Doug Casey on Bitcoin and Currencies

We’ve had a num­ber of read­ers ask for your take on this new Bit­coin sys­tem. As a per­son who likes to see the pri­vate sec­tor com­pete in areas that gov­ern­ments try to reserve for them­selves, this seems right up your alley — what do you think?

Doug: It’s a sign of the times. Lots of peo­ple are actively look­ing for an alter­na­tive to the dol­lar. I think Bit­coin is a very good thing, in prin­ci­ple. But after the recent dis­as­trous hack, it’s prob­a­bly a dead duck, at least in ver­sion 1.0.

It’s appro­pri­ate, how­ever, that we’re talk­ing about Bit­coin — an Internet-driven phe­nom­e­non — while you are in Bishkek, Kyr­gyzs­tan and I’m in Beirut, Lebanon, and we’re speak­ing essen­tially for free over the Inter­net. Money is increas­ingly going to be Internet-related. But first we should explain what Bit­coin is.

L: Sure. There’s a Wiki entry, but the basic idea is that Bit­coin is an online (and there­fore dig­i­tal), non-government-backed cur­rency. It’s not backed by any­thing, actu­ally, but that doesn’t seem to be a prob­lem for many users. The sys­tem has been adopted by a grow­ing num­ber of peo­ple around the world in just the last two years. Peo­ple are used to cur­ren­cies not backed by any­thing, so I guess I shouldn’t be sur­prised, but I am. On the other paw, unlike gov­ern­ment cur­rency, the Bit­coin sys­tem is based on a decen­tral­ized com­puter sys­tem that no sin­gle per­son or entity — includ­ing any gov­ern­ment — has con­trol over. That’s part of a design to keep the num­ber of Bit­coins in cir­cu­la­tion (infla­tion) strictly in check. So I can see why some peo­ple would see Bit­coin as being just like gov­ern­ment cur­rency, but bet­ter, because it’s sup­pos­edly inflation-proof.

That’s the idea, any­way, but in my view, it’s still not money — no more than unbacked gov­ern­ment promises are. You can only use them among oth­ers will­ing to pio­neer this cyber-frontier, so I really was quite sur­prised to see them catch on as well as they have. I’ve seen esti­mates that the mar­ket value of Bit­coins in cir­cu­la­tion rose to about $130 mil­lion before they crashed last weekend.

Doug: Again, it’s quite encour­ag­ing to see that so many peo­ple are so dis­gusted with gov­ern­ment cur­ren­cies, and the total lack of pri­vacy in bank­ing. That’s why Bit­coin could catch on at all. But let’s go back to basics, and see if Bit­coin qual­i­fies as money. Money is a medium of exchange and a store of value. Bit­coin may work as a medium of exchange some­times, but not a very good one, because it’s prov­ing so unsta­ble. It has fluc­tu­ated so much in value over its short life that it is totally unsuit­able as a store of value. Over 2,300 years ago, Aris­to­tle iden­ti­fied the five essen­tial attrib­utes that are nec­es­sary for a good money…

L: It has to be durable, divis­i­ble, con­ve­nient, con­sis­tent, and have value in itself. But don’t for­get your own adden­dum of “can’t be cre­ated out of thin air infinitely.”

Doug: Right. Let’s see how Bit­coin stacks up. First, is it durable? As noth­ing more than ones and zeros on a com­puter net­work, it might seem that the answer is no — it’s cer­tainly not as sub­stan­tial as gold. But a Bit­coin is arguably a lot more durable than a piece of government-issued paper than can be lost, burned, or even fall apart in your jeans pocket if you for­get to take it out before doing the laun­dry. More­over, since the Inter­net was designed to be mul­ti­ply redun­dant, and even able to with­stand nuclear attack, it’s arguable the Bits won’t just disappear.

L: We should point out that the recent prob­lem with a bunch of user­names and accounts being exposed was not a fail­ure of the Bit­coin sys­tem itself, but appar­ently of the phys­i­cal secu­rity of an inter­me­di­ary busi­ness that inter­faces between the pub­lic and Bit­coin. There’s another attack put together by hack­ers, not try­ing to crack the integrity of the Bit­coins them­selves, but to get arti­fi­cially paid by the Bit­coin sys­tem for doing com­pu­ta­tional work. Some­one has also released a virus aimed at steal­ing users’ Bit­coin account information.

Doug: Yes, these are all seri­ous attacks, and there are likely to be oth­ers. But it remains to be seen if Bit­coin will sur­vive the crash in value last week­end — Bit­coins had been trad­ing as high as $30 each and dropped to $0.01 at one point. Since Bit­coins rest on noth­ing but con­fi­dence, it’s going to be hard to restore that con­fi­dence now that it’s lost. But it’s inter­est­ing that the Bit­coins them­selves have proven quite resis­tant to tam­per­ing. In short, they’ve shown sig­nif­i­cant dura­bil­ity. So they pass that criterion.

L: Okay. Divisible?

Doug: No prob­lem there; they’re elec­tronic ledger entries, so they can be divided and sub­di­vided as many times as you like.

L: What about con­ve­nience? You can’t spend Bit­coins at a gas sta­tion or a vil­lage in Africa.

Doug: Don’t be so sure. More and more peo­ple are on the Inter­net these days. We’ve both seen vil­lagers in Africa with smart phones. It won’t be long before most every­body has one. Any­one with Inter­net access can arguably deal in Bit­coins, so they could poten­tially be very con­ve­nient to use. That’s a lot more peo­ple than the num­ber who will take, say, Russ­ian rubles, Zam­bian kwacha, or Viet­namese dong.

And Bit­coins are cer­tainly con­sis­tent; each one has iden­ti­cal properties.

L: Do they have value in themselves?

Doug: There’s the rub; I don’t see that they do. Bit­coins are just an elec­tronic abstrac­tion. They can’t be used for any­thing else, nor are they made of some­thing that can be used for any­thing else. They are like one of those knots in a string that dis­ap­pear if you pull hard enough on the ends of the string. They are not backed by any­thing at all. Like gov­ern­ment fiat cur­ren­cies, they are a con game, func­tion­ing only as long as peo­ple have con­fi­dence in them, regard­less of whether that con­fi­dence is well placed or not.

I’ve always said that the dol­lar is an “I owe you noth­ing,” and that the euro is a “Who owes you noth­ing.” With Bit­coins — which no indi­vid­ual can be held account­able for and which have no value in them­selves — I’d have to say they are a “No one owes you any­thing.” It was inevitable, there­fore, that the scheme would col­lapse… at least in its present form.

Their main value seems to have been as a spec­u­la­tive medium. Worse, actu­ally, in that they are — or were — based on find­ing a “greater fool” to pass them on to, for some­thing of value. The bub­ble in Bit­coins is, how­ever, just one of many to come as peo­ple try to get out of paper cur­ren­cies in the years to come. With the bub­ble that arose in tulip bulbs in 17th cen­tury Hol­land, you might at least have wound up with a flower. This time, peo­ple just got stung. The mes­sage is clear: Get used to bub­bles, as gov­ern­ments print up more and more fiat money.

Bit­coin reminds me of the so-called “barter cur­ren­cies” peo­ple tried to start in the U.S. some time ago, sup­pos­edly trad­ing units of “barter.” Peo­ple traded chits, where a bar­ber might charge ten for a hair­cut, and a lawyer 100 for an hour of coun­sel. But they were just another paper cur­rency, based on con­fi­dence. And, when you’re deal­ing with total strangers, con­fi­dence is hard to come by…

L: Sounds like a con­tra­dic­tion; the whole con­cept of barter is trad­ing in goods and ser­vices directly, not via media of exchange.

Doug: Well, barter chits were sup­posed to encour­age trade among those who used them. And they were also a tax dodge, since no offi­cial money changed hands. That was a major incen­tive for using them. But they all dried up and blew away, and the peo­ple who wound up hold­ing them had noth­ing. Sort of like when the Argen­tine peso col­lapsed ten years ago. The provinces decided to set up their own cur­ren­cies, but they weren’t backed by any­thing either, and they all dried up and blew away as well, leav­ing those who held them hold­ing an empty bag.

So, way before the dol­lar value of Bit­coins stepped off a cliff last week­end, I was telling peo­ple who asked me that I didn’t use them and didn’t plan to use them.

Frankly, I can’t see why any­one would, when there’s already an elec­tronic dig­i­tal cur­rency like Bit­coin but backed with gold: Gold­Money. I should dis­close that I’m a small investor in the com­pany. But I have to say that I really do like Gold­Money. It does every­thing Bit­coin does — or did — but is backed by some­thing of real value: gold. That means it’s not just an abstrac­tion, but an actual store of wealth. The ulti­mate proof of that is that you can take deliv­ery of your gold if you want to. With Bit­coin, there’s noth­ing to take deliv­ery of. I don’t under­stand why any­one would use Bit­coin when they can use Gold­Money, which does all the same things but has real backing.

L: Nei­ther do I. I was quite sur­prised to see that the idea had actu­ally caught on. I loathe the gov­ern­ment cur­rency monop­oly as much as any­one, but I wasn’t even tempted to try Bit­coin out, because it wasn’t backed by any­thing. Maybe it’s sim­ply Bitcoin’s case for being inflation-proof. This gets to your adden­dum to Aristotle’s five qual­i­ties: Peo­ple clearly placed great value on Bitcoin’s promise to limit cir­cu­la­tion to a finite num­ber. The per­cep­tion among peo­ple who’ve for­got­ten what money really is — which is most peo­ple — is that money is only a medium of exchange. In this case, the meme that “it’s bet­ter than gov­ern­ment paper” cre­ated enough per­cep­tion of value to keep the things in cir­cu­la­tion — or did until last week­end. Bit­coin looks more like “Bit the Dust” now. But in spite of its prob­lems, do you still seem pleased with the whole Bit­coin experiment.

Doug: I like the fact it’s untrace­able and secret. I like the idea that it was try­ing to be an alter­na­tive to the dol­lar; it’s great to see peo­ple try­ing to get out of the U.S. dol­lar. The dol­lar is a state monop­oly of the worst kind. It’s not only the world’s reserve cur­rency for cen­tral banks, but it’s become the world’s de facto inter­na­tional cur­rency. If you’re Cana­dian or Asian or African or South Amer­i­can and travel abroad, you pretty much need U.S. dol­lars as soon as you leave the bor­ders of your coun­try. Even the euro isn’t much good out­side of the euro­zone. That some­thing like Bit­coin can gain any trac­tion at all is a real — if early — chal­lenge to the supremacy of the U.S. dol­lar. This is quite sig­nif­i­cant. That was prob­a­bly one thing on Sen­a­tor Charles Schumer’s warped lit­tle mind when he referred Bit­coin to the Jus­tice Depart­ment for inves­ti­ga­tion recently. Schumer is always on the wrong side of absolutely everything.

The U.S. dol­lar has actu­ally become a major weapon in the hands of the U.S. gov­ern­ment now. All bank trans­ac­tions go through the U.S. SWIFT sys­tem. Even the Chi­nese and Rus­sians, who have no love for the U.S. gov­ern­ment, have to use dol­lars for inter­na­tional trade. They don’t like it. Mus­lims all around the world are com­ing to feel that they are ene­mies of the United States, so they don’t want to use the dol­lar either. And the more reg­u­la­tions the U.S. puts in place about how money is trans­ferred and used — like FATCA — the harder peo­ple will look for alter­na­tives. The U.S. gov­ern­ment is treat­ing everyone’s dol­lars as its per­sonal prop­erty. They’re becom­ing des­per­ate, and des­per­ate gov­ern­ments are espe­cially dan­ger­ous. This one is start­ing to thrash around like a large, stu­pid dinosaur in its death throes — stay out of its way.

Mohamed Mohatir in Malaysia, fol­low­ing the dic­tates of the Koran, which I under­stand states that only gold and sil­ver should be used as money (the dinar and dirham), actu­ally made moves towards estab­lish­ing a new gold stan­dard. He tried to get other Islamic gov­ern­ments to buy into it, and cut the dol­lar out of their inter­na­tional trade. But most of those gov­ern­ments — then as now, although things may be chang­ing — are both U.S. stooges and klep­toc­ra­cies, so they weren’t inter­ested in hon­est money.

There’s huge and grow­ing appetite around the world for alter­na­tives to the dol­lar. Bit­coin is a beta ver­sion of what’s com­ing in the post-dollar world. Gold­Money, how­ever, is already a proven ver­sion 2.0.

L: So … Invest­ment implications?

READ ON... at Howestreet.com

A First Step To Sound Money

Here’s a hypothetical situation. Suppose you had $1.5 million. At today’s gold price that would buy approximately 1,000 ounces of gold. Suppose now that President Obama, the Congress, and the Federal Reserve began managing the American economy in such a way that by the end of President Obama’s second term, the dollar was back to where it was when President George W. Bush began his first term. Were that to happen, your $1.5 million could purchase 5,660 ounces of gold.

So, do you think you should have to pay taxes on the increase in the value of your money?

If the idea strikes you as crazy, let us refer you to the legislation introduced today at the Senate by James DeMint, Rand Paul, and Michael Lee. It’s called the Sound Money Promotion Act, and The New York Sun is happy to lay claim to being the first newspaper to endorse it. The measure, as it is characterized in a press release posted by Senator DeMint, would remove the tax burden on gold and silver coins that have been declared legal tender by either the federal government or state governments.

On its face it might seem an odd bill. But looks at the hypothetical situation above from the opposite end of the telescope, so to speak. It seeks to block tax authorities from treating gold and silver coins as though they were mere commodities and start treating them, at least in tax law, as though they were what the Founders of America thought they were, which is money. Gold and silver coins are already treated this way, as legal tender, inside the state of Utah, whence Senator Lee was elected.

This is because Utah was the first state in our modern time to exercise its constitutional power to make gold and silver coins legal tender. It did so earlier this year, ahead of as many as a dozen states that are at various stages of looking in to the question of how to protect themselves against the collapse of the United States dollars that are being issued by the Federal Reserve. They are all being energized by the fact that the value of the dollar has collapsed to barely a fifth of what it was, if that, at the start of the 21st century.

One of the states considering making gold and silver coins legal tender is South Carolina. That was remarked on by Mr. DeMint, one of its senators at Washington, in introducing the bill. He attributed the dollar’s collapse in recent years to “the government’s reckless over-spending, continued bailouts, and the Federal Reserve’s easy money policy” and said that in addition to fiscal discipline the country would need “monetary discipline to restrain further destructive monetizing of our debt.” The legislation, he said, “would encourage wider adoption of sound money measures.”

The press release introduced by Senators DeMint, Lee, and Paul noted that Standard & Poor’s has recently downgraded America’s outlook to “negative” from “stable,” meaning, the senators asserted, “there is a one in three chance of an actual credit downgrade in the next two years.” They asserted that the Federal Reserve is now buying 70% of U.S. Treasuries, set to surpass the holdings of both Communist China and Japan combined.

How far the three senators will get with the Sound Money Protection Act is hard to say. Its implication — a recognition of gold and silver as the true constitutional money — is, in the current context, radical. But it's no more radical than the Founders, who, when they twice used the word “dollars” in the Constitution, were referring to a coin containing 371 ¼ grains of silver. They codified that as the definition of the dollar in the Coinage Act of 1792. They also referenced gold in the 1792 Act, with a value of 15 times that of silver. We are in a time when understanding the concept of constitutional money will point the way to the policies needed to steer our country out of its current difficulties.

Will Greek Austerity Measures Work?

Today the Greek Parliament, flying in the face of violent and deadly protests, voted to adopt austerity measures designed to reduce Greece's mountainous debt and settle very shaky nerves in the euro zone.

Even if this plan is passed, though, will the euro - and the EU - be on the path to recovery?

It's hard to say, but I believe that the austerity plan - while not perfect - takes sufficient aim at Greece's bloated public sector.

Greece is notorious for being a state consumed by the public sector, which amounts for about 40% of its GDP. The average retirement age in Greece's public sector is 61, well below what it should probably be. The austerity plan should help with these matters.

What is not being addressed, however, is corruption. Corruption is widespread in the Greek public sector, causing hundreds of millions of euros to be paid out each year in under-the-table bribes for basic public services. In fact, corruption may be one of the key reasons why the Greek economy is so weak - systemic reasons aside.

Corruption has to be addresed by the Greek government in order for any austerity plan to be successful. Pay cuts, salary freezes, and layoffs may work to a degree, but corruption and grafts have to be squashed as a part of any package dealing with the public sector.

It's too early to say if these plans will work or not. Besides, even if they do, you still have a dire situation in Italy, Portugal, Spain, and Ireland that has to be handled. But, the markets will probably view this as a positive development, and in the short term, things could be worse.

Protest Violence Before Key Greek Austerity Vote

Greek police clashed with protesters trying to block the way into parliament on Wednesday as signs grew that the government would succeed in passing a sweeping austerity plan demanded by international creditors.

With Greece risking bankruptcy if the measures are blocked, parliament was expected to vote in the afternoon on the mix of spending cuts, tax increases and privatizations to be implemented as conditions for a massive bailout by the European Union and the International Monetary Fund.

After the start of a 48-hour general strike and violent clashes on Tuesday that transformed the central Syntagma Square into a battle zone, fresh protests were planned on Wednesday and thousands had gathered in front of parliament by midday.

Late on Tuesday, the government of Prime Minister George Papandreou received a boost when one of three rebel deputies from his PASOK party backtracked on his previous opposition and said he would vote for the package.

"I have made the decision to vote for the plan because national interests are more important than our own dignity," the deputy, Thomas Robopoulos, told Reuters.

A parliamentary official said the vote would probably take place between 2 and 5 p.m. (1100-1400 GMT).

One communist deputy was pelted with yoghurt as she made her way into parliament and three people were treated for minor injuries as protesters clashed with police during an attempt to bar the way into the chamber.

The communist-affiliated PAME labor group held a rally in the morning and several other meetings were expected during the day, culminating in a major demonstration by public service union ADEDY and private sector union GSEE at 7 p.m. (1600 GMT).

Greece's central bank governor, George Provopoulos, warned that a "no" vote would be catastrophic for Greece.

"For parliament to vote against this package would be a crime - the country would be voting for its suicide," he told the Financial Times.

The measures demanded by international lenders as the price for continuing to support Athens have caused bitter resentment among Greeks coping with the deepest recession since the 1970s and now facing years of grim austerity.

Another PASOK rebel, Panagiotis Kouroublis, said he still objected to the plan but declined to say whether he would vote against it. "I will speak to the Parliament later and you will hear what I have to say," he told Alter TV. "Nothing is more important than my dignity and my love for my country."

SLIM GOVERNMENT MAJORITY

Papandreou's Socialists hold a narrow majority with 155 seats in the 300-member legislature and with Robopoulos, the most prominent of a handful of potential rebels, backtracking on his opposition, chances of the vote going through improved.

In a sign of growing optimism on financial markets about the outcome, Greek bank stocks opened up 3 percent on Wednesday, while Greek bond yields fell.

However even with approval on Wednesday, there will still be a risk of lawmakers rejecting detailed austerity bills in votes on Thursday on the implementation of different elements of the plan, such as tax rises and the sale of state assets.

The EU and the IMF have said the entire plan must be passed this week for Greece to obtain the next, 12 billion euro ($17.3 billion) tranche of emergency loans under the bailout.

Greek officials have said the country needs the money by mid-July to continue paying its debts.

Despite heavy international pressure, the center-right opposition declared ihttp://www.blogger.com/img/blank.gift would vote against the package but close attention was being paid to a splinter group of conservative deputies led by former foreign minister Dora Bakoyanis.

Bakoyanis, who broke party ranks to vote in favor of Greece's first EU/IMF bailout last year, said on Wednesday she would abstain from voting this time. The other four deputies in her group would vote according to their consciences.

"The government cannot govern and apply the program and the political opposition is lying, this is the problem. It does not dare to tell people that there are no magic solutions, that sacrifices are necessary," Bakoyanis said.

View original source: Reuters.com

China's premiere arrives in the UK (25-Jun-11)(GLOBAL FOCUS series - UK)

China's premiere arrives in the UK (25-Jun-11)(GLOBAL FOCUS series - UK)

Good discussion about the Greece Economic crisis and Chinas interest in maintaining european economic stability

Max Keiser with Gerald Celente on The IMF (24-Jun-11)(1-2 UNDERSTANDING NWO ECONOMICS series

Max Keiser hosts a discussion with Gerald Celente about The IMF - his tv show "on the edge"

Peter Schiff on Fox Business - Possibility of QE3 6-22-11

Schiff contends QE3 will happen, though Bernanke will call it something else.

Q3 is all but certain, and also going to fail too... Peter Schiff.

Why the Misery Index Is Higher Than the Feds Let On

The Dow Jones Industrial Average continues its hiatus from doom and gloom yesterday – up more than 100 points so far today on what would be its fourth consecutive winning session.

A four-day winning streak may not seem like much, but as The Daily Reckoning faithful will recall, the Dow has fallen for six straight weeks. Perhaps the Blue Chips will fall for a seventh straight week, but so far the Dow is solidly in the black.

Sure, the reasons for lightening up on stocks remain just as compelling today as they did last week (and the five weeks before that), but that doesn’t mean the stock market has to fall every day.

Greece is still racing towards an inevitable default, America’s governmental finances – from Washington to Sacramento – are still sickly and the US economy’s performance still continues to disappoint.

So, yeah, stocks might drop again tomorrow…http://www.blogger.com/img/blank.gif

But there is “a time for everything,” as the writer of Ecclesiastes observed about three millennia ago…and the Byrds re-iterated about three decades ago. And this week – so far – is simply not the time for selling.

Ample time remains for selling stocks, of course,…and also for buying them. But when it comes to buying, you know our view: Stick with the companies that provide indispensable goods and services. Stick with the companies that provide the world’s “must haves,” rather than the world’s “like to haves.”

Read more: Economic News and Ideas on Debt, the Market, Gold, Oil, and Investing. http://dailyreckoning.com/

Shekel Drops to Week-Low as Fischer Bids for IMF Job; Bonds Fall

The shekel fell to the lowest level in more than a week amid concern about Israel’s ability to maintain economic stability as central bank governor Stanley Fischer bid for the International Monetary fund’s top job.

The country recovered from the global recession faster than many other developed economies during Fischer’s tenure, with growth of 4.7 percent in the first quarter of 2011 and 7.6 percent in the fourth quarter of 2010. The economy is likely to expand 5.2 percent this year and 4.2 percent in 2012, the central bank said in a June 1 forecast.

“The possibility of Fischer leaving the country is creating uncertainty about the economy, which is a concern for investors because there is no adequate replacement,” Rony Gitlin, head of spot trading at Bank Leumi Le-Israel Ltd. in Tel Aviv, said by telephone. “There are bets on whether Fischer will succeed in the candidacy, but he wouldn’t bid for the post if he wasn’t sure he will succeed. He must know something we don’t.”

The shekel weakened as much as 0.9 percent to 3.4386 per dollar, the lowest since June 2, and was down 0.8 percent at 3.4348 at 11:53 a.m. in Tel Aviv.

Fischer, 67, is betting his experience and a shortage of candidates will prompt IMF members to waive an age requirement that would exclude him from the position, a person familiar with the situation said yesterday. French Finance Minister Christine Lagarde and Mexican central bank chief Agustin Carstens also are running.

Greece Dispute

“At the end of the day, the country’s economy doesn’t depend on any one person,” Sagi Stein, chief executive officer of Migdal Mutual Funds, said in a telephone interview yesterday. “I don’t believe it would harm the economy” if Fischer left, he said.

The shekel also is weakening because a dispute about Greece’s financing needs is increasing demand for the relative safety of the dollar, Leumi’s Gitlin said.

European Central Bank President Jean-Claude Trichet and German Finance Minister Wolfgang Schaeuble are at odds over investors’ role in the second Greek rescue in 14 months. Unless a deal can be struck to guarantee Greece’s financing needs for the next 12 months, the International Monetary Fund has threatened to withhold its share of what remains of Greece’s original 110 billion-euro ($158 billion) bailout.

The yield on Israel’s 5 percent Mimshal Shiklit bond due January 2020 rose five basis points, or 0.05 percentage point, to 5.15 percent, the highest since May 24.

To contact the reporter on this story: Sharon Wrobel in Tel Aviv at swrobel4@bloomberg.net

Default would be dire, Greek leader says

ATHEN — Greece’s prime minister, George Papandreou, said yesterday that he will continue with policies to drastically cut the country’s debt because the alternative — a default — would be catastrophic.

“We have taken a decision that no Greeks should live through the consequences of a default — and to change the country radically so that it . . . can stand on its own feet,’’ Papandreou told a newspaper. Never “did I imagine that we would need to slash pensions in order for the state to continue to pay any pensions at all,’’ he added.

An austerity program running through 2015 is designed to save $41 billion. It’s seen as essential in securing the fifth installment, worth $17 billion, of a $159 billion bailout by the European Union and International Monetary Fund. Greece hopes to secure a second bailout this month

BERNANKE, OBAMA SPEAK OUT AGAINST RECESSION RUMORS

Both President Obama and Federal Reserve chairman Ben Bernanke addressed fears of a double dip recession today, in speeches that were not related. Mr. Obama held a press conference after meeting with German Chancellor Angela Merkel. “I’m not worried about a double-dip recession,” he said. He said he is worried about the slow pace of job creation in the country.

Speaking at a different conference, Mr. Bernanke echoed the sentiments of the president. “Until we see a sustained period of stronger job creation, we cannot consider the recovery to be truly established,” he said. After the Fed chairman made his remarks, both metals and stocks lost ground that was gained early in the day. This situation brings back to mind a buzzword from 2009: Stagflation, which The American Heritage Dictionary defines as “characterized by sluggish economic growth and high inflation.”

In a sign that the world may be starting to recognize the inevitable fall of the Ghaddafi regime, China and Russia have held talks with rebel leaders. Both countries formerly abstained from voting on the U.N. resolution authorizing use of force against Libya’s military. It’s hard to fathom that the former ruler could come back to full power after NATO forces have made clear that their end-in-mind goal is to see the entire ruling family ousted.

At 4:06 pm (CT) the APMEX precious metals spot prices were:

•Gold - $1,546.00 (down $1.70 on the day)
•Silver - $37.25 (up $0.38)
•Platinum - $1,836.90 (up $14.70)
•Palladium - $811.20 (up $10.50)

by Robert Davis June 7, 2011