Perspectives on the global economic changes

[Neshant]

I'm going to be buying gold all throughout 2014.

[chanakyaa]

China strengthens Pakistan ties with $6.5bn loan for nuclear power
http://www.ft.com/cms/s/0/4407fcee-72e9 ... z2pCPt2Q4A

[Austin]

I'm going to be buying gold all throughout 2014.

Agreed , Will try the same although Gold in India are priced higher thanks to beloved FM

What are the consequences of taxing gold higher other then encouraging smuggling and black market ?

[svinayak]

I'm going to be buying gold all throughout 2014.

Agreed , Will try the same although Gold in India are priced higher thanks to beloved FM

What are the consequences of taxing gold higher other then encouraging smuggling and black market ?

India is going to import the same amount of gold including smuggling ~1000 MT of Gold
So Indians have paid $300 more for every ounce of Gold which amounts to billions of dollars extra due to govt imposed TAX.
Approx $10+ B due to high price

This is adding to the CAD and foreign exchange crisis.

[Neshant]

Since none of the national debts being racked up are going to be repaid, there's going to be a devaluation of some kind.

Developed countries with unpayable debt up the wazoo will push for SDRs as a means of stealth devaluation of their currencies should bond rates start to rise. That must be their Eject button which is why they are unconcerned with running up more and more national debt every year.

This guy below tries to articulate that. But I doubt he has any in depth understanding of it. Still, I think there's merit to some of what he says.

[svinayak]

China and russia and all central banks have been hording gold in the past 3 years. When banks and countries do this its telling you something. Don't look at what our news media is saying, look at what they are not saying. The establishment doesn't want you to be protected! Please Please buy gold while you can. Buy as little as a 1 gram for around $50.00. There will be a day in the future you wont even be able to find online a gram of gold. Trust me your children and family may not understand, but when the times comes they will thank you for having for seen what many didn't see coming!

[svinayak]

Glenn Beck Predicts New World Order

Currency will fall apart into different zones

[Tanaji]

Glenn Beck?!?! Really?? Oh come on...

[TSJones]

Glenn Beck?!?! Really?? Oh come on...

If he has to, Glenn will cry for you. Don't you want to see Glenn cry?

[Christopher Sidor]

The New German Question --- New York Books Review
A fascinating article about the Euro-crisis and Germany's place in it. The Euro was born ought of fear. The fear was of a united Germany with its fabled Currency "Deutsche Mark". To constraint Germany the Euro was born as a compromise to forever bind Germany to Europe. Many, included Germans, pointed out the fallacy of having a monetary union without a fiscal union. But as the article correctly points out

Kohl[German Chancellor at the time of reunification] cogently argued that a monetary union would need a fiscal and therefore also a political union to accompany it; but Mitterrand[French President at the time of reunification] and Andreotti[Italian Leader] were having none of this. The idea was that they should get a handle on Germany’s currency, not that Germany should get a handle on their national budgets. And so some of the fundamental defects that the eurozone is struggling to correct today—monetary union without mutual oversight of budgets, debts, and banks—emerged from the turgid politics of its inception. As the historian Heinrich August Winkler observes: “To solve the German question with the consent of Europe, the European question had to remain open.”

Now for the view from German side

"You see," says one senior German politician, "I let my daughter use my credit card, but I check the transactions record." I tease out the point: “And if the French girl is blowing it all on beautiful couture dresses…?” “Exactly!” he snorts. German officials say privately, “We have to pretend to treat France as an equal.”
....
....
When outsiders ask us[Germans] for leadership, what they mean is money.

It took an earth shattering event, the fall of Berlin Wall and the reunification of Germany, for Euro to be born. It was born out of fear and if a Fiscal union has to come to EU or shall we say Eurozone it will be via fear. Right now Euro has been propped up just so as to make sure that it does not fail. It has not got to the edge of abyss. Maybe Eurozone can come together. But one cannot have a fiscal union only for Eurozone and the rest of the EU countries staying away from that zone. European Parliament is for every EU country and not only for Eurozone countries. European Commision is for each EU country and not only for Eurozone countries. And if there is another institution added exclusively for Eurozone countries then what happens to the so-called trust between Europeans?
Added to this is another human frailty very few have willingly given up power. The act of reuniciation takes a lot. It is not possible for mere mortals to undertake that step. Are the Europeans willing to give up their parliaments their sovereignty to a building housed in Brussels and in Frankfurt?

[Austin]

Russian Banks Buy 181.4 Tons Of Gold In 2013

Biggest buyers according to Finance Ministry include Sberbank (48.5 tons), VTB (38.9 tons), Gazprombank (29.1 tons), Nomos Bank (19.6 tons), Lanta Bank (8.6 tons).

So, like China, we are sure Russia will be sending a big "Thank You" to the Fed (and BIS) for their efforts.

[Austin]

Could The Fed Lose Control Of The Frankenstein Economy It Has Created?

Martin Armstrong Warns Europeans Of The Coming Expropriation Of 10% Of Everyone's Accounts

[svinayak]

http://wtfrly.com/2013/10/23/never-saw- ... sW0aPRDuAg

Never Saw It Coming: Why the Financial Crisis Took Economists By Surprise
October 23, 2013


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Foreign Affairs
By Alan Greenspan
t was a call I never expected to receive. I had just returned home from playing indoor tennis on the chilly, windy Sunday afternoon of March 16, 2008. A senior official of the U.S. Federal Reserve Board of Governors was on the phone to discuss the board’s recent invocation, for the first time in decades, of the obscure but explosive Section 13(3) of the Federal Reserve Act. Broadly interpreted, that section empowered the Federal Reserve to lend nearly unlimited cash to virtually anybody: in this case, the Fed planned to loan nearly $29 billion to J.P. Morgan to facilitate the bank’s acquisition of the investment firm Bear Stearns, which was on the edge of bankruptcy, having run through nearly $20 billion of cash in the previous week.
The demise of Bear Stearns was the beginning of a six-month erosion in global financial stability that would culminate with the failure of Lehman Brothers on September 15, 2008, triggering possibly the greatest financial crisis in history. To be sure, the Great Depression of the 1930s involved a far greater collapse in economic activity. But never before had short-term financial markets, the facilitators of everyday commerce, shut down on a global scale. As investors swung from euphoria to fear, deeply liquid markets dried up overnight, leading to a worldwide contraction in economic activity.
The financial crisis that ensued represented an existential crisis for economic forecasting. The conventional method of predicting macroeconomic developments — econometric modeling, the roots of which lie in the work of John Maynard Keynes — had failed when it was needed most, much to the chagrin of economists. In the run-up to the crisis, the Federal Reserve Board’s sophisticated forecasting system did not foresee the major risks to the global economy. Nor did the model developed by the International Monetary Fund, which concluded as late as the spring of 2007 that “global economic risks [had] declined” since September 2006 and that “the overall U.S. economy is holding up well . . . [and] the signs elsewhere are very encouraging.” On September 12, 2008, just three days before the crisis began, J.P. Morgan, arguably the United States’ premier financial institution, projected that the U.S. GDP growth rate would accelerate during the first half of 2009. The pre-crisis view of most professional analysts and forecasters was perhaps best summed up in December 2006 by The Economist: “Market capitalism, the engine that runs most of the world economy, seems to be doing its job well.”
What went wrong? Why was virtually every economist and policymaker of note so blind to the coming calamity? How did so many experts, including me, fail to see it approaching? I have come to see that an important part of the answers to those questions is a very old idea: “animal spirits,” the term Keynes famously coined in 1936 to refer to “a spontaneous urge to action rather than inaction.” Keynes was talking about an impulse that compels economic activity, but economists now use the term “animal spirits” to also refer to fears that stifle action. Keynes was hardly the first person to note the importance of irrational factors in economic decision-making, and economists surely did not lose sight of their significance in the decades that followed. The trouble is that such behavior is hard to measure and stubbornly resistant to any systematic analysis. For decades, most economists, including me, had concluded that irrational factors could not fit into any reliable method of forecasting.
But after several years of closely studying the manifestations of animal spirits during times of severe crisis, I have come to believe that people, especially during periods of extreme economic stress, act in ways that are more predictable than economists have traditionally understood. More important, such behavior can be measured and should be made an integral part of economic forecasting and economic policymaking. Spirits, it turns out, display consistencies that can help economists identify emerging price bubbles in equities, commodities, and exchange rates — and can even help them anticipate the economic consequences of those assets’ ultimate collapse and recovery.
SPIRITS IN THE MATERIAL WORLD
The economics of animal spirits, broadly speaking, covers a wide range of human actions and overlaps with much of the relatively new discipline of behavioral economics. The study aims to incorporate a more realistic version of behavior than the model of the wholly rational Homo economicus used for so long. Evidence indicates that this more realistic view of the way people behave in their day-by-day activities in the marketplace traces a path of economic growth that is somewhat lower than would be the case if people were truly rational economic actors. If people acted at the level of rationality presumed in standard economics textbooks, the world’s standard of living would be measurably higher.
From the perspective of a forecaster, the issue is not whether behavior is rational but whether it is sufficiently repetitive and systematic to be numerically measured and predicted. The challenge is to better understand what Daniel Kahneman, a leading behavioral economist, refers to as “fast thinking”: the quick-reaction judgments on which people tend to base much, if not all, of their day-to-day decisions about financial markets. No one is immune to the emotions of fear and euphoria, which are among the predominant drivers of speculative markets. But people respond to fear and euphoria in different ways, and those responses create specific, observable patterns of thought and behavior.
Perhaps the animal spirit most crucial to forecasting is risk aversion. The process of choosing which risks to take and which to avoid determines the relative pricing structure of markets, which in turn guides the flow of savings into investment, the critical function of finance. Risk taking is essential to living, but the question is whether more risk taking is better than less. If it were, the demand for lower-quality bonds would exceed the demand for “risk-free” bonds, such as U.S. Treasury securities, and high-quality bonds would yield more than low-quality bonds. It is not, and they do not, from which one can infer the obvious: risk taking is necessary, but it is not something the vast majority of people actively seek.
The bounds of risk tolerance can best be measured by financial market yield spreads — that is, the difference between the yields of private-sector bonds and the yields of U.S. Treasuries. Such spreads exhibit surprisingly little change over time. The yield spreads between prime corporate bonds and U.S. Treasuries in the immediate post‒Civil War years, for example, were similar to those for the years following World War II. This remarkable equivalence suggests long-term stability in the degree of risk aversion in the United States.
Another powerful animal spirit is time preference, the propensity to value more highly a claim to an asset today than a claim to that same asset at some fixed time in the future. A promise delivered tomorrow is not as valuable as that promise conveyed today. Investors experience this phenomenon mostly through its most visible counterparts: interest rates and savings rates. Like risk aversion, time preference has proved remarkably stable: indeed, in Greece in the fifth century BC, interest rates were at levels similar to those of today’s rates. From 1694 to 1972, the Bank of England’s official policy rate ranged from two to ten percent. It surged to 17 percent during the inflationary late 1970s, but it has since returned to single digits.
Time preference also affects people’s propensity to save. A strong preference for immediate consumption diminishes a person’s tendency to save, whereas a high preference for saving diminishes the propensity to consume. Through most of human history, time preference did not have a major determining role in the level of savings, because prior to the late nineteenth century, most people had to consume virtually all they produced simply to stay alive. There was little left over to save even if people were innately inclined to do so. It was only when the innovation and productivity growth of the Industrial Revolution freed people from the grip of chronic starvation that time preference emerged as a significant — and remarkably stable — economic force. Consider that although real household incomes have risen significantly since the late nineteenth century, average savings rates have not risen as a consequence. In fact, during periods of peace in the United States since 1897, personal savings as a share of disposable personal income have almost always stayed within a relatively narrow range of five to ten percent.
THE JESSEL PARADOX
In addition to the stable and predictable effects of time preference, another animal spirit is at work in these long-term trends: “conspicuous consumption,” as the economist Thorstein Veblen labeled it more than a century ago, a form of herd behavior captured by the more modern idiom “keeping up with the Joneses.” Saving and consumption reflect people’s efforts to maximize their happiness. But happiness depends far more on how people’s incomes compare with those of their perceived peers, or even those of their role models, than on how they are doing in absolute terms. In 1995, researchers asked a group of graduate students and staff members at the Harvard School of Public Health whether they would be happier earning $50,000 a year if their peers earned half that amount or $100,000 if their peers earned twice that amount; the majority chose the lower salary. That finding echoed the results of a fascinating 1947 study by the economists Dorothy Brady and Rose Friedman, demonstrating that the share of income an American family spent on consumer goods and services was largely determined not by its income but by how its income compared to the national average. Surveys indicate that a family with an average income in 2011 spent the same proportion of its income as a family with an average income in 1900, even though in inflation-adjusted terms, the 1900 income would represent only a minor fraction of the 2011 figure.
Such herd behavior also drives speculative booms and busts. When a herd commits to a bull market, the market becomes highly vulnerable to what I dub the Jessel Paradox, after the vaudeville comedian George Jessel. In one of his routines, Jessel told the story of a skeptical investor who reluctantly decides to invest in stocks. He starts by buying 100 shares of a rarely traded, fly-by-night company. Surprise, surprise — the price moves from $10 per share to $11 per share. Encouraged that he has become a wise investor, he buys more. Finally, when his own purchases have managed to bid the price up to $30 per share, he decides to cash in. He calls his broker to sell out his position. The broker hesitates and then responds, “To whom?”
Classic market bubbles take shape when herd behavior induces almost every investor to act like the one in Jessel’s joke. Bears become bulls, propelling prices ever higher. In the archetypal case, at the top of the market, everyone has turned into a believer and is fully committed, leaving no unconverted skeptics left to buy from the first new seller.
That was, in essence, what happened in 2008. By the spring of 2007, yield spreads in debt markets had narrowed dramatically; the spread between “junk” bonds that were rated CCC or lower and ten-year U.S. Treasury notes had fallen to an exceptionally low level. Almost all market participants were aware of the growing risks, but they also knew that a bubble could keep expanding for years. Financial firms thus feared that should they retrench too soon, they would almost surely lose market share, perhaps irretrievably. In July 2007, the chair and CEO of Citigroup, Charles Prince, expressed that fear in a now-famous remark: “When the music stops, in terms of liquidity, things will be complicated. But as long as the music is playing, you’ve got to get up and dance. We’re still dancing.”
Financial firms accepted the risk that they would be unable to anticipate the onset of a crisis in time to retrench. However, they thought the risk was limited, believing that even if a crisis developed, the seemingly insatiable demand for exotic financial products would dissipate only slowly, allowing them to sell almost all their portfolios without loss. They were mistaken. They failed to recognize that market liquidity is largely a function of the degree of investors’ risk aversion, the most dominant animal spirit that drives financial markets. Leading up to the onset of the crisis, the decreased risk aversion among investors had produced increasingly narrow credit yield spreads and heavy trading volumes, creating the appearance of liquidity and the illusion that firms could sell almost anything. But when fear-induced market retrenchment set in, that liquidity disappeared overnight, as buyers pulled back. In fact, in many markets, at the height of the crisis of 2008, bids virtually disappeared.
FAT TAILS ON THIN ICE
Financial firms could have protected themselves against the costs of their increased risk taking if they had remained adequately capitalized — if, in other words, they had prepared for a very rainy day. Regrettably, they had not, and the dangers that their lack of preparedness posed were not fully appreciated, even in the commercial banking sector. For example, in 2006, the Federal Deposit Insurance Corporation, speaking on behalf of all U.S. bank regulators, judged that “more than 99 percent of all insured institutions met or exceeded the requirements of the highest regulatory capital standards.”
What explains the failure of the large array of fail-safe buffers that were supposed to counter developing crises? Investors and economists believed that a sophisticated global system of financial risk management could contain market breakdowns. The risk-management paradigm that had its genesis in the work of such Nobel Prize–winning economists as Harry Markowitz, Robert Merton, and Myron Scholes was so thoroughly embraced by academia, central banks, and regulators that by 2006 it had become the core of the global bank regulatory standards known as Basel II. Global banks were authorized, within limits, to apply their own company-specific risk-based models to judge their capital requirements. Most of those models produced parameters based only on the last quarter century of observations. But even a sophisticated number-crunching model that covered the last five decades would not have anticipated the crisis that loomed.
Mathematical models that calibrate risk are nonetheless surely better guides to risk assessment than the “rule of thumb” judgments of a half century earlier. To this day, it is hard to find fault with the conceptual framework of such models, as far as they go. The elegant options-pricing model developed by Scholes and his late colleague Fischer Black is no less valid or useful today than when it was developed, in 1973. But in the growing state of euphoria in the years before the 2008 crash, private risk managers, the Federal Reserve, and other regulators failed to ensure that financial institutions were adequately capitalized, in part because we all failed to comprehend the underlying magnitude and full extent of the risks that were about to be revealed as the post-Lehman crisis played out. In particular, we failed to fully comprehend the size of the expansion of so-called tail risk.
“Tail risk” refers to the class of investment outcomes that occur with very low probabilities but that are accompanied by very large losses when they do materialize. Economists have assumed that if people acted solely to maximize their own self-interest, their actions would produce long-term growth paths consistent with their abilities to increase productivity. But because people lacked omniscience, the actual outcomes of their risk taking would reflect random deviations from long-term trends. And those deviations, with enough observations, would tend to be distributed in a manner similar to the outcomes of successive coin tosses, following what economists call a normal distribution: a bell curve with “tails” that rapidly taper off as the probability of occurrence diminishes.
Those assumptions have been tested in recent decades, as a number of once-in-a-lifetime phenomena have occurred with a frequency too high to credibly attribute to pure chance. The most vivid example is the wholly unprecedented stock-price crash on October 19, 1987, which propelled the Dow Jones Industrial Average down by more than 20 percent in a single day. No conventional graph of probability distribution would have predicted that crash. Accordingly, many economists began to speculate that the negative tail of financial risk was much “fatter” than had been assumed — in other words, the global financial system was far more vulnerable than most models showed.
In fact, as became clear in the wake of the Lehman collapse, the tail was morbidly obese. As a consequence of an underestimation of that risk, financial firms failed to anticipate the amount of additional capital that would be required to serve as an adequate buffer when the financial system was jolted.
MUGGED BY REALITY
The 2008 financial collapse has provided reams of new data on negative tail risk; the challenge will be to use the new data to develop a more realistic assessment of the range and probabilities of financial outcomes, with an emphasis on those that pose the greatest dangers to the financial system and the economy. One can hope that in a future financial crisis — and there will surely be one — economists, investors, and regulators will better understand how fat-tail markets work. Doing so will require better models, ones that more accurately reflect predictable aspects of human nature, including risk aversion, time preference, and herd behavior.
Forecasting will always be somewhat of a coin toss. But if economists better integrate animal spirits into our models, we can improve our forecasting accuracy. Economic models should, when possible, measure and forecast systematic human behavior and the tendencies of corporate culture. Modeling will always be constrained by a lack of relevant historical precedents. But analysts know a good deal more about how financial markets work — and fail — than we did before the 2008 crisis.
The halcyon days of the 1960s, when there was great optimism that econometric models offered new capabilities to accurately judge the future, are now long gone. Having been mugged too often by reality, forecasters now express less confidence about our abilities to look beyond the immediate horizon. We will forever need to reach beyond our equations to apply economic judgment. Forecasters may never approach the fantasy success of the Oracle of Delphi or Nostradamus, but we can surely improve on the discouraging performance of the past.
Copy Rights Foreign Affairs

[TSJones]

Delete

[ramana]

TSJ, The above post does not belong to this thread. What global perspectives are shared with Walmart selling tainted donkey meat in China?

[TSJones]

You're right. I will delete.

[ramana]

Thanks, I posted it in the PRC News and Discussion thread.

[Christopher Sidor]

The statement that the financial crisis was not seen coming is bland faced lie. Only those who had their heads buried in the sand did not see it coming. It was becoming clear by 2006-7 when billions of worth of housing was being constructed just for flipping of houses and earning a commission. The signs were there all around. If people choose to ignore it and believe in heresy theories like "Efficient Market Theory" or "Minimal supervision theory" or "Self-Supervision is the best form of supervision" then it is these pundits who are to blame.

[Christopher Sidor]

In the coming decade USA's growth will not directly lead to growth in the BRICS countries. A lot of recent growth and the coming growth in USA, will come from the shale gas revolution, which has made manufacturing attractive, for some industries, in USA. Recall how motorola and apple have again started to manufacture/assemble some of their products in USA. So we should not assume that a healthy consumption in USA will directly lead to more growth in services or growth in export of manufactured items from East Asia.

Further parts of USA infrastructure are degrading and aging very quickly. So USA will spend a considerable amount of money on these. This will not directly lead to more demand for East Asia and even India. Further US Budget Deficit is decreasing. As USA winds down its war and tries to fix medicare and social security, this deficit and consequently the Sovereign debt of USA will start to decline.

In Case of EU or Eurozone the situation remains murky. Till last year the Euro strengthened against the Dollar. But in the coming quarters, with the draw down of the Fed Stimulus i.e. the so called taper, the positions will reverse. Euro will weaken. This might lead to inflation in the Euro-zone. Let us not forget one of the pillars of ECB is so called "price-stability". In simpler terms it is keeping inflation low so that countries like Germany can continue to export.

If current trends hold true then the real test or whammy for BRICS will come very near in the future. When the second recession will hit USA in the next few years. In our case it will be flight of the capital or hot-money from our markets. In case of PRC it still has to be make a shift from export-cum-investment-led economy to a more balanced consumption-cum-investment-cum-export economy. PRC has gone through a lending binge. It has added some 15 trillion USD credit to its economy, almost the size of US economy, in the past 5 years. We do live in interesting times. Who will come out stronger and who will be fatally wounded?

[chola]

If current trends hold true then the real test or whammy for BRICS will come very near in the future. When the second recession will hit USA in the next few years. In our case it will be flight of the capital or hot-money from our markets. In case of PRC it still has to be make a shift from export-cum-investment-led economy to a more balanced consumption-cum-investment-cum-export economy. PRC has gone through a lending binge. It has added some 15 trillion USD credit to its economy, almost the size of US economy, in the past 5 years. We do live in interesting times. Who will come out stronger and who will be fatally wounded?

No, a recession in the US helps India because the American reaction to economic downturns is to push QEs (Quantitative Easing) which in turn sends a flood of funds into the rest of the world like India in the form of FII.

The currently strengthening American economy is what punished the rupee during the past year. Until we wean ourselves off the liquid investments and into more stable FDI we'll be hostage to currency flows.

So the danger is a strengthening US economy not a weakening one. US growth will help IT outsourcing but not enough to counteract the end of QE.

The PRC conversely will be helped by the strengthening US economy because it means more exports. The frightening thing about the PRC (from our perspective) is that it can add the size of the US economy into its money supply and still have the Yuan rise. For most developing nations this should have put their currency into free-fall. The fact is while exports are important the PRC is for all intents and purposes already a consumer-led society. You can't be the world's largest car market without a commensurate consumer base.

Again, growing US economy hurts India. An US recession actually helps.

[Theo_Fidel]

The signs were there all around.

The signs are always all around. even now there are pundits proclaiming the ends of the world... ...doomsday nuts are building bunker. etc. the truth of course is that they will be right at some point, one time onlee. even greenspan was talking about irrational exuberance remember... ...the problem then and now is no one knew/knows how to manage the end game of the bubble. there are no good idea except whole sale bankruptcy-unemployment-bailout-ponzi implosion-etc.

capitalism remains vulnerable to this cycle. And people have stopped talking about it.... ....so the next one will come. 10-20-30-40-50 years from now.. ...who can prdict.

[chanakyaa]

Transparency International: The ECB is an ever-more-powerful “democratic black hole”

This is actually an old article by Transparency International’s Jana Mittermaier (“New ECB Powers: The Buck Stops Where?”), from September 2012, but it remains entirely relevant. The article succinctly and eloquently explains the accountability of the European Central Bank, over which no elected parliament has any effective supervisory powers, and of its exponentially-growing authority as it seizes powers for itself (bailout of banks and governments, pressuring of governments) and is granted new powers (notably the “Banking Union,” giving it supervision and policy powers over the eurozone’s 6,000 banks with some €30 trillion [sic] in assets (almost 250% of GDP).

http://www.craigwilly.info/2013/12/10/t ... lack-hole/

[Neshant]

Milton is a good speaker... in the sense that he dodges the question quite artfully.

[panduranghari]

I'm going to be buying gold all throughout 2014.

Buying anything else is like throwing good money away.

Gold is the most oversold it's ever been since 1974.

[panduranghari]

Could The Fed Lose Control Of The Frankenstein Economy It Has Created?

Martin Armstrong Warns Europeans Of The Coming Expropriation Of 10% Of Everyone's Accounts

The problem with Martin Armstrong and deflationists in general is their inability to see the massive elephant in the room- the wishes of the people backing their survival.

Look at the antics of congress and AAP. All the public will backing their bizzare actions proves why the expropriation if everyone's account by 10% is not likely nor politically viable.

Why do they not get this

"My friend, debt is the very essence of fiat. As debt defaults, fiat is destroyed. This is where all these deflationists get their direction. Not seeing that hyperinflation is the process of saving debt at all costs, even buying it outright for cash. Deflation is impossible in today's dollar/rupee/euro/yen/yuan terms because policy will allow the printing of cash, if necessary, to cover every last bit of debt and dumping it on your front lawn! Worthless dollars/rupees/euros/yen/yuan, of course, but no deflation in dollar terms! )"

[Austin]

Russia's Oil Industry Is Doing Fine, Which Is Great News For The Kremlin

[Austin]

In this episode of the Keiser Report, Max Keiser and Stacy Herbert discuss the beggar economy in which the biggest pickpockets rule. They look at the London Gold Fix, in particular, where every day for the past more than 20 years, pockets were picked every single day, according to the data. In the second half, Max interviews precious metals expert James Turk about his new book, “The Money Bubble,” and about the dollar, gold and Bitcoin.

http://rt.com/shows/keiser-report/episo ... eiser-144/

[chola]

Buying gold if you're in India is a nice way to help fund the baboos in New Delhi and also add to the debilitating current account deficit. I guess it will look nice on the wife but it won't really net you much in investment after taxes.

[TSJones]

Ah, but you see the price of gold is undervalued according to our fellow posters. That's a can't lose proposition to them. Factor in the coming hyperinflation due to the over printing of the dollar and they will be sitting pretty with their physical gold stowed away. Then they will be like the ants happily secure with their golden charms while we, the frivilous grasshoppers will be in the streets begging for scraps to eat. Soul satisfying. eh?

And don't you pay any attention to the fact that gold could collapse further down. That will just give them opportunity to buy more gold! Can't lose!

Please don't pay any attention to the prospect of a stronger dollar in the next few years due to a growing American economy and reduction of federal borrowing. It's all based on fiat currency which we all know is worthless grasshopper machinations so that they can afford their extravagant no-assets life style. Well, except for the stock market and bond markets. Disregard those. They're fantasy land and worthless.

[member_26147]

Ah, but you see the price of gold is undervalued according to our fellow posters. That's a can't lose proposition to them. Factor in the coming hyperinflation due to the over printing of the dollar and they will be sitting pretty with their physical gold stowed away. Then they will be like the ants happily secure with their golden charms while we, the frivilous grasshoppers will be in the streets begging for scraps to eat. Soul satisfying. eh?

And don't you pay any attention to the fact that gold could collapse further down. That will just give them opportunity to buy more gold! Can't lose!

Please don't pay any attention to the prospect of a stronger dollar in the next few years due to a growing American economy and reduction of federal borrowing. It's all based on fiat currency which we all know is worthless grasshopper machinations so that they can afford their extravagant no-assets life style. Well, except for the stock market and bond markets. Disregard those. They're fantasy land and worthless.

Hahaha! Well said!

[Neshant]

We'll see where gold prices head in the next few years.

The "stronger economy" looks 100% bogus to me. There is not a single new productive industry that has come into existence.

It is the same feeling I had about the "stronger economy" from 2002 to 2008. I could not see what productive industry was powering so called economic growth. For a while I thought I did not understand economics. Eventually reality caught up.

Right now there is absolute zero powering economic growth and the jobs created are not high skilled professions. Everyone knows the stock market is being rigged.

Its just a question of how long this game can go on and what the aftermath of the inevitable crash looks like once reality once again catches up.

[Theo_Fidel]

If hoarding gold meant a rich country, India would be richest in the world, yet we are not. The gold has effectively destroyed our ability to grow our capital base. Some small amount of GDP, there is no harm, but right now it is ~ 5%+ of GDP, all imported and is financially ruinous esp. when there are so many other capital needs. Right now our expenditure on construction is 8% of GDP while housing construction is about 40% of that or 3%-4% of GDP. Yes we spend more on gold than on building our houses. or toilets for that matter.

Again the greatest wealth generation mechanism on the planet right now is the Indian Stock market. Invest and stay invested 20-30 years and you can buy all the gold you want when you are rich.

It is not an accident that the USA went of the gold standard, banned private ownership of gold, forcing investment in productive areas and turned into the wealthiest nation on earth. Neither did china make progress by hoarding gold.

[Austin]

If hoarding gold meant a rich country, India would be richest in the world, yet we are not.

Isnt it the case that most Gold is owned by People of this country for private/personal use and not by GOI ...so GOI does not hoard gold on the contrary they make it harder to buy by making it expensive

Again the greatest wealth generation mechanism on the planet right now is the Indian Stock market. Invest and stay invested 20-30 years and you can buy all the gold you want when you are rich.

Not really it depends on your investment , Stock Market is no magic cave where money grows and if you really need fail safe investment in India then after gold its Property where prices have grown steady almost matching Gold price rise and in some case even much more ........ Stock is good if you know where to invest and follow it if you dont understand then dont invest.

It is not an accident that the USA went of the gold standard, banned private ownership of gold, forcing investment in productive areas and turned into the wealthiest nation on earth. Neither did china make progress by hoarding gold.

But isnt US wealth is also negated by the enormous debt they hold .......they seems to have more debt then actually productive GDP ....and from what i have seen some stastics they need to invest $4 for every $1 gain in GDP....living on borrowed money and no one knows how long the party will last.

[Theo_Fidel]

Not really it depends on your investment , Stock Market is no magic cave where money grows and if you really need fail safe investment in India then after gold its Property where prices have grown steady almost matching Gold price rise and in some case even much more ........ Stock is good if you know where to invest and follow it if you dont understand then dont invest.

Please pick one of the SENSEX mutual funds, its is fully diversified. You will not find a simpler investment. yes it goes up and down but averaged over 20-30 years returns are far more certain than other modes with far less risk. For the vast majority of folks this will return better than property.

I own property and it is definitely not for everyone. It takes a tremendous effort to manage and extract quite low returns on investment. Most folks can not pull this off, even property only tracks inflation + 1%-2% other than a few of the high demand areas. One property dispute landing up in courts is all it will take to bankrupt you. It is with great effort that I have managed to avoid this myself. When it comes time to sell finding a buyer who is 'legal' is a drama all its own. No saar, other than your house/flat/1-2 plot of land, I can't recommend property as a wealth generator. If you don't understand property and don't have the time to put in the effort, don't get into property.

WRT the USA wealth, like I have said before the economy throws off $16 Trillion of additional wealth every year. Its debt has very low interest rate long term.

[Christopher Sidor]

^^^^
What you are referring to is called as "illiquid" investment. Also the appreciation that one sees in its value is unrealized gain till the property is sold.

A majority of Indians are risk averse. They look for "Guarantee". Their risk taking appetite is low. And their risk tolerance threshold is also low. Hence the lure of Property. Off course this is reinforced by the actions of GoI and RBI which have allowed our currency to depreciate, i.e.. they have debased our currency.

[Theo_Fidel]

The majority of Indians are also mislead. Look at the mountains of advertising popularizing gold and property purchase as source of being karrordapati's. How many advertisements do you see for a sensex fund. People go where the advertising is.

[Austin]

Please pick one of the SENSEX mutual funds, its is fully diversified. You will not find a simpler investment. yes it goes up and down but averaged over 20-30 years returns are far more certain than other modes with far less risk. For the vast majority of folks this will return better than property.

20-30 years is a long time for any one to park money and I have seen funds that dont give more than 100 - 200 % return in 20 years period.

Invest in a property you would get 600-700 % return and best part is you may lease it out and get monthly rent.

The down side to property is you need to maintain it on regular basis but all said and done its worth the effort if you look at investment vs gains.

The other best option is Gold but keeping physical gold is a challenge and you can earn interest over it.

Sensex is not worth especially if its your hard earned money , if you an Indian and have enough black money and appetite for risk then its good , if you are an NRI/PIO with enough green buck then its worth the risk.

WRT the USA wealth, like I have said before the economy throws off $16 Trillion of additional wealth every year. Its debt has very low interest rate long term.

Throws off where ? IF that were to be even remotely true they wouldnt have a Debt that growing faster then GDP

[Neshant]

a good old fashioned Ponzi scheme.

... which no doubt is what ALL of banking is.

______________

India Savings Deposit Scam Collapse Leaves Thousands Penniless

http://www.bloomberg.com/news/2014-01-0 ... iless.html

Sudipta Sen was on the run when police arrested him on April 23 at Hotel Snow Land, a resort with views of the Himalayas in Sonamarg, India, about 2,700 kilometers northwest of his Kolkata base.

Sen’s Saradha Realty India Ltd., the anchor of an empire that took in small deposits and promised payouts of land, apartments or a refund of clients’ money with interest rates as high as 24 percent, was defaulting on thousands of deals. Employees of Sen’s media companies hadn’t gotten paychecks in months. As cash dried up, 1.74 million customers saw savings vanish, Bloomberg Markets magazine will report in its February issue.

The upheaval didn’t end with Saradha. Panicked depositors rushed to pull money from similar companies. Since April, more than 34 people have committed suicide, 13 of them Saradha agents and investors. A 50-year-old domestic helper south of Kolkata in Baruipur, one of many hubs of Sen’s activities, set herself ablaze after losing 30,000 rupees ($482).

Saradha Group, the parent of Saradha Realty, was among hundreds of unlicensed deposit-taking enterprises that serve India’s poor -- and skirt regulators.

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Undermining Confidence

Harm to small investors undermines confidence in the financial system. When Indians lose cash, they put money into physical assets such as gold, which India imports, Shah says. That reduces household capital that powers the economy.

India raised the tax on gold imports three times in 2013 to curb demand and tackle a record $87.8 billion current-account deficit that weakened the rupee in August to an all-time low of 68.845 to the dollar.

“Beyond the actual dollars lost, these Ponzi schemes contaminate people’s confidence, and the financial markets become weak,” Shah says. “To have a comprehensive, vibrant economy, you need to have households that have confidence in an array of financial institutions and products, whether it’s a bank or mutual funds.”

[panduranghari]

Buying gold if you're in India is a nice way to help fund the baboos in New Delhi and also add to the debilitating current account deficit. I guess it will look nice on the wife but it won't really net you much in investment after taxes.

Gold is not investment.

[panduranghari]

We'll see where gold prices head in the next few years.

The "stronger economy" looks 100% bogus to me. There is not a single new productive industry that has come into existence.

It is the same feeling I had about the "stronger economy" from 2002 to 2008. I could not see what productive industry was powering so called economic growth. For a while I thought I did not understand economics. Eventually reality caught up.

Right now there is absolute zero powering economic growth and the jobs created are not high skilled professions. Everyone knows the stock market is being rigged.

Its just a question of how long this game can go on and what the aftermath of the inevitable crash looks like once reality once again catches up.

But gold price will fall. You need to understand gold price is not the real price discovery from the digging of the earth. It also includes a lot of paper gold like ETF. IMO the current comex price is the paper price mostly.