China alarmed by U.S. money printing
Interesting news piece from the Telegraph. The most interesting part was when Cheng Siwei was quoted with this little tidbit, “Gold is definitely an alternative, but when we buy, the price goes up. We have to do it carefully so as not to stimulate the markets.“ He was speaking to an alternative to the U.S. dollar. China is very aware of the fact that any major public gold bullion purchases would “stimulate” the markets, I read this as drive the price to the moon and some. I will close with this little interesting fact that gold as consolidated at $930.00/oz. during the traditionally lower demand part of the year. Unless we see a major correction tomorrow morning in the New York Spot market, I predict we will finally see gold bust through $1,000.00 per ounce. Does the smart money know something the average joe doesn’t? Likely in my opinion.
Telegraph, London - Cheng Siwei, former vice-chairman of the Standing Committee and now head of China’s green energy drive, said Beijing was dismayed by the Fed’s recourse to “credit easing”. “We hope there will be a change in monetary policy as soon as they have positive growth again,” he said at the Ambrosetti Workshop, a policy gathering on Lake Como.
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The Coming Pandemic of Debt Based Paper Money
Editor’s Note: This was emailed to me from a very good commercial mortgage lender friend of mine. I am not sure of who the original author is, so if you do know, please email me so I can give him credit and a link. This article is spot on and now we are seeing gold react during the traditional slow season when you see gold prices drop, they are instead approaching the $1,000.00/oz. USD mark.
It is short-sighted to think we can bailout all these bad actors, run trillion dollar deficits and think that it will not have serious issues coming down the road in the form of price inflation and possibly a collapse of the U.S. dollar. One thing I do think we will see is the end of debt-based fiat currencies issued by private central banks, it really makes no sense to borrow from yourself at interest just to issue your currency. Is the Greenback going to make a comeback?
Article (Author Unknown):
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China positioning its currency for a run at world supremacy by 2020?
In my opinion I do not see the dollar as the “only” dominant currency by 2020 either, with China, India and Brazil working hard to provide employment and raise the standards of their people, to accomplish this, they will need to provide stability and that will make those countries more attractive to invest in and that is the biggest reason people invest in the dollar. If we were more responsible with how we handled our currency, we would not hear these calls as loud as we do in these current times. It will be interesting to see how this plays out.
News (LA Times):
Reporting from Shanghai — Could the world’s currency of choice have the face of Mao Tse-tung on it, not George Washington? Quixotic or not, the Chinese are preparing for that day.
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China calls for new global currency to replace dollar
The calls for a replacement to the dollar is getting more pronounced everyday. China has really pushed for the IMF to use SDRs (Special Drawings Rights) as the super-sovereign currency used between governements. I am not in favor of giving any international agency this type of power. When you concentrate power, it makes it much easier to abuse.
I understand why the call for these changes are coming, being that we are the de facto reserve currency, our domestic monetary polices are devaluing the dollar. We should not look to bailout and look more to preserve our currency on the world market and let the market take care of the mal-investment.
News (AP):
China is calling for a new global currency controlled by the International Monetary Fund, stepping up pressure ahead of a London summit of global leaders for changes to a financial system dominated by the U.S. dollar and Western governments.
The comments, in an essay by the Chinese central bank governor released late Monday, reflect Beijing’s growing assertiveness in economic affairs. China is expected to press for developing countries to have a bigger say in finance when leaders of the Group of 20 major economies meet April 2 in London to discuss the global crisis.
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Federal Reserve to Buy $300 Billion of Longer-Term U.S. Treasuries to monetize the debt
Wow, this rocked the markets, value of the dollar and gold bullion. This is a sign of bad things to come, we now have our central bank buying our debt to monetize it because our bailout policies have shaken the confidence of the foreign investors that would normally buy our debt. Unless we see a turn around soon, I think the dollar is now in its final decline. I am very worried about this development. Be Safe.
News:
The Federal Reserve opened a new front in its battle to bring down borrowing costs across the economy, pledging to buy as much as $300 billion of Treasuries and stepping up purchases of mortgage bonds.
The announcement following the Federal Open Market Committee meeting today in Washington spurred the biggest rally in longer-dated Treasuries in decades. Officials unanimously voted to expand the Fed’s balance sheet up to $1.15 trillion, and said they may broaden a program aimed at boosting consumer loans to include other assets, today’s statement showed.
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Warren Buffett says U.S. Treasury bubble one for the ages
With the fundamentals in place on the dollar, it does seem like we have a huge crowd of “safe haven” investors sitting on the sideline in cash waiting for some sign of a bottom, which may or may not be in the near future. I would say we are not close and we most likely see another bear market rally before we really start continue declines in the Dow and S&P. I am personally shorting treasuries in anticipation of a fall in the dollar after these record levels of debt issuance.
News:
Warren Buffett, whose Berkshire Hathaway Inc sits on $25.54 billion of cash, said worried investors are making a costly mistake by buying up U.S. Treasuries that yield almost nothing.
In his widely read annual letter to Berkshire shareholders, the man many consider the world’s most revered investor said investors are engulfed by a “paralyzing fear” stemming from the credit crisis and falling housing and stock prices. Treasury prices have benefited as investors flocked to the perceived safety of the “triple-A” rated debt.
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With quantitative easing under way, where is M3?
Well it would be nice to see what this number would be at if they still published it? Many other people has reconstructed data sets that try and emulate the old statistic. From all they I have read, the M3 measure of the money supply would be in double digits. That does not say much for inflation when the business cycle picks up again. At the time of this writing, the Dow Jones Industrial Index lost 7.7% today alone.
I believe people are losing confidence in the system and the information they keep being told. We are bailing out bad institutions with good money and in turn, reducing the confidence in our currency with their bad assets which should of never been made whole. Why do I have to accept $24,000+ in debt to people who got greedy and wanted to raise their relative advantage higher?
Why are we saving a system that has created more wealth disparity than wealth itself? I thought we are suppose to have life, liberty and the pursuit of happiness protected and not oppressed? You can see it in all the currently writings by our press and government. It is all about getting the credit (debt) flowing and not actually address the problem of deficit spending, incentification of profit over job creation & raising of living standard which is what drives consumption in the first place. We actually encourage companies to send job overseas to make products for consumption in the U.S.
Who are we actually benefiting in that situation, I would say the shareholders to the determent of our people. I am not advocating stepping away from free markets with prudent regulation at all, but I am saying that we should take into effect what the costs and benefits are by focusing on consumption and not production. We need to address the real problems and make a system that give equal opportunity to all its people. From their a person can and will choose their path in life.
News:
With quantitative easing under way, money supply is going to become an increasingly important gauge.
Morgan Stanley notes the measure will be a key indicator of when ‘QE’ actually starts to kick in. Before adopting QE, all excess reserves created by the Fed were being hoarded by banks. Rather than increasing, the so-called money multiplier (the link between the Fed’s balance sheet and the money supply) had actually plummeted. The only other time this has happened is during the Great Depression, say Morgan Stanley. But there is reason to be optimistic.
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