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Tuesday, March 22, 2016

Silver Prices Retreat in July 2010

July 31, 2010 by · Leave a Comment 

U.S. silver marked a third straight day of gains Friday, but it still declined this week which set prices lower for July.
On Friday, silver for September delivery advanced 38.6 cents, or 2.2%, to settle at $18.003 an ounce on the Comex in New York. The metal fell 9.8 cents, or 0.5%, this week. It […]

Bullion Prices and Business July 2010 Review

July 31, 2010 by · Leave a Comment 

Weekend Recap: Silver, Gold and Platinum Prices; Business Week NewsGold settled higher for a third day on Friday, as bargain hunters stepped in on expectations prices would ultimately rise following a 5.0 percent loss in July — the biggest monthly decline since December.

"People are trying to add to holdings of gold at a sale price," Zachary Oxman, managing director at TrendMax Futures, said and was noted on MarketWatch. "and I think you are seeing some long-term players adding to their net long holdings at a reduced price."

Gold prices picked up Friday morning after a government report showed that the U.S. economy lost momentum in the second quarter, renewing fears about the recovery. The yellow metal was also aided by a falling dollar…. Read the rest of Bullion Prices and Business July 2010 Review (1,319 words)

© 2010 CoinNews Media Group LLC

PCGS Expands Submission Levels For Possible Plus (+) Designation

July 31, 2010 by · Leave a Comment 

Professional Coin Grading ServiceEffective August 1, 2010, Professional Coin Grading Service (PCGS) will begin offering "Plus" (+) designations for all qualified coins submitted in the Regular, Express and Walkthrough service levels.

The enhancements for these services will be offered at no additional charge.

"The introduction of PCGS Secure Plus™ three months ago has dramatically changed the grading landscape," said Don Willis, President of PCGS, a division of Collectors Universe, Inc. (NASDAQ: CLCT)…. Read the rest of PCGS Expands Submission Levels For Possible Plus (+) Designation (378 words)

© 2010 CoinNews Media Group LLC

Ancient Tetradrachm Featured in Heritage Boston ANA Auction

July 31, 2010 by · Leave a Comment 

A nearly 2,500-year old silver coin of Rhegion, an ancient Greek city located in would become Italy, is expected to bring upwards of $25,000 at the Heritage Signature® Auction of Ancient and World Coins at the ANA World’s Fair of Money in Boston, Thursday, Aug. 12, starting at 6 p.m.

Ancient Tetradrachm Coin

The silver tetradrachm – lot number 20007 – a coin about the diameter of a quarter but much thicker and heavier, depicts the stylized head of a lion on the obverse and a profile portrait of Apollo, Greek god of wisdom and enlightenment, on the reverse. It was struck between 415 and 387 BC, a time when the Greek cities of Italy and Sicily were competing with each other and with Carthage in North Africa for control of the western Mediterranean.

… Read the rest of Ancient Tetradrachm Featured in Heritage Boston ANA Auction (442 words)

© 2010 CoinNews Media Group LLC

Morgan ‘covering like crazy’ in silver, Ted Butler tells King World News

July 31, 2010 by · Leave a Comment 

10:20a ET Saturday, July 31, 2010

Dear Friend of GATA and Gold (and Silver):

JPMorganChase, the big short in the silver market, is “covering like crazy,” silver market analyst Ted Butler remarks in his weekly interview with Eric King of King World News. Butler thinks that both silver and gold turned around this week and he wonders whether, in light of the new financial regulation law, MorganChase will ever come back to shorting silver so much. Butler also is very encouraged by the comments of Commissioner Bart Chilton of the U.S. Commodity Futures Trading Commission and the promise of position limits in the precious metals markets. You can listen to the interview with Butler at the King World News Internet site here:

http://www.kingworldnews.com/kingworldnews/Broadcast_Gold+/Entries/2010/…

CHRIS POWELL, Secretary/Treasurer

Gold Anti-Trust Action Committee Inc.

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Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

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Adrian Douglas: What’s unravelling is gold price suppression

July 31, 2010 by · Leave a Comment 

By Adrian Douglas
Friday, July 30, 2010

Yesterday the Financial Times published an article headlined “BIS Gold Swaps Mystery Is Unravelled” in an attempt to clarify the recently discovered gold swaps undertaken by the Bank for International Settlements with European commercial banks:

http://www.ft.com/cms/s/0/3e659ed0-9b39-11df-baaf-00144feab49a.html

I recently published my interpretation of these gold swaps and concluded that they were most likely a secret bailout of one or more bullion banks that do not have enough physical gold to meet burgeoning demand:

http://www.gata.org/node/8803

Lawyers always tell their clients to shut up and not speak to the press because the more they say without proper legal consultation, the more likely they are to incriminate themselves. One has to wonder why lawyers at the BIS didn’t offer similar advice to the spokespeople at the BIS, because they have opened their mouths and inserted both feet.

The FT reports that “Jaime Caruana, head of the BIS, told the FT the swaps were ‘regular commercial activities’ for the bank.”

The FT also reports that “‘the client approached us with the idea of buying some gold with the option to sell it back,’ said one European banker, referring to the BIS.”

So we are led to believe that the BIS just casually called up some commercial banks and proposed a “regular commercial” activity of a 346-tonne gold swap.

The only problem with this story is that this is the biggest gold swap in history. It was anything but a “regular commercial activity.”

The FT tries to palm off the biggest gold swap in history as just a matter of the BIS earning a little return on $14 billion.

The FT says it has learned that the swaps, which were initiated by the BIS, came as the so-called “central banks’ bank” sought to obtain a return on its huge U.S. dollar-denominated holdings. The BIS asked the commercial banks to pledge a gold swap as guarantee for the dollar deposits the banks were taking from the Basel-based institution.

And GATA has learned that the moon is made of Swiss cheese.

In central banking $14 billion is chump change. The U.S. Treasury auctions between $70 billion and $130 billion of Treasury debt very other week. Only a few weeks ago the European Central Bank created a trillion dollars out of thin air to defend the euro amid the Greek debt crisis.

There are two sides to a swap transaction, but one would have to have the IQ of a grapefruit to believe that the important part of this transaction is a piffling $14 billion and not the 346 tonnes of gold that make it the biggest gold swap in history.

But the BIS has given us another piece of information.

The FT says: “Three big banks — HSBC, Societe Generale, and BNP Paribas — were among more than 10 based in Europe that swapped gold with the Bank for International Settlements in a series of unusual deals that caused confusion in the gold market and left traders scratching their heads.”

I had assumed in my last article that only one bullion bank was involved, but we now find that more than 10 banks were involved. The first on the list is none other than HSBC, which along with JPMorganChase holds 95 percent of all gold and precious metals derivative positions among U.S. commercial banks as reported to the U.S. Treasury Department. HSBC and JPMorganChase are also holding a massive short position in gold and silver on the New York Commodity Exchange. Further, HSBC is the custodian of the gold that is supposedly backing the exchange-traded fund GLD.

In my analysis of the BIS swaps I postulated that a bullion bank had made a swap with one or more central banks and had obtained bullion in exchange for $14 billion. I further postulated that the bullion bank made another swap with the BIS whereupon the BIS gave the bank $14 billion but the bullion bank did not hand over the gold to the BIS but instead credited the BIS with a ledger entry of gold in the BIS unallocated gold account. This would allow the bullion bank to have real gold to meet burgeoning demand while the accounts would show that the same gold had been credited to the BIS.

The FT says: “Officials said other commercial banks obtained the gold from the lending market, borrowing bullion from emerging countries’ central banks.”

So the tripartite nature of this shady transaction is confirmed — central banks were a source for the real gold. But the real gold wasn’t the “gold” that the BIS received as a swap for $14 billion. The FT explains:

“The gold used in the swaps came mainly from investors’ deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called ‘allocated accounts,’ which restrict the custodian banks’ ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper ‘unallocated accounts,’ which give banks access to their bullion for their day-to-day operations.”

But unallocated gold is not gold at all. It is not gold that has been deposited that is loaned to someone else. It is gold that has been deposited that is loaned simultaneously to many other people. I have estimated that for each ounce in their vaults the bullion banks have loaned or sold 45 ounces.

So the FT’s story appears to confirm my thesis that the BIS has been credited with 346 tonnes of ledger-entry gold in the BIS unallocated gold accounts held with the bullion banks. This makes the BIS an “unsecured creditor” of the bullion banks as defined by the London Bullion Market Association’s description of “unallocated account” holders.

The FT story suggests that at least 10 bullion banks needed physical gold bullion desperately. This looks like a rerun of the 1960s London Gold Pool fiasco where central banks dishoarded gold to meet massive investor demand in a futile attempt to maintain a gold price of $35 per ounce.

I have spelled out in recent articles that there is a run on the bullion banks has begun and is gaining momentum. Investors and institutions are realizing that “unallocated gold” is not gold at all but just an unsecured promise for gold. So investors and institutions are starting to demand delivery of their metal, and as there is only 1 ounce backing each 45 ounces that are claimed, the situation is turning into what will be a short squeeze of epic proportions.

The FT says: “Investors have bought physical gold in record amounts during the past two years and deposited it in commercial banks. European financial institutions are awash with bullion and some are trying to pledge gold as a guarantee.”

As Jeffrey Christian of CPM Group has explained, the “physical” gold market is in fact a misnomer as that market is actually a paper market backed by only a small amount of physical gold:

http://www.cpmgroup.com/free_library1/HEDGING_AND_DERIVATIVES/Bullion_Ba…

So investors have bought a record amount of “physical gold,” which is actually paper gold that they have never seen, and only about 2.3 percent of what has been sold actually exists. The bullion banks are “awash” with liabilities for the record amount of gold they are supposed to be holding. Investors are now distrusting the bullion banks and are asking for delivery, so is it surprising that the record amount of “physical gold” sales has led to a record gold swap being transacted to give the bullion banks liquidity?

The International Monetary Fund has been surreptitiously selling gold at a clip of around 15 tonnes per month since February without any official announcements and without disclosing the recipients. This is another sign that the bullion banks are in serious trouble.

When 45 ounces of gold are sold but only 1 ounce is sourced, the result is a massive suppression of the gold price. But the converse is also true: When 45 ounces of gold are demanded for every 1 ounce that is in the vault, the price explosion is beyond imagination.

What is unravelling is not the mystery of the BIS gold swaps, as claimed by the Financial Times, but the unravelling of the gold price suppression scheme itself.

—–

Adrian Douglas is a member of GATA’s Board of Directors and editor of the Market Force Analysis letter (www.MarketForceAnalysis.com), which provides indications of market turning points and good times to enter, take profits, or exit a market. Subscribers receive bi-weekly bulletins on the markets of their choice.

* * *

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

Gold in BIS swaps said to have come from looted bank customers’ deposits

July 31, 2010 by · Leave a Comment 

8:07p ET Friday, July 30, 2010

Dear Friend of GATA and Gold:

If you want to believe the Financial Times, the 346 tonnes of gold swaps recently undertaken surreptitiously by the Bank for International Settlements were a matter of the BIS’ requiring three of the world’s biggest banks to pledge gold as collateral against U.S. dollar deposits placed with them by the BIS so the BIS could earn a little interest. According to the FT, the banks also needed to raise cash and so were glad to obtain it by collateralizing the BIS’ deposits with gold.

The FT’s latest account of the transaction, published Thursday and appended here, is surely the account the BIS would like the world to settle for as curiosity about the swaps is increasing and raising concerns about the grotesque unaccountability of central banks. And as the mouthpiece of the financial establishment, the FT surely was only too happly to convey this unofficial official story. But it’s a doubtful story and raises questions of its own.

For why would the BIS deposit money with banks considered so shaky that they would have to be required to pledge gold to secure the deposits? Wouldn’t U.S., British, German, or French government bonds provide sufficient income and security for the BIS’ funds? The BIS’ annual report suggests that the bank already holds such bonds:

http://www.bis.org/publ/arpdf/ar2010e8.pdf

By depositing money at the three banks — HSBC, Societe Generale, and BNP Paribas — according to the FT — was the BIS really hoping to earn get premium yields from the great business those banks have done lending on condominiums in Florida, Nice, and Madrid?

And remarkably, according to the FT the gold obtained by the BIS as collateral from the three banks didn’t really belong to the banks at all. Rather, as the GATA Dispatch suggested sarcastically three weeks ago (http://www.gata.org/node/8799), the gold was essentially looted from the three banks’ own gold depositors.

The FT reports: “The gold used in the swaps came mainly from investors’ deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called ‘allocated accounts,’ which restrict the custodian banks’ ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper ‘unallocated accounts,’ which give banks access to their bullion for their day-to-day operations.”

At least this part of the FT’s story has the ring of truth and confirms what, among others, GATA board member Adrian Douglas and GATA consultant James Turk, founder of GoldMoney, have been warning for some time: that if you own “unallocated gold,” you don’t really own gold at all but have only a tenuous claim against a counterparty that likely is working against you from the start. In the case of the BIS gold swaps, the tenuous claim is against financial institutions the BIS considers so unreliable that it won’t loan them money unless they turn over their customers’ gold as security, thereby proving their unreliability.

The FT story doesn’t address what is to become of the collateralized gold just transferred to the BIS, but the section of the BIS’ annual report cited at the link above shows that the BIS is constantly trading gold and gold futures and options, just as the journalist Edward Jay Epstein reported in his long profile of the BIS published in Harper’s magazine in November 1983. (See http://www.gata.org/node/8773.) So odds are that the gold purchased from or supposedly kept at those commercial banks by gold investors is now being used by the international banking system to suppress gold’s price against the interest of the investors who think they own it.

The FT’s story is headlined “BIS Gold Swaps Mystery Is Unravelled.” The BIS can only hope that people will think so, and the FT can only hope that its story will get people to stop pestering it and other financial news organizations to do some serious, documented, on-the-record journalism instead of playing along with this manipulative, confidential source-based disinformation.

CHRIS POWELL, Secretary/Treasurer
Gold Anti-Trust Action Commtitee Inc.

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BIS Gold Swaps Mystery Is Unravelled

By Jack Farchy and Javier Blas in London
Financial Times, London
Thursday, July 29, 2010

Three big banks — HSBC, Societe Generale, and BNP Paribas — were among more than 10 based in Europe that swapped gold with the Bank for International Settlements in a series of unusual deals that caused confusion in the gold market and left traders scratching their heads.

The mystery of who was involved in deals with the BIS, the bank for central banks, and what they were doing, has become clearer.

The Financial Times has learnt that the swaps, which were initiated by the BIS, came as the so-called “central banks’ bank” sought to obtain a return on its huge US dollar-denominated holdings. The BIS asked the commercial banks to pledge a gold swap as guarantee for the dollar deposits they were taking from the Basel-based institution.

When news of the swaps, which were disclosed in a note to the BIS’s latest annual report, circulated among traders this month, it caused a sharp fall in the gold price, sending bullion to what was then six-week lows. Gold has since fallen further: It was trading at $1,164 an ounce on Thursday.

Some analysts speculated that the swap deals were a surreptitious bailout of the European banking system ahead of last week’s publication of stress tests. But bankers and officials have described the transactions as “mutually beneficial.”

“The client approached us with the idea of buying some gold with the option to sell it back,” said one European banker, referring to the BIS.

Another banker said: “From time to time, central banks or the BIS want to optimise the return on their currency holdings.”

Nonetheless, two central bank officials said some of the commercial banks also needed the US dollar funding and were keen to act as a counterparty with the BIS. The gold swaps began in December and surged in January, when the Greek debt crisis erupted and European commercial banks were facing funding problems.

Jaime Caruana, head of the BIS, told the FT the swaps were “regular commercial activities” for the bank.

In a short note in its annual report, published at the end of June, the BIS said it had taken 346 tonnes of gold in exchange for foreign currency in “swap operations” in the financial year to March 31.

In the same fiscal year, the BIS took three times the amount of currency deposits it had taken the previous year as central banks around the world became concerned about using commercial banks for their deposits and turned to the Basel institution.

In a gold swap, one counterparty, in this case a bank, sells its gold to the other, in this case the BIS, with an agreement to buy it back at a later date.

The gold swaps were, in effect, a form of collateral against the US dollar deposits placed by the BIS with commercial banks. Gold is widely regarded as one of the safest assets, but has not been widely used as collateral in the past. Mr Caruana described the transactions as “loans with a guarantee.”

Investors have bought physical gold in record amounts during the past two years and deposited it in commercial banks. European financial institutions are awash with bullion and some are trying to pledge gold as a guarantee.

George Milling-Stanley, managing director for government affairs at the industry-backed World Gold Council, said: “The gold swaps commercial banks carried out with the BIS demonstrate the effectiveness of gold as an asset class, because even in the depths of the worst liquidity crisis in living memory, institutions with access to gold were able to make use of it to generate dollar liquidity. The issue also feeds right into the current debate among Asian central banks about the lack of assets suitable for use as cross-border collateral.”

Last year, CME Group, the world’s largest derivatives exchange, allowed investors to use gold futures as collateral for some operations. Other institutions, such as central banks, had begun using and requesting gold as collateral in the past two years as perceptions of counterparty risk have risen, bankers and officials said.

The gold used in the swaps came mainly from investors’ deposit accounts at the European commercial banks. Some investors prefer to deposit their gold in so-called “allocated accounts,” which restrict the custodian banks’ ability to use the gold in their market operations by assigning them specific bullion bars. But other investors prefer cheaper “unallocated accounts,” which give banks access to their bullion for their day-to-day operations.

Officials said other commercial banks obtained the gold from the lending market, borrowing bullion from emerging countries’ central banks.

* * *

Help keep GATA going

GATA is a civil rights and educational organization based in the United States and tax-exempt under the U.S. Internal Revenue Code. Its e-mail dispatches are free, and you can subscribe at:

http://www.gata.org

To contribute to GATA, please visit:

http://www.gata.org/node/16

Goldcorp Inc. Q2 2010 Earnings Call Transcript

July 31, 2010 by · Leave a Comment 

Goldcorp Inc. (GG)

Q2 2010 Earnings Call Transcript

July 29, 2010 1:00 pm ET

Read more »

Lundin Mining Corp. Q2 2010 Earnings Call Transcript

July 31, 2010 by · Leave a Comment 

Lundin Mining Corp. (LUNMF.PK)

Q2 2010 Earnings Call

July 28, 2010 10:00 am ET

Read more »

Risk of Depression Low, Says Our Man in China

July 30, 2010 by · Leave a Comment 

By Rick Ackerman, Rick’s Picks

( Rick’s Picks frequently runs guest commentaries expressing opinions that differ markedly from our own. Below, Mario Cavolo, an expatriate who lives in China, argues that there is no global, deflationary depression bearing down on us, but rather a muddle-along economy with strong spots as well as weak ones. We disagree and see a period of economic darkness more severe and widespread than any ever recorded.  That’s because the world is unwinding a financial asset bubble with a notional value of nearly a quadrillion (i.e., $1,000,000,000,000,000) dollars. Considering the sum involved, there can be no easy or quick return to economic health. More logical is that a totally corrupt global financial system will have to be destroyed before we can rebuild the economy on honest trade. As things stand, the world’s financial-products-and-services balance sheet is at least ten times as large as the ledger for trade in real goods and services.

Mario notes optimistically that Japan has muddled through its decades-long deflationary recession without experiencing social disintegration. Although this is true, we would argue that it is so only because Japan had the rest of the world – including an insatiable U.S. consumer – to keep its powerful export machinery humming as it traversed deflation’s valley of death.  But who will bail out the U.S. and Europe as we continue to sink together? We could take on Mario’s arguments point by point here, but we’lll let that happen in the Rick’s Picks forum, which continues to attract an intelligent and articulate following.  RA)

It is easy to continue feeling humbled and confused by the sentimental and fundamental dance of the world’s asset classes and regions, be they equities, currencies, commodities, or that shiny stuff; feel free to pick your basket of market sectors to analyze and track.  DaBoyz is a moniker here at Rick’s advisory website, typically referring to the big time market players, institutional investors, bank/investment house trading desks and other various neo-elitists who have literally taken over the world’s free markets.  Planet Hollywood was a great brand name idea. Today, so is Planet Las Vegas or Planet Macau. The singular “George Soros who made billions shorting the British pound” example has

Lamborghini's new showroom in Beijing: enough prosperity to weather adversity?

become a cancerous plurality on the daily tape in a high stakes global trading playground. It is indeed real, a separate “sector” of reality, while the rest of reality — the real reality of the real world — goes on day by day, dealing with the damage trickling down. As might be suspected as the new reality unfolds, there is bad news for some and there is good news for others, and the point of this article is the worryingly good good news. Also, note that this article has a point of view with a high correlation to China and the U.S.

The One Exception

The rich are richer than ever the world over, with more than enough evidence available to confirm that this is the case. Furthermore, it is so on an unprecedented global scale now that China and her citizens have led the rise of the APAC region to prominence and power alongside the American and European economic blocs. As we shall see, America’s decline is the decline of only one main sector of her economy, along with the rise of others. No, the baby is not going to be thrown out with the global bath water, and there will be no doomsday collapse with one exception: a 30% chunk of the middle class in America whose lives and careers and futures have been decimated. They may as well pack their bags and come to the APAC/China region to teach English at twenty bucks an hour, because that’s loads better than anything they are going to find staying put. Those are the folks in the wrong place at the wrong time in the annals of history’s economic and political cycles. We should genuinely feel for their plight, including many whom I know personally.

Inflationary Vortex To Hell?

What does it all mean? Let’s make sure we understand where the balance points lie and have a clear understanding of what to expect in the coming years. Rick and a number of his loyal, fabulously intelligent and respecting followers make a well thought-out case for an impending, downward spiral into hell which, however, will simply never occur.  Until you can wrap your mind around the idea of being sucked downward into a spiraling vortex yet that is being sucked upward into an inflationary vortex, you’re missing today’s and tomorrow’s reality.  We have quite the dichotomy to resolve, and it is not a question of inflation vs. deflation. It will not go “one way or the other.” Different regions and sectors of the now intricately connected global economy will experience vastly different economic impacts.

Oh joyful global happy days for so many than ever before! Do you know that? That’s a fact to contend with not argue about, making it very hard to reconcile with predictions of a worldwide doomy, gloomy deflation scenario.  We’ve talked about how the Japanese economy spent 15 years in deflationary hell, going nowhere. But if the majority of her citizens had a million in the bank and house worth that much, who really cared? In the end, if the trappings of daily life are comfortable, if you know your home is secure, you have enough money to make it to your death and beyond, so then what’s the fuss if the economy sucks?

This lack of economic stress is typical of the mindset of today’s newly rich China citizen, both her poor citizens and her newly rich middle class citizens. While it may be frustrating and annoying, it is not a big problem to be unemployed if you have $200,000 in the bank and a home worth $300,000 with no mortgage, like most of your neighbors.

Better to Be Poor or Rich in China

Let’s get the “poor in China” debate out of the way quickly. If you’re poor in America, you’re really screwed from several points of view. If you’re poor in China, you’re not destitute. Life can still be very safe and comfortable at only USD $200/month.  Why? Because you don’t need a car to get a low paying job, your expenses at the level of “local” life are 10 times lower than in America; you can rent a comfortable room for $75 (the room I rented in Huntington Beach back in the early 90’s was $450/month) and there are no minority drug gangs with guns around destroying the neighborhood and threatening your safety;  that’s even today, even in magnificent Shanghai! You can eat three square freshly cooked meals of noodles or rice, with veggies and a protein for USD $5 total. You ride an old bicycle no one will steal and which can be replaced for USD $10 if it is stolen anyway.  Your medical expenses are equally cheap starting with antibiotics for USD $3 (Cipro or Cefradine, for example) when you catch a winter cough and fever. You can even get a body massage with a haircut and a happy ending for less than USD $20, for those of you who understand what I just wrote. Hard to imagine such a daily lifestyle, eh? Yet it is accessible and normal to a person who is struggling to get on their feet here in China, making it a fabulous place to  be “poor”.  And let’s take a final moment for the supposedly miserable 800 million farmers; they have plenty of food, they live in brick dwellings with cheap coal  brick oil barrels to stay warm in winter, they eat three square a day, freshly picked and cooked. I’m not saying its great. They toil the fields 12 hours a day but it’s just basic countryside living and I wouldn’t call that “poor” as a typical Westerner defines poor or poverty.

America’s Deep Wealth

This lack of economic stress is also typical of the mindset of today’s upper middle class and rich Americans. While it may also be frustrating and annoying for business to be bad or to have your career obliterated, it is not a big problem to be unemployed if you have a boatload of money in the bank and a nice home with plenty of equity like most of your rich and semi-rich neighbors. American citizens with plenty of money are all over the place. They are out spending it and there are enough of them in combination with all the other of the world’s rich and semi-rich to sustain the global economy.

Ah, but wait. You are screaming that can’t be true. Then why is it true? In the U.S., the rich and semi-rich are richer than ever and out spending! We can say corporate earnings are questionable due to accounting questions and games, but are they a disaster indicative of impending doom? They are certainly not. American corporations have gotten lean in the past two years and that has hurt many in terms of employment. But that also means it is much easier to turn a profit and move forward in the global economy, which they are. And imagine what will happen when the U.S. banks do start lending again. Meanwhile, the middle class chunk of around 40 million citizens and their lifestyle has been decimated, transformed and sinking into that miserable abyss.  It is their time of decline in the economic cycle of rises and declines.

China’s Huge Home Equity

Back to China for a moment to do a big little calculation;  I’ve said the rich are richer than ever here with the rising middle class of 300 million also richer than ever, rising proudly and happily. Let’s look at just one key slice of the Chinese population with the following conservative calculation: an average 100,000,000 million homeowners with equity in their homes which has increased from $50,000 to $150,000 equaling a total of  $15,000,000,000,000. May I ask is that 15 TRILLION in pure available home equity wealth with NO mortgages? Yes it is. And is that equity on top of the fabulously rising salaries? Yes it is.  In addition to the elite rich sector, this is their time of rising in the economic cycle of rises and declines. Good for them, they are as entitled as any other nation state to prosper and grow as history reveals in the long term economic cycles of growth and decline.
[ad#gold-newswire-inserted-in-post]
So then we reach our happy conclusion; there is plenty in the pockets of the combined army of rich and new semi-rich in the U.S., in Europe and in China, to sustain economic status quo and avoid a collapse.  The bubble will burst in the face of this asset inflation created wealth? Nonsense. I’m tired of hearing it. What bubble? Which bubble? This kind of talk is becoming both misleading and self-serving disinformation fed to the masses via the complicit media. In America and Europe, the rich are richer than ever. In China, the rich and middle class rising are richer than ever. That is not a formula for the collapse of anything.

Keynesian Rape

However, it is a setup for the continuation of the Keynesian social neo-elitist raping of the world which is also arranged by those same in power to simply absorb the entire mess via continued price inflation and decline of currency purchasing power; the only exception being American real estate and wages, more than offset by the polar opposite happening in China!

What will happen, what is happening is this: One slice of the asset pie at a time, in some bizarrely rhythmic fashion will continue to inflate. For example, China wages and prices. Now they are inflating and will continue to do so for years to come. Real estate will flatten a bit but with little leverage, any sharp property value declines will be quickly absorbed and forgotten. Just think of the American expansion starting from the 60’s and you can easily see the point. Then another couple of slices also inflating globally; crude oil and gold for example. Up, up, up they will go.  The cost of energy and water supply: heading up. But not U.S. middle class wages and real estate.  Those are two slices of the pie not likely to budge anytime soon. But that’s only two slices of a very large and complex pie.

Conclusions

The final conclusion is twofold.  First, that the richer and richer hundreds of millions in the global economy identified in this article will sustain the global economy and are easily able to absorb the continued worldwide inflation of prices and decline in currency purchasing power. They will still sleep soundly at night. Interest rates by the way, must remain low relative to risk or these folks will stop spending and investing in the asset classes. Bonds won’t collapse because instead currencies will simply decline in purchasing power across the global board. The daily purchasing power of “the haves” will of course also deteriorate along with everyone else’s, but so what? They will “cut back” but still buy extra virgin olive oil, brand name clothes, send their kiddies to a good college, and go to the IMAX if they feel like it because they can afford it. Their lives will remain relatively protected, nice and comfortable. Secondly, The rest of the world starting with the struggling middle class on down will feel poorer and poorer over the coming years, a daily reality much easier to deal with if you live in China/Asia than if you live in America or Europe.

One might ask is there a historic migration from declining America somewhere in the cards? Maybe, but don’t think for a moment that there’s going to be a welcoming “Ellis Island” anywhere near Chinese shores.

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© Rick Ackerman and www.rickackerman.com, 2010.

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