Australia Silver - Investment news and information

Australia Silver - Investment news and information

Eventual Replacement of the Debt Pegged Economic System

Isn’t it time we reconsider the current monetary system where our paper money value can only really be considered to be backed by debt. As absurd as this may sound every time a bank loan or mortgage is given, that money is created as debt.

Bill Still and Ron Paul propose two new systems that could see this financial system re-evaluated, as more and more citizens become aware of the limitations of the current system and learn that there may be a viable and beneficial alternative.

Ron Paul, (Part of the Austrian school of economics along with the likes of Peter Schiff) is a firm believer in a gold-backed monetary system and believes that if the dollar is pegged to gold (and Silver) it will only be able to expand as more gold (and Silver) is mined and minted. This would restrict the new money released into the system severely reducing any inflation concerns; however the ability for the economy to grow would diminish to a sustainable if not stifling rate of development.

Bill Still, author of the film prodctions The Money Masters and The Secret of OZ calls for a plentiful money system and a change to the bank requirement from 1:10 to a 1:1 entirely backed system. Also that money is born into the system as wealth rather than debt whilst never getting in debt to an IMF (World Bank type monetary body.)

The current Reserve requirement system tends to benefit purely the banking institution lending the debt whereas a money as wealth system would see an expansion in the monetary system as wealth as instead of retiring debt, the completion of a loan would result in more generated wealth which is beneficial to economies at large. This would offset what many see as a potential issue in the Gold Backed System.

Find out all about these alternate systems:

Bil Still

Ron Paul

Peter Schiff

By Joseph Gale

If Market Keeps Falling, Fed Will Keep Printing: 'Dr. Doom'

Speaking as global markets fell violently lower in the wake of the Japan earthquake and fears of a nuclear meltdown, Faber said a stock correction actually is healthy in view of how far equities have come from the March 2009 lows.

He also expects weakness to persist and the Standard & Poor's 500 to drop as much as 15 percent. Further, Fed Chairman Ben Bernanke will likely give the green light to another round of Treasurys purchases, which have come to be known as quantitative easing, he said.

"We may drop 10 to 15 percent. Then QE 2 will come, (then) QE 4, QE 5, QE 6, QE 7—whatever you want. The money printer will continue to print, that I'm sure," said the author of the Gloom, Boom and Doom Report. Later in the interview, he added, "Actually I made a mistake. I meant to say QE 18."

As for the situation with Japan specifically, he said the end result of rebuilding after the quake would be inflation and a positive for stocks, while Japanese Government Bonds, or JGBs as they are often called, would suffer.

"This huge selloff is an investment opportunity in Japanese equities, but if a meltdown occurs then all bets are off," he said.

The Nikkei Japanese stock market index has plunged more than 12 percent this week, its worst two-day drop in more than 20 years.

US equities have shown far less reaction but were poised to drop more than 2 percent at the open Tuesday. Faber, though, said the central bank would spring into action should the selling get out of hand.

"I think Mr. Bernanke doesn't know much about the global economy but he probably watches the S&P every day," he said.

"Until very recently the Feds have had very few critiques, very few people criticized the Fed's policies under Mr. Greenspan and Mr. Bernanke," Faber added. "Over the last few months, a lot of critical comments have come up about the Fed and its money-printing habit. The S&P drops 20 percent (and) all the critics will be silent and they will all applaud new money-printing."



Falling stock prices will be met only with more money injections from the Federal Reserve, Marc Faber, the so-called "Dr. Doom," told CNBC.

United States Treasuries Snap Decline as Fed Plans to Purchase Notes Today

US Treasuries snapped a decline from yesterday as the Federal Reserve prepared to buy as much as $6 billion of U.S. debt today, after saying it intends to stick to its plan to purchase $600 billion of securities by June 30.

Yields have risen too far given that inflation is running slower than the Federal Reserve wants, according to Nikko Cordial Securities Inc., a unit of Sumitomo Mitsui Financial Group Inc., Japan’s third-largest publicly traded bank. The U.S. government is scheduled to sell $29 billion of seven-year debt today, the last of three note auctions this week.

“It will take a few quarters for inflation to pick up,” said Hiroki Shimazu, an economist at Nikko Cordial in Tokyo. “That will make Treasury yields fall in the next few months.”

Ten-year notes yielded 3.41 percent as of 6:51 a.m. in London, according to BGCantor Market Data. The 2.625 percent security maturing in November 2020 traded at 93 1/2. The yield increased eight basis points yesterday.

U.S. government securities have fluctuated between gains and losses for the past eight sessions. The 10-year rate will fall to 3 percent by March 31, Shimazu said.

The Fed will buy $4 billion to $6 billion of notes maturing from July 2012 to July 2013 today, according to its website.

The euro was near a two-month high versus the dollar before a German report forecast to show consumer prices rose at the fastest pace in two years. The 17-nation currency rose to $1.3722 yesterday, the strongest since Nov. 22.

Extra Yield

The extra yield investors demand to hold two-year German notes instead of similar-maturity Treasuries expanded to 70 basis points today, the most since January 2009.

The difference between 2- and 30-year rates was 3.96 percentage points. The spread widened to a record 3.98 percentage points on Jan. 20 based on closing levels, indicating investors have been demanding greater compensation for rising costs in the economy.

Ten-year Treasury Inflation Protected Securities show bondholders expect the consumer price index to increase 2.27 percentage points annually on average over the life of the debt. Economists surveyed by Bloomberg forecast an inflation rate this year of 1.7 percent.

Treasuries fell yesterday as the Fed maintained its bond- purchase program while saying the pace of economic expansion is insufficient to lower unemployment. The jobless rate has been more than 9 percent for 20 months.

Government securities also declined after the U.S. sold $35 billion of five-year notes and a report showed sales of new homes rose more in December than economists forecast.

‘Full Speed Ahead’

While commodities have risen, “longer-term inflation expectations have remained stable, and measures of underlying inflation have been trending downward,” the central bank said in a statement yesterday after its two-day meeting.

The inflation gauge watched by the Fed, which excludes food and energy costs, increased 0.8 percent in the 12 months through November. The figure is below the 1.6 percent to 2 percent range central bank officials say is consistent with achieving their legislative mandate for stable prices.

Treasuries are heading for a fourth monthly decline on signs the economy is improving. U.S. debt has handed investors a 3 percent loss since the end of September, based on Bank of America Merrill Lynch data.

The MSCI All Country World Index of stocks returned 11 percent in the period, according to data compiled by Bloomberg. U.S. corporate bonds fell 0.2 percent, the BOA indexes show.

Durable Goods

Orders for U.S. durable goods and pending home sales both rose in December, economists said before government and industry reports today. At General Electric Co., the world’s biggest maker of jet engines, operating earnings will increase “nicely” this year, Chief Executive Officer Jeffrey Immelt said Jan. 21.

The Fed’s purchases of Treasuries and mortgage debt reduce the supply of those securities, according to Fidelity Investments, the Boston-based fund manager that oversees $1.6 trillion of assets.

“The corporate bond market is still reasonably attractive,” David Prothro, a debt fund manager at Fidelity, wrote in a report yesterday on the company’s website. “The U.S. economy is stabilizing.”

The seven-year notes being sold today yielded 2.77 percent in pre-auction trading, compared with 2.83 percent at the previous sale of the securities on Dec. 29.

Investors bid for 2.86 times the amount on offer last month, up from 2.63 times in November. Indirect bidders, the class of investors that includes foreign central banks, bought 64.2 percent of the debt, versus a 10-sale average of 50.9 percent.

--Editors: Nicholas Reynolds, Jonathan Annells

To contact the reporter on this story: Wes Goodman in Singapore at wgoodman@bloomberg.net.

To contact the editor responsible for this story: Rocky Swift at rswift5@bloomberg.net.