Click on WORD or PDF for full content
January 23rd Pickings had an item by James Delingpole of The Telegraph,UK on Germany’s request for its gold. Peter Schiff takes this up in his Gold Letter for this month.
The financial world was shocked this month by a demand from Germany’s Bundesbank to repatriate a large portion of its gold reserves held abroad. By 2020, Germany wants 50% of its total gold reserves back in Frankfurt – including 300 tons from the Federal Reserve. The Bundesbank’s announcement comes just three months after the Fed refused to submit to an audit of its holdings on Germany’s behalf. One cannot help but wonder if the refusal triggered the demand.
Either way, Germany appears to be waking up to a reality for which central banks around the world have been preparing: the dollar is no longer the world’s safe-haven asset and the US government is no longer a trustworthy banker for foreign nations. It looks like their fears are well-grounded, given the Fed’s seeming inability to return what is legally Germany’s gold in a timely manner. Germany is a developed and powerful nation with the second largest gold reserves in the world. If they can’t rely on Washington to keep its promises, who can?
The impact of Germany’s repatriation on the dollar revolves around an unanswered question: why will it take seven years to complete the transfer?
The popular explanation is that the Fed has already rehypothecated all of its gold holdings in the name of other countries. That is, the same mound of bullion is earmarked as collateral for a host of different lenders. Since the Fed depends on a fractional-reserve banking system for its very existence, it would not come as a surprise that it has become a fractional-reserve bank itself. If so, then perhaps Germany politely asked for a seven-year timeline in order to allow the Fed to save face, and to prevent other depositors from clamoring for their own gold back – a ‘run’ on the Fed.
Now, the Fed can always print more dollars and buy gold on the open market to make up for any shortfall, but such a move could substantially increase the price of gold. The last thing the Fed needs is another gold price spike reminding the world of the dollar’s decline.
None of these theories are substantiated, but no matter how you slice it, Germany’s request for its gold does not bode well for the future of the dollar. In fact, the Bundesbank’s official statements are all you need to confirm the Germans’ waning faith in the US. …
David Harsanyi posts on the negative growth in the GDP.
So, U.S. consumer confidence unexpectedly plunged in January to its lowest level in more than a year. Then the U.S. economy unexpectedly posted a contraction in the fourth quarter of 2012 — for the first time since the recession — “defying” expectations that any meaningful economic growth is in our future.
If the economy were as vibrant as President Barack Obama has told us it is, a belt tightening in a single sector of government surely wouldn’t be enough to bring about “negative growth.” But one did. Unexpectedly. No worries, though. Pundits on the left tell us that this contraction was good news — possibly the best contraction in the history of all contractions. The White House blamed Republicans and, I kid you not, corporate jet owners because — well, who else? But mostly, the left is bellyaching about the end of temporary military spending and a brutal austerity that’s enveloped a once great nation.
There’s a small problem with that argument. There is no austerity. In the fourth quarter of 2012, Washington spent $908 billion, which was $30 billion more than it spent in the last quarter of 2011 and nearly $100 billion more than it spent in the third quarter of 2012. Taxpayers took on another $400 billion in debt during the quarter. If this is poverty, can you imagine what robust spending looks like?
If we took the argument at face value, though, it means this: The left is contending that George W. Bush’s wars have been propping up the economy for years. They believe that spending, no matter where we “invest,” is tantamount to economic growth — that trillions in deficit spending ostensibly meant to “stimulate” the economy is really meant to artificially inflate the gross domestic product. If this were true, the only question we should have is: Why don’t we spend five times as much and grow the economy fivefold?
Then the unemployment figures get the Harsanyi treatment.
The unemployment rate is up, the economy has contracted for the first time in three years, yet my Twitter feed keeps telling me the underlying dynamics of the economy are just awesome.
We added 157,000 jobs in January and the unemployment rate ticked up to 7.9 percent. After $7.66 trillion in stimulus spending, a Federal Reserve pumping tens of billions into the economy week after week, we have an unemployment rate that is one tenth of a point higher than the one we had when Barack Obama took office. As Reuters points out, “Economists say employment gains in excess of 250,000 a month over a sustained period are needed.” That stagnation looks something like this: …
Robert Samuelson sees the same numbers and sees the US in danger of becoming Japan.
… The lesson is that huge budget deficits and ultra-low interest rates — the basics of stimulus — have limits and can be self-defeating. To use a well-worn metaphor: Stimulus becomes a narcotic. People feel better for a while, but the effect wears off. The economy then needs a new fix. Too many fixes may spawn new problems (examples: excessive debt, asset “bubbles,” inflation). That’s already happened in Japan.
It’s caught in a trap. On the one hand, it needs stimulus to grow. On the other, the debt from past stimulus measures threatens future growth. About 95 percent of government debt is held by Japanese investors — banks, insurance companies and pensions — that have been patient, report economists Takeo Hoshi and Takatoshi Ito. If investors lose patience and balk at buying government debt, the economy could implode. But their patience presumes that annual deficits will someday shrink. The trouble is that the required tax increases or spending cuts could act as a drag on the economy. Already, the Diet has voted to raise the consumption tax in 2014 and 2015 from 5 percent to 10 percent.
Considering this, Japan isn’t an attractive place for private investment. A declining population reinforces the effect. Katz of the Oriental Economist suggests spurring growth by dismantling protections for sheltered domestic industries. Higher growth would emerge as “inefficient firms die [and are] replaced by better firms.” But Japan’s leaders have generally shunned this complex and contentious approach. Once the present stimulus fades, Katz writes, it’s likely “Japan will fall back to stagnation.”
The United States isn’t Japan. The American economy is more flexible and entrepreneurial. The natural gas and oil boom is a godsend. Housing is reviving. Still, similarities with Japan loom. Growth rates have been stubbornly low. Both countries rely on stimulus policies — cheap credit, big deficits — to cure problems that are fundamentally structural and psychological. The parallels are worrying.
From killer economies to killer pets. NY Times on the cats we love – or not.
For all the adorable images of cats that play the piano, flush the toilet, mew melodiously and find their way back home over hundreds of miles, scientists have identified a shocking new truth: cats are far deadlier than anyone realized.
In a report that scaled up local surveys and pilot studies to national dimensions, scientists from the Smithsonian Conservation Biology Institute and the Fish and Wildlife Service estimated that domestic cats in the United States — both the pet Fluffies that spend part of the day outdoors and the unnamed strays and ferals that never leave it — kill a median of 2.4 billion birds and 12.3 billion mammals a year, most of them native mammals like shrews, chipmunks and voles rather than introduced pests like the Norway rat.
The estimated kill rates are two to four times higher than mortality figures previously bandied about, and position the domestic cat as one of the single greatest human-linked threats to wildlife in the nation. More birds and mammals die at the mouths of cats, the report said, than from automobile strikes, pesticides and poisons, collisions with skyscrapers and windmills and other so-called anthropogenic causes.
Peter Marra of the Smithsonian Conservation Biology Institute and an author of the report, said the mortality figures that emerge from the new model “are shockingly high.”
“When we ran the model, we didn’t know what to expect,” said Dr. Marra, who performed the analysis with a colleague, Scott R. Loss, and Tom Will of the Fish and Wildlife Service. “We were absolutely stunned by the results.” The study appeared Tuesday in the journal Nature Communications.
The findings are the first serious estimate of just how much wildlife America’s vast population of free-roaming domestic cats manages to kill each year. …