May 13, 2011
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Speaking of currency crises, I found this earlier today in my inbox:
Jim Rogers: Currency Crisis Coming Within Two Years
Turmoil in the world's currency markets will reach crisis levels within two years, legendary commodities investor Jim Rogers says.
"I would expect to see more crises in the currency market, maybe as soon as this fall, or certainly by the fall 2012-13," Rogers tell Russia Today.
The conversation just gets more and more crazy.
The so-called printing presses have not added to the M1 money supply so real inflation is negligible. The push up of commodity speculation is not real inflation but just speculative price pushing. There are no shortages of commodities world wide. So it is neither supply or demand that is moving commodity prices.
Furhter businesses are not going broke; they are flush with cash.
As for the Asians... even price speculation by the Goldman's of the world can't stop the Asians. They have an unlimited supply of cheap labor and can absorb it. But when the Goldman's pump up the commodity markets, they slow down the US consumer. So the only products the Consumers can afford are Asian products which drop with every boatload shipped. And there is no limit to how hard the Chinese can squeeze their own labor.
Another proof that the commodities are driven by speculation not supply and demand issues are the CME margin increases. This worked for cotton, worked for silver, worked for oil. It really only affects speculators who are in the commodities markets with producers and end users only to supply liquidity. But with the advent of ETFs. you have a lot more speculators in there changing the dynamic from an actual commodities supply and demand curve to speculative bubbles.
As for the gold standard. Nixon left the gold standard because middle eastern countries who were paid in dollars for oil wanted to redeem the dollars for Gold. By then the US Gold supplies had been so price manipulated by Gov as to be worthless. So what Nixon did made absolutely no difference.
The reason why we went into a recession was the cost of Vietnam and the liberal war on poverty. The US was broke from Gov spending not because of a move from the gold standard.
Shiff is an alarmist. That is how he sells book... I can see the next books coming... "The coming currency crisis and how to ... blahh blahhh blahhhhhh."
As for gold and silver investors, there has never been a single instance in history where they were not annihilated in the markets post post recession. They always get active about two or three years after a recession ends and they lose their minds and get nailed in the markets.
QE II actually had an economic purpose. It was to drive the intrerest rates down on bonds in order to stimulate banks into lending rather than living off the bond interest.
The latest look at Citi and Bac shows lending has come back. Lending by banks is the only mechanism by which the M1 money supply increases. And that is just starting to rise slowly.
Yet market yappers are selling down banks, buying US treasury bonds buying commodities even though the speculative rise in commodities hurts the consumer. This is the stupid money to be sure.
The whipsaw in commodities is most definitely real. 120 billion evaporated from the oil patch. Goldman predicts that the US with shale and increased oil production will not need to buy any foreign oil in 2012, unless its cheap.
What you are seeing now is the parabolic tail of the fanatics and they will go down in flames.
Let me remind you what the greatest US investor of all time has to say about gold...
My first question, as I sit there on the couch in his office, is: "What about gold? Is this a classic bubble or what?"
"Look," he says, with his usual confident laugh. "You could take all the gold that's ever been mined, and it would fill a cube 67 feet in each direction. For what that's worth at current gold prices, you could buy all -- not some -- all of the farmland in the United States. Plus, you could buy 10 Exxon Mobils, plus have $1 trillion of walking-around money. Or you could have a big cube of metal. Which would you take? Which is going to produce more value?"
Okay, so gold is not a screaming buy to Buffett. What should a typical upper-middle-class person in the U.S. buy to prepare for retirement?
"Equities," Buffett answers without a moment's hesitation.