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| Last Updated: Oct 10th, 2008 - 11:32:05 |
Newsletters
:
2008 Newsletters
:
22 August 2008
Thought for the Day
As we see from newspaper stories around the world the journalists are starting to understand the world's money woes.
It is clear that the basis of paper money is confidence in its value. This confidence is badly shaken in many quarters but so far not yet in the public arena.
We are still at the beginning stages of the bust and it is not clear what will happen. Certainly, the Central Bankers are very concerned and are working together to keep everything afloat. This may just ensure that we all go down together.
Let us hope not.
Aug 22, 2008, 10:53
Newsletters
:
2008 Newsletters
:
22 August 2008
The Eagle Has Been Grounded
US Mint Halts Gold-Coin Sales After Supply Depleted Amid Price Drop.
So I rang up the New Zealand Mint and asked them if they could sell me some Silver 1 ounce coins.
"Certainly", they said. "They are spot price plus 18% and that works out at $22 each". "Send the money immediately and we will deliver in 6 or 7 weeks. There is a hold up on the supply of silver blanks at the moment"
It seems as if there is a world wide shortage of gold and silver at the moment. This is interesting because the price of gold has just dropped 20% and the price of silver has dropped even more.
According to standard economic theory, when things become scarce the price goes up. Oil went up. Corn went up. Copper went up. Iron ore and coal have gone up.
Gold and silver are in short supply and demand is going up but the price is going down.
Have the laws of economics been laid aside?
Aug 22, 2008, 09:45
Newsletters
:
2008 Newsletters
:
22 August 2008
Bank Borrowing From ECB Is Out Of Control
In May the Reserve Bank of New Zealand decided to accept mortgages as collateral from banks if they needed cash urgently. The carry trade from Japan may reduce sharply at any time and this could trigger off such a need from the banks. Remember, they borrow short and lend out long on mortgages. This is inevitable under the current money regime and is the classic recipe for disaster.
The Europeans also have a similar problem which is creating a stir as the housing markets in Spain, Britain and Ireland decline significantly. But the Euro is a different sort of money from normal national money. It is not guaranteed by any one nation and Central Banks are not supposed to be doing what they are doing.
How will they solve this problem - print more money and launch another round of inflation? This is the standard Keynesian solution. It has worked so far but the problems just keep coming back - bigger and bigger!
Aug 22, 2008, 09:33
Newsletters
:
2008 Newsletters
:
22 August 2008
Is Deleveraging Bad for the Economy?
This article gives us a good explanation for the difference between "Real Savings" from earned money and credit from "thin air" as produced by banks. It also describes how the banking bust can manifest itself and the desired end of all that.
The point of major interest is that it shows that economics is about real goods and services producing real wealth and is not to be confused with Keynes theories about the importance of consumers keeping their spending up and thus keeping demand up. We are now in the throes of finally proving that Keynes got it wrong. And Mises got it right.
The implications are interesting.
[ Visit Website ]
Aug 21, 2008, 18:01
Newsletters
:
2008 Newsletters
:
22 August 2008
Still Bleeding
Some people are saying that the Credit Crunch is over and done with. We can relax and carry on as before.
Don't you believe it. Serious voices are telling it like it is!
"The rate at which big banks lend to each other, meanwhile, hit a two-month high. One of them may go bust in coming months, mused Kenneth Rogoff, the IMF’s former chief economist, adding his name to the lengthening list of those who think the worst is yet to come. Given what has already been endured, that is a blood-curdling thought."
Aug 21, 2008, 17:23
Newsletters
:
2008 Newsletters
:
22 August 2008
Silver Has Run Out -- Now
Ever since the Hunt brothers tried to corner the Silver market the world has had an interest in silver. At one stage Warren Buffet owned about 4000 tonnes of the stuff. And he is not known for being fiscally stupid!
A funny thing is happening in the market place at the moment. Silver is hard to get. The demand is getting stronger and the normal suppliers are not able to supply immediately. Yet the price is dropping.
When normal economics stops applying in the market place then the only conclusion to come to is that the market is not a free market.
How interesting!
Aug 21, 2008, 11:16
Newsletters
:
2008 Newsletters
:
22 August 2008
Sharp Contraction In Money Supply Points To Wall Street Crunch
We have spoken about how the expansion of the M3 money supply leads on to inflation. (More money chasing the same goods.)
Now the M3 money expansion in the USA has suddenly crunched to a standstill.
Oops!
Aug 20, 2008, 11:10
Newsletters
:
2008 Newsletters
:
22 August 2008
Quote for the Week
A last note for the week, on gold, from Lord Rees-Mogg:
“In 1908, good farmland in England was worth about 45 pounds per acre. Similar land would now be worth about 4,500 pounds an acre...On that basis, land has risen by about 100 times...over the last century.
“We can be more precise about gold. In 1908, an ounce of gold was worth four sovereign coins. At the current dollar price of $900, an ounce of gold is worth about 450 pounds, or about 110 times what it was worth a century ago.”
As a store of value, gold is not perfect. But it’s a whole lot better than paper .
Jul 22, 2008, 10:25
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