A New Era
>> November 9, 2008
Just recently, the vice-president elect Joe Biden said some remarkable words about the threat that lies behead. Mr. Biden said; "Mark my words. It will not be six months before the world tests Barack Obama like they did John Kennedy. The world is looking."
Was Biden right or what? Within 24 hours after the election of the new President-elect Barack Obama, Russia elected to stir things up. Russian President Medvedev said: "Kremlin would station missiles in the tiny Russian enclave of Kaliningrad, which borders Poland, in response to US plans for an anti-missile system in Eastern Europe."
The Russian newspaper Vedomosti predicts that Putin could retake his position as Russia’s President somewhere in 2009 Setting Medvedev aside. That is just like getting back to the cold war again, this time without the uranium and colonial offensives. Only this time, the world has changed. Now we have the credit crisis, peak-oil crisis, global warming crisis…and Putin is using oil and commodities as strategic weaponry.
With all the (global) change on our planet and especially with oil at $65 a barrel and heading lower, (pushing Russia, Venezuela, Iran and others slowly into crisis-mode), the oil-autocracies of the world are becoming somewhat irritated. Most of these countries need a price of $70 – $90 dollars a barrel-oil to cover their domestic social budgets. Saudi Arabia could have some more slack to a more reasonable $50 dollars per barrel-oil. Don’t forget that Iran and the Saudi’s already reached their peak-oil discussions some time ago. With the latter having the largest reserves and thus the most swing capacity available. Oil prices will rise eventually (either OPEC manipulated or by demand), but will gold follow suit?
Probably not. We have seen the oil/gold ratio of 15.1 fall apart. Today it stands near 7.5. If we believe some of the experts out there, gold could be touching $500 this Christmas. In another article I sensed that the indicators are turning worse. First by global recession following the drop in overall demand. Second by aiming at possible monetary deflation situation in about 6 - 9 months from now. Keep your eyes at the overnight interest rate as an (rough) indicator. It will drop to zero within a year if the economy evolves into depression. Another indication would be rising unemployment numbers.
According to the new ‘doctor Doom’ also known as Dr. Nouriel Roubini, there is a new phenomenon occurring known as ‘stag deflation’. Roubini’s four forces of stag deflation are:
1. a slack in goods markets,
2. a "recoupling" of the rest of the world with the U.S. recession,
3. a slack in labor markets, and
4. a sharp fall in commodity prices.
These factors would, "reduce inflationary forces and lead to deflationary forces in the global economy," he writes in an article in Forbes.
I found another economic expert known as John Williams from shadowstats.com who has a more elaborate explanation about the US government’s manipulation in CPI and the M3 numbers (see shadowstats website). Below I attached an interesting video from CNN Money (February 2008). Williams points out how the M3 money supply keeps expanding instigated by the FED, accompanied with the asset deflation and (real) inflation that hits the markets with approx. 6 – 12 months of delay caused by the system. By the end of 2009 he expects the global downturn to evolve into a depression. CNN Money - John Williams
Was Biden right or what? Within 24 hours after the election of the new President-elect Barack Obama, Russia elected to stir things up. Russian President Medvedev said: "Kremlin would station missiles in the tiny Russian enclave of Kaliningrad, which borders Poland, in response to US plans for an anti-missile system in Eastern Europe."
The Russian newspaper Vedomosti predicts that Putin could retake his position as Russia’s President somewhere in 2009 Setting Medvedev aside. That is just like getting back to the cold war again, this time without the uranium and colonial offensives. Only this time, the world has changed. Now we have the credit crisis, peak-oil crisis, global warming crisis…and Putin is using oil and commodities as strategic weaponry.
With all the (global) change on our planet and especially with oil at $65 a barrel and heading lower, (pushing Russia, Venezuela, Iran and others slowly into crisis-mode), the oil-autocracies of the world are becoming somewhat irritated. Most of these countries need a price of $70 – $90 dollars a barrel-oil to cover their domestic social budgets. Saudi Arabia could have some more slack to a more reasonable $50 dollars per barrel-oil. Don’t forget that Iran and the Saudi’s already reached their peak-oil discussions some time ago. With the latter having the largest reserves and thus the most swing capacity available. Oil prices will rise eventually (either OPEC manipulated or by demand), but will gold follow suit?
Probably not. We have seen the oil/gold ratio of 15.1 fall apart. Today it stands near 7.5. If we believe some of the experts out there, gold could be touching $500 this Christmas. In another article I sensed that the indicators are turning worse. First by global recession following the drop in overall demand. Second by aiming at possible monetary deflation situation in about 6 - 9 months from now. Keep your eyes at the overnight interest rate as an (rough) indicator. It will drop to zero within a year if the economy evolves into depression. Another indication would be rising unemployment numbers.
According to the new ‘doctor Doom’ also known as Dr. Nouriel Roubini, there is a new phenomenon occurring known as ‘stag deflation’. Roubini’s four forces of stag deflation are:
1. a slack in goods markets,
2. a "recoupling" of the rest of the world with the U.S. recession,
3. a slack in labor markets, and
4. a sharp fall in commodity prices.
These factors would, "reduce inflationary forces and lead to deflationary forces in the global economy," he writes in an article in Forbes.
I found another economic expert known as John Williams from shadowstats.com who has a more elaborate explanation about the US government’s manipulation in CPI and the M3 numbers (see shadowstats website). Below I attached an interesting video from CNN Money (February 2008). Williams points out how the M3 money supply keeps expanding instigated by the FED, accompanied with the asset deflation and (real) inflation that hits the markets with approx. 6 – 12 months of delay caused by the system. By the end of 2009 he expects the global downturn to evolve into a depression. CNN Money - John Williams
Several scenarios of the current situation could come out into a continuous downfall for the global economy in the coming months. When FED-created (bailout) money hits the ground in the real economy, inflation explodes instantly. But it’s possible that inflation will not make it into the real economy as monetary deflation sets in. How that transition works out is unknown. Basically it could boost gold shortly or possibly not at all. As you know, the markets are volatile and behave mainly on investor emotions. My overall advice to you still is: remain out of commodities and miner stocks. Take a small portion of gold bullion into your portfolio for the long run. No more than maximum of 10 percent of your total investment money as some form of protection in this new era. History in the making.
By Rob de Graaf
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