BERKELEY – Fiscal profligacy did not cause the sovereign-debt crisis engulfing Europe, and fiscal austerity will not solve it. On the contrary, such austerity has aggravated the crisis and now threatens to bring down the euro and throw the global economy into another tailspin. In 2007, Spain and Ireland were models of fiscal rectitude, with…
Greece is frozen in a political stalemate. Youth unemployment is running at over 50%. And there has been a $1 billion run on Greek banks.
From near and afar, there appears to be no easy way out, especially now that the Eurozone is heading back into a recession.
It’s times like these when investors pour into the U.S. dollar for its “perceived safety.”
With commodities priced in U.S. dollars, this spike in the greenback has sent commodities-including gold prices-into a tailspin since early March.
That has many doubters asking: “Has the commodities super-cycle ended?”
It’s a reasonable question considering the Continuous Commodity Index (CCI) is back down to levels it last saw in September 2010.
What’s more, gold prices have backed off to near $1,500/oz., and oil prices have fallen from $110 to $90/barrel.
But as you’ll see, the commodities coin does have another side.
The Other Side of the Commodities Story
In fact, a recent article by Frank Holmes, CEO and chief investment officer at U.S. Global Investors, pointed out how China and other emerging nations are in better fiscal shape than much of the West.
Even if China is slowing somewhat, it is still growing at an enviable 8% per year, with only 42% debt to GDP ratio. So rather than go for more outright stimulus, it’s expected that China will target new loan growth and its M2-money supply growth to around 14%.
Meanwhile, India and Australia have just lowered interest rates while other central banks are basically refusing to raise rates.
It means the world will keep turning, people will keep consuming and annual demand of raw materials is likely to remain elevated.
As for gold prices, let’s cut right to the chase.
Why Is Art So Damned Expensive?
Dec 5, 2011 12:00 AM EST
A pile of stools for $575,000….
Regime Change in Europe: Do Greece and Italy Amount to a Bankers’ Coup?
By Stephan Faris Friday, Nov. 11, 2011
The voice of the people isn’t something the markets seem to want to hear these days. First…
Friday’s S&P outlook downgrade of Italian sovereign debt has sent credit markets into a tailspin this morning, and made a difficult situation in Europe look even worse. Recent elections and failed austerity measures have also exacerbated the crisis, w…
Tax receipts collapsed at an annual rate of 18% in October, which is far worse than I had feared based on our tracking of the daily data. At the same time, mortgage purchase applications collapsed last week, signaling the tailspin we expected as the first time home suckers panic subsided. The extension of this subsidy…
The market stall continued on Friday, raising the question of whether that stall will turn into a tailspin and crash. Click here to download complete report in pdf format (Professional Edition Subscribers). Try the Professional Edition risk free for thirty days. If, within that time, you don’t find the information useful, I will give you…