Italy Referendum Exit Poll Shock; Gold Spikes

UPDATE:

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Bits and Bigotry

After several embarrassments, Krugman makes another rather sad attempt to cover Bitcoin which according to him “is a digital currency that has value because … well, it’s hard to say exactly why”.

Indeed, he wouldn’t be amongst my favorite economic idiots if his ignorance on the “why” and in fact on the entire protocol, process, and purpose behind mining, were to keep him from boldly declaring that with Bitcoin “we are for some reason digging our way back to the 17th century”.

And just by the by: If someone tries to lecture me on the supposed “barbarism of gold” without showing me that he has had the capacity, rigor, or curiosity to do even the most basic research into the unspeakable and unprecedented genocides, world wars, civil wars, and destruction brought about by fiat money central banking systems, then I cannot possibly take that person serious for even just a second.

What an embarrassment for mankind to still have mental garbage of this kind roaming the web and how beautiful to see Bitcoin slowly but surely push it into complete and total irrelevance.

Just keep diggin’ that pit, Paul.

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Discussion on Gold, Money, South Africa, and Mining

It’s these kinds of conversations that I love. Knowledgeable individuals who calmly discuss world events without any mainstream media bias or bullshit …

The main things to take away from this conversation:

  • Gold has remained money for 5000 years while fiat currencies have failed over and over again
  • The Euro will fail (if it hasn’t already)
  • 40% (!!) of the world’s gold has been produced in South Africa (it is thus to gold like Saudi Arabia to oil)
  • Fleming proposes that a sizable portion of Chinese gold demand comes from personal savers, and thus represents genuine and un-manipulated personal savings demand
  • Fleming believes that the dollar price gold will sooner or later get back to Dow Jones parity (in case you’re wondering: gold is currently at $1500 while the Dow is at 12500)
  • Fleming also suggests that individuals Greece, once left alone by EU imperialists, will have incentives to focus on one of their biggest strengths, namely the shipping industry

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Mish & Max Keiser, Economic & Political Predictions for 2012

Here are Mish’s predictions for 2012:

  1. Severe European Recession as the sovereign debt crisis escalates: Austerity measures in Italy, Greece, Spain, and Portugal plunges all of Europe into a major recession. Spain and Portugal will follow Greece into an outright depression.
  2. Political Crisis in Europe: French President Sarkozy loses to socialist challenger Francois Hollande. German Chancellor Angela Merkel’s coalition collapses. The Merkozy agreement is either modified to do virtually nothing or is not ratified at all. This chain of events will not be good for European equities or European bonds.
  3. Relatively Minor US Economic Recession: The US will not avoid a recession in 2012. Retail spending ran its course with the tail-off into Christmas of 2011. The Republican Congress has little incentive for fiscal stimulus measures in 2012 so do not expect any. However, with housing already limping along the bottom in terms of construction and investment (not prices), a US GDP decline will not be severe. The US may see a recession even if GDP barely drops. Certainly the US recession will be far less severe than the recession in Europe and Australia.
  4. Major Profit Recession in US: Profit margins in the US will be torn to shreds as businesses will be unable to reduce costs the same way they did in 2008 and 2009 (by shedding massive numbers of employees).
  5. Global Equity Prices Under Huge Pressure: Don’t expect the same degree of reverse decoupling of US equities we saw in 2011. The US economy will be better than Europe, but equities globally will take a hit, including the US. Simply put, stocks are not cheap.
  6. Fiscal Crisis in Japan Comes to Forefront: Japan’s fiscal crisis and debt to the tune of 200+% of GDP finally matters. The crisis in Japan will start out as a whimper not a bang, but will worsen as the year wears on. If Japan responds by monetizing debt, not a remote possibility at all, Japanese equities will massively outperform in nominal and perhaps even in real terms. “Real” means “yen-adjusted”, not “inflation-adjusted” terms.
  7. Few Hiding Spots Other than the US Dollar: US treasuries and German bonds were safe havens in 2011, but with yields already depressed don’t expect huge gains. Expect to see a strengthening of the US dollar across the board against all major currencies. Moreover, cash (one the most despised asset classes ever), may outperform nearly everything, even if the dollar goes virtually nowhere. Hiding places will be few and far between for much of 2012.
  8. US Public Union Pension Plans Under Attack: States finally realize the need to rein in pension plans much to the dismay of public unions. Social and economic tensions in the US rise.
  9. Regime Change in China has Major Ramifications: China will start a major shift from a growth model dependent on housing and infrastructure to a consumer-driven model. The transition will not be smooth. Property prices in China will collapse and commodity prices will remain under pressure.
  10. Hyperinflation Calls Once Again Will Look Laughable: Unless there is a major disruption in the Mideast (which I do not rule out by any means), oil prices will drop and food prices will follow. If so, we will once again see silly talk from the Fed about preventing “unwelcome drops in inflation”. As always, the deflation key is not prices at all but rather credit and credit marked-to-market. Expect credit in all forms to come under attack and expect junk bonds take a hit as well. By the way, regardless of what happens to oil prices, hyperinflation calls will look silly.

As always, out of all the experts out there, Mish’s predictions are probably the ones I would pay most attention to.

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What’s Behind the West’s Involvement in Lybia?

Some food for thought regarding Lybia (a friend forwarded several articles to me):

First off, I believe it’s quite curious that the IMF was so quick to recognize the TNC as Lybian government:

International Monetary Fund (IMF) today recognised the rebel’s National Transitional Council (NTC) as the legitimate government of Libya, assuring the war ravaged country of rapid and sustainable economic recovery.

“I am happy to report that reflecting the views of the international community, the IMF will deal with the NTC as the government of Libya,” IMF Managing Director Christine Lagarde said.

“In this context, the Fund stands ready to help the authorities through technical assistance, policy advice, and financial support if requested, as they begin to rebuild Libya’s economy,” she said.

… it certainly helps motivate “rebel” leaders to seize power when they are given the ability to request massive financial aid, pay it out to themselves and their cronies, and kindly pass the bill on to the country’s future taxpayers, in short … the IMF’s modus operandi.

In March BBC already reported:

Libya has declared gold reserves worth more than $6bn at current prices, thought to be held largely at home.

The reserves are substantial, ranking in the global top 25, according to International Monetary Fund (IMF) data.

… since then gold has risen by about 30%, so those total reserves would now be closer to $8bn, if the reports are accurate.

And Asia Times Online asks Libya all about oil, or central banking?:

(…)

I have never before heard of a central bank being created in just a matter of weeks out of a popular uprising. This suggests we have a bit more than a rag tag bunch of rebels running around and that there are some pretty sophisticated influences.

(…)

Another provocative bit of data circulating on the Net is a 2007 “Democracy Now” interview of US General Wesley Clark (Ret). In it he says that about 10 days after September 11, 2001, he was told by a general that the decision had been made to go to war with Iraq. Clark was surprised and asked why. “I don’t know!” was the response. “I guess they don’t know what else to do!” Later, the same general said they planned to take out seven countries in five years: Iraq, Syria, Lebanon, Libya, Somalia, Sudan, and Iran.

What do these seven countries have in common? In the context of banking, one that sticks out is that none of them is listed among the 56 member banks of the Bank for International Settlements (BIS). That evidently puts them outside the long regulatory arm of the central bankers’ central bank in Switzerland.

The most renegade of the lot could be Libya and Iraq, the two that have actually been attacked. Kenneth Schortgen Jr, writing on Examiner.com, noted that “[s]ix months before the US moved into Iraq to take down Saddam Hussein, the oil nation had made the move to accept euros instead of dollars for oil, and this became a threat to the global dominance of the dollar as the reserve currency, and its dominion as the petrodollar.”

According to a Russian article titled “Bombing of Libya – Punishment for Ghaddafi for His Attempt to Refuse US Dollar”, Gaddafi made a similarly bold move: he initiated a movement to refuse the dollar and the euro, and called on Arab and African nations to use a new currency instead, the gold dinar. Gaddafi suggested establishing a united African continent, with its 200 million people using this single currency.

During the past year, the idea was approved by many Arab countries and most African countries. The only opponents were the Republic of South Africa and the head of the League of Arab States. The initiative was viewed negatively by the USA and the European Union, with French President Nicolas Sarkozy calling Libya a threat to the financial security of mankind; but Gaddafi was not swayed and continued his push for the creation of a united Africa.

(…)

So is this new war all about oil or all about banking? Maybe both – and water as well. With energy, water, and ample credit to develop the infrastructure to access them, a nation can be free of the grip of foreign creditors. And that may be the real threat of Libya: it could show the world what is possible.

Most countries don’t have oil, but new technologies are being developed that could make non-oil-producing nations energy-independent, particularly if infrastructure costs are halved by borrowing from the nation’s own publicly owned bank. Energy independence would free governments from the web of the international bankers, and of the need to shift production from domestic to foreign markets to service the loans.

If the Gaddafi government goes down, it will be interesting to watch whether the new central bank joins the BIS, whether the nationalized oil industry gets sold off to investors, and whether education and healthcare continue to be free.

Of course health care is never free, so just ignore that nonsensical statement. The article also makes some, in my opinion, very questionable analyses about monetary policy and central banking which I am sparing you in the excerpts above. But that doesn’t mean it doesn’t provide a lot of interesting journalistic insights into what may be going on behind the scenes in this project.

As my friend who sent me these articles pointed out: Let’s see how long it’ll take until we hear stories about Lybian assets missing.

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