The dollar continues to slide by .18 after today's regular trading hours rout following Bernanke's errant announcement to debase the dollar further with money printing extensions. Many mindless dim lights cheer the Fed's actions just like clueless cheerleaders. As YDM points out, new claims for unemployment rose and PPI unexpectedly vaulted much higher than most government hacks expected. 1.7% per month PPI rise, if now a new normal "rate to inflate", could result in annualized increase at 20.4% and will spell definite troubles for our "troubled" middle class. Things are not well in Wonderland.
Dollar's slide means silver/gold's gain. Should we PM investors cheer? Well, that depends. If silver and gold launch to the stratosphere as the dollar is flushed down the toilet, there will probably be repercussions of the sort that those who believe in law and order will be more than disgruntled.
I raise my glass to toast a slow and steady rise in PM prices and to the hope that the government will "take the red pill, stay in Wonderland, and are shown you how deep the rabbit hole goes."
Bernanke certainly is not "the One". But neither is Mitt. When Felix Zulauf joins so many others and today predicts a coming "systemic collapse", then we should be getting worried. (Check KWN website)
Hoping for better times but still clinging to those shiny metals....GLTA
Europe will pay for the euro, with a lot of suffering"
Asset manager Felix Zulauf:.
Mr. Zulauf, even before the euro they warned that monetary union could go down as one of the shortest in history. Are you clairvoyant?
Would be nice. But to make this prediction, only required good knowledge of economic history.
And lesson learned should have been..?
The politicians euro fantasy - would have been better served studying the history of monetary unions. In past none worked more than a limited time. Even the Scandinavian Monetary Union, 19th Century between Denmark, Norway and Sweden, failed and these countries had closer economic structure and culture more similar than the states in our euro zone today. The Scandinavian Monetary Union lasted 50 years. The euro will not. Pressure to end the euro area will increase significantly in the next two years. Europe's economy will slide into a severe recession. Southern Europe is still in recession. Industrial production in Italy is 25 percent below the 2007 level, Spain, 30 percent - a disastrous situation; competitiveness of these debtor countries has barely improved. And in Germany, we see first weaknesses. This is a dangerous mix
Will the euro break?
Very painfu short term, but long term a blessing for Europe. Artificially propping the euru is a much larger disaster.
A Euro-crash for Europe would not be so bad?
It's not immediately intuitive, but look only at the consequences of a common currency for the continent, for me, the introduction of the euro was the stupidest decision to hit Europe since the Treaty of Versailles of 1919. Sure, the intention was understandable: Europe wanted to position itself more as a regional economic space internationally. You have reached the opposite. The continent is economically weakened and will remain - a debtor country after another slide down into depression. Europe is divided and split.
These are hard words. The policy affirms always the opposite. The euro fails, Europe fails, Angela Merkel has said.
With all due respect: This is really nonsense. The policy still refuses to think the consequences of monetary union to its logical conclusion. She wears the euro as dogma like Vatican celibacy. Of course, the politicians fear costs of a collapse that would be high short term. But long term the euro is more expensive - all of Europe will pay for this with a lot of suffering.
What makes you so sure?
In this monetary union there are two completely opposing economic philosophies. The Germans want a strong currency because then it is worthwhile to save. This leads to higher investment, more jobs and rising incomes. Higher wages can consume more but also save more. But a structurally weak currency, however, is not worth saving, due to low investment and low competitiveness. Jobs are destroyed, real wages fall. This is the way of Southern Europe, now calling for new rescue measures by the European Central Bank (ECB) which weaken the euro, reduce benefit to citizens, and the future of our children and grandchildren.
Why ECB President Mario Draghi insists it so vehemently that everything must be done to get the euro?
What other courses does Draghi have? The ECB has no intention to abolish itself. They can finance many years bankrupt governments and bankrupt financial institutions - but that's not really the job of a central bank. For me, the ECB has lost its credibility.
Draghi wants to buy bonds of troubled states and reduce the debt-crisis. It's not going to work?
You see, in Europe, there is a complete money illusion: The states are deeply in debt, many governments are bankrupt itself. The politicians don't want to admit it, because they fear for their re-election. Now comes the central bank and finance the debt simply by buying bonds - ie it prints money. This money illusion isn't permanently maintainable. The consequence will be: If you want to hold it together, then, they will have to devalue the euro against other currencies - it would lead to a structural weak currency with all the problematic consequences that I have described.
A weaker euro would benefit export industries..
Sure, but consider at what price. The actions of the ECB may eventually lead to inflation, that would be another attack on the purchasing power of citizens. Look deeper into the story: Even if the export sector benefits short term - no state has ever prospered based on a weak currency to build great wealth.
Suppose the Euro is really the weak currency. How do investors adjust?
By considering which investments benefit if the euro loses value. Euro based so-called safe government bonds are the wrong choice. Your interest would be eaten up by inflation and loss of purchasing power. In addition, the yields on bonds have fallen for 30 years, now, the trend for the next decades is the opposite direction.
I recommend selling bonds and focus on long-term tangible assets, ie stocks and gold.
But in a worse economic situation those companies and their stocks would suffer too.
That is correct. I therefore believe that the moment to get started and has not come yet. First, it is to be seen how the company will survive the next six to twelve months. Investors should keep some of their assets in cash. But in the long run there is no way to share: An investor who acquires an interest in a securities company in times of weak currency is worth more than an IOU from the state. And for many other major investors such as insurance companies still have very low equity exposure in their portfolios. This they will not in the long run afford. In addition to shares don't forget, in cases of prolonged weakness of the euro is gold: It protects against the loss of value of a currency. The gold price has now given way for a year - now is the time suggested that investors may gradually increase again.
For the right time, you seem to have a sense: the 1987 stock market crash you survived without loss, even the Internet bubble. What is your trick?
I have to disappoint you: I can't guarantee when to make the right move. 1987, for example, most investors had a lot of stock in their portfolios, all were positive about - at the same time, monetary policy of central banks was much more restrictive. It was clear to me: collapse was only a matter of time. And fortunately, I sold a few weeks before the crash. That was not as simple as it sounds. Unconventional decisions are either great successes or great failures - you're alone, and customer criticism is initially large.
Entitled crisis prophet today economist Nouriel Roubini picked up on your approach only after you reviewed your euro.
Oh, you know--Prophets are loved usually very little. It's better others claim the role for themselves.
Interview: Dennis Kremer.
Felix Zulauf on Financial Advisors
Financial crises h