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Daily Digest 10/27 - The Decline Of CA Agriculture, How China And Gold Will Shape The Future

Monday, October 27, 2014, 10:40 AM

Economy

The Zombie System: How Capitalism Has Gone Off the Rails (tomc)

Today, no one talks anymore about the beneficial effects of unimpeded capital movement. Today's issue is "secular stagnation," as former US Treasury Secretary Larry Summers puts it. The American economy isn't growing even half as quickly as did in the 1990s. Japan has become the sick man of Asia. And Europe is sinking into a recession that has begun to slow down the German export machine and threaten prosperity.

How China And Gold Will Shape The Future (pinecarr)

Willem Middlekoop, author of The Big Reset: The War On Gold And The Financial Endgame, believes the current international monetary system has entered its last term and is up for a reset. Having predicted the collapse of the real estate market in 2006 (while Ben Bernanke didn't), Middlekoop asks, rhetorically, can the global credit expansion 'experiment' from 2002–2008, which Bernanke completely underestimated, be compared to the global QE 'experiment' from 2008–present? The answer is worrisome. In the following presentation he shares his thoughts on the future of the global monetary system; and how gold, the US and China are paramount for its outcome.

An American Dream Deferred (jdargis)

But then July turned into August, and August turned into September, and Obama decided it was more politically prudent to delay his executive action until after November’s midterm elections. So instead of being offered his reprieve, Javier was sent back to the poorest state in Mexico, where the advocate had sent him one final note. “Sorry,” it read. “Terrible timing.”

Nurse Held in Ebola Quarantine Will Be Allowed to Go Home, Christie Says (jdargis)

“She will remain subject to New Jersey’s mandatory quarantine order while in New Jersey,” the state’s health department said in a statement. “Health officials in Maine have been notified of her arrangements and will make a determination under their own laws on her treatment when she arrives.”

Under Pressure, Cuomo Says Ebola Quarantines Can Be Spent at Home (jdargis)

The announcement by Mr. Cuomo seemed intended to draw a sharp contrast — both in tone and in fact — to the policy’s implementation in New Jersey, where a nurse from Maine who arrived on Friday from Sierra Leone was swiftly quarantined in a tent set up inside a Newark hospital, with a portable toilet but with no shower.

Saudi Arabia: Producing More Crude, Selling Less? (Evan K.)

Media reports are quoting an anonymous source as saying Saudi Arabia, the world’s leading oil exporter, supplied foreign and domestic customers with less crude during September even though its oil production was up slightly. The source, identified only as being familiar with the Saudi oil industry, said it extracted, on average, 9.7 million barrels of crude each day of the month, a rise from 9.597 million barrels per day in August.

Deflation in the euro zone is all too close and extremely dangerous (jdargis)

Now that German growth has stumbled, the euro area is on the verge of tipping into its third recession in six years. Its leaders have squandered two years of respite, granted by the pledge of Mario Draghi, the European Central Bank’s president, to do “whatever it takes” to save the single currency. The French and the Italians have dodged structural reforms, while the Germans have insisted on too much austerity. Prices are falling in eight European countries. The zone’s overall inflation rate has slipped to 0.3% and may well go into outright decline next year. A region that makes up almost a fifth of world output is marching towards stagnation and deflation.

The Decline of California Agriculture Has Begun (jdargis)

California is in the middle of its hottest and driest three years in recorded history. You’ve lived in the Central Valley a long time, and your work starkly documents the changing face of agriculture there. Does the current round of drought feel different from the rest?

It truly does feel new. It feels like uncharted territory. The big question in the air right now is: What’s next year going to bring? If we don’t have a seriously wet winter, next year could just be epic.

Gold & Silver

Click to read the PM Daily Market Commentary: 10/24/14

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

5 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
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HughK's picture
HughK
Status: Platinum Member (Offline)
Joined: Mar 6 2012
Posts: 760
I'll bet against Santelli: Swiss Gold Initiative won't pass

Hi all,

For those that don't know, on November 30, there is a popular initiative scheduled in Switzerland which calls for the repatriation of Swiss gold reserves stored abroad (in the US & UK I think) and which would require the Swiss National Bank to hold 20% of its reserves in gold.  I put a Google translated version of the initiative text at the bottom of this message.  The initiative puts a time frame of 2 years on repatriation and 5 years for bringing the SNB balance sheet up to 20% gold.

I am going to go out on a limb and speculate that this initiative will not pass.  However, I wouldn't bet the farm on this, as the most recent opinion poll says more voters polled support the initiative than oppose it:

The poll, conducted between Oct. 13 and 18 by the gfs.bern group, shows 44% of respondents in favor of the Save Our Swiss Gold Initiative. A further 39% are against, while 17% are undecided.  

Source: WSJ

So, it's conceivable that enough of the 17% of the undecided voters could tip this initiative into the passing zone.  Nonetheless, the three reasons why I think this won't pass are: 1. It's necessary to have a double majority to pass a popular initiative  2.  My personal experience does not suggest that gold is as deeply infused in the Swiss culture as some claim.  3.  Swiss political institutions oppose the initiative for the most part

1.  One problem is that for a federal initiative like this one to pass, it's necessary to have a double majority: not only must a majority of voters support the measure, but a majority of the 26 cantons (Swiss states/provinces) must as well.

2.  Another reason why I would bet a modest amount (e.g. one silver eagle) on this initiative not passing is just anecdotal.  Even though some in the goldbug press, such as Rick Santelli, have predicted the initiative's passage, I think that the argument that the Swiss "are a hard money people" is a stereotype more than reality.   Most of the Swiss that I have talked to about gold think the same things that most Americans think:  gold can go up, gold can go down...gold is not a very big part of the modern economic system.  But, it is true that you can buy gold and silver rather easily at most Swiss banks, and this lends credence to the claim that valuing PMs is a part of Swiss culture.  On the other hand, most Swiss that I know don't own any bullion.

I can't vote in Swiss federal elections, but if I were a Swiss citizen, I think I would vote for the initiative.  After all, who wouldn't support having one's gold reserves in their own country?  To understand why a financial haven such as Switzerland, with some of the best bank vaults in the world, saw it necessary to move major portions of its gold reserves abroad is probably better understood by studying Cold War geopolitics as opposed to finance...  

Here is the record of the Swiss National Bank's purging of gold from its balance sheet, from an FT article:

Source

Obviously this is dependent on both the gold price and the quantity of gold the SNB holds, as well as the size of the SNB's overall balance sheet.  The SNB, like the Bank of England, sold a lot of its gold back in 1999-2001 (and I think also in 2008?).  The SNB has also really stocked up on Euros since Switzerland decided to join the other fiat currencies in a race to the bottom when the SNB pegged the franc to the euro at 1.20 CHF/EUR in 2011.

3.  Also, no major institutions support the initiative.  The SNB opposes it and the Swiss parliament also opposes it by a sizeable majority.  The 7 member Swiss executive branch also opposes it. Even the Swiss People's Party, the right-wing party that sponsored the measure, is divided. While the whole point of the direct democracy enabled by initiatives is to bypass the political class, I would guess that the powers that be in Switzerland, such as they are, are doing what they can to make sure the initiative doesn't pass.  It's worth noting that the parliament opposed a referendum on minarets that still passed in 2009.

Another interesting thing is that any initiative that passes the double majority and becomes law is automatically constitutional.  In 2009, there was a national referendum on the building of minarets in Switzerland that passed.  At the time I thought that this violation of religious freedom would likely be struck down by the Swiss equivalent of the Supreme Court.  That's when I learned about the automatic constitutionality of successful initiatives and referendums.  Now, Switzerland is minaret-frei, except for the 4 already built minarets that were grandfathered in.  

Minarets as depicted by the SVP in the 2009 campaign:

One of the four actual minarets in Switzerland (with one of the thousands of church towers in Switzerland in the background):

Articles on the Swiss gold initiative:

In English:

FT:  SNB Fights to Block Public Gold Vote

Reuters: Swiss gold referendum's support falls short of majority: poll

WSJ:  Swiss Vote on SNB Gold Holdings too Close to Call, Poll Shows

In German or French (with translated headlines)

Note: in German the Swiss People's Party goes by SVP and in French by UDC

Three SVP party members want Swiss Gold [in Switzerland]

Gold Initiative Troubles the Financial World

Gold Initiative Divides the UDC

 

Google translation of the initiative text:

Federal popular initiative 

"Save the Swiss gold Initiative (gold)" 
The initiative has the following content: 
The Constitution is amended as follows: 
Art. 99a (new) Gold reserves of the Swiss National Bank 
1 Gold Swiss National Bank reserves are inalienable. 
2 They must be stored in Switzerland. 
3 The Swiss National Bank must hold a significant portion of its assets in gold. the 
share of gold should not be less than 20%. 
II 
The transitional provisions of the Constitution are amended as follows: 
Art. 197, c. 9 (new) 
9. Transitional provision to Art. 99a
(Gold reserves of the Swiss National Bank) 
1 al. 2 must be implemented in a transitional period of two years from 
the acceptance of the art. 99a by the people and the cantons. 
2 al. 3 must be implemented in a transitional period of five years from 
the acceptance of the art. 99a by the people and the cantons.

Cheers,

Hugh

 

Arthur Robey's picture
Arthur Robey
Status: Diamond Member (Offline)
Joined: Feb 4 2010
Posts: 3936
On Australian Banks.

I read in the "Financial Times" yesterday that the ANZ bank was being criticized for investing in productive capacity in Asia because the real money  was to be made in the Real Estate Ripoff.

Streuth! So we are going to run an economy renting each other properties? But it gets even better. While walking in Sodom City (Sydney) my daughter and I bumped into an enthusiastic Chinese couple who were on a real estate shopping spree. Further, the Chinese are contemplating buying up the cattle stations.

So this is how the ball bounces. The Chinese hold the real estate, bought with funny money. Un, or under-employed Australians are forced to pay through the nose for shelter. The unemployed are supported by tax dollars on the few remaining workers who also have a ridiculous mortgage to pay.

From the Chinese perspective Australia is Terra Nullius. Forget Crocodile Dundee, he went the way of the boomerang.

Let us examine the silver lining- at least the Real Estate market is rock solid, and completely unaffordable to anyone in the productive sector of the economy. Anyone with access to computer digits is in the gravy.

My greetings to all the Asians in the sweat shops supporting this abomination.

Edit: My daughter asks irritably, "Yes Dad, but what is your solution?"

Easy- The Real Estate is bought with funny money and we pay rents with funny money, and then things trundle along until they don't. Perhaps this IS the Singularity. Maybe my idea of an honest days pay for an honest days work can go join Crocodile Dundee.

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4065
HughK's picture
HughK
Status: Platinum Member (Offline)
Joined: Mar 6 2012
Posts: 760
Grant Williams' analysis of Swiss Gold Initiative

Grant Willams thinks the Swiss gold initiative has a much greater chance of passing than many people (including me) think.  One of his strongest points is that so far there is no organized "no" campaign and that the "yes" campaign can legally receive funding from international sources, such the wealthy gold bugs like Von Greyherz, Sprott, and Turk

Things that make you go hmmm...like the Swiss Gold Status Quo Shutdown

 

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