Professor Nouriel Roubini, of New York University, says there’s no economic respite for the US and predicts at least 10 years of falling living standards: No defence left against double-dip recession
Some interesting figures have come out of the 2010 Q2 data published by the World Gold Council. Physical gold demand by weight rose 35%. But when expressed in dollar value, it rose a hefty 77%. This is good news for all those who expect the continuing devaluation of paper money, and who are hedging against such an eventuality by owning gold.
And as David Galland points out in Uncle Scam – today’s dollar is only worth 18 cents in 1971 terms, the year President Nixon closed the gold convertibility window.
Bond yields are tumbling, as investors seek “safe havens” for their cash. Trouble is, no country is sound enough to warrant investing in it – and those accepting rates of as low as 1.02% on 10 year Swiss bonds, and of 2.11% on German Bunds are in for a rude awakening down the track.
The desire to find “safety” is understandable enough, but to seek it in the debt of nations is foolhardy, and represents behaviour more like lemmings following each other over a cliff. Why? Because the levels of indebtedness and economic fundamentals in all developed nations does not support the idea that such bonds are “safe”.
Far from it. Investing in bonds is investing in government debt – the very same debt that is getting us all into trouble. The same debt that must be paid back by citizens of each respective country – either by taxation or the stealth tax of inflation.
If such countries and their citizens simply revolt and do not pay back their debts – then bond investors are left carrying the losses.
In my book, the very last place I’d be looking for “safety” is in government bonds. So don’t be a lemming. If you are really looking for safety, then you should be in gold - the only real money.
Ambrose Evans-Pritchard takes up the latest developments in: Fresh flight to Swiss franc as Europe’s bond strains return
Ambrose Evans-Pritchard summarises the moves towards the financial crisis end game:
Hard-nosed Fed sends global markets reeling
Governments love fudging the numbers, especially when it comes to disclosing the actual size of the national debt. One way of discounting such a debt is to ignore what is termed “unfunded liabilities” – things like social security or pensions.
Well, the Institute of Economic Affairs has calculated the UK’s national debt – taking into account such unfunded liabilities – and come up with a total of £4.8 trillion (US$7.74 trillion), or £78,000 (US$121,000) for each and every person in the UK. That is a whopping 333% of the UK’s GDP!
It’s figures like these that underscore the severe economic situation we are really in – because if and when other countries calculate their national debt in the correct manner, I’m quite confident a similar bleak outlook will prevail.
Yes, the USA is bankrupt – but you wouldn’t know it by reading the news. The talk is always about spending more money (money it doesn’t have) on economic “stimulus” packages, perpetual foreign aid and never-ending wars. And no one is brave enough to shout, “The Emperor has no clothes!”
But it appears the reality of US bankruptcy is seeping through the cracks and starting to become discussed in respectable circles. Boston University Economics Professor, Laurance Kotlikoff, spells out the dismal situation here …
The search is always on for good economic news, to bolster the idea that the recession is over, and that better times are just around the corner. But the data does not support that optimistic view – as David Galland illustrates in his commentary – Who’s Scoffing Now?
The United States has always been the world’s largest energy consumer – until now, as Marin Katusa explains …
The fear in the US now is due to the strong possibility of serious deflation and a “double-dip” recession. Obviously should prices fall, then one could expect gold to fall also – at least temporarily, until other economic factors come into play later (inflation for example).
However, it’s not entirely certain that gold will fall to such an extent, or even if it will fall much at all, as Louis James ponders in: Gold Meltdown or Mania – Batten Down The Hatches
Apparently books telling the tale of the German Weimar inflation are being reprinted and read again. With the massive expansion of the money supply that has occurred in many countries, it’s only a matter of time before the possibility of hyper-inflation is on the cards.
Ambrose Evans-Pritchard comments on this possibility in his article: Death of Paper Money
