Oct 31

Solutions for Everything, Answers to Nothing

Gold Price Comments Off on Solutions for Everything, Answers to Nothing
Could one day’s Financial Times be the best £2.50 humanity ever spends…?
 

WEDNESDAY we picked up an issue of the Financial Times, writes Bill Bonner in his Diary of a Rogue Economist – the so-called pink paper due to its distinctive color.
 
We wondered how many wrongheaded, stupid, counterproductive, delusional ideas one edition can have.
 
We were trying to understand how come the entire financial world (with the exception of Germany) seems to be singing from the same off-key, atonal and bizarre hymnbook. All want to cure a debt crisis with more debt.
 
The FT is part of the problem. It is the choirmaster to the economic elite, singing confidently and loudly the bogus chants that now guide public policy.
 
Look on practically any financial desk in any time zone anywhere in the world, and you are likely to find a copy. Walk over to the ministry of finance…or to an investment bank…or to a think tank – there’s the salmon-pink newspaper.
 
Yes, you might also find a copy of the Wall Street Journal or the local financial rag, but it is the FT that has become the true paper of record for the economic world.
 
Too bad…because it has more bad economic ideas per square inch than a Hillary Clinton speech. It is on the pages of the FT that Larry Summers is allowed to hold forth, with no warning of any sort to alert gullible readers. In the latest of his epistles, he put forth the preposterous claim that more government borrowing to pay for infrastructure would have a 6% return.
 
He says it would be a “free lunch” because it would not only put people to work and stimulate the economy, but also the return on investment, in terms of GDP growth, would make the project pay for itself…and yield a profit.
 
Yo, Larry, Earth calling…Have you ever been to New Jersey?
 
It is hard enough for a private investor, with his own money at stake, to get a 6% return. Imagine when bureaucrats are spending someone else’s money…when decisions must pass through multiple levels of committees and commissions made up of people with no business or investment experience – with no interest in controlling costs or making a profit…and no idea what they are doing.
 
Imagine, too, that these people are political appointees with strong, and usually hidden, connections to contractors and unions.
 
What kind of return do you think you would really get? We don’t know, but we’d put a minus sign in front of it.
 
But the fantasy of borrowing for “public investment” soaks the FT.
 
It is part of a mythology based on the crackpot Keynesian idea that when growth rates slow you need to stimulate “demand”.
 
How do you stimulate demand?
 
You try to get people to take on more debt – even though the slowdown was caused by too much debt.
 
On page 9 of Wednesday’s FT its chief economics commentator, Martin Wolf (a man who should be roped off with red-and-white tape, like a toxic spill), gives us the standard line on how to increase Europe’s growth rate:
“The question […] is how to achieve higher demand growth in the Euro zone and creditor countries. [T]he Euro zone lacks a credible strategy for reigniting demand [aka debt].”
It is not enough for people to decide when they want to buy something and when they have the money to pay for it. Governments…and their august advisers on the FT editorial page…need a “strategy”.
 
On its front page, the FT reports – with no sign of guffaw or irony – that the US is developing a “digital divide”.
 
Apparently, people in poor areas are less able to pay $19.99 a month for broadband Internet than people in rich areas. So the poor are less able to go online and check out the restaurant reviews or enjoy the free pornography.
 
This undermines President Obama’s campaign pledge of giving every American “affordable access to robust broadband.”
 
The FT hardly needed to mention it. But it believes the US should make a larger investment in broadband infrastructure – paid for with more debt, of course!
 
Maybe it’s in a part of the Constitution that we haven’t read: the right to broadband. Maybe it’s something they stuck in to replace the rights they took out – such as habeas corpus or privacy. 
 
We don’t know. We only bring it up because it shows how dopey the pink paper – and modern economics – can be.
 
Quantity can be measured. Quality cannot. Broadband subscriptions can be counted. The effect of access to the internet on poor families is unknown.
 
Would they be better off if they had another distraction in the house? Would they be happier? Would they be healthier? Would they be purer of heart or more settled in spirit?
 
Nobody knows. But a serious paper would at least ask.
 
It might also ask whether more “demand” or more GDP really makes people better off. It might consider how you can get real demand by handing out printing-press money. And it might pause to wonder why Zimbabwe is not now the richest country on earth.
 
But the FT does none of that.
 
Over on page 24, columnist John Plender calls corporations on the carpet for having too much money. You’d think corporations could do with their money whatever they damned well pleased.
 
But not in the central planning dreams of the FT. Corporations should use their resources in ways that the newspaper’s economists deem appropriate. And since the world suffers from a lack of demand, “corporate cash hoarding must end in order to drive recovery.”
 
But corporations aren’t the only ones at fault. Plender spares no one – except the economists most responsible for the crisis and slowdown.
“At root,” he says of Japan’s slump (which could apply almost anywhere these days), the problem “results from underconsumption.”
Aha! Consumers are not doing their part either.
 
Summers, Wolf, Plender and the “pink paper” have a solution for everything. Unfortunately, it’s always the same solution and it always doesn’t work.
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Feb 04

Gold Price Up, Investor Interest Down

Gold Price Comments Off on Gold Price Up, Investor Interest Down
Gold Investor Index slips to 18-month low as price rises…
 

GOLD PRICES rose in January for the first month in five in each of Dollars, Euros and Sterling, writes Adrian Ash at BullionVault.
 
Private investor sentiment, in contrast, slipped to its lowest level since July 2012, as measured by our proprietary Gold Investor Index.
 
Calculated since October 2009, the Gold Investor Index measures the balance of people who added gold vs. those who cut their holdings using BullionVault, the world’s No.1 precious metals market for private investors online.
 
Now used by more than 51,000 people worldwide, Bullionvault has found nearly 90% of its customers in Western Europe or North America. Our index offers a unique window onto self-directed gold investor sentiment in the developed world. 
 
Now, a reading above 50 indicates more buyers than sellers. Not more buying by weight. Rather the number of buyers, as revealed by actual behavior rather than merely a “survey” of intentions.
 
Peaking at 71.7 when the gold price peaked in September 2011, the Gold Investor Index slipped last month from 52.9 to 51.9, the lowest January on our data series.
 
Gold price gains, meantime, showed up for investors in all currencies, even the resurgent Japanese Yen. The average monthly price rose 1.8% in US Dollar, Euro and British Pound terms on average. So while sentiment remained positive, the balance of investors buying gold eased back after they’d bought the drops delivered so aggressively in 2013.
 
But also note that, by weight, the sum total of gold owned by private investors on BullionVault slipped for the second month running in January. Dropping 0.4% to 32.175 tonnes, it edged down to the lowest level since July 2013.
 
For all those headlines and tipsheets proclaiming a turnaround in gold prices, private gold investors making their own decisions remain wary of chasing this rally just yet.
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Oct 01

What No-Fed-Taper Did to Gold Investor Sentiment

Gold Price Comments Off on What No-Fed-Taper Did to Gold Investor Sentiment

Bullionvault’s Gold Investor Index edges down from 4-month high, but only just…

WHAT DID the US Fed’s taper-no-taper dance do to gold and other assets prices last month? asks Adrian Ash at BullionVault.

You can see that simply by glancing at the charts. But what did its shilly-shallying do to the central bank’s long-term credibility?

Well, according to our Gold Investor Index here at Bullionvault – the world’s largest provider of physical bullion ownership online – it took some of the heat out of investor sentiment towards gold. But not a lot.

The Gold Investor Index slipped from a 4-month high in September. Measuring the balance of customers who added to their gold holdings over those who reduced them, it edged down from 53.8 in August to 53.0 last month.

The Gold Investor Index peaked at 71.1 in September 2011. A reading of 50 would signal an equal number of net gold buyers and sellers.

Last month’s reading compares with 52.2 in September 2012. So big picture, the balance of private investor sentiment was stronger even as “tapering” loomed than when this current program of quantitative easing was first begun 12 months before.

No, the Fed didn’t reverse all of this September’s investor caution on gold when it then lost its bottle and stuck with $85 billion of monthly money printing. And yes, price-wise September failed to deliver gold’s typically strong start to autumn. But that gave new investors the chance to buy the dip. And the number of people choosing gold to insure a portion of their savings continues to grow.

Buying gold is always a political vote against central banks. Or rather, it’s way of betting that central banks are mismanaging money. As the Gold Investor Index shows, the US Fed’s flip-flopping over its QE policy continues to weaken the central bank’s credibility with savers still further.

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