Daily Digest 12/16 - Fractional Gold System in Central Banks?, China's Wind Power, U.S. Rare Earth Shortages
- Are The Central Banks Running A Fractional Gold System?
- Merk Commentary: Fed - Inflation, Inflation, Inflation
- Canary In The Coal Mine
- Toppy Tuesday - Can the Dollar Fall Faster than our Indexes?
- To Conquer Wind Power, China Writes the Rules
- U.S. Called Vulnerable to Rare Earth Shortages
- Energy Department Seeks 'Rare Earth' Security
Central banks were offered two different types of account at the BIS, earmarked and sight: earmarked accounts recorded gold held separately and specifically for a central bank, and sight accounts were non-specific. Earmarked gold is allocated, while sight gold is unallocated; earmarked is custodial and sight is co-mingled. The flexibility of the system allowed a central bank to diversify its gold reserves in a number of centres through a politically neutral institution, and it made sense to allocate some of this into a fungible account to settle transactions with other central banks. But that was pre-war, and before the US, with the co-operation of the IMF and other European central banks, demonetised gold.
In August, Federal Reserve (Fed) Chairman Bernanke stated inflation was too low; in October, the Fed's Minutes lamented that the market appeared not to take Bernanke's August statements seriously enough. In our assessment, today's Fed statement of the Fed's Open Market Committee (FOMC), with an almost verbatim repetition of the previous FOMC statement, screams: "markets: trust us, we mean what we say." When former Fed Chairman Volcker raised rates in the 80's to root out inflation, initially, the markets didn't take him seriously. But persistence eventually made the market price in lower inflation expectations. Similarly, as the markets appear slow to embrace the Fed's at higher inflation target. We have little doubt, however, that the Fed will succeed in raising inflation expectations.
Canary In The Coal Mine (jim quinine)
Just these nine well known retailers alone, have added 6,435 stores since 2007. Some of the stores were international, but the vast majority were opened in the U.S. This increase in store counts in the face of reality is the ultimate in CEO hubris. Inflation adjusted retail sales since 2007 in the U.S. are down 19%. This is a recipe for disaster. Americans must deleverage over the next decade. They have no choice. Their retirement savings levels are pitiful. They will be forced to stop buying crap. The boomers are leaving their high spending years and entering the forced saving phase of their lives, whether they like it or not. Every retail CEO in the country should recognize these facts. But still, they relentlessly expand. A fool and his company are soon parted.
At least sliver hasn't been used since the Hunt Brothers crashed the market back in 1979 but that was long enough ago that we have an entirely new generation of suckers who are willing to believe that JPM has been foolish enough to be short 3.3Bn ounces worth of silver ($99Bn) to the point where if everyone in America bought an ounce (300M ounces for $10Bn) it would bankrupt them. Aside from the fact that the math doesn't work in the first place (10% isn't going to blow out JPM), what are the odds you could get more than 2% of the people in this country to do something so stupid as to buy silver for about 100% above it's 5-year average based on some idiotic rumor.
Nearly all the components that Gamesa assembles into million-dollar turbines here, for example, are made by local suppliers — companies Gamesa trained to meet onerous local content requirements. And these same suppliers undermine Gamesa by selling parts to its Chinese competitors — wind turbine makers that barely existed in 2005, when Gamesa controlled more than a third of the Chinese market. But in the five years since, the upstarts have grabbed more than 85 percent of the wind turbine market, aided by low-interest loans and cheap land from the government, as well as preferential contracts from the state-owned power companies that are the main buyers of the equipment. Gamesa’s market share now is only 3 percent.
At least 96 percent of the most crucial types of the so-called rare earth minerals are now produced in China, and Beijing has wielded various export controls to limit the minerals’ supply to other countries while favoring its own manufacturers that use them. “The availability of a number of these materials is at risk due to their location, vulnerability to supply disruptions and lack of suitable substitutes,” the report says, which also mentions some concerns about a few other minerals imported from elsewhere, such as cobalt from the Congo.
A senior Energy Department official on Wednesday will discuss efforts to ensure U.S. access to rare-earth elements, critical to manufacturing a range of low-carbon energy technologies including wind turbines and electric vehicles. The remarks come amid growing fears that China could restrict access to the materials. Some lawmakers and U.S. officials fear the absence of domestic rare-earth production, and heavy reliance on China, could limit the growth of clean energy. The big worry: trading reliance on foreign oil for reliance on foreign rare earths.
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