economic questions to ask a Presidential Candidate even are, and they continue to disappoint.  Regardless, last I checked, this is still America where the American people should have the final say.  Let’s make a statement to the mainstream media at the polls, and in the primaries.  Become active, become a delegate if you are in a caucus state, and vote for real reform.  You can find at the bottom of my webpage a link to Ron Paul’s 2012 official website, and also a campaign accessories site link.  That’s all for today.

John F. Haettich-  8/24/2011

This is a special news update.  The CME Group has raised its gold margin requirements by 22% going into effect after the close of business today (Thursday, August 11, 2011).  This is a similar move to what happened with Silver back in May when the margin requirements were raised and silver took a dive from $50/ounce, to $35/ounce.  This type of move could cause Gold to correct as much as 10%.  My advice- hold on to your gold and don’t sell.  Rather, if you have dollars to invest, buy more gold after this correction takes place at the lower price.  Gold is going to be in a bull market for quite some time given the current situation with the Dollar, the Euro, and world markets.  Over the past month, the Dow Jones index has fallen by over 14%, the French market is down 23%, the Nikkei by 11%, the German market is down 24%, and even Chinese equities are down 20% since November.  Interest rates are being held artificially low worldwide via easy money policies, and Gold will continue to soar in this economic climate.  Don’t lose money by selling Gold that is only correcting.  Rather buy more gold when it does take a dip.  It will not take long for Gold to recover if it corrects even 10% in this atmosphere.  As for other places of safety- you may find some hedging power in the Australian dollar as it is up 12.6%, Swiss Francs are up 37% and strong, and Non-Dollar Sovereign bonds, utilities and real estate trusts.  Anything Dollar or Euro backed is not a place of safety and your wealth will be at risk there.  That’s all for this special news update. 

John F. Haettich- 8/11/2011

 

Most of you are probably wondering, “What the heck happened today in the markets?”  Well, in my opinion we witnessed the beginning of QE3.  I wrote an article a couple of months ago entitled, “Possible unofficial announcement of QE3 coming- Bill Gross.”  In that article, I indicated that some comments from Bill Gross, the head of the largest bond fund in the world- held a lot of water, and I confirmed his foresight was probable.  The points in the article are outlined as follows (pertaining to a QE3):

-They won’t be calling it QE at all

-It will be “Interest Rates” focused on Longer Term Treasuries

-They will announce that they won’t allow rates to rise above a certain level

-They will buy the additional treasuries required to keep rates at the capped level announced

-They will not assign a dollar amount to the QE- This is far more dangerous

Now let’s look at what happened today.  The Federal Reserve came out and announced that they were going to keep rates artificially low until 2013, and “markets would have to ‘go it alone’ until then.”  I’ve never heard a more bogus statement.  What we saw today was the beginning of QE3.  As you will notice from the points made above- 1. It hasn’t been called QE at all, 2. It is interest rates focused on longer term treasuries, 3. They’ve announced that they will keep rates artificially low until 2013, and 5. They have not assigned a dollar amount to the QE nor have they admitted that it is even happening or must happen to accomplish their goal. 

Please realize, in order for the Federal Reserve to keep interest rates low until 2013, they have no other choice than to create new liquidity and buy treasuries.  The Federal Government continues to operate at a deficit close to $1 trillion, of which the Federal Reserve has been buying approximately 70% of the treasuries.  Why?  Because there are no other buyers at such low rates- after all, who would want a treasury from any government at such low interest rates, accompanied with problems of soaring debt and a negative outlook.  If the Fed wishes to attract new buyers of treasuries allowing them to reduce their role in bond buying, they would have to raise interest rates to a level that would attract the buyer.  This is an increasingly difficult task, especially as our credit rating has been downgraded, and hundreds of municipal bonds have been downgraded as well.  The only way for the Federal Reserve to accomplish their goal of keeping interest rates low until 2013, is to continue creating money and buying treasuries. 

Now let’s look at what happened in the markets today.  We started out in a downward spiral, the Fed came out with their announcement, the market dropped a little bit more, and then the Dow did a 180 and went upwards.  I believe what we saw in that end of the day rally is the beginning of our third bond buying program, labeled “keeping interest rates low.”  We saw the beginning of a liquidity pump in the end of day rally.  The Dow may be choppy for a few days, but it is going to “artificially recover” from here on out because of this unofficial QE.  We’ll be watching this closely for the remainder of the week.  Regardless, the stock market is an inflated mess.  From here on out, I’d advise anyone with assets to hedge as soon as possible.  With this QE program, there is no end until 2013, and there is no cap on the amount of money that will be pumped into the system.  This is a dangerous situation for anyone that holds cash, stocks, or any investment that promises payment in dollars.  Gold will soar the remainder of this year along with most commodities, and we will really be seeing inflation the remainder of this year and 2012.  If you are looking for a “QE3” look no more, it has arrived and it will make QE1 & QE2 look like tiddlywinks.  That’s all I have for today. 

John F. Haettich- 8/9/2011

Yesterday, we heard that the Democrats, Republicans, and the President have come to some form of an agreement to raise the debt ceiling.  All sides are saying that they didn’t get everything they wanted but they are willing to settle so that the US doesn’t default.  How honorable that these men have decided to further imprison the American people with debt and interest for programs that we don’t approve of or even understand.  In reality, honor is a word that is foreign to the politicians that are in a position to represent and protect the interests of the American people. 

We are now primed for a currency crisis that is sure to come.  Why?  Interest rates continue to be low, meaning it is going to be extremely difficult to attract buyers to these treasuries.  This will lead to the only solution government seems to know, the continued printing of money via the Federal Reserve.  It is literally impossible for our government to continue without additional easing.  For a gold trader, this is great news, but for the average American with his life savings valued in U.S. Dollars, this is the worst news you can get.  Should interest rates skyrocket- which also could happen, we will be faced with a default situation again, as we won’t be able to afford the interest on our soaring debt.  It is my belief that we will be hitting the debt ceiling again next year in 2012, rather than 2013 as the economy is going to be sucking wind from here on out.  We continue to be pushed further into the corner by our own representatives. 

Vladimir Putin today said to a group of Russian students, “The United States is like a parasite on the global economy.”  He recognizes the scam of America depending on the export of U.S. Dollars to keep our country running.  The world is becoming wise to this situation, and adjustments are being made.  China continues to expand their Yuan market, while the IMF continues talks of a new world currency, the Bancor, which would be based on a basket of commodities.  It is only a matter of time before the dollar becomes worthless.  The politicians who have been arguing the point that failure to raise the debt ceiling would result in crisis, are wrong.  The real crisis is just around the corner.  This is a crisis that they won’t speak of.  Not the crisis of not being able to spend more- but rather, the crisis of lending.  When our lenders stop lending, this is when we will see the real crisis.  When our currency is worthless, then you will see the real crisis. 

We’ve seen from CNBC reports that layoffs are at a 16 month high, manufacturing is at a 2 year low, and the stock market has slid around 400+ points to 11,767 on the Dow within the past two days.  During the first and second quarter of this year, I blogged that when QE2 ends, the following two months (July and August) would be filled with the real truth of our economic situation and a stock market crash.  We are seeing the beginning of this now, and it only took about a month.  Eventually pressure will build and the Federal Reserve will have to issue an official QE3 or whatever they will call it.  They already have added pressure to buy treasuries as the government seems to be full speed ahead with spending.  At close to 0% interest they won’t be able to give these treasuries away.  We’ve seen GDP revised to .4% for the first quarter of 2011.  That isn’t even growth- can you say depression.  We are on the verge of seeing the real economic collapse, the greatest depression this country has seen or experienced. 

As for the wealth of the American people, prepare to be robbed.  We are going to be taxed like never seen before, not through legislation, but rather through inflation.  For those that continue to hold dollars, assets that or backed by U.S. Dollars, or investments that promise payment in US Dollars, you are about to see the largest tax increase in the history of the world.  Prepare for the value of your dollars to decline rapidly.  The cost of living is set to rise drastically over the next few years, and standard of living will take an unprecedented dive.  You may have noticed that Gold has skyrocketed, and silver is holding strong at $40-41/oz.  Why do you think that is?  What has happened is the smart money (those that understand markets and economics), have received the clear indicator that the U.S. is going to continue spending, in effect the printing presses are getting revved up.  What other option is there for the smart money, than to hedge their assets.  Be advised though, Gold is overdue for a correction which could be even 5-10%, but if/when this happens, it will be an opportune time to buy.  Gold in the long term is extremely bullish, and I’d argue that it is still cheap compared to where it’s going.  If you have cash, take advantage of every dip in gold or silver and buy, as these metals have a long upward journey ahead. 

Don’t get distracted with the European debt crisis.  The world seems to focus on the crisis overseas, which always seems to temporarily rally the US Dollar but at the end of the day, our debt problems are far worse than theirs.  When all is said and done, the dollar is going to be worthless.  The question isn’t “if” Europe and the US crash, but it is “when.”  These policies of doing the same thing over and over again but expecting a different result is madness.  Increasing liquidity in these markets has never worked before, and it won’t work now.  The economic correction is coming, and by that I mean a severe depression.  The question is, will we have a currency, or will it cease to exist. 

I had someone recently refer to a currency collapse as an “Armageddon”, and I had to disagree.  This situation is far from an Armageddon, but rather this is something that has happened all throughout history, just never on such a grand scale.  Countries that have experienced hyperinflation include Angola, Argentina, Austria, Belarus, Bolivia, Bosnia, Brazil, Germany’s Weimar Republic, Greece, Hungary multiple times, Israel, Mexico, North Korea,  Nicaragua, Peru, Philippines, Poland, Romania, The Soviet Union, Taiwan, Ukraine, Yugoslavia, Zaire, and Zimbabwe.  Even in our history here in the United States, we have experienced hyperinflation on a smaller scale.  During the U.S. Civil War, between 1861 and 1865, the CPI increased from 100 to over 9,000 (this was known as the “Lerner Commodity Price Index”).  The Confederate dollar was overprinted, its value became less and less, and by the last few months of the war these notes were almost worthless.  The big difference today is that our current U.S. Dollar is accepted all over the world, and it is being devalued rapidly by these easy money policies, and insane spending.  We are in unchartered waters because never before, has a currency that is accepted worldwide reached the point of hyperinflation and collapse.  This isn’t Armageddon, but rather it is history repeating itself on a very large scale.  We’ve now clearly seen where government stands on the issue, and we’ve seen where the smart money stands- where do you stand?  That’s all I have for today.

John F. Haettich- 8/3/2011