Beiträge von Schwabenpfeil

Now compare what Dennis G has to say versus two veteran Café members:

Bill,
The last few months have been very frustrating for us all and the last couple of weeks even more so. I admire your tenacity and ability to continue to swim not only up the stream less traveled but often against tremendous current. It must feel like you are knocking your head on a very hard wall at times. I just hope that one day we are all rewarded for hanging on to our gold and gold stocks.

Things must really be bad as even I could not handle the latest call from the financial wizard in the UK. I have sent the following letter to the Australian Financial Review and also to the British Financial Times. I purposely wrote it in an Australian folksy way to give me the best chance of getting it printed in Australia at least. The trouble is the press here and the UK remains fairly gutless and probably won’t touch this. If you have any addresses for German, French, Italian financial news papers or any other outlet I could try I will be happy to give them a try.

As I have at least gone to the trouble of putting this letter together please feel free to use my letter in any way you wish at least a few of your readers may get a laugh. After the last few weeks I’m sure like me they could use one.

Please keep on the good work.
Best regards: Andy Igo

What to make of it all:

*Brown and his Gold Cartel allies have succeeded in casting a pall over the gold market which may last for months. Veteran gold market observers all know what happened to the price of gold when Britain announced their sales in 1999 and when Australia bombed the market in 1997.

*What is coming out from the G-7 meeting is for public consumption. The real story is a very different one. The only aspect which is transparent is Brown pushing for sales to keep the price of gold capped for the foreseeable future.

*It is inconceivable how the South African finance minister said what he did, except to understand the man is bought and paid for and yes, a traitor to his people and the poor of his country. South African gold companies are laying off workers and delaying plans to hire more miners because they cannot make enough profit at these gold price levels with their costs having risen so sharply. Lower gold prices for years to come will be devastating.

Perhaps Manuel really is stupid, yet a nincompoop would know that even talk of outright gold sales would put a damper on the price and scare away potential investors – at least western investors – which would adversely affect the price. Since a lowered gold price hurts so many people in South Africa and sub-Saharan Africa, he should have lowered the boom on Brown, not facilitate his proposal.

This will give you some idea of how powerful The Gold Cartel and the powers behind them really are. Manuel’s moronic comments were blunt. Where were Canada’s and Australia’s finance ministers when they were talked into selling their gold? Think of how the lowered gold price has affected so many companies in Canada and Australia over the past half decade – the lowered economic activity, etc. There is no doubt in my mind the price of gold will soar above $1,000+ per ounce in the years to come, IMF sales or no. The governments of Canada and Australia will not participate as both countries have dumped ALL their gold.

*No country is more anti-gold than the US. GATA has 6 years of documentation of this. Therefore, you can be sure U.S. Treasury Under Secretary John Taylor’s objection to gold sales is a red herring of sorts. While speculation on my part, there is good reason to believe the US is scared to death of the gold issue being raised, as it may lead to questions about US gold, a portion of which has most likely been clandestinely mobilized (lend or swapped out). The last thing the US wants is for this issue to become a highly discussed one in our country. This would be just the opportunity for GATA to bring up the hard questions re US gold, a nightmare for the US Treasury, Fed, certain members of Congress etc.

How interesting that Treasury Secretary Snow developed a cold right after the State of the Union Address on Wednesday and the G-7 meeting on Friday. Did he fear pointed questions regarding gold and perhaps the role of the Exchange Stabilization Fund these days in capping the gold price?

*Now for the potential good news. It is the general notion in the GATA camp that The Gold Cartel is running low on enough physical gold to keep the price from moving MUCH higher. This has been my take for months. Now, we have Gold Cartel apologist Brown demoralizing the gold market with his calls for outright IMF sales. Let us go retro:

There was a clamor to sell IMF Gold in 1999, which was roundly defeated, with support for the measure coming mostly from the US Treasury. Britain announced their sale program only after this measure was defeated, just as gold was finally about to take out $300 per ounce on the upside. The point is The Gold Cartel was scrambling for gold back then to cap the price and England came to their rescue. Here we are six years later and they appear to be in a similar situation, with one immense difference. The Gold Cartel has gone though 6,000 to 10,000 tonnes of central bank gold since then. One fifth to one third of central bank gold has been used up, bought by the Chinese, Arabs, Turks, Indians, etc. Wherever The Gold Cartel found their gold over these past years, it is gone.

The only question is who is out the gold? The British? Could they be short? The US? Is our "Deep Storage" Treasury gold really gold which is yet to be mined because we have lent out, or swapped out, most of our gold? Does the US have some kind of tacit agreement with the likes of Barrick, etc., to replace this gold down the road if they feel they are going to be found out? Hard to know...all of these notions are very plausible.

What GATA does know is some of the above is the way it is. The only question is exactly who are the culprits and when will they be found out. Since there is a 1500+ tonne yearly supply/demand deficit, discovery is only a matter of time. Therefore, while The Gold Cartel and allies have sullied the very short-term, the big picture grows even brighter.

Yes, it is very plausible The Gold Cartel is truly hitting the fan and knows the jig is up, gradually coming to the end of the decade-long scheme as they know they don’t have the gold to keep up their scam. It is conceivable they are using this opportunity to do what they can to rout the market and turn the specs short. Why? Because they need to buy all the gold they can down here to cover some undisclosed predicaments (England covering shorts, for example). Not only talking about countries here. This is the chance for JP Morgan Chase and Goldman Sachs to continue to cover too. They might not get a better one for decades to come.

Meanwhile, it is amazing how gullible certain in the mainstream are when it comes to what Wall Street and officialdom puts out there. None is more visibly gullible than Denis Gartman, of the widely-followed Gartman Letter. His latest today on the G-7/IMF flap:

The gold bulls got a reprieve over the weekend when it was decided at the G-7 meeting to defer any action on the plan put forth by UK Chancellor of the Exchequer Brown to tackle the problems of Third World debt and aid by selling gold from the IMF's reserves... or from the reserves of the various industrialised nations. In the communiqué released at the meeting's end, the leaders said only that they would take up the discussion at a later date... perhaps in April in Washington and/or perhaps in the UK in June Mr. Rodrigo Rato, the IMF's Managing Director, has been given the portfolio to look into the matter of such gold sales and/or reserve re-valuation and to make his case at the April meeting. The IMF has 3,217 tonnes of gold in store, valued at approximately 20% of its current spot price and the most likely proposal that he will put forth shall be to revalue that gold, strengthen the IMF's balance sheet, and use that stronger balance sheet either to borrow against, with the proceeds going to the Third World, or actually selling the told in question and using those very real proceeds to pay down that same debt.

For the moment, however, the proposition has been tabled and put into Mr. Rato's hands for later consideration. The US led the opposition to Mr. Brown's proposals, and was rather openly critical of his proposal to use national and/or IMF gold reserves in some fashion for the aid he hoped to put forth. We are left to wonder how our friends at GATA, who are so convinced that the US has lead a conspiracy to keep gold prices down, shall view the US opposition to gold sales this time now. It leaves GATA in a bit of a quandary, for suddenly the governments are not their enemy but are instead their aid and comfort..

-END-

G7 Mulls IMF Gold Sales to Help Poor

By Katie Allen
Reuters
Saturday, February 5, 2005

http://www.reuters.com/newsArt…inessNews&storyID=7547548

LONDON -- The International Monetary Fund will look into using its huge gold reserves to help finance debt relief for the world's poorest countries on the urging of the Group of Seven rich nations, ministers said on Saturday.

Finance chiefs from the G7 in their communique issued at the end of the two-day meeting said IMF managing director Rodrigo Rato will look at proposals to revalue or sell gold reserves to offer debt relief to alleviate global poverty.

"I believe this is the first time there has been a mention of the use of gold in a G7 communique for achieving debt relief," said British finance minister Gordon Brown, who hosted the two-day meeting in London.

He said gold sales as well as revaluations would be investigated and Rato would report back in April, when the IMF meets in Washington.

"To finance the relief of debts owed to the IMF and to enable the Fund to continue to play a role in the poorest countries, the Managing Director has stated that he will bring forward proposals ... covering the Fund's gold and other resources and in an orderly way," the communique said.

Rato said on Friday there are clear ways to sell gold effectively if IMF shareholders decide to proceed. But he stressed he was not providing an opinion.

"Certainly we have done it before and we think there are clear ways to do it that will be the most effective from a financial point of view," he said at the London meeting.

The world's poorest nations owe $12 billion to the IMF, Brown said. Overall, sub-Saharan Africa owes some $70 billion to multilateral lenders, and developing countries say repayments are crippling them by diverting funds from education and health care.

Brown has made debt relief the centerpiece of Britain's 2005 presidency of the Group of Eight, which includes the G7 nations France, Italy, Canada, Germany, Japan, and the United States as well as Russia.

He first proposed revaluing IMF gold stocks with off-market sales last year. Under a 1971 agreement, most IMF gold is valued at $40 to $50 an ounce, or about one-tenth of current market prices. The fund holds 103.4 million ounces of gold.

Brown has said revaluing the gold could free up billions of dollars to ease debt burdens on the world's poor.

But U.S. Treasury Under Secretary John Taylor said the United States had other plans for alleviating poverty.

Asked about using IMF gold stocks he said: "The United States is not convinced that's the necessary way to do it."

The United States has a de-facto veto power on IMF gold sales because of its voting weight at the fund.

Leading gold producer Canada was cautious in its support.

"If a technical answer can be found that does not compromise the IMF's integrity, we are prepared to go with it," said Canadian Finance Minister Ralph Goodale after the London talks.

But the plan received key backing from the world's largest gold producer, South Africa, although Finance Minister Trevor Manuel cautioned there must be a rational approach to sales.

"Unless we manage this process, you might have disruptive sales, which will have disastrous consequences for gold-producing countries," he told Reuters on the sidelines of the G7 talks.

He suggested staggered sales to ensure market stability.

"I would rather have an arrangement where we agree to sell, agree to order, agree to a queuing system. I would be happy to have the IMF have some preference in that queue so that we don't impede the debt relief," he said.

-END-

February 7 – Gold $413.40 down 60 cents – Silver $6.53 down 3 cents

What Is The Real Story Behind The Brown/G-7/IMF Gold Sale Flap?

1. In every work of genius, we recognize our rejected thoughts. 2. Let me never fall into the vulgar mistake of dreaming that I am persecuted whenever I am contradicted. 3. Nothing great was ever achieved without enthusiasm. 4. The reward of a thing well done is to have done it. 5. Though we travel the world over to find the beautiful, we must carry it with us or we find it not. 6. We are always getting ready to live, but never living. 7. What you do speaks so loudly that I cannot hear what you say...Ralph Waldo Emerson

GO GATA!!!!

If there ever was a time for the gold industry to get off their butts and speak out for themselves, it is now. One thing for sure, recent developments regarding IMF gold have further shorn up the need for the work of the GATA camp re the gold loan/swaps to see further scrutiny and the light of day.

Very subtly Britain’s finance minister Gordon Brown has postured the IMF from revaluing its gold to selling it outright. This is the same Gordon Brown who sold Britain’s gold at $280. The last thing he wants is to see gold at $500, which would further embarrass him for his ill-conceived move of dumping his country’s gold so cheaply from 1999 to 2001.

We have seen the tenor of his gold sales pitch quietly increasing over the past month, culminating with this weekend’s G-7 meeting…as portrayed in this article in the FT:

Zitat

Original von neuling

Wieso will die Bank mein Silber nicht, obwohl es angeblich so gesucht und wertvoll ist?

Hallo Neuling,

weil Deine Bank Dich mit Papieranlagen viel besser und leichter abzocken kann

Gruß
Schwabenpfeil

Hatte er damals hier bestätigt. Im Zweifelsfall zur 100% igen Sicherheit halt noch einmal telefonisch bzw. per email nachfragen ...

Gruß
Schwabenpfeil

Zitat

Original von Metatron

Sicher günstiger als mein Münzengeschäft in Wien, aber wenn ich bei den deutschen Münzengeschäften was bestelle, zahle ich noch ordentlich Porto dazu (bis zu 35€) und das zahlt sich nicht mehr aus

Hallo Metatron,

Portokosten sind immer ein großes Thema. Wie wäre es, wenn Du zum Bsp. jedes halbe Jahr für ca. 600 EUR kaufst. Bei FE sind Lieferungen ab 500 EUR in Deutschland portofrei. Nach Österreich müßtest Du mit Ihm reden. 35 EUR Portokosten habe ich allerdings noch nie gehört ...

Gruß
Schwabenpfeil

Zitat

Original von hpopth

Entschuldigt, dass ich wieder gemeckert habe!

Gerne. Aber Deine Motive bleiben mir ein Rätsel ...

Gruß
Schwabenpfeil

Zitat

Original von Pauli

Ich verstehe nicht, wie jemand, der hier seit einem Jahr recht aktiv posted und es zum "König" gebracht hat, einen solchen Hass auf die GATA entwickeln kann, dass er die Verbreitung der LeMetropole Infos hier unterdrücken will. Es KANN nicht sein, dass Dich als Experten nicht viele der Infos inhaltlich überzeugen; weil die dort veröffentlichten Fakten schlichtweg häufig nicht widerlegbar sind. [Dass Du selbst zur vielzitierten Gold-"Kabale" gehörst, will ich mal nicht unterstellen.]

Also - ein wenig mehr Toleranz für andere Meinungen und sachliche Vorschläge wäre hier schon angebracht.

Hallo Pauli,

da hast Du Ulfur wohl gründlich mißverstanden. Er plädiert schon länger dafür, die GATA Texte in diesem Thread zu veröffentlichen. Er hat Deinen "Vorschlag" vielleicht etwas zu hart kritisiert. Moderatoren verlieren sich ja bei Diskussionen nie hier in den Thread ?(, bin aber auch fast 100 % sicher, dass Deine Idee nicht realisierbar ist.

Ich kann nur immer wiederholen, dass ich der letzte bin, der einer besseren Lösung im Wege stehen will. Aber offensichtlich kennt keiner eine realsierbare ...

Gruß
Schwabenpfeil

Zitat

Original von hpopth
tut mir leid man kann halt nicht alles.

Hallo hpoth,

schon ok, wenn Du nicht soo gut in Englisch ist. Weshalb Du wegen Deiner Schwächen aber die englischen Texte aus dem Le Metropole wiederholt als Müll bezeichnest, ist mir ein Rätsel

Gruß
Schwabenpfeil

Appendix

Hi Bill,
No amount of propping of the bond market, nor frantic bombing of the gold paper futures, while the dollar repeatedly struggles to break resistance is going to convince the G7 countries or the world that the U.S. is serious about solving its financial problems. The powers controlling the U.S. financial system have chosen market rigging, rather than legitimate reform, to attack the symptoms of the grave fundamental and structural problems they've created by design.

Despite their cleverness, these people are fools and appear ready and willing to sacrifice this country to maintain their monopoly power through perception management. All this is borne of their ill-gotten privilege to control us by simply creating legal tender currency from nothing.

As you know and have stated for years, the consequences of their evil manipulations are going to be unprecedented and truly ugly. As I see it, it remains our responsibility to see that the tail is pinned upon the donkey it belongs to, thereby ensuring that responsibility for what is to come is placed squarely upon the shoulders of the real perpetraitors, the monopoly banking cartel.

best regards and keep up the good work,
Tom K

Shaka Jr.,
Leading up to the crash of 29, history recounts the near sanity pulverizing experience of those who "stood against the tide" of bullish behavior engulfing the masses and the statistical tripe disingenuously yet systematically spewed from the financial/political leadership of the day.

This morning I wander the halls aimlessly, fluttering my finger between my flabby lips humming some dusty Dylan lick, eyes glazed, wondering if pink would be a great color to spruce up the place.

Then slowly the fog thins and the sunlight of truth, warm and bright, seeps through the crust of the current malaise to remind me that perseverance paves the path from the prison to the palace. (read Genesis chapter 41, Joseph the Dreamer becomes #2 honcho in Egypt).
Unwilling to quit,
Buena Fe

The gold shares held their own with the XAU up .07 to 91.09 and the HUI only down 1.03 to 197.73.

My island reversal hope trade went out the window, which is how they got their name. Veteran traders know when you are counting on a hope trade, you are in trouble. Maybe Monday?

Well, the real estate on our planet got cheaper this week, even though the fundamentals went our way on almost all counts. With the Orwellians doing their thing out there, analysis doesn’t count for much, especially mine.

Still, gold and silver should take off in the months to come and the stock market ought to be clobbered. Patience has taken on a new meaning.

At least I can root for my old team, the Patriots, this weekend. Go Pats!

GATA BE IN IT TO WIN IT!

MIDAS

Chuck checks in:

At the end of such a week, one would think that it would be impossible to write an upbeat assessment of our market. But I believe I can and with conviction. Each day this week seem to bring polarized moves in stocks and gold. The stock market that is reeking with optimism and complacency moved higher and higher culminating on Friday which to me is a historically turn day. The VIX now has sunk to a little over 11. Each day the market either gapped up or was up after 20 minutes and then never looked back. A 10 point set back has been a rarity.

Contrast that with a gold market that gapped down almost every day irregardless of the condition of the dollar. That meant to me that there was a concerted selling by the central banks in front of a political event, the G7. These are the kind of conditions that precede a turn. It is as though if you ask why the players are buying stocks, they would say, "I don't know but everyone else is." And why everyone is selling gold stocks, they would respond just the opposite. Please read Adam Hamilton's excellent essay today on the true condition of the HUI for a healthy perspective of the gold market.

The bottom line is that the personality of the stock market, except for that period when stocks declined sharply off of their 2000 highs, has not changed. A blind faith and optimism relentlessly continues. The only difference is that this time it has been joined by an unreal real estate bubble that is enchanting our nation even more than the high tech mania ever did. The wolf is at the door. Chuck

This USAGold posting will surprise no one in the GATA camp:

Copperfield (2/3/05; 05:28:52MT - usagold.com msg#: 128814) Wellink

Heard this from a reliable source: Nout Wellink, president Dutch CB, stated off the record: Central banks must lie about interest rates and gold. He also stated that this monetary system one day will implode..

***

As each month goes by, the GATA ARMY comes up with more evidence of what the real gold story is, AKA the gold truth.

Speaking of the gold truth with the MIDAS commentary ranting on Greenspan...here is a treat after some fine sleuthing work by the GATA ARMY:

Hi Bill:
In the 2/2/05 Midas, a GATA soldier referenced a 1981 WSJ article. Enclosed is a copy of the 9/1/81 WSJ article, " Can the U.S. Return to a Gold Standard?" by Alan Greenspan. Alan "goldbug" Greenspan indicates that the major roadblock to restoring the gold standard is the problem of re-entry. Alan proposes that convertibility be instituted gradually by issuing gold notes. Alan needs to exorcise his fiat currency demons, work with Antal Fekete and GATA, and get the parallel gold-coin standard rolling.
Regards,
Paul

Greenspan Article 09-01-1981.pdf
(Easy to read once enlarged)

Nice work Paul.

We are all peeved as hell Mihaly:

hi bill,
just a message...because with today’s action i am pissed as hell....just like the rest I suppose. With all the fundamental information, u would expect that gold will perform well...or at least neutral. The last couple of months the market reaction of gold was in complete disconnect with the fundamentals. As you said many times, market action makes market news. You might ask, why are you so pissed...well, because of this:

I have been reading for many years now central banking documents....all sorts. I even took the time too figure out how the hell these central banks account for there reserves/swaps/repos/reverse repos/deposits/loans. As you can imagine, central banking accounting is not easy and it took some time. A few months ago, I figured out how they report these swaps/repos and loans according to IMF regulations. The data can be found on the IMF site:

http://www.imf.org/external/np/sta/ir/colist.htm

and is called Data Template on International Reserves and Foreign Currency Liquidity

So you would think that the central banks fill out this form....well:

They dont have to: Countries participating in this endeavor do so on a voluntary basis.

Snd even worse, in the book "How countries manage reserve assets''(central banking publications), on page 259 it is stated that there are several shortcomings with the SDDS and the data template. The 3 auteurs (from the Safeguards Assessments Division, IMF), see the biggest shortcoming as (quote):

"Finally, and most important, the data contained in the SDDS are NOT audited by an independent third party."

So no wonder that the United States has a lot of zeros in the data template....Another point, I asked the Central Bank of Belgium to comment on their data in the IMF sheet. As I said in the past, at an annual shareholders meeting, it was said by the central bank that there is no more gold in the Belgium vaults (not on print!). This can also be seen in the sheet. I emailed the Bank 14th of december 2004, and I am still waiting for an answer.

According to the sheet, the goldswap position would be 1,134.87 and goldloans would be 2,142.36 with a total gold value of 3,529.42...which would mean almost everything is gone(everything in Millions of US Dollars).

No answer...voluntary data....data not audited by independent party......yeah.....isn't central bank accounting great? There is not much to find, if they dont have to tell. And that's why i am pissed...

Although central banks are becoming more and more transparent....it seems like they can still lie about the interest rate.....and gold.
greetz (from the Netherlands)
mihaly

Mihaly sent me the above email right BEFORE I served up the following in last night’s MIDAS:

Rhody with a leasing update:

Good morning Bill:
Backwardation eased again in gold lease rates this morning. Now we have a flattened rate curve. To put this in perspective, the difference between the one month lease rate and the one year rate is .075%. The similar figure for silver is .76%. That means silver's rate curve is ten times steeper than that of gold, and that means gold is being leased in the near term for capping purposes at many times the volume of silver. If you compare gold and platinum's rate curve, platinum has a .6% difference between the one month and the one year rate and it's rate curve is similarly flattened as gold, but at a far higher level of over 3%. Platinum has been like this for years. It is only gold and silver that show huge changes in the steepness of the rate curve.

I think this is because of leasing for capping rather than leasing for commercial purposes. It is the difference between leasing for politics and leasing for business purposes.
Regards, Rhody.

The COT report showed the gold commercials only reducing their net short position by 2,000 contracts. Houston’s Dan Norcini:

Hi Bill:
COT is a bit of a shocker to me personally.

I have no idea why the trading funds would be covering shorts. I had fully expected them to be adding shorts and abandoning longs. They ditched the longs but the shorts as well? the market headed straight down since Thursday , Jan 27 of last week and broke back under the 10 DMA and the 20 DMA. From a technical standpoint, that should have encouraged the short spec category. Instead they covered and ran to the hills right alongside of the spec longs. Very strange... the specs, both longs and shorts are fleeing the gold market as if it has the plague.... If the cartel was attempting to remove the excitement from the gold market and not draw any attention to it, they have succeeded brilliantly.

Problem with this COT data is that by the time we get it, three days of price action have passed and a whole lot of stuff can happen. We did break out of that sideways trading range we were in between $420 and $430 to the downside yesterday and open interest picked up a bit, so maybe that was enough to entice some more of the specs to the short side. We simply have no way of knowing until next week.

About the only good thing I can say is that at least the trading funds have not moved to a Net Short position. That is not something any of us want to see at this point.

It is quite remarkable reading Greenspan's babble these days. Just a few months ago he is making noises about the unsustainablility of the U.S. current account deficit and the real risk of increased difficulty in attracting sufficient foreign capital to fund it. That was enough to send the dollar crashing down the 80 level. Here he is a couple of months later pontificating about the relative insignificance of the CA deficit. as a result, it looks like the dollar is going to try to head up to test the 86 level barring any surprises out of the G7.

In effect we have the following:

Greenspan late last year: "Be AFRAID. BE VERY AFRAID"

Greenspan today: "DON'T WORRY; BE HAPPY".

Geesh, and to think this guy gets paid to do this!
Later,
Dan

Wonder what the real story is behind the scenes on this one. Good cop, bad cop pitch?

G7-Taylor says U.S. opposes UK debt relief plan

LONDON, Feb 4 (Reuters) - U.S. Treasury Under Secretary John Taylor on Friday dealt a setback to debt relief, saying the United States could not accept the British proposals or a new financing facility.

"Not only does the IFF not work for the United States, we don't need the IFF, " Taylor said, referring to British finance minister Gordon Brown's idea for a new International Finance Facility and writing off debt to poor countries.

Taylor, speaking to a small group of reporters who travelled with him to the Group of Seven finance ministers' meeting, said the U.S. has its own "bold" proposal for debt relief for poor countries that would also include more aid through grants instead of loans in the future.

Taylor also said that the U.S. is "not convinced of the need" to sell International Monetary Fund gold to finance debt relief.

-END-

Goodies from:

The King Report
M. Ramsey King Securities, Inc.
Friday Feb. 4, 2005 – Issue 3091 "Independent View of the News"

Q4 productivity rose 0.8%, a tad more than half of the expected 1.5%. Unit labor costs increases 2.3%, 2% exp. Y/y productivity growth fell to 2.5%, a sharp drop from the 5.7% peak of Q4 2003.

The sharp decline in productivity suggests that companies no longer can squeeze the workforce to produce profits and/or economic growth is slowing and/or inflation is increasing. Of course as we have been maintaining for the past several years, productivity is grossly overstated because inflation is grossly understated, which overstated GDP.

Higher CPI = lower real GDP = lower productivity = lower corporate profits

This implies that corporations, which have been jettisoning jobs, outsourcing etc, have reached the limits of that exercise. So in order to reload the supply of jobs available that can be cut, outsourced, ‘part-timed’ or ‘independent contracted’ corporations are engaging in merger activity. Soon, these mergers will yield another heaping dose of job cuts, outsourcing, etc.

Somewhat buried in Thursday’s FT (page 4): "BoJ’s bills flop fuels liquidity concerns." For the first time in about 2.5 years, the BoJ failed to attract enough offers to fulfill its Y1 trillion bill-buying operation, even though it was an "all offices" transaction that included regional branches. If the BoJ has to lower its liquidity target, it will be a major turning point in monetary policy. The BoJ is blaming technical issues for the shortfall…The article notes that bank loans continue to fall because Japanese companies are reluctant to borrow or hire workers; and wages are still declining.

If the BoJ becomes encumbered in its liquidity operations in Japan, what would be the consequences of its dollar rigging policies in the US? We can’t fathom anything benign. After all the analysis and financial jabberwocky, the bottom line is the US has been living off the kindness of the stranger AKA the BoJ.

The main factor that kept Thursday’s market from a bigger decline is the perception that today’s Employment Report will show wonderful job growth, which suggests a jiggy economy. Of course The Street has been spewing this hokum for months.

Several research pieces note the gap between core and headline inflation, or the crude and final sales levels, must narrow. The feeling, which is reflected in the Fed’s newfound concern about inflation, is that core inflation will be pushed higher on that front and final sales inflation will be pushed higher as companies pass on cost increases to consumers. That sounds reasonable, but who has been eating the increased costs from the crude and intermediate production levels? After all, corporate profits and cash flow last year were wonderful.

Some economists still assert that ‘slack in the labor force’ will mitigate inflation. How’s that working out in Latam? In the ‘80s and ‘90s US jobs boomed while inflation tanked. In the late ‘70s, inflation and unemployment soared. We thought the Phillips Curve inflation-employment tradeoff was thoroughly debunked during Carter’s reign’ and then again under Reagan. If these economists didn’t experience those periods, what did they study in economics? Apparently IS-LM graphs and Phillips Curve sophistry.

The IMF has cut its forecast for Euro Region GDP growth in 2005 to 1.9%; that’s down from the 2.2% forecast last September…The IMF slashed its G-7 growth forecast to 2.7% (from 2.9%) for 2005…..

-END-

Bill King’s work is outstanding – written well, unique and very informative.

CARTEL CAPITULATION

The US stock market took off with the DOW gaining 123 to 10,716, while the DOG leaped 29 to 2087. Bad news is good news I guess.

US economic news:

09:47 Jan. final Univ. of Michigan Confidence reported 95.5 vs. consensus 96
Prior reading was 95.8. S&P futures currently at 1192.5.
* * * * *

WASHINGTON (Reuters) - U.S. employers added just 146,000 new jobs in January and hiring in the previous three months was revised lower, the government said on Friday in an unexpectedly weak report on the job market, but a drop in job-seekers pushed the unemployment rate to its lowest level in three years.

The gain in nonfarm payrolls in January came in below market expectations for 190,000 new jobs but was enough to return the nation's employment to where it was before the 2001 recession began. It also erased the jobs lost during President Bush's first term.

January's increase in hiring came after a downwardly revised 133,000 gain in December. The Labor Department also cut its estimate of jobs created in October and November, trimming a total of 59,000 jobs over the fourth quarter of 2004.

Still, the unemployment rate fell to 5.2 percent, the lowest level since a 5.0 percent reading in September 2001. The drop came amid a fall in the number of people in the labor force, which includes both those with jobs and those looking for work.

As expected, the Labor Department also said it had revised up its measure of jobs created in the year to March 2004. In its annual benchmark revision, the government statisticians said 203,000 more jobs were created in the March 2003-March 2004 period. The revision was expected and does not change the general outlook for employment.

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