Wednesday, June 23, 2010

Middle class shackled by banking debt chains. 113 million households each owe an average of $113,000 in banking debt for mortgages, student loans, cre

The middle class has been systematically shackled by large amounts of debt, banking debt to be exact in a new form of financial serfdom. Much of this started in the early 1970s on par with the deficits don’t matter policy that engulfed our monetary policy for the next four decades. Like any giant structure built on debt, there is usually a point where a sort of debtor’s spiral will hit. Many middle class Americans have seen this occur with their credit card debt, mortgages, and auto loans. This also comes at a time when we have a record amount of two (or more) income households. More people are working under one roof but earning less and less in low paying service sector jobs. If it wasn’t for the two income trap, we’d see how shackled the public is to the banking debt that is so pervasive in America.

This amount of debt will cripple any recovery. Take a look at the current trap: (more)

Silver, ‘Gold’s Little Brother,’ May Advance to $23

Silver may surge to as much as $23 an ounce next year, the highest price since 1980, as investors seek a cheap alternative to gold and a global economic recovery boosts industrial demand, according to Commerzbank AG.

The metal may advance to as much as $21 an ounce by the end of this year, about 12 percent higher than yesterday’s close, Eugen Weinberg, head of commodity research, wrote in a report, dubbing the metal “gold’s little brother.” Compared with gold, silver may be considered low priced, Weinberg wrote.

Gold surged to a record $1,265.30 an ounce yesterday as investors sought to preserve their wealth against declining currencies, and China’s decision to drop the yuan’s dollar peg boosted commodity prices. There’s rising demand for silver, or “poor man’s gold,” the Perth Mint said earlier this month. (more)

Rise Of The New Gold Rush

They called us “kooks” and “crackpots”. They said our ideas were outdated and incompatible with modern finance. They said it wouldn’t last. Oh yes, Gold, they said, was a silly investment with no inherent value, and soon, precious metals investors would be “wiped out” by the “inevitable implosion of the gold bubble” (gold bubble….?). Mainstream establishment economists and Keynesians have been yipping and snarling like overanxious Chihuahuas for the past two years against gold and silver, most specifically their use as a hedge against collapse in stocks and currencies.

The vitriol they have aimed at PM’s and PM enthusiasts, though, borders on the obsessive. If we are all “crazy survivalists” and Y2K’ers, then why bother with us? Wouldn’t the folly of our financial strategy be blindingly evident to the majority of investors if we really are all madmen waiting for the seas to boil? If there is no chance of monetary implosion, why bother to plead and beg with the average American NOT to buy gold? Why invent wild generalizations and stereotypes of precious metals investors to dissuade the public from examining our model for economic security? Wouldn’t the mere passage of time prove us inaccurate? What is it about gold that frightens them so…..? (more)

Loonie and Aussie dollar gaining reserve currency status

The Australian and Canadian dollars are becoming reserve currencies for central bankers seeking alternatives to deteriorating government credit quality in Europe, the U.S. and Japan.

“They’ll gain an increasing place in reserves because of diversification,” European Central Bank governing council member Christian Noyer said in a June 16 interview with Bloomberg News in Paris.

Russia may add the Australian and Canadian dollars to its international reserves for the first time after fluctuations in the U.S. currency and euro, Alexei Ulyukayev, the first deputy chairman of the nation’s central bank, said in an interview in Moscow on June 15. The International Monetary Fund may add the Aussie and loonie to a basket of currencies it uses in transactions, strategists at UBS AG, the world’s second-largest foreign-exchange trader, predict. (more)

Jay Taylor: Turning Hard Times Into Good Times

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Australia reportedly plans 'fix' to resource tax

The Australian government is planning to use about A$4 billion in savings from axed rebates to refashion its contentious resource super profits tax, say government sources according to a report in Wednesday's Australian Financial Review.

The report says the government will ditch a proposed exploration rebate and 40% upfront capital allowance for losses and use the savings from this to raise the rate of return at which the tax will kick in.

The revised proposal will also see lower-value resources such as clay, sand, gravel, rock and limestone dropped from the tax, while the taxing point for other commodities will be brought forward to nearer the point at which they are extracted from the ground. (more)

The New Word on Gold Reserve Reporting

Today, we add a new phrase to our gold bubble lexicon: “Peacocking.”

How else would you explain this: Saudi Arabia “restated” its gold reserves yesterday, right as the spot price found an all-time high of $1,265. Last week, SAMA, the shady Saudi sovereign wealth fund, held 143 tons of gold. Today – 322 tons!

The Saudis gave little explanation other than a humble “adjustment of the SAMA’s gold accounts.” Heh, 100+%? That’s some adjustment.

China did the same thing roughly a year ago. Having not reported its gold holdings in years, the Chinese quietly announced they were holding over 1,000 tons of the metal, double what the world expected. (more)

Krugman: It's Feeling Just Like the 1930s All Over Again

The political and economic climates are taking on a decidedly 1930s feel, says Nobel Prize winning economist Paul Krugman.

“Suddenly, creating jobs is out, inflicting pain is in,” Krugman writes in The New York Times.

“Condemning deficits and refusing to help a still-struggling economy has become the new fashion everywhere, including the United States, where 52 senators voted against extending aid to the unemployed despite the highest rate of long-term joblessness since the 1930s.”

Krugman and some other economists say this raises the specter of the 1930s — 1937 to be precise, when President Franklin Roosevelt’s attempts to balance the budget drove the economy back into recession. (more)

Outlook for Home Prices Grows Darker

Housing analysts have grown gloomier about the outlook for U.S. home prices as sales slump, a new survey shows.

The monthly report by MacroMarkets LLC, due for release Wednesday, found that 56% of the 106 economists and other analysts surveyed expect home prices to decline this year. That is up from 40% a month ago.

In a separate report Tuesday, the National Association of Realtors measured completed resales of homes in May at a seasonally adjusted annual pace of 5.66 million units, down 2.2% from April, though up 19% from a year earlier.

Federal tax credits of as much as $8,000 for home buyers spurred sales in recent months. To qualify for those credits, buyers had to sign purchase contracts by April 30. The Realtors' data for May reflect completions of sales, most of which were based on contracts signed in March or April. (more)

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