Currencies Will Rise During Economic Contractions And Expansions

Like it or not the bailouts and massive liquidity injections, part of operation kick the can down the road, have kept this economic downturn classified as a recession rather than depression. Some still fail to realize that currencies can rise during economic contraction, i.e. the strong dollar into the 1932 economic low or strong Yen since 2007, as much as it can rise during economic expansions. No centralized operation, regardless of the size an coordination, can stop or reverse the flow of capital once in motion.

Headline: Brazil pledges to stop US 'melting the dollar'

There is widespread concern about the effects of a weaker dollar on the competitiveness of emerging markets, many of which have seen foreign investment send their currencies soaring.

"We're not going to allow our American friends to melt the dollar," said Mr Mantega, who views the US government's move to pump $600bn (£387bn) into its economy as an unfair attempt to help exports

Source: telegraph.co.uk

China to buy 6 billion euros of Spanish debt: report

Let's see if China has similiar interests in State muni bond auctions.

Chinese Vice Premier Li Keqiang has said his country is willing to buy about 6 billion euros ($7.9 billion) of Spain's public debt, Spanish newspaper El Pais reported on Thursday, citing government sources.

Li said at a meeting that China was willing to buy as much Spanish public debt as its Greek and Portuguese debt holdings combined, the sources told El Pais. They said that added up to about 6 billion euros in Spanish government bonds.

Source: finance.yahoo.com

It's Not Your Imagination: Your Juice Has Been Downsized

Another way of looking at currency devaluation, often cited as a rise in the general price level of goods and services, i.e. inflation, is the reduction in purchasing power over time. The following article illustrates how shrinking product whiile maintaining price helps hide this reduction.

Headline: It's Not Your Imagination: Your Juice Has Been Downsized

Does it seem like you've been changing the toilet paper a little more often, or heading out to buy paper towels a little more frequently? It's not your imagination.

According to research from Consumer Reports, many companies have been shrinking the size of the products you buy, while charging the same amount for the product.

The report, featured in the February issue of Consumer Reports and online on their Web site, says companies are attributing the downsizing to rising costs for ingredients and energy.

Shrinking Package Size:

Source: cnbc.com

Bad Money Drives Out The Good

Gresham’s law – “bad money drives out the good”, driven by the effects of currency devaluation, also know as inflation and hyperinflation, ensures that push for cashless society will grow as the existing monetary system continues to crumble.

It’s only a matter of time before denominations such as the penny and nickel are eliminated and recomposed, respectively.

In 1982 the penny was recomposed from 95% copper (Cu) and 5% Zinc (Zn) to 97.5% Zn and 2.5%. Why? “Bad money drives out the good.”

It would cost 0.0285 cents to produce 95/5 Cu/Zn mixture today. Soon market forces will drive the cost of 97.5/2.5 Zn/Cu above 1 cent. Today's Zn/Cu blend costs 0.0065 cents. Hence, the rumblings about termination have grown loader as the production costs approaches par value.

A recomposition and death of the nickel is not too far behind. Today’s nickels metal content, a 77/25 Cu/Ni mixture, at 0.066 already exceeds its face value.

The elimination of smaller denominations from circulation by market forces is a classic sign of hyperinflation. It is difficult to profit without the knowledge of history. History, the collective voice of previous generations, is saying, wake up people. The choices made from here, whether large or small in scope, will define history for the next generation.

Ignore The Spin and Follow The Cycles

Here it comes, the unexpectedly strong economy of 2011. The labor market continues to ignore spin and follow the cycles. An 'improving' job market and the economic spin it supports will end when TIME is up.

Average Weekly Initial Claims State Unemployment (AWIC) And YOY Change:


Average Continuing Claims State Unemployment (ACC) And YOY Change:


Headline: Private sector adds 297,000 jobs in December: ADP

Private employers added 297,000 jobs in December, the biggest increase since at least 2001, compared with a revised gain of 92,000 in November, a private report showed on Wednesday.

The median estimate from 27 economists surveyed by Reuters for the ADP Employer Services report was for a rise of 100,000 private-sector jobs in December.

Source: finance.yahoo.com

Race To Devalue Across The Globe

The race to devalue fiat remains unperturbed across the globe. Chile, following Venezuela's decision and logic, has moved to weaken the peso against the dollar to 'help' exports. If policy ‘cause and effect’ were that easy… Paper gold, nevertheless, continues to be hammered under pretense of headline fear and doubt despite the secular trends. The rally will resume when as many contracts as possible have been repositioned at the expense of the weak hands.

Headline: Chile Central Bank to Buy $12 Billion to Stem Peso's Region-Beating Rally

Chile’s central bank plans to buy $12 billion of U.S. dollars to help exporters by weakening the peso, Latin America’s best-performing currency last year.

The bank will buy $50 million a day from Jan. 5 to Feb. 9 and will announce further plans later. The move will boost international reserves to the equivalent of 17 percent of gross domestic product, the bank said today in a statement. The bank will sell bonds to drain the equivalent amount of cash from the economy.

Source: bloomberg.com

The Message From Gold Stocks

A breakout gap was created in the gold miners index on 11/4. This gap has acted as support three times since its formation. The first test of support, circled red, came on a surge in volume. This implied a retest of support after a short-term bounce. The subsequent retests, circled green, have come on a sharp contraction in volume. These tests suggest that the downside force within the trend is weakening. That which cannot break support with force will eventually reverse and attempt to break resistance with force. Those blinded by headline fear and doubt are certain to miss this message.

Gold Miners Index ETF(GDX):