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German Gold Claw Back Causes Concern
  23 Jan 2013     12:02 am

Last week the Bundesbank (the German central bank) surprised markets around the world by announcing that it will repatriate a sizable portion of its gold bullion reserves held in France and the United States. To many, the news from the world’s second largest holder of gold signaled a growing, if clandestine, mistrust among central banks, possibly fueled by diverging policy goals. The Germans have attempted to tamp down the alarm by highlighting the myriad of logistical, practical and historical reasons that qualified the announcement as unremarkable. But the size, scope, …

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France and the UK Could Be the Lynchpins of Europe
  19 Jan 2013     12:02 am

Over the past two months, Europe’s problems seem to have disappeared from the headlines. However, the new French Socialist government is pushing ahead with policies that favor significantly higher government spending, greater regulation of business and commerce, and severely higher taxes on high earners. The long term effects of these policies, which I believe will lead to further economic decline, may be given fresh scrutiny if France is drawn into a lasting conflict in West Africa as a result of its surprise intervention in Mali last week. The financial discussions …

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Washington Squanders its Gift of Time
  1 Jan 2013     12:02 am

As the clock winds down on 2012, the Fiscal Cliff is all anyone seems capable of discussing. Right now it appears that some sort of narrow deal has just emerged that will include raising tax rates on family income over $450,000 a year, increasing the estate tax rate, extending unemployment benefits for one year, and delaying spending cuts. But the prospect of higher taxes and the great uncertainty that has surrounded this fiscal fiasco has been acting like sand in the gears of the complex but sputtering U.S. economy. If …

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Republican Sellout Invites Stagflation
  23 Dec 2012     12:01 am

While it may not be a surprise that the Republicans are preparing to yield on their vow to oppose tax hikes, it should raise investor concerns the world over that an upcoming budget agreement will likely involve a Congressional surrender of its authority to set the federal debt ceiling. In exchange for this, it appears that the Republicans have simply done nothing to halt, or even curb, the dangerous federal spending trajectories or the current drift towards greater state control of the economy. President Obama has politically outmaneuvered the Republicans, …

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Budget Farce Suggests Term Limits Needed
  11 Dec 2012     12:02 am

Put simply, the fiscal cliff debate is an illustration of staggering political cowardice. Politicians of both parties are unwilling to ask voters to pay for all of the big government promises that they made on the campaign trail. They would rather risk the country’s long term future than risk losing the next election.  As a former elected legislator, I can assure them that their offices are not worth the price they are asking us, the voters, to pay.
Big government is hugely expensive. Beyond the costs in money, the regulations and …

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Central Banks Hedge Their Bets
  5 Dec 2012     12:02 am

Gold appears to be headed for an impressive price appreciation for the second half of 2012. Since the beginning of July, gold is up almost 10 over the same time frame. What is noteworthy here is that in recent months, fears of a worldwide recession have increased markedly. It used to be considered axiomatic that recession created adverse conditions for commodities (a reality that has helped push down the price of crude oil thus far in 2012). How then can we understand the movement in gold?
Reports have recently been released …

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Euro Crisis: Major Implications For Investors
  20 Nov 2012     12:02 am

The euro crisis has begun to feel like an everlasting steeplechase with high hedges and water obstacles blocking the path to economic resurgence on the Continent. Each time a hurdle has been cleared another problem emerges to potentially block the track. The latest developments involve ugly anti-austerity riots across the southern tier and open rifts emerging among the creditors, most notably between the International Monetary Fund and northern nations. Despite the difficulties, I believe that ultimately the horse will pass the finish line; the Continent has too many economic bright …

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Report Raises Questions About Central Bank Gold Holdings
  7 Nov 2012     12:02 am

For years I have cautioned that changes in the ownership of gold held in the vaults of key central banks around the globe may not have been accurately reported. A report issued last month in Germany has once again brought these issues to the fore. In today’s environment of rampant money creation and questioning of central bank activities, such uncertainty is bound to spark the curiosity of an increasing number of investors.
Since the depths of the 2008 financial crisis, central banks around the world have increased their gold holdings. As …

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Banks Punished For Central Bank and Political Errors
  17 Oct 2012     12:01 am

In recent decades politicians have increasingly followed the Keynesian prescription of economic growth through continued government borrowing and the creation of undreamt of amounts of fiat money by central banks. To facilitate this process, the larger commercial banks have acted as the central banks’ de facto distribution system, and as a result have grown ever larger while accepting progressively greater risks.
In 2008, potential catastrophe loomed as the entire international financial system was challenged with collapse. But, as the ‘darlings’ of the central banks, the “too big to fail” banks were …

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Gold Glitters
  29 Sep 2012     12:02 am

Just a few weeks ago, Mario Draghi, President of the European Central Bank (ECB), announced that he would do anything required to bailout  the weakest members of the Eurozone and in so doing prevent the euro currency from dissolution. Investors who may have been previously positioning themselves to withstand a euro crisis seem to be anxious to believe that such bold actions will prevent the worst. Consequently, many unwound positions in U.S. dollars and bought back euros. In the wake of the announcement, the euro rose from $1.22 to $1.30.
Two …

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September 12th Looms Large for Germany
  6 Sep 2012     12:01 am

The German economy is undoubtedly the powerhouse of Europe. As a result, an understanding of the developments within Germany can offer a strong indication of the path that the rest of Europe is likely to take. Until recently, Germany stood as a bastion of sound money against those Keynesian led regimes in the developed nations that favor continual currency debasement as an economic panacea. Throughout much of the past decade the German monetary bias was upheld by the Frenchman Jean Claude Trichet, the president of the European Central Bank. During …

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Mistrust Fuels Continued Gold Demand
  23 Aug 2012     12:01 am

In the face of growing fears of a renewed global plunge into economic depression and a climate of low apparent price inflation, investors might expect commodities and precious metals to be falling in price. Instead, gold continues to hover around a relatively high $1,640 an ounce and silver at $29. At the same time, central banks – including those of the ever more important China, Russia and India – continue aggressively to buy gold.
At a time when very complex financial instruments allow for the seemingly effective hedging of all manner …

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Disconnected Markets Confound Investors
  17 Aug 2012     12:01 am

The current environment for investors is perhaps one of the most confusing that many have ever encountered.  Unpredictable markets now appear to take no clue whatsoever from underlying economic data, and maxims long cherished by traditional money managers are being abandoned in favor of seemingly illogical choices.  We are in a world in which apparently intelligent investors are willing to pay a premium for 10 year Treasury bonds that are almost certain to lose real value if held to maturity. While such an environment is enough to encourage many to …

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Promises, Promises
  7 Aug 2012     12:01 am

In the last week of July, ECB President Mario Draghi attracted investor interest worldwide by saying that he would do “whatever it takes” to solve the Eurozone crisis and, in the process, save the euro. Markets rallied as investors concluded that Mr. Draghi could only be referring to the financial heroine of quantitative easing (QE) and the transfer of toxic Eurozone sovereign debt assets from troubled private banks to EU taxpayers. This mini rally built on momentum that had previously been fueled by belief that Fed Chairman Bernanke would imminently …

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Dependence Day
  17 Jul 2012     12:01 am

The Fourth of July week brought unwelcome birthday gifts to the United States in the form of poor domestic jobs data and similarly gloomy information from other major economies. Amidst the heat and festivities, it has become difficult to deny that the economy is deteriorating. Politicians appear helpless, thrashing about for a solution and blaming everything and everyone but themselves. This lack of leadership is apparent to those who have by now lost all confidence of a possible quick rebound, if only the tough decisions had been made early and …

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Germany Loses to Italy, Again
  10 Jul 2012     12:01 am

June was not a particularly good month for Germany. First, she suffered a loss to Italy in the semi-finals of the European Cup soccer tournament. Then, she suffered a more significant blow when Italy’s Prime Minister, Mario Monti, extracted important concessions from German Chancellor Angela Merkel at the European Summit.  A loss on the soccer pitch can put a dent in the national ego. But a loss on the field of finance can be far more serious.
The deal made by Merkel puts at risk Germany’s hard-won financial treasure and could …

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European Leaders Play With Fire
  29 Jun 2012     12:01 am

The world economy today stands at the doorstep of great change. A gathering crisis looms in Europe, splitting the Continent into two competing blocs. While leaders there face off against one another in a high stakes game of chicken, the rest of the world powerlessly watches the train wreck slowly unfold. Political leaders on both sides of the Atlantic fail to grasp the fragility of the current world order and do not understand the forces they are unleashing. A parallel here can be drawn with the political situation that existed …

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Germany Faces Political Isolation
  16 May 2012     12:01 am

One month ago it appeared that Germany held the whip hand in its titanic struggle against those seeking to cure all economic ills with the snake oil of currency debasement. Now, it appears that the ground beneath its feet is being swept away in a flood of popular unrest and political exploitation. The recent elections in Europe, which highlight both the strong grass roots revolt against Germanic demands in Greece and France show that the cause of sound money and fiscal prudence to be a lonely and difficult endeavor.
The political …

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Germany’s Mixed Signals
  12 May 2012     12:01 am

Last week’s media headlines focused on how the election results in France and Greece reflected a wave of rising public resistance across Europe to the austerity programs being championed by Germany, the IMF, and the EU. Less notice has been given to Germany’s internal revolt against Chancellor Angela Merkel’s conservative policies at home and abroad. Elections in the north German state of Schleswig-Holstein just ended the dominance there of Angela Merkel’s Christian Democrats (CDP/CDU) while emboldening the center-left Social Democrats (SDP), hard-left Greens, and libertarian Free Democrats (FDP). Those results …

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