Friday, May 29, 2009

Energy supply crunch brewing

Forget low oil prices. The worry of the moment is a spike in oil prices and how long it will take before a supply crunch sends prices soaring.

And if one subscribes to the views of former CIBC World Markets economist Jeff Rubin and University of California, San Diego economics professor James Hamilton, a spike in prices could send the world tumbling back into recessionary territory, just as it is about to climb out of it.

Both Rubin and Hamilton hold the view that the current recession is the result of a spike in oil prices and not the collapse in the U. S. housing market.

So what's the deal with the about-face in sentiment on oil prices? (more)

Markets set to plunge again, says Jim Rogers

Published: Wed May 27, 2009 6:54 pm

INTERNATIONAL. Investment gurus Jim Rogers and Marc Faber agree on one thing. They see a major correction looming in equity markets with a currency effect for the US, since the current rally has been mostly based on printed money, a kind of 'reverse Robin Hood policy' of governments, to steal from the peasants to give to the rich.

As with Faber, Rogers is mostly to be seen being interviewed on CNBC Asia or Europe, since their views are to put it mildly, somewhat negative on the US Dollar and the prospects for green shoots in the US economy.

Legendary investor Jim Rogers told CNBC on Wednesday he is not short or hedged in anything at the moment, but buying Japanese Yen. The next crisis in his eyes is in currencies which makes sense since sovereign states have taken much of the bad debt from the banks and piled them onto their own balance sheets.

The stock market may hit new lows this year or the next as the current rally has been largely caused by the money printed by central banks and fundamental problems remain unsolved, he said. (more)

McAlvany Weekly Report

Meltdown: An Interview With Thomas Woods Jr.Thomas E. Woods, Jr., senior fellow in history at the Mises Institute, holds a bachelor’s degree in history from Harvard and his master’s, M.Phil., and Ph.D. from Columbia University. Woods has appeared on Fox News Channel’s Hannity & Colmes, Fox & Friends, and The Big Story with John Gibson, as well as on MSNBC’s Scarborough Country and C-Span2’s Book TV. His latest book includes the New York Times bestseller Meltdown: A Free-Market Look at Why the Stock Market Collapsed, the Economy Tanked, and Government Bailouts Will Make Things Worse. Mr. Wood’s latest book can be found at:

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John Embry - China/Western Central Banks on Gold

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Why Is China Buying Gold?

Eric Fry, reporting from Laguna Beach, California…

Hey Rude readers, can you see the chart below? The Chinese can see it to…and that may be a big part of the reason why the gold price keeps marching steadily higher.

The Chinese can see that U.S. dollars – like all the rest of the world’s paper currencies – tend to lose value over time…lots of value. The Chinese can also see that the current crop of American leaders is implementing policies that will likely accelerate the dollar’s decline.
American politicians, Federal Reserve appointees and Treasury officials are united in their efforts to counteract the forces of recession. Their weapon of choice: dollar debasement. From behind the ramparts of New Era acronyms like “TARP” and New Era euphemisms like “quantitative easing,” the Fed and its comrades-in-arms hurl trillions of dollars of currency and credit toward the enemy…hoping to scare it into retreat.

So far, the enemy seems unfazed. Recession continues to advance, even though the battlefield is littered with Private “Benjamins.” Therein lies the problem for the U.S. economy. Even if the Fed manages to repel the forces of recession for a while, the cost to our beloved dollar could be incalculable. In other words, we might win this particular battle, but we are likely to lose the war. The more dollars the Fed catapults into the banking system, the greater the risk that hyper-inflation will ensue.

Several high-ranking Chinese officials fear such an outcome…and they are not afraid to say so. In mid-February, Zhou Xiaochuan, the Governor of China’s central bank wondered aloud, “Is it time for China to consider using its reserves somewhere else, instead of concentrating too much on the United States?”

One month later, Premier Wen Jiabao remarked, “I am a little bit worried. I request the US to maintain its good credit, to honor its promise and to guarantee the safety of China’s assets.” A few days prior to this statement, Luo Ping of China’s Banking Regulatory Commission offered a less delicate version of the premier’s remark: “Once you start issuing $1 to $2 trillion [of Treasury bonds], we know that the dollar is going to depreciate. So we hate you guys, but there is nothing much we can do.”

Nothing much, perhaps…but something, nevertheless. The Chinese can diversify a portion of their reserves into gold. And that’s exactly what they appear to be doing. Even a modest re-allocation to gold could produce a meaningful rise in the gold price…and that’s without including growing demand from the rest of the world’s dollar-phobes.

Business Week June 08, 2009

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