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The GoldBugg Report - Profit During Times of High Inflation, Own Precious Metals

March 4, 2008

• Paul van Eeden claims the banking system in the United States is broke. - Read full story at »
• Inflation-The rate at which the general level of prices for goods and services is rising, and, subsequently, purchasing power is falling. As inflation rises, every dollar will buy a smaller percentage of a good. For example, if the inflation rate is 2%, then a $1 pack of gum will cost $1.02 in a year. Most countries' central banks will try to sustain an inflation rate of 2-3%. Investopedia.com
• Hyperinflation-Extremely rapid or out of control inflation. There is no precise numerical definition to hyperinflation. This is a situation where price increases are so out of control that the concept of inflation is meaningless. The most famous example of hyperinflation occurred in Germany between January 1922 and November 1923. By some estimates, the average price level increased by a factor of 20 billion! Investopedia.com
• Core Inflation-A measure of inflation that excludes certain items which face volatile price movements. Core inflation eliminates products that can have temporary price shocks because these shocks can diverge from the overall trend of inflation and give a false measure of inflation. Core Inflation is thought to be an indicator of underlying long-term inflation. Core inflation is most often calculated by taking the Consumer Price Index and excluding certain items from the index, usually energy and food products. Other methods of calculations include the outliers method, which removes the products that have had the largest price changes. Investopedia.com
• "Gold bears the confidence of the world's millions, who value it far above the promises of politicians, far above the unbacked paper issued by governments as money substitutes. It has been that way through all recorded history. There is no reason to believe it will lose the confidence of people in the future." Oakley R. Bramble
• The Dow currently trades 13% below its all-time record high. For some further perspective into how the stock market is actually performing, today's chart presents the Dow divided by the price of one ounce of gold. This results in what is referred to as the Dow / gold ratio or the cost of the Dow in ounces of gold. For example, it currently takes 12.9 ounces of gold to "buy the Dow." This is considerably less that the 44.8 ounces back in the year 1999. When priced in that other world currency (gold), the Dow is in the midst of a massive eight year bear market! Chartoftheday.com
• Jim Rogers says US 'out of control. 'Rogers who co-founded the now closed Quantum Fund with George Soros told 750 global fund managers in Tokyo today that, America is "completely out of control", there will be a 20-year bull market in commodities and that prices will be in turmoil. And he also warned that it "made sense" if global competition for resources ended in armed conflict. Mr. Rogers told delegates to the CLSA investment forum that the prices of all agricultural products would "explode" in coming years and that the price of gold, which hit an all-time high this week, will continue its surge to as much as $3,500 an ounce. Gold would continue to rise, the analyst Christopher Wood told fund managers, "because it is the exact opposite of a structured finance product". In a blistering attack on US monetary policy and the "helicopter cash drop" responses of the Federal Reserve, Mr. Rogers described the American dollar as a "terribly flawed currency". He said that the plan by Ben Bernanke, the Fed Chairman, to "crank up the money-printing machines and run them until we run out of trees" had exposed America's weakest point to her rivals and enemies. The dollar may have declined recently, he added, "but you ain't seen nothing yet". - Read full story at »
• Facing Public Pressure, Bush Administration Will Continue Site Tracking U.S. Economic Indicators. On Feb. 13, ThinkProgress reported that facing a faltering U.S. economy, the Bush administration was attempting to hide economic data by shutting down the award-winning website EconomicIndicators.gov. As Forbes explained when it awarded the site one of its "Best of the Web awards, Economic Indicators is a "necessary" portal because it provides easy access to aggregated economic data across government agencies. More significantly, people can sign up to receive e-mails as soon as new data becomes available. Yet recently, the Bush administration announced the site would be shut down on March 1 because of "budgetary constraints." Thinkprogress.org
• Performance of different assets over the past 2 Months. Alf Field - Read full story at »

GOLD

• Strong support in gold is now seen at $890 to $900. Short term support is now at $925 and below that at $915. The $1000 price level remains a short term price target and $1,200 is now a realistic possibility in the coming weeks. Gold.ie
• Counter intuitively, this newest in a long line of mooted IMF gold sale proposals may again be bullish for gold. When Gordon Brown telegraphed his sale of British gold reserves in 1999 the market was initially concerned that the sales could lead to falling gold prices. This concern was proven false and look how gold has performed since rising from below $300 to over $900. Gold.ie
• U.S. Treasury Under Secretary David McCormick said on Monday it was still unclear when the U.S. Congress would be asked to approve proposed International Monetary Fund gold sales and the move would depend on implementation of the IMF's reform agenda. "We've done a fair amount of work already in terms of doing outreach to members of Congress," McCormick told an audience in Washington, saying there was already bipartisan support for the move. "We would hope that we will be able to build support for action while President (George W.) Bush is still in office. If that turns out not to be the case given the timing then we hope the work we're doing will lay groundwork for the next president," he added. Reuters - Read full story at or at »
• IMF sales a perspective. The gold for sale is different from the rest! It looks as though any sales by the IMF will be restricted to 400 tonnes used in a previous sale and repurchase agreement and in any case would be made within the existing CBGA sales Agreement. The market is right to remain unfazed! - Read full story at »
• Precious Metals Remain Undervalued and Are in a Classic Bull Market. To those not familiar with the precious metals markets, gold and silver look overvalued due to the recent increase in prices and many believe this is a prelude to a 1980 style gold price collapse. This is extremely unlikely for a variety of reasons. Indeed quite the opposite is true, a gold panic and mass exodus into the safe haven of gold is more likely than any ending of this secular bull market. Firstly, gold and silver's rise in recent years has been gradual and orderly and both show the price movement of a classic bull market. Volatility has been less than in the benchmark S&P 500 with daily price movements averaging around 1%. Very rarely have there been price movements of 3% or more up or down and rarely have there been weekly movements of more than 5%. The bull markets in precious metals have been marked by periods of price strength, price corrections and consolidations prior to further increases in price. Classic bull market behaviour designed to put off and deter weak hands and uninformed investors (who unfortunately will only partake in the bull market in the final blow out stage which is likely some 5 to 12 years away). Continuously many analysts and much of the media has exaggerated gold's sell offs and there have been many times when market tops have been called. At $600, $700, $800, $850 and $900 there have been doubters and naysayers who have warned that gold was overvalued and ripe for a correction or price 'collapse'. This is the classic grind of 'two steps forwards and one step back' and the wall of worry that all bull markets are subject too. But particularly the gold market due to the lack of informed comment and analysis. To further put gold's bull market in context, oil is up some 1,000% in recent years from $10 to over $100 per barrel. Wheat is up some 100% in the last 6 weeks while gold is up 100% in the last 3 years. Again gold is only up 365% in 9 years. Calling a top in gold now is akin to calling a top in the Dow Jones Industrial Average in 1997 when it reached 7,000. The DJIA has risen from a post 1987 crash level of 2000 to 7000 in 1997. It subsequently doubled in value. Finally, in 1980 gold had risen from $35 to $850 or 3,000% in 9 years. Today gold has risen from $260 in 1999 to over $950 today or some 365% in 9 years. So gold had a 3,000% increase in the 1970s and has seen a 365% increase in the 2000s. And this increase in price has been in U.S. dollars which has been the weakest currency in the world (after the Zimbabwean dollar). Hardly the stuff of speculative bubbles. Gold will likely double in value in the coming years and will reach its 1980 adjusted for inflation high of some $2,300 per ounce (based on CPI calculation of inflation). Gold.ie
• Any good, service or commodity has value if it is useful. Gold's value derives from its usefulness as money. In other words, gold's value arises from its usefulness in economic calculation. This point is self-evident from the following chart, which presents a Base-100 analysis of the price of crude oil in terms of US dollars and goldgrams. When viewed in terms of gold, the price of crude oil is essentially unchanged throughout the six decades presented in this chart. It is the dollar that is volatile, not gold. Economic calculation becomes sensible when prices are viewed in terms of gold, which provides a stable purchasing power over long periods of time. James Turk-An Overview of Gold's Supply & Demand - Read full story at »
• Gold and the U.S. dollar conclusion. As the many rescues planned and put in place, monetary inflation will be mammoth. The US$ will inevitably be sacrificed in the housing crisis and mortgage debacle, in addition to reviving the banks. The US$ will be weighed down further, in order to lead the US Economy out of recession. Cheap money is coming again, and globally. The US Fed will not be able to escape the clutches of 1.0% interest rates again, coupled with the extreme shame. The US Dollar will not be able to escape the plumbing of lower exchange rates, like down to the 70 level. The gold price will feed off lower interest rates, as speculative gains will be back in vogue, even called a good thing. There is nothing like a bout with deflation to change the mindset of speculation and its vagaries, turning it positive. The gold & silver prices will rise from the cheap money, low interest rates, stimulus packages to ward off recession, rescues to banking, and lower US Dollar. But the US Economy desperately needs the next 'Policy Bubble' in order to come back to life, to produce jobs, to change national psychology, to revive hope. Without a plan to puff a new bubble, which will buy some years of time, the nation will morph into chaos. A military dictatorship would be the only alternative. The urgent next step is leaders with some vision, rather than a plan for private profiteering, founded upon fear. Hope pays off more than fear, unless fascism is the end game. Jim Willie CB
• Gold Sales Volume in Greater China Rises 23% in 2007. - Read full story at »
• Flight to safety and stagflation fears boost gold. - Read full story at »
• The gold standard. A precious metal that's not just an investment but a worldview too. - Read full story at »
• The dollar versus gold? No contest. Why China and India have always been heavy-metal fans. - Read full story at »
• Gold dehedging persists in Q4 07, more expected in '08. - Read full story at or at »
• Gold Fields to Close Shafts, Reduce Output in South Africa. - Read full story at »

SILVER

• Silver Now Outperforming Gold. Clearly since mid-2006, silver has had the upper hand on the HUI basket of stocks and without the risks that accompany such stocks. That is why The Silver Analyst prefers silver to gold as a majority holding in precious metals. As silver attacks $20 and beyond, we hope to see this leverage over gold increase until the final blow off which in our estimation cannot be too far away now. Roland Watson - Read full story at »
• What lit the fire under silver this week? That's a tough one, as there appeared to be no particular driver save strength in copper, to which silver is somewhat tied. Perhaps a moment of reckoning is nearing, as the redoubtable Ted Butler insists. Butler writes about short sales and unbacked silver certificates, and combining these two he asserts that "more silver is pre-sold than real metal that exists in the world. This will invariably drive prices to unbelievable heights." Kitco Daily Resource
• As we stated in the past, silver remains undervalued and $25 looks likely in 2008. Silver's nominal high of $50 per ounce is likely to be reached in the next 3 to 7 years. Nearly all other commodities have reached their nominal record highs and some have reached their inflation adjusted record highs. Silver remains the laggard and this will likely change soon as silver plays catch up. Gold.ie
• Speaking at the inaugural Global Capital Forum on gold and silver in London, Jessica Cross of the VM group was very positive about the price prospects for the metal, despite there being an apparent supply surplus and a steady fall in usage in its principal industrial use in the photography sector. Cross described silver as "exciting and often ignored, competing in the shadow of gold and platinum". Indeed since the low point in precious metals markets in 2001, silver has outperformed gold by rising 254% as against gold's 235%. As for platinum, which has actually recorded an even greater rise on a genuine supply shortage, that's another issue altogether! Cross said silver had sometimes been somnolent "but boy it can move!" - Read full story at »
• Positive portents still for gold and silver. With South African gold output continuing to fall, exacerbated by the power problems being experienced there, the gold price is being underpinned by production losses and the continuing 'managed' devaluation of the US dollar. - Read full story at »

PLATINUM-PALLADIUM

• Many assume that the surge in platinum in recent weeks must be a speculative blow off and will result in a sharp selloff soon. This is highly unlikely as this has not been a speculatively driven market. The FT reports that CFTC data showed a reduction in the speculative net long position for a sixth consecutive week in spite of prices rising to record levels amid concerns about the South African power crisis causing a supply shortfall this year. John Reade of UBS said the data was a clear indication that speculators were not the driving force behind rising platinum prices. "Over the counter buying from funds and investors, together with some producers scrambling to cover contractual requirements have been behind the move in platinum (prices) this year," said Mr. Reade. Mr. Reade said that "supply deficits of more than 700,000 ounces a year will result over the next three years. The only way the market can be brought back to near balance is for higher prices to displace jewellery demand and encourage scrap (supplies) and profit taking from investors." The shortfall in platinum production appears to be creating a structural change in the platinum market that will result in materially higher prices and $3,000 per ounce is being spoken of as a realistic medium term target. Gold.ie
• Platinum could hit US$3,000 an ounce as car consumption increases. Rising demand and constrained demand for Platinum could lead to lead to substantial rises in its price taking it up to around US$3,000 an ounce, predicts Daniel Sacks, portfolio manager on the Investec GSF Global Gold Fund. - Read full story at »

COMMODITIES

• Coxe: Global bull market for metals has just begun. - Read full story at »
• The bull run in commodities is far from over, according to a prominent market strategist who predicts base metal stocks will take a breather before resuming their ride on a "once-in-a-millennium" boom that will last at least two decades. Bank of Montreal global portfolio strategist Don Coxe is expected to deliver his exceedingly bullish forecast at an industry conference in Florida today where the bulk of the world's major mining executives have gathered. Mr. Coxe, who correctly predicted the start of the mining boom at the same conference six years ago, believes that metals demand from the roaring economies of China, India and other developing nations will outweigh the effects of a U.S. recession and equities bear market. "It has become clear that this is a once-in-a-millennium commodity boom that will last at least as long as the commodity crash - two decades," Mr. Coxe wrote in a report titled "The Music of the Metal Markets." - Read full story at »
• The ethanol bust. The ethanol boom is running out of gas as corn prices spike. - Read full story at »
• The first flight by a commercial airline to be powered partly by biofuel has taken place. - Read full story at »
• Wheat Breaches $12 for First Time After Biggest Gain Since 2002. - Read full story at »
• High food prices may force aid rationing. - Read full story at »
• Commodities Boom Sends French Food Prices Rocketing. Prices of grain and milk-based food products have surged in France in recent months due to booming commodities prices, a French consumer group said in a report. - Read full story at »
• Global shortage of metals looming. Our peak oil thesis gained some new respect last week as oil prices hit yet another record, the first close over US$100 per barrel. Demand fluctuates, but it is all about supply, and supply concerns this week showed how tight the market really is. Peak oil has lots of press, but what about peak copper? Peak zinc? Peak gold? Sounds preposterous, but maybe it's not so far-fetched. Nearly every commodity is experiencing some supply issues, for a host of reasons. Add it all up, and it means potential supply shortages in the future. Demand may slacken this year, but in the next 10 years today's high commodity prices may actually look like a bargain. Let's take a look at some of the issues facing commodity projects today, and give some examples of companies that have already been impacted by them. Cost overruns: Inflation, equipment shortages, and labour issues have combined to wreak havoc on so many new commodity projects that long-term supply issues may result. - Read full story at »

OIL-GAS

• Saudi Arabia, the world's biggest oil producer, may lobby OPEC to maintain output quotas at its March 5 meeting while trimming its own production to curb global supply, the Centre for Global Energy Studies said. "OPEC is likely to desist from making any output cuts until the second half of the year," the London-based center, known as CGES, said in a report e-mailed today. "Saudi Arabia may insist on keeping quotas the same while varying its own output in pursuit of high prices." - Read full story at »
• Are the days of easy-to-reach oil at an end? Apart from a new price high, this week has been more of the same oil prices have been high, and boy, are they looking to stay that way. But what people are talking about now is the one factor that may keep those prices in place. And the words of the day are 'peak' and 'oil'. - Read full story at »
• Bush to veto bill rolling back tax breaks for oil. White House says the president will refuse to sign a bill that puts an end to $18 billion in tax cuts for the oil industry. - Read full story at »
• Energy Sector Trends Paint "A Very Alarming Picture." The concept of 'peak oil' has been derided by the big oil companies for years, but last week the chief executive of the oil giant Royal Dutch Shell, Jeroen van der Veer, released a study forecasting the end of easy oil. - Read full story at »
• U.S. Should Release Oil, Not Store It, Bingaman Says. - Read full story at »
• Exxon vs. Chavez: More Smoke than Fire. These are the following three essential facts about the U.S. oil predicament. - Read full story at »
  1. The U.S. produced less oil in 2006 than it did in 1950.
  2. Venezuelan oil accounts for 10% of total U.S. oil imports.
  3. Oil imports made up 40% of the U.S. trade deficit last year.
  
• Norwegian state-owned petroleum company Petoro reported a 6.7 percent drop in oil production for the fourth quarter on Thursday though higher gas output kept total production steady. - Read full story at »

GLOBAL FINANCIAL CRISIS

• Even Goldman Sachs Group Inc. and Lehman Brothers Holdings Inc. may find they haven't dodged the credit crisis. The new source of potential losses: so-called variable interest entities that allow financial firms to keep assets such as subprime-mortgage securities off their balance sheets. VIEs may contribute to another $88 billion in losses for banks roiled by the collapse of the housing market, according to bond research firm CreditSights Inc. Goldman, which hasn't had any of the industry's $163 billion in writedowns, said last month it may incur as much as $11.1 billion of losses from the instruments. - Read full story at »
• CIBC reported the second-biggest loss in its 141-year history writing down $1.46B. - Read full story at or at »
• Two Bank of Montreal commercial- paper funds were downgraded to junk by DBRS after the funds failed to meet margin calls for collateral, raising the prospect of more writedowns for the bank. - Read full story at or at »
• American International Group Inc., the world's largest insurer by assets, posted its biggest quarterly loss as a publicly traded company as it wrote down guarantees sold to protect fixed-income investors. The company declined in extended trading. The fourth-quarter net loss of $5.29 billion, or $2.08 a share, compared with profit of $3.44 billion, or $1.31, a year earlier. - Read full story at »
• Ambac Bailout May Cause Crisis. A consortium of banks is considering injecting $3 billion dollars into Ambac, the mono-line insurer that relies on its AAA rating to insure, amongst others, municipal bonds and CDOs (collateralized debt obligations). What appears as a rescue plan and may appease the markets short-term, may plant the seeds for disaster. Axel Merk - Read full story at »
• Fannie Mae, the largest source of money for U.S. home loans, posted a $3.55 billion fourth-quarter loss and said its slump will worsen this year as rising foreclosures send credit costs soaring. The net loss was triple analyst estimates. Fannie Mae recorded a $3.2 billion drop in the value of derivative contracts and $2.9 billion in credit expenses, according to a filing with the Securities and Exchange Commission. - Read full story at »
• Freddie Mac, the second-largest mortgage-finance company, posted a record $2.45 billion loss for the fourth quarter as rising defaults sent credit costs soaring. The net loss, which amounted to $3.97 a share, widened from $401 million, or 73 cents, a year earlier, the McLean, Virginia- based company said in a statement today. Freddie Mac, which buys and guarantees home loans, had predicted the results would be similar to the third-quarter's $2 billion loss. - Read full story at »
• Mortgage woes force Thornburg to pay $300M. If available cash cannot cover future margin calls, Thornburg Mortgage may have to begin selling assets to raise cash. Thornburg Mortgage Inc., a mortgage lender, said Thursday it has been the subject of margin calls on a portfolio of securities backed by alt-A mortgages. Alt-A mortgages are loans given to customers with minor credit problems or who cannot document their income or assets to get a traditional, prime mortgage. Margin calls force borrowers to repay loans or put up more collateral to secure them. - Read full story at »
• FDIC to Add Staff as Bank Failures Loom. - Read full story at »
• London Scottish Bank closing door to borrowers. Lender to focus on debt collection business, won't pay dividend. - Read full story at »

U.S. RECESSION

• Economy Slows to Near Crawl. Economy Slowed to Near Crawl, Minuscule 0.6 Percent Growth Rate in 4th Quarter. - Read full story at or at »
• Recession more likely this year survey. Business economists see growing evidence that the country has toppled into a recession. - Read full story at »
• Greenspan negative on US economy. The former chairman of the US central bank Alan Greenspan has warned that US economic growth has stalled and a quick recovery is not likely. "As of right now US economic growth is at zero," he said, adding the longer it stayed this way the greater the risk of a deep recession. Wall Street giants Goldman Sachs and Merrill Lynch have both forecast that the US economy will contract in 2008. The US Federal Reserve has said 2008 growth will be between 1.3% and 2%. The forecast, made last week, was half a percent lower than the Fed's previous estimation. The gloomy outlook was blamed on falling house prices, reduced bank lending, turmoil in the financial markets and higher oil prices. - Read full story at »
• Consumer confidence lowest in 14 years. Conference Board's measure tumbles below expectations amid concern about jobs and slowing business activity. - Read full story at »
• 11 reasons Bernanke's recession lasts till 2011. Last summer they assured us the subprime-credit crisis was "contained." We now know that was a big lie. They knew, had the facts, early warnings, lied and are still lying. More proof? They just told Congress: "America will avoid a recession." New data tells a different story. - Read full story at »
  1. Stagflation: Bernanke's no-win Achilles heel.
  2. Housing-credit meltdown: We've got a long way to go!
  3. Commodities: World's new reserve 'currency,' not dollars.
  4. Toxic derivatives: World's $516 trillion ticking time bomb.
  5. Massive debt: Everywhere, trade, federal, states, local.
  6. America's new 'pushers:' Banks feeding consumer addicts.
  7. More wars: Pentagon predicts bigger, costlier conflicts.
  8. Greed: Wall Street and Corporate America's defining 'value.'
  9. Democracy failing: America now run by 35,000 lobbyists!
  10. America's already in a recession, and in denial.
  11. Class warfare: Superrich vs. Main Street America.

U.S. DOLLAR-EURO

• Greenspan tells Gulf oil producers to dump the dollar. - Read full story at »
• The dollar fell to a record low against the euro for a third straight day as a weakening U.S. labor market and slower-than-forecast economic growth bolstered bets the Federal Reserve will cut interest rates through June. - Read full story at »
• Dollar to slip into steady decline as expert paints a bleak picture. The dollar is heading into a period of sustained decline as recession tightens its grip on the US economy, one of the world's leading investment gurus claimed yesterday. Painting a bleak picture of the road ahead, Jim Rogers, the former head of research with the global Quantum Fund investment partnership, blamed the US Federal Reserve for tipping the US economy into crisis, stating that it has made the same mistakes the Bank of England did in the 1960s when sterling lost its position as a global reserve currency along with its status as the preferred medium of exchange for trade in many commodities. Mr. Rogers said that some countries, such as Iran, were already demanding euros for their oil and that this trend will grow, extending to other commodities as the currency declines in value. He declined to put a value on the size of the potential dollar decline. He was slightly more forthcoming on the length of the downturn in financial and property related investments. "You do not undo a bubble that was 15 years in the making in a few years," he advised, stating that it could take years to unwind the mess created by the subprime crisis in the US. - Read full story at »
• Real, Peso Show U.S. Hegemony Fading in Latin America. - Read full story at »
• Soaring euro threatens European jobs exodus. - Read full story at »

INFLATION

• Wholesale Prices Jump in January. Higher Costs for Food, Energy and Medicine Push Wholesale Prices Up Sharply. Battered by bad economic news, consumer confidence plunged while wholesale food, energy and medicine costs soared, pushing inflation up at the fastest pace in a quarter century. The Labor Department said Tuesday that wholesale inflation jumped by 1 percent in January, more than double the increase that analysts had been expecting. Meanwhile, the New York-based Conference Board reported that its confidence index fell to 75.0 in February, down from a revised January reading of 87.3. The drop was far below the 83 reading that analysts had forecast and put the index at its lowest level since February 2003, a period that reflected anxiety in the leadup to the Iraq war. - Read full story at »
• Stagflation not a problem Bernanke. Federal Reserve Chairman Ben Bernanke says the 1970s conundrum is far off, but rising inflation makes economic stimulus difficult. - Read full story at »
• Unfortunately one of the few things still made in America is inflation. In fact, it now ranks as our greatest export. A significant by-product of the current global economic system, wherein Americans spend money they do not earn to buy foreign products that they do not make, is that trillions of dollars are now parked in foreign banks just looking for somewhere to go. Peter Schiff - Read full story at »
• Double trouble for consumers: Oil, food spike. Sharply higher prices at the supermarket and the gas pump are squeezing discretionary spending. As anyone who's been to the gas station or supermarket lately knows, the prices of fuel and food are on the rise. And you haven't seen anything yet, some experts say. - Read full story at »
• Gas Prices Soar, Posing a Threat to Family Budget. - Read full story at »
• Bush finds out about $4 gas forecasts. President says best way to help consumers cope is to make his tax cuts permanent. - Read full story at »
• A top Federal Reserve official said on Tuesday that a weakened U.S. economy was a bigger worry than higher inflation, suggesting a willingness to lower interest rates further as the central bank tackles "difficult times." "I do not expect the recent elevated inflation rates to persist," Fed Vice Chairman Donald Kohn told business school students at the University of North Carolina at Wilmington. "In my view, the adverse dynamics of the financial markets and the economy have presented the greater threat to economic welfare in the United States," he said. Kohn painted a gloomy picture of economic prospects. Retail sales and manufacturing data have been weak, and surveys of consumers and businesses in the current quarter have been almost uniformly downbeat, he said. The central bank has wanted to reassure "lenders and spenders" that it stands ready to prevent "an especially adverse outcome," he said. - Read full story at »
• U.K. Shoppers warned bigger bills on way. - Read full story at »

INTEREST RATES

• Bernanke Signals Fed Prepared to Lower Rates Again. Federal Reserve Chairman Ben S. Bernanke said the U.S. central bank "will act in a timely manner" to insure against "downside risks" to the economy. "The Federal Open Market Committee will be carefully evaluating incoming information bearing on the economic outlook and will act in a timely manner as needed to support growth and to provide adequate insurance against downside risks," Bernanke said in semiannual testimony on the economy before the House Financial Services Committee in Washington. Bernanke's remarks may reinforce investors' expectations that the central bank will lower interest rates further to help a faltering economy. While officials have expressed concern that inflation is accelerating, Bernanke signaled he shares Vice Chairman Donald Kohn's view that financial market turmoil and slowing growth pose the "greater threat." The Fed chief's testimony came as government figures today showed the U.S. economic expansion, now in its seventh year, is increasingly in peril. Durable-goods orders fell 5.3 percent, more than forecast, in January as companies reduced spending. New-home sales fell last month to the lowest level since February 1995 even as prices slid by a record 15 percent from a year ago. Bernanke referred to "downside" risks for the economy four times in his testimony, and noted that data since the last Fed meeting in January pointed to "sluggish" growth. Policy choices have also become more complicated as energy and commodity prices rose in recent weeks, he indicated. - Read full story at »
• Bernanke Readiness to Cut Rates Stokes Price Concerns. Federal Reserve Chairman Ben S. Bernanke's readiness to cut interest rates to avert a recession is stoking concerns that prices will get out of hand. "Bernanke has really overweighted the economic risks relative to inflation," said John Silvia, chief economist at Wachovia Corp. in Charlotte, North Carolina, following the Fed chief's testimony to Congress yesterday. "He may get some disagreement" among colleagues on the Federal Open Market Committee, Silvia said. Investors' expectations for inflation over the next 10 years jumped to the highest since June after Bernanke pledged to the House Financial Services Committee to act in a "timely manner" to combat "downside risks" to growth. A day after government figures showed wholesale costs rose 7.4 percent in January from a year ago, Bernanke said the price outlook has deteriorated "slightly." "They will keep cutting," said Kurt Karl, chief U.S. economist at Swiss Reinsurance Co. in New York. "If inflation looks like it is taking off quite rapidly, or inflation expectations take off, they will have to backtrack." The FOMC last month lowered the benchmark rate by 1.25 percentage points in nine days, the steepest reduction in two decades, to 3 percent. The two decisions each saw one dissenting vote on the Fed panel. - Read full story at »
• Ben S. Bernanke, who has reduced interest rates faster than any Federal Reserve chairman since 1982, is failing to bring down the cost of credit for most American homeowners. The average fixed rate for a 30-year home loan rose more than half a percentage point during the past four weeks to 6.04 percent, according to Freddie Mac, the world's second-largest mortgage buyer after Fannie Mae. The increase occurred after the Fed lowered its benchmark rate by 0.75 percent on Jan. 22 and cut the rate by a further half-point eight days later. - Read full story at »
• BoE fears largest ever peacetime liquidity crisis. The Bank of England's Deputy Governor today warned that the ongoing credit crunch had left the Monetary Policy Committee uncertain as to its next move as it and fellow central banks face up to what she described as the "largest ever peacetime liquidity crisis. - Read full story at »
• The perceptive Charles Dumas of Lombard Street Research said that the policy of even more interest rate cuts is "disastrous". Dumas said the policy could actually lead to recession, rather than avert it, as the resulting inflation was eventually squeezed out of the U.S. economy or as consumers' real incomes fell because of higher prices. "The Fed's childish denial that food and energy prices matter (they are not included in the "core" inflation measure) is contributing to the strong upward trend in commodity prices, as investors globally fly from the dollar into real assets," he said. Gold.ie
• Interest rates: The new conundrum. When Alan Greenspan hiked short-term rates, long-term rates barely moved. Ben Bernanke is cutting interest rates but bond yields are rising. Here's what it means. - Read full story at »

REAL ESTATE

• Existing Home Sales Hit 9-Year Low. - Read full story at or at »
• New home sales near a 13-year low. January home sales slip 2.8%, below consensus estimates, as prices continue their decline. - Read full story at »
• The decline in residential real estate accelerated though the end of 2007, and home prices in 20 key markets plunged 9.1% for the year, according to a survey released Tuesday. - Read full story at »
• Homeowners Losing Equity Lines. - Read full story at »
• The subprime crisis is just the tip of the iceberg. Fundamental changes in American life may turn today's McMansions into tomorrow's tenements. The Next Slum? - Read full story at »
• Say good-bye to granite countertops. High-end kitchen and bath renovations just aren't boosting a home's value the way they used to. Sellers who succumbed to home over-improvement syndrome are feeling the pain. - Read full story at »
• It's Not Surprising Prices Are Declining. - Read full story at »
• A Market that's Still Rolling Downhill In California. - Read full story at »
• A Metaphor For The Building Boom Gone Bust. - Read full story at »
• A Reality Check For Unsold Realty. - Read full story at »
• It Was Definitely A Bubble. - Read full story at »
• Sellers Trying To Catch A Slinky Going Down The Stairs. - Read full story at »
• There Will Be Blood In California. - Read full story at »
• Too Much Supply, Not Enough Demand In Florida. - Read full story at »
• The InvesTech Housing Bubble Bellwether Index bounced up once again this past week and is nearing its recent peak of early February. While some may feel that a bottom in the housing market may be near, we will closely watch mortgage rates, housing sales and inventories during the spring selling season. Existing home sales remain in a steep downdraft. Figures for January are off 33 percent since June of 2005. As recession fears continue, downward pressures will not likely diminish anytime soon. Analysis by James Stack, InvesTech Research.

FORECLOSURES-MORTGAGES

• U.S. Home Foreclosures Jump 90% as Mortgages Reset. Bank seizures of U.S. homes almost doubled in January as property owners failed to make higher payments on adjustable-rate mortgages. Repossessions rose 90 percent to 45,327 last month from the same period a year ago, according to RealtyTrac Inc., a seller of foreclosure statistics that has a database of more than 1 million properties. Total foreclosure filings, which include default and auction notices as well as bank seizures, increased 57 percent. - Read full story at or at »
• White House to veto foreclosure bill. $4 billion housing bill is too expensive for the administration and would 'slow the recovery of the housing sector.' - Read full story at »
• Housing bill will 'bail out lenders' Bush. President reiterates his objection to a proposed change to help homeowners in bankruptcy and the creation of a $4 billion fund to let agencies buy foreclosed homes. - Read full story at »
• Banks Lose to Deadbeat Homeowners as Loans Sold in Bonds Vanish. Joe Lents hasn't made a payment on his $1.5 million mortgage since 2002. That's when Washington Mutual Inc. first tried to foreclose on his home in Boca Raton, Florida. The Seattle-based lender failed to prove that it owned Lents's mortgage note and dropped attempts to take his house. Subsequent efforts to foreclose have stalled because no one has produced the paperwork. - Read full story at »
• Cleveland: ghost town created by America's loan scandal. - Read full story at »
• Vulture Fund Deals With Delinquent Homeowners Lost by Subprime. - Read full story at »

THE THREE TRILLION DOLLAR WAR

• The cost of the Iraq and Afghanistan conflicts have grown to staggering proportions. - Read full story at »

GEOPOLITICAL

• Al-Qaeda Directing Terrorist Groups on Afghan Border, U.S. Says. - Read full story at »
• Kurd-Arab Kirkuk Clash Is 'Ticking Time Bomb,' UN Mediator Says. - Read full story at »
• Iran 'number one world power': Ahmadinejad. President Mahmoud Ahmadinejad declared on Thursday that Iran was the world's "number one" power, as he launched a bitter new assault on domestic critics he accused of siding with the enemy. "Everybody has understood that Iran is the number one power in the world," Ahmadinejad said in a speech to families who lost loved ones in the 1980-1988 Iran-Iraq war. "Today the name of Iran means a firm punch in the teeth of the powerful and it puts them in their place," he added in the address broadcast live on state television. Ahmadinejad's comments come amid renewed Western efforts on the UN Security Council to agree a third package of sanctions against Tehran over its refusal to suspend sensitive nuclear activities. - Read full story at »
• Iran Won't Comply With Proposed UN Nuclear Demands, Envoy Says. - Read full story at »
• The U.N. nuclear monitoring agency presented documents Monday that diplomats said indicate Iran may have focused on a nuclear weapons program after 2003 - the year that a U.S. intelligence report says such work stopped. Iran again denied ever trying to make such arms. Ali Ashgar Soltanieh, the chief Iranian delegate to the International Atomic Energy Agency, dismissed the information showcased by the body as "forgeries." - Read full story at »
• Iran fails to answer weapons questions: IAEA. - Read full story at »
• Iran's Supreme Leader Ayatollah Ali Khamenei has hailed Iran's "great victory" over its nuclear programme. Mr Khamenei praised President Mahmoud Ahmadinejad's handling of the issue. Last week, the UN nuclear watchdog said Iran was being more transparent, but had not given "credible assurances" that it was not building a bomb. On Monday, the agency heard that Iran may have continued secret work on nuclear weapons after 2003, the date US intelligence suggested the work ceased. - Read full story at »
• Ahmadinejad: US Should Apologize to Iran. Iranian President Mahmoud Ahmadinejad called on the U.S. and its allies to "apologize" to Iran for accusing it of seeking nuclear weapons a day after the U.N. nuclear watchdog released its latest report on Iran's atomic program. Ahmadinejad said the report by the International Atomic Energy Agency vindicated Iran and warned that Tehran would take unspecified "reciprocal measures" against any country that imposed additional sanctions against Iran. The IAEA report said several past questions about Iran's nuclear program had been resolved, but highlighted Tehran's continued refusal to halt uranium enrichment. Ahmadinejad said in a televised address to the nation that the best way for the U.S. and its allies to "compensate for their mistakes" is to "apologize and pay compensation." "If they continue" pursuing sanctions, he said, "we have definitely drawn up reciprocal measures." Ahmadinejad did not elaborate. AP
• Hizbullah head Hassan Nasrallah on Friday said Israel's "disappearance" is an inevitable fact. "If Israel's attacks Lebanon again, we will wage war without any preconditions," Nasrallah said during a speech in Beirut in honor of Hizbullah arch-terrorist Imad Mughniyeh, who was assassinated last week in Damascus. "The disappearance of Israel is an inevitable fact. It is an historical process in the region which will come to an end in several years," he said. - Read full story at »
• Canada and the U.S. have signed an agreement that paves the way for the militaries from either nation to send troops across each other's borders during an emergency, but some are questioning why the Harper government has kept silent on the deal. Neither the Canadian government nor the Canadian Forces announced the new agreement, which was signed Feb. 14 in Texas. The U.S. military's Northern Command, however, publicized the agreement with a statement outlining how its top officer, Gen. Gene Renuart, and Canadian Lt.-Gen. Marc Dumais, head of Canada Command, signed the plan, which allows the military from one nation to support the armed forces of the other nation during a civil emergency. The new agreement has been greeted with suspicion by the left wing in Canada and the right wing in the U.S. The left-leaning Council of Canadians, which is campaigning against what it calls the increasing integration of the U.S. and Canadian militaries, is raising concerns about the deal. - Read full story at »

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The GoldBugg Report - Profit During Times of High Inflation, Own Precious Metals
Posted by Worldwide Precious Metals on Tuesday, March 04, 2008