Wednesday, October 21, 2009

Todays Hourly action in Gold

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Jay Taylor, Turning Hard Times Into Good Times

Special guest Robert Prechter

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Will History Repeat Itself?

...The U.S. fiscal deficit for 2009 was $1.42 Trillion... Remember how I used to take the previous administration to the woodshed for posting $450 Billion fiscal deficits? How did we go from $450 Billion to $1.42 Trillion, that is if that's really the number??? Well... That's not a question to really answer, folks, we all know how we got here... But now that we're here, what happens next?

I came across this when putting the two monthly newsletter together on Sunday, I think it would be appropriate to share it with you here...

Peter Bernholz (Professor Economics in Basel) studied the world's 12 most important periods of hyperinflation and discovered that the tipping point occurs when deficits amounted to 40% of the expenditures.

For the United States we have arrived at exactly that point. The deficit of $1.5 trillion amounts to 41.7% of the $3.6 trillion in expenses.

You see, that Peter Bernholz, rounds some numbers, but for those of you keeping score at home, the real point is that the U.S. deficits are greater than 40% of expenditures... And you know me, I truly believe in this history repeating itself, or as Mark Twain put it, it may not repeat itself but it rhymes... Mark Twain also wrote: "It's not worthwhile to try to keep history from repeating itself"... (more)

Countries with the Biggest Gaps Between Rich and Poor

The U.N. Development Program recently came out with a report looking, among other things, at income inequality worldwide.

The UNDP ranked countries and regions based on a number of factors, including their Gini coefficient, named for Italian statistician Corrado Gini.

We have listed the world's most advanced economies based on their Gini score, with zero marking absolute equality and 100 absolute inequality. Scandinavian countries, Japan, and the Czech Republic have the least amount of inequality. The U.S. is among the most unequal, but it's not No. 1. To see which economy is, read on. (more)

2009 US economy: largest transfer of wealth to financial/political elite in global history

Political “leadership” of the two oligarchy parties spin their economic policy as being for the public benefit. Professional economists increasingly cast economic policy in unprecedented harsh criticism, even calling for public demonstrations against what they claim as gross violations of financial law. Let’s consider current facts of high importance:

• Transfer of somewhere over $3 trillion with a total potential of $23.7 trillion to banks and financial institutions for the socialization of their gambling losses on illegal sub-prime mortgages and credit default swaps. We know the sub-prime lending was illegal because the FBI concluded 80% of all sub-prime fraud originated from the lenders. (more)

UK Government debt ‘nearly three times higher than official figure’

Employers yesterday called upon the Government to get to grips with its ballooning debts as a new study put the true size of the public sector’s net liabilities at £2,200 billion, almost three times official figures.

The CBI said that the Government needed to cut its planned spending by £120 billion over the next six years, amid forecasts that official figures due tomorrow will show that total net borrowing has surged by another £10 billion in the past month.

The true level of Government debt is equivalent to 157 per cent of national output and nearly three times as large as the £805 billion figure reported by the Office for National Statistics, according to a new book published by a centre-right think tank. (more)

Fannie, Freddie common shares worthless, KBW says

Analysts at Keefe, Bruyette & Woods on Monday said the common shares of Fannie Mae and Freddie Mac are likely worthless even if the troubled mortgage-finance giants end up being recapitalized by the banking industry.

KBW analysts led by Bose George downgraded shares of Fannie Mae /quotes/comstock/13*!fnm/quotes/nls/fnm (FNM 1.10, -0.02, -1.79%) and Freddie Mac /quotes/comstock/13*!fre/quotes/nls/fre (FRE 1.25, +0.01, +0.81%) to underperform from market perform and cut their price target on both stocks to zero from $1.

"In order for the government-sponsored entities to survive going forward, we believe they need to be recapitalized through investments from the banks that benefit from their role in the secondary market," KBW wrote in a research note. (more)

Einhorn bets on major currency 'death spiral'

Greenlight Capital is betting on the possibility of a major currency collapse and a surge in interest rates, the hedge-fund firm's manager David Einhorn said Monday, citing ballooning government deficits in some of the world's most developed countries.

Einhorn, who warned about Lehman Brothers' frailty before it collapsed last year, also said financial institutions that are deemed as "too big to fail," such as Citigroup Inc. /quotes/comstock/13*!c/quotes/nls/c (C 4.42, -0.01, -0.23%) , should be broken up.

Greenlight has been buying physical gold this year because Einhorn is concerned that efforts to save the financial system and fuel economic recovery are undermining the value of such currencies as the U.S. dollar. (more)

Gregg: U.S. Could Become a Banana Republic

A leading voice for government spending restraint, Sen. Judd Gregg (R-N.H.), ranking Republican on the Senate Budget Committee, says that the U.S. economy faces a future as a “banana republic” if current federal fiscal policies continue.

“We’re creating these massive debts which we’re passing on to our children,” Gregg said on CNN on Sunday.

“We’re going to undermine fundamentally the quality of life for our children by doing this. You can’t blame that on George Bush.”

Using the Obama administration’s own projections, the budget deficit for the next 10 years is $1 trillion per year. Public debt as a percentage of gross domestic product also will increase. (more)

Florida Condos Head to New Lows

South Florida condominium prices already have dropped up to 88 percent from their 2006 peak, and the meltdown isn’t over yet.

So says real estate consultant Jack McCabe, who has earned the reputation as South Florida’s top residential real estate analyst.

He told Bloomberg that condos which sold for $1,000 per square foot in 2006 now command prices of only $125 to $350.

And he says prices could ultimately drop to $100 a foot, less than half the condos’ construction costs and a level last seen 20 years ago. (more)

Peter Schiff on CNN - The Economy