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XMFSinchiruna (27.70)

January 2008

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19

If you own Barrick Stock...

January 28, 2008 – Comments (5) | RELATED TICKERS: ABX , AEM

This might be a terrific time to consider getting out of your position and into another gold company that is on better footing.  Why the cause for concern?  There is no more compelling narrative within the financial world than the moves insiders make with their company shares.  They can spin their words to shareholders however they like, but you can't put a positive spin on this:  [more]

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Great Video, former GG CEO Rob McEwen lays out argument for $5,000 Gold!!!

January 16, 2008 – Comments (7)

For those of you invested in precious metals already, this video may help to make you feel less pain over the seemingly premature down-ticks over the past few days.  For those of you not yet into Precious metals heavily, well then let this serve as your final call... this is likely to be the last time we see gold under $900 for many years to come!!!  [more]

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20

Take a deep breath here... and carefully select the unmistakable bargains.

January 15, 2008 – Comments (4) | RELATED TICKERS: CX , ACH , SLW

Well investors, if you're like me you're still reeling from today's numbers.  I had my biggest one-day decline since I've started investing.  I wish I could say it was a one-day anamoly, but unfortunately indications are that at least at the open tomorrow things will be sinking further.  If you check the after-hours action on some of your holdings, I'm guessing you'll see the same thing... most of my holdings are down an additional 1-3% after-hours... pouring salt on our wounds.  I guess it's possible buyers may start stepping in the pre-market session, but I doubt it.  I think we're in for another tough day tomorrow, and for the time being it seems that no sector is safe.  Everything was off today... gold/silver, miners, oil and gas, BRIC ETFs and ADRs (especially China)... it was hard to know where to go.  I did do some buying today, too much in retrospect, but long-term I know I got some good deals.  [more]

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16

Police condicting unjust seizures of cash!

January 14, 2008 – Comments (7)

Se this article below.  Lately I've been hearing far too many stories about people having cash confiscated from them based purely on suspicion of foul play, even in cases where there is no evidence whatsoever.  I'm not familiar with the particulars of the case outlined below, but when they state that something "didn't add up", that translates to me as making legal decisions on a hunch.  I wish they could have provided the person's name so I could contact him and ask where the money came from.  This is state-sponsored larceny.  If it turns out that the guy was indeed a big dope dealer, then it will look like everything was fine in what they did, but if he's innocent... there's the problem... they're spending this money before they even find out if he's guilty of a crime.  That's not what our legal system is supposed to be.  I post this to the CAPS site because such seizures seem to be on the rise, and I believe it's linked to the larger fiscal crisis facing this country... municipalities are having to get increasingly creative to fund themselves.  Shame.   [more]

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Anna Schwartz blames Fed for sub-prime crisis

January 14, 2008 – Comments (0)

As rebukes go in the close-knit world of central banking, few hurt as much as the scathing indictment of US Federal Reserve policy by Professor Anna Schwartz.

The high priestess of US monetarism -- a revered figure at the Fed -- says the central bank is itself the chief cause of the credit bubble and now seems stunned as the consequences of its own actions engulf the financial system.

"The new group at the Fed is not equal to the problem that faces it," she says, daring to utter a thought that fellow critics mostly utter sotto voce.

"They need to speak frankly to the market and acknowledge how bad the problems are, and acknowledge their own failures in letting this happen. This is what is needed to restore confidence," she told The Sunday Telegraph.

"There never would have been a sub-prime mortgage crisis if the Fed had been alert. This is something Alan Greenspan must answer for," she says.

Schwartz remains defiantly lucid at 92. She still works every day at the National Bureau of Economic Research in New York, where she has toiled since 1941.

Her fame comes from a joint opus with Nobel laureate Milton Friedman: "A Monetary History of the United States." It revolutionised thinking on the causes of the Great Depression when published in 1965. The book blamed the Fed for causing the slump. The bank failed to use its full bag of tricks to stop the implosion of the money stock, and turned a bust into calamity by raising rates.

"The book was a bombshell," says British monetarist Tim Congdon. "Until then almost everybody thought the free-market system itself had failed in the 1930s. What Friedman-Schwartz say was that incompetent government bureaucrats at the Fed had caused the Depression."

"It had an enormous impact in revitalising free-market conservatism, and it broke the Keynesian stranglehold over policy," Congdon says. Keynes himself was a formidable monetarist. He became a "Keynesian" big spender only once all else seemed to fail.

The tale of the early 1930s is intricate, but worth rehearsing in the climate of today's credit crunch.

The October 1929 crash did not cause the slump; it was merely a vivid detail. The US economy muddled through for another year, seemingly sound. Then it buckled as rising defaults in the farm belt set off a run on local banks.

It was at this juncture that, critics claim, the Fed lost the plot. Washington prohibited the pros at the New York Fed from injecting sufficient stimulus through open market operations -- buying bonds.

Contagion spread. The Jewish-owned Bank of United States was allowed to collapse by fellow clearing banks, for reasons of snobbery and malice.

The Chicago Fed insisted into the depths of the deflation that inflation still lurked, that there was an "abundance of funds," that speculators had to be punished, and that bad banks should fail. The staggering blindness of Fed backwoodsmen from 1930-1933 is hard to exaggerate.

In hindsight it seems astonishing that the Fed raised the discount rate twice in late 1931 to 3.5 per cent even as global finance was disintegrating. It did so to halt bullion flight and defend the gold standard but it failed to offset the effects with bond purchases. Britain was forced off the gold standard in September 1931 after the Atlantic Fleet "mutinied" at Invergordon over 10 per cent pay cuts. That proved a providential crisis -- the pound fell. The Bank of England was soon able to slash rates. The slump proved less serious than in the US, and not a single bank collapsed in the British Empire.

Schwartz warns against facile comparisons between today's world and the gold standard era. "This is nothing like the Depression. I don't really believe the economy as a whole is going to fall apart. Northern Rock has been the only episode of a bank failure so far," she says.

More than 4,000 US banks -- a fifth -- collapsed in the 1930s. There was no deposit insurance. Real economic output fell by a third, prices by a quarter, and unemployment reached a third. Real income fell by 11 per cent, 9 per cent, 18 per cent, and 3 per cent in the years to 1933.

According to Schwartz the original sin of the Bernanke-Greenspan Fed was to hold rates at 1 per cent from 2003 to June 2004, long after the dotcom bubble was over. "It is clear that monetary policy was too accommodative. Rates of 1 per cent were bound to encourage all kinds of risky behaviour," Schwartz says.

She is scornful of Greenspan's campaign to clear his name by blaming the bubble on an Asian savings glut, which purportedly created stimulus beyond the control of the Fed by driving down global bond rates. "This attempt to exculpate himself is not convincing. The Fed failed to confront something that was evident. It can't be blamed on global events," she says.

That mistake is behind us now. The lesson of the 1930s is that swift action is needed once the credit system starts to implode: when banks hoard money, refusing to pass on funds. The Fed must tear up the rulebook. Yet it has been hesitant for three months, relying on lubricants -- not shock therapy.

"Liquidity doesn't do anything in this situation. It cannot deal with the underlying fear that lots of firms are going bankrupt," Schwartz says. Her view is fast spreading. Goldman Sachs issued a full-recession alert on Wednesday, predicting rates of 2.5 per cent by the third quarter. "Ben Bernanke should be making stronger statements and then backing them up with decisive easing," says Jan Hatzius, the bank's US economist.

Bernanke did indeed switch tack on Thursday. "We stand ready to take substantive additional action as needed," he says, warning of a "fragile situation." It follows a surge in December unemployment from 4.7 per cent to 5 per cent, the sharpest spike in a quarter century. Inflation fears are subsiding fast.

Bernanke insists that the Fed has leant the lesson from the catastrophic errors of the 1930s. At the late Milton Friedman's 90th birthday party, he apologised for the sins of his institutional forefathers. "Yes, we did it. We're very sorry. We won't do it again."  [more]

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