Archive for January, 2011
| by Adam D. Sacks |
| 20 January 2011 |
That birds fly and pigs don’t is a consequence of laws of nature governing physics and biology. Nothing that transpires on physical planet Earth is any different: the laws of nature are inviolate. Always. [1]
This is a truism, and should be readily apparent, as it indeed often is in indigenous cultures where people are entirely dependent on natural forces and what is close at hand. But this truism is rendered invisible by technological and bureaucratic power, the delusional quality of human exceptionalism, and the complexity of civilizations, especially but not exclusively of recent industrialized civilization.
That is, we have imagined throughout the known history of the past ten thousand friendly-climate years that, because from time to time we have been able to use the laws of nature to our short- and long-term advantage, we are no longer subject to them. Current instances are encyclopedic: Use of fossil fuels, the Green Revolution, atomic energy, widespread dispersion of toxics, and entering the sixth great extinction are recent examples. We persistently act as if unintended consequences do not exist.
Nonetheless, such consequences abound, and are forcefully shaping our lives. If we are to address causes and consequences, whether we fully understand them or not, it’s essential to be open to and explore perspectives that may be very different from prevailing ones.
Cultures evolve because they provide us with effective ways of surviving the environmental hand we are dealt, but cultures are powerful regulators of human behavior and thought, and tend to persist despite changes which may render their central assumptions dysfunctional or lethal (e.g., we can pollute and desertify the planet to our heart’s content).
By Daniel R. Amerman, CFA
Overview
Will future gold profits be enjoyed on a tax-free basis because gold has become the new currency and cash isn’t taxed when it is spent? Or will governments around the world use the pretext of financial emergency to continue to take ever greater control of their citizens’ private lives and make cash itself illegal, requiring all financial transactions to be in electronic form with a “cc” to the government?
Last year I wrote an article titled Hidden Gold Taxes: The Secret Weapon Of Bankrupt Governments about the “elephant in the living room” that most precious metals investors are unaware of. In simple, step by step detail, I showed how the government uses taxes on false inflation “profits” to not only effectively confiscate profits from gold investors, but effectively create an asset tax. So that the higher the rate of inflation, and the higher that precious metals prices soar – the more of the precious metal investor’s starting net worth that is confiscated by the government in after-inflation terms.
Among the many responses, nobody has even attempted to disprove the simple but irrefutable math of gold investor wealth confiscation through inflation taxes, but many people dispute the idea that gold profits will be taxable at all. Some are convinced that the future is certain – that after the scoundrels are thrown out, right-thinking people will insist on the use of gold as currency, which means gold investors will reliably be relieved of tax obligations. Others are convinced governmental breakdown and anarchy will make tax considerations irrelevant. As I’ve seen discussed on internet forums, still other gold investors apparently find my concern about taxes to be the very height of naiveté if not downright laughable, and believe that I’m missing the point of discretely spendable gold and silver coins, which is specifically to avoid paying taxes.
In this article about possible future scenarios, we will briefly look at the history of government actions during global financial crisis, as well as what governments are doing now, and we’ll explore whether it is more likely that the future will be tax-free for gold investors, or whether the future may be one of crushing government control on a global scale that makes previous black market strategies obsolete. If we combine history’s repeating itself – but with more advanced technology this time around – many precious metals investors may just be making one of the biggest mistakes of their lives if they are not anticipating paying taxes in full at likely higher future tax rates.
John Browne
Posted Jan 28, 2011
Following the huge gains made by Republicans in the midterm elections, it was widely expected that President Obama would use the State of the Union address to signal a major policy shift toward the center of the political spectrum. On the surface, at least, he appeared to do just that, hinting that he took budget management very seriously and that Americans should be prepared for shared sacrifice. However, as the final applause still echoed in the House chamber, many astute pundits were left trying to make sense of the many contradictory policy prescriptions the President proffered.
Classical political maneuvering dictates that when clouds are grey, politicians must offer good news, tell jokes, and remind us warmly of our childhood (or in Obama’s version, America’s triumph over Russia in the Space Race). Disclosure of specific measures should be avoided at all costs. President Obama followed these tactics closely.
PARSONS, Kan. – A southeast Kansas business that is the last place in the world to process Kodachrome has been inundated with the elaborately crafted color-reversal film as it prepares to stop handling it.
Grant Steinle primarily runs Dwayne’s Photo, the business in the small town of Parsons that his father founded in 1956. He said the company received “a tsunami of film” after announcing it would stop processing Kodachrome at the end of 2010.
The Kansas City Star reported that the stop date for processing the film has been postponed to Monday or Tuesday at the earliest.
Business has been so hectic that for a time, processing went on 24 hours a day, seven days a week. Dec. 30 was the deadline for submitting film, which has arrived from as far away as China, Japan and Australia.
“Normally we get 20 to 30 packages a day from FedEx and three or four bags of mail from the post office,” Steinle said. “One day last week, we got 500 packages from FedEx, 250 from UPS and probably 18 bags of mail.”
One Arkansas railroad worker who photographed trains recently picked up 1,580 rolls from Dwayne’s. The $15,798 bill was so steep that he had to tap his father’s retirement account to pay it.
Dwayne’s, which once was one of about 25 Kodachrome processers worldwide, is enjoying the attention.
Kodachrome enjoyed its mass-market heyday in the 1960s and `70s before being eclipsed by video and easy-to-process color negative films, the kind that prints are made from. It garnered its share of spectacular images, none more iconic than Abraham Zapruder’s reel of President Kennedy’s assassination in 1963.
Kodak gave longtime National Geographic photographer Steve McCurry the last roll after announcing in 2009 that it was discontinuing the slide and motion-picture film.
But the distinction of shooting the last roll to be processed will go to Dwayne Steinle, the founder of Dwayne’s Photo. The pictures are of him and his 60 employees, wearing yellow T-shirts and standing outside his business. The backs of their shirts tout Kodachrome’s history. Toward the end, the shirts say, “we developed the last roll.”
http://news.yahoo.com/s/ap/20110110/ap_on_bi_ge/us_kodachrome_s_last_gasps
NEW YORK (TheStreet) — Kodachrome (1935-2010) has officially met its end. Dwayne’s Photo in Parsons, Kansas — the last laboratory with the capability to develop the storied color-reversal film — will develop its final roll on Thursday.
Kodachrome: Funeral for a Friend (1935-2010)
By 1990, Kodachrome embarked upon a two-decade demise, spurred by the release of Fujichrome Velvia. Fuji’s rival offering, a reversal film rated at ISO 50, offered photographers a slide as sharp as Kodachrome 25 that was twice as sensitive to light. Fujifilm also utilized a common development process known as E-6, which could be performed less expensively than Kodak’s proprietary K-14 development process, necessary to develop Kodachrome films.
In the early 2000s, digital cameras manufactured by Nikon and Canon(CAJ_) placed further pressure on the film products industry, forcing Kodak to discontinue the no-longer-profitable Kodachrome 25 in 2002. Devotees of the film scrambled to buy inventory, storing it in their freezers for years to come and creating a secondary market for the film on auction web sites such as eBay(EBAY_) .
In June of 2009, Kodak discontinued Kodachrome 64, the last remaining Kodachrome film.
For many photographers, December 30, 2010, will be a funeral for a friend. Thousands of amateur and professional photographers have taken to the web to remember their “first” film — and why it meant so much to them.
As photographer Dan Bayer writes on his Kodachrome tribute website, “While I do shoot lots of digital, I have more than a warm place in my heart for Kodachrome as I started using the film some 29 years ago at age 13…. For what it is worth, I am very impressed that Kodak has made the film this long. It truly is a statement in product commitment and longevity so I have to really thank them for that.”
– Written in New York by John W. DeFeo
~watch for this!!!~jude
* U.S. may hit debt ceiling as early as March 31
* Congress has power to raise debt limit
* Republicans resistant to allowing U.S. to borrow more
By Rachelle Younglai
WASHINGTON, Jan 24 (Reuters) – Republican lawmakers are working on legislation designed to help the United States avoid defaulting on its debt if the country is not allowed to borrow more, congressional aides said on Monday.
Republicans in the Senate and House of Representatives are expected to introduce similar legislation this week that would require the U.S. Treasury to pay interest on its debt if the nation reaches its $14.3 trillion borrowing limit.
The Obama administration has said that the so-called debt ceiling could be breached as early as March 31, and as late as mid-May. It is pressuring Congress to raise the debt limit, or the amount of debt the country is legally allowed to issue, predicting catastrophic consequences if the borrowing limit is not raised.
Fearful of anti-government sentiment, Republicans are loathe to allow the nation to borrow more without taking substantive steps to cut spending and trim the $1.3 trillion budget deficit.
Under legislation that Representative Tom McClintock is crafting, the U.S. Treasury would be forced to prioritize payments on national debt.
Senator Pat Toomey is getting ready to introduce similar legislation, requiring the government to prioritize payments on U.S. debt before the federal government’s other obligations in the event the debt ceiling is reached.
An aide to Toomey said his bill has 10 co-sponsors so far. It is not known how many lawmakers are supporting McClintock’s bill.
Although Toomey acknowledges that a lack of funds would hurt the country, he has said: “It would be even worse simply to raise the debt ceiling without regaining control of federal spending.”
In order for a bill to become law, both chambers must pass similar legislation.
TREASURY CALLS PLAN UNWORKABLE
The U.S. Treasury has already rejected the concept of prioritizing payments and has said it would not prevent the country from defaulting on its debt because it would only protect principal and interest payments and not other legal obligations of the United States.
“While well-intentioned, this idea is unworkable,” Deputy Treasury Secretary Neal Wolin has said.
“Adopting a policy that payments to investors should take precedence over other U.S. legal obligations would merely be default by another name, since the world would recognize it as a failure by the U.S. to stand behind its commitments,” Wolin said on the Treasury’s web site.
If Congress does not allow the government to borrow more, the U.S. could default on its debt and wreak havoc on financial markets. (Additional reporting by Andy Sullivan and David Lawder; Editing by Leslie Adler)
Rachelle Younglai
By Rebecca Christie and Liz Capo McCormick - Jan 25, 2011 6:45 AM MT
The Treasury Department will probably reduce its borrowing on behalf of the Federal Reserve as the Obama administration and Congress battle over raising the U.S. debt limit, according to Wrightson ICAP LLC.
Treasury officials may shrink the Supplementary Financing Program, currently at $200 billion, to as little as $5 billion while the government’s debt approaches its $14.29 trillion threshold, said Lou Crandall, chief economist at Wrightson, a Jersey City, New Jersey-based research firm that specializes in U.S. government finance. Treasury Secretary Timothy F. Geithner said Jan. 6 that lawmakers must raise the federal borrowing ceiling in the first quarter or risk a default on U.S. debt and a loss of access to credit markets.
When the Treasury sells bills at the Fed’s behest through the SFP, it drains reserves from the banking system and makes the central bank’s job of controlling interest rates easier. The Fed said a year ago that the program, set up in 2008 during the midst of its efforts to prop up the financial system, is helpful to the central bank’s monetary policy goals and might be part of future efforts to withdraw economic stimulus. Treasury estimates the legal limit could be reached between March 31 and May 16.
“Time is running out on the SFP auctions, but there is little risk that the Treasury will terminate them without any advance warning,” Crandall said in a telephone interview. “If the debt ceiling drags on to the point where the Treasury must take more drastic steps to stay under the limit, it might eliminate the SFP altogether.”
Borrowing Strategy
The Treasury will provide a borrowing strategy update on Feb. 2, when it announces the amount of securities it will sell under what’s become known as its quarterly refunding. The SFP program is not listed as a topic on the official agenda for the Jan. 28 meeting of the Fed’s 18 primary dealers that takes place before the release of the policy statement.
Colleen Murray, a Treasury spokeswoman in Washington, declined to comment on plans for the SFP. In a Jan. 21 comment on the Treasury’s website, Deputy Secretary Neal Wolin called on Congress to raise the limit and said proposals to “prioritize” debt payments over other obligations would be “unworkable.”
Focus on the debt ceiling, which was increased a year ago, has risen since Republicans won control of the House of Representatives in November with pledges to challenge the Obama administration on spending. GOP lawmakers have told President Barack Obama and Democratic legislators that they will insist on specific cuts as a condition of raising the U.S. debt limit.
Emergency Measures
The U.S. can’t avoid reaching the debt limit by reducing the budget as being proposed by some lawmakers, Geithner said. “The need to increase the debt limit would be delayed by no more than two weeks,” Geithner said in his Jan. 6 letter to Speaker of the House John Boehner, Senate Majority Leader Harry Reid and all other members of Congress.
The Treasury chief also said his department’s toolkit of emergency measures, such as tapping government retirement funds and suspending some types of intergovernmental lending, would delay a debt ceiling breach “by several weeks.” At that point, he said, “no remaining legal and prudent measures” would be available and the U.S. would start to default.
Treasury would likely shrink the SFP before the limit is reached, according to Barclays Plc and Deutsche Bank AG. The Treasury has shrunk the SFP in two previous debt-limit standoffs and then brought it back when Congress restored borrowing room.
General Collateral
Removing most of the SFP program’s $200 billion in bills from the market would trigger three-month rates to fall by over 0.10 percentage points, according to Deutsche Bank. Overnight repurchase agreement rates, which firms use to finance debt holdings, may slide more, according to Barclays, which along with Deutsche Bank is one of the primary dealers that trade with the Fed.
The overnight general collateral repurchase agreement rate was 0.23 percent, compared with the Fed’s target rate for overnight loans of zero to 0.25 percent. Government securities that can be borrowed in the repo market at rates close to the Fed’s target are called general collateral.
Ending the SFP program could cause the rate on the three- month Treasury bill to slide to as low as 0.01 percent from 0.15 percent, Marcus Huie, fixed-income strategist at Deutsche Bank in New York, said in a telephone interview.
“The cut in bill supply will cause the entire short-end of the yield curve from bills out to the two-year Treasury note to richen, with rates falling,” Huie said. Two-year notes yield 0.62 percent.
As the Treasury cuts SFP bills, it also will have a seasonal need to increase its other bill offerings, Joseph Abate, money-market strategist at Barclays in New York, said in an interview. The net effect would cause overnight repo rates to fall to around 0.15 percentage points or less by the second quarter, Abate said.
To contact the reporters on this story: Liz Capo McCormick in New York at emccormick7@bloomberg.net; Rebecca Christie in Washington at rchristie4@bloomberg.net
joel@dailyreckoning.com
En garde, Fellow Reckoner! We’re under attack!
Jean-Claude Trichet, head of the European Central Bank, has sounded the alarm.
“All central banks, in periods like this where you have inflationary threats that are coming from commodities, have to…be very careful that there are no second-round effects” on domestic prices, Mr. Trichet told The Wall Street Journalfrom his office overlooking Frankfurt’s financial district.
Can you believe it, Dear Comrade? If we are reading Mr. Trichet’s comments correctly, it would seem that the world’s food and energy communities are consciously rallying against us. Long thought to be soulless, mindless vegetables and minerals, commodities have apparently taken it upon themselves to “become” more expensive, to raise their own prices. We can almost hear the battle cries coming from the fields: Ears of corn unite!
Farmers are warned to sleep with one eye open lest an overzealous head of lettuce break ranks and attack under cover of darkness.
Mr. Trichet is busy marshalling the euro zone’s 17 member countries ahead of this weekend’s World Economic Forum in Davos, Switzerland. He’s encouraging them to strengthen “surveillance” of each other’s fiscal policies.
By Greg Hunter’s USAWatchdog.com
In November 2010, the Federal Reserve announced a second round of economic stimulus commonly referred to as Quantitative Easing (QE2). The reason, according to the Fed, was“progress toward its objectives has been disappointingly slow.” So, to try and turn the economy around, the Fed said, “. . . the Committee intends to purchase a further $600 billion of longer-term Treasury securities by the end of the second quarter (June) of 2011, a pace of about $75 billion per month.” (Click here to read the complete announcement from the Fed.) QE means the Fed basically creates money out of thin air to buy debt. The current money printing orgy is financing more than half of U.S. government right now. The first round of QE bought toxic mortgage debt and bailed out the bankers.
What was not said in the press release was much more important and may go down as one of the biggest turning points in the history of America. Bringing on QE2 meant QE1 ($1.75 trillion) failed to provide a sustained recovery. It also exposed the $12.3 trillion total spent or loaned by the Fed since the meltdown of 2008 failed to give the economy a lasting boost. The Fed did save some businesses and all the big Wall Street Banks from bankruptcy, but we now know nothing has really been fixed.
What really puzzled me the past few days was that not one of the major Media’s or Columnists seems to pay attention to the northern African Country of Tunisia.
Tunisia was past decades pretty much the Cancun for the Europeans, focusing on Tourists, primarily from Europe.
Predominantly a Muslim Country, Tunisia was very progressive and did not forcefully insist on radical Muslim rules such as Sharia Law. As a matter of fact Tunisia allowed the building of Hotel resorts, organized Hog and other Jungle Animal Hunting tours and used its breath taking access to the Mediterranean See to offer its shore for Tourism. True to the motto: “1001 night meets western civilization”.
But there has also always been a certain danger in this self declared Wonderland. If Tourists went too far into the southern part of the country, away from the primary Tourist sections, they exposed themselves to Kidnapping by the African Branch of Taliban and Al Qaida. And they were brutally active.
The system was simple: Stay away from Americans and target primarily Europeans. Since the majority of the Tourists are Europeans those Terrorists could be sure that the countries paid the ransom and so they financed their Terror attacks all over the world.
Oh and if you think they are not a threat just think of the past few caught Terrorists in American such as the “Underwear Christmas Bomber” – they all came from Africa.
The landscape as well as the lack of border patrols between the northern African Countries and as well as the fact that the majority of the local Law enforcement (if that’s what you want to call them) is highly corrupt and cooperates with the terrorists makes it easy for those to kidnap and disappear in the deserts between, the countries.
In most cases of kidnapping Muammar Al Gaddafi’s son Islam al Gaddafi, educated in Austria/Europe and connected with excellent ties to European Governments, acts as the local off-the- record negotiator and official point of contact to the “extremists” to buy kidnapped people free.
But the peace is over. This La-La-Fantasy of east meets west and we all go along show has come to an end.
On January 15th of 2011 the people in Tunisia revolted against the current Government and forced the President and his wife to flee for asylum to Saudi Arabia.
While the government and especially the, since 23 years reigning President Zine El Abidene Ben Ali (74) and his wife Leila Ben Ali, got richer and richer on the tremendous income from the Tourists the people of the country hardly ever got anything from the riches.
As a matter of fact the common populace was starving and lived in poverty with rising prices for food and gas and decreasing income.
Now there is a revolution in Tunis. Rumors have it that Leila Ben Ali and her Husband fled the country with 1.5 tons of Gold. The latest news was that the, on January 18th 2011 installed interims government where finally the previous forbidden opposition became three seats lasted exactly 2 hours when those three resigned.
But what does that has to do with us in the United States?
· At $1350, gold shows a break down on the P&F chart below. $1300 will be the next stop. (Chart source: Stockcharts.com)
· If it drops below $1248 then according to the second chart below, it can get to $1,076 (still above the rising trend line) (Chart source: Stockcharts.com)
· Third chart below shows Baltic Dry Index is still falling. By implication, tempo of international trade is falling (Chart source: http://investmenttools.com/futures/bdi_baltic_dry_index.htm )
· Fourth chart below shows that bullish investor sentiment is starting to waiver. (Chart source: Decisionpoint.com)
· Fifth chart below (30 year yield) shows tightening attitude to credit (Chart source: Stockcharts.com)
· Sixth chart below (10 year yield) shows breakout – with 5.8% as destination (Chart source: Stockcharts.com)
· Seventh chart below (10 year yield with scale adjusted to exclude noise) shows destination of between 4.87% and 5.2% depending on technique (The rock) (Chart source: Stockcharts.com)
· Eighth chart shows that oil is headed for $135 – $141 a barrel (The hard place) (Chart source: Stockcharts.com)
· US Public Debt as at today is: $14,053,512,150,448.45 (The other hard place) (Source:http://www.treasurydirect.gov/NP/BPDLogin?application=np )
· Table at bottom shows that domestic house prices in China are grossly overpriced in terms of affordability (Source: http://www.numbeo.com/property-investment/rankings.jsp ). If you scroll through you will see that parts of India and the old USSR are basket cases.
Analyst Comment
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