Is Gold Crash Proof This Time Around?

 

World Bank's Zoellick Calls For Overhaul Of Monetary System, Says Yuan Should Get Prominent Role

Submitted by Tyler Durden on 02/19/2011 13:54 -0500

World Bank's Robert Zoellick, who has recently been on a truth-telling roll, suggesting a return to the gold standard, and also highlighting that surging food prices have suddenly pushed 44 million to extreme hunger around the world raising the likelihood for many more revolutions, penned an oped in yesterday's FT, sharing his vision for a "monetary regime for a multipolar world" in which, not surprisingly he warned that the current monetary system is perilous, and that China's Yuan should be added to the SDR, as well as other currencies "over time." This is yet another dig at the dollar's status as a reserve currency, yet without China taking proactive steps to indicate its interest at becoming the new de facto world currency, the status quo may be stuck with the greenback. Essentially, China is waiting until the right moment emerges, a time when it has stockpiled enough resources, when it can, unilaterally, or in collaboration with Russia and potentially a post-EUR Europe, make an announcement that the Yuan is the new reserve currency, backed by a basket of commodities. This is precisely the step-change that Zoellick is trying to avoid: "A framework to manage a monetary system in transition may be less headline-grabbing than sudden regime change, but it is a lot more realistic. Modernising the management of international monetary affairs could prove an important contribution to future growth. The time of powerful kings is long gone. But today’s leaders still have the chance to stamp their mark on the monetary framework of tomorrow." Unfortunately, the possibility of a gradual transition in which the US willingly cedes ever increasingly more of its reserve status is unthinkable: after all the bulk of the Fed's disastrous policy is dictated that no matter what the Chair does, the world has no choice but to continue using dollars. Which will work until it doesn't (and with total US debt at almost 100% of GDP, the "doesn't" part is approaching.

Meet The Objects Tunisia's Ben Ali Did Not Have Time To Steal

Submitted by Tyler Durden on 02/19/2011 20:50 -0500

Even as Ben Ali was fleeing his country, his presidential palace continued to be a hoard of all the items he had "borrowed" over the decades. As Al Arabiya reports, "Tunisia's ousted president stashed diamonds, gold and wads of cash in secret spots around his palace in the impoverished country's capital, according to video shown by state television on Saturday." The clip below shows the objects Ali was in too much of a hurry to pick up. Among these: wall safes full of cotton fiat, necklaces and other trinkets. Alas: not a single bar of silver or gold anywhere. It seems the dictator may have lacked in PR skills, but he sure knew what to pick when fleeing the country. 

 

 

 

Guest Post: Rising Food Prices Push Up Inflation Significantly

Submitted by Tyler Durden on 02/19/2011 16:08 -0500

A recently released report by the World Bank’s Food Price Watch confirms that rising agricultural products are sharply pushing up global food prices in lower-income nations (see “World food price uncertainty presents social risks,” in AsiaNews, 4 February 2011), especially among the poorest (where the poverty line is defined as US$ 1.25 per person per day). The WB’s global food price (GFP) index increased by 15 per cent between October 2010 and January 2011, 29 per cent above its level a year earlier. The global prices of wheat, maize, sugar and edible oils especially saw sharp increases. According to the WB estimates, an additional 44 million people fell into poverty. For some Asian nations, the price of wheat rose considerably: Kyrgyzstan (54 per cent), Bangladesh (45 per cent), Tajikistan (37 per cent), Mongolia (33 per cent), Sri Lanka (31 per cent), Azerbaijan (24 per cent), Afghanistan (19 per cent), Sudan (16 per cent), and Pakistan (16 per cent). 

 

 

Tired (And Broke) From All The "QE Is Just An Asset Swap" Rhetoric? Then Read This

Submitted by Tyler Durden

If you, like us, are tired of all the textbook pundits claiming over and over again that QE is nothing but an asset swap (odd how asset swaps get food prices to hit all time highs, not to mention M2, and to reverse what has formerly been a trillion dollar annualized drop in shadow banking - must be that latest outbreak of disinflation...), we urge you to read the following essay from Sean Corrigan. The Diapason Securities strategist as usual manages to cut through the academic drivel and hit at the core of the issue. The conclusion: "money does not have to be borrowed into existence, it can be spent into existence by the state for so long as that money's recipients show a willingness to accept it as a medium of exchange - and that is exactly what we have at work here...the government spends money it does not have into existence and disburses it through its welfare/patronage network; the associated debt is then taken up by a monetary institution (not least, the Fed itself, whether by its earlier process of debt substitution on private sector balance sheets when it was buying MBS, or in its current, direct uptake of Treasuries at the NYFRB) and the non-bank sector ends up with increased holdings of new MONEY as a result... The Fed has successfully placed a great deal of new money in the hands of those same banks' customers and this is patently exerting its expected influence on the prices of a whole range of non-money goods and assets, in a typically differentiated, Cantillon-effect fashion. How anyone can deny this is truly a mystery!" Indeed.

China sells $34.2bn of US treasury bonds.


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