'Solutions' Represent Different Sides Of The Same Economic Coin

Bob,

The distinction between “left and right” will blur as market forces smash both sides of the argument. Raising taxes or currency devaluation as a result of infinite liquidity are two sides of the same economic coin. This coin represents a lower standard of living for years to come.

The choice is simple – raise taxes (maybe cut a little spending for the cameras) or devaluation through infinity QE. The former opens the door to the possibility of recall elections and political career suicide. The latter is far more difficult for the public to recognize. While the public recognizes inflation, they can be easily convinced that it’s a byproduct of expanding economic demand. This sugarcoated perspective, a technique of MOPE, makes recognition that the two arguments reside on the same coin far more difficult.

RY

Eric,

Miami-Dade mayor Carlos Alvarez and Commissioner Natacha Seijas were ousted in recall votes. Both voted for huge tax hikes that will saddle county taxpayers for years to come.

Bob

Headline: Voters Recall Florida Official

Miami-Dade County voters recalled their top elected official Tuesday, culminating an effort financed by a billionaire car dealer and fueled by frustrations over a poor economy and unpopular policy decisions.

Some 88% of 200,347 voters elected to oust Republican Carlos Alvarez, with 707 of 829 precincts reporting, along with early and absentee ballots

Mr. Alvarez easily won re-election in 2008 as mayor of Miami-Dade, the county of 2.5 million residents that includes the city of Miami. But a recall effort gained momentum last fall when he agreed to a budget that raised the county's property taxes while increasing pay to unionized public employees.

Source: online.wsj.com

Gold Is The Ultimate Safe Haven

The Swiss franc has been the safe haven against the devaluation of most, if not all, fiat currency.

Swiss Franc (FXF)


A safe haven discussion, however, must include gold. Gold priced in Swiss francs has been rising steadily since 1999; the pace of the rise accelerated substantially in 2005. This acceleration is depicted by the sharp rise in the angle of ascension of the secular trend from 14 to 32 degrees. This is illustrated in the chart below. While the Swiss franc might represent a safe haven against fiat, i.e. U.S. dollar and Euro, it can't hold a candle to gold.

Swiss Franc Gold:


Currency devaluation has infected all fiat (paper) money. Gold clearly illustrates that the Swiss franc, despite its designation as a safe haven currency, is not immune devaluation.

Headline: Swiss Franc Sets Record Versus Dollar; Japan Disaster Sparks Haven Demand

The Swiss franc surged to a record versus the dollar amid concern that a nuclear disaster is unfolding in Japan, prompting investors to seek havens.

Switzerland’s currency also jumped the most since September against the euro as stocks plunged in Asia and Europe and swaps to insure Japanese debt climbed to a record. Tokyo Electric Power Co.’s stricken Fukushima nuclear power plant was rocked by three explosions today as workers struggled to avert a meltdown in the wake of the March 11 earthquake.

“Given the domestic risk in Japan, which is leaving the yen’s safe-haven status more questionable, the Swiss franc is the clear alternative and is benefiting,” said Adam Cole, head of global currency strategy at Royal Bank of Canada in London. “Markets will stay very nervous, at least for the next couple of days. That probably will continue to support the franc.”

Source: bloomberg.com

Real Estate Struggles Despite Liquidity Driven Recovery

Real estate remains a sore spot for the liquidity-driven recovery. As I have suggested in previous commentary, it will take years (decades) for real estate to recover.

Housing Starts And Change YOY


Headline: New-home construction plunges in February

Builders broke ground last month on the fewest homes in nearly two years, a reflection of declines in home prices and diminished demand that has made it difficult for them to compete.

The Commerce Department says home construction plunged to a seasonally adjusted 479,000 homes last month, down 22.5 percent from the previous month. It was lowest level since April 2009, and the second-lowest on records dating back more than a half-century.

The building pace is far below the 1.2 million units a year that economists consider to be healthy.

Source: finance.yahoo.com

In The News

BOJ responds with liquidity injections as concerns mount.

Headline: Japan Nuclear Reactor Cores May Be Damaged

A fire and aftershocks struck the crippled Fukushima Dai-Ichi power plant today, as officials battling to prevent a nuclear meltdown said fuel rods at two reactors may have been damaged.

Clouds of white smoke or steam started rising from reactor buildings at 10 a.m. and moving westward inland. Japan Chief Cabinet Secretary Yukio Edano said radiation levels at the plant rose at that time but have since fallen. About 70 percent of the uranium-plutonium fuel rods at the plant’s No. 1 reactor and a third of the No. 2 reactor’s fuel may have been impaired, Tokyo Electric Power Co. said.

Source: finance.yahoo.com

Headline: Foreign bankers flee Tokyo as nuclear crisis deepens

Foreign bankers are fleeing Tokyo as Japan's nuclear crisis worsens, scrambling for commercial and charter flights out of the country and into other major cities in the region.

BNP Paribas (Paris:BNPP.PA - News), Standard Chartered (LSE:STAN.L - News) and Morgan Stanley (MS - News) were among the banks whose staff have left since Friday's earthquake and tsunami, and now a nuclear plant disaster, according to industry sources with direct knowledge of the matter.

Source: finance.yahoo.com

Headline: Bank of Japan emergency funding hits nearly $700B

Japan's central bank continued to flood money markets with cash on Wednesday, bringing its total emergency funding to nearly $700 billion as it tries to soothe fears about the economic impact of the catastrophic earthquake, tsunami and unfolding nuclear crisis.

The latest offer of Bank of Japan funding came as stock markets bounced back from a steep sell-off that sent the benchmark Nikkei down 20 percent over two days to an almost two-year low. The index finished up 5.7 percent at 9,093.72.

Source: finance.yahoo.com

Japan abandons stricken nuke plant over radiation

Japan suspended operations to prevent a stricken nuclear plant from melting down Wednesday after a surge in radiation made it too dangerous for workers to remain at the facility.

Chief Cabinet Secretary Yukio Edano said work on dousing reactors with water was disrupted by the need to withdraw.

Earlier officials said 70 percent of fuel rods at one of the six reactors at the plant were significantly damaged in the aftermath of Friday's calamitous earthquake and tsunami.

News reports said 33 percent of fuel rods were also damaged at another reactor. Officials said they would use helicopters and fire trucks to spray water in a desperate effort to prevent further radiation leaks and to cool down the reactors.

Source: news.yahoo.com

If Market Keeps Falling, Fed Will Keep Printing: 'Dr. Doom'

In Disney's movie Finding Nemo, a blue fish name Dory sings a catch little hook that repeats the phrase "just keep swimming."

Replace swimming with printing and the Fed has a theme song.

Falling stock prices will be met only with more money injections from the Federal Reserve, Marc Faber, the so-called "Dr. Doom," told CNBC.

Speaking as global markets fell violently lower in the wake of the Japan earthquake and fears of a nuclear meltdown, Faber said a stock correction actually is healthy in view of how far equities have come from the March 2009 lows.

He also expects weakness to persist and the Standard & Poor's 500 to drop as much as 15 percent. Further, Fed Chairman Ben Bernanke will likely give the green light to another round of Treasurys purchases, which have come to be known as quantitative easing, he said.

Source: cnbc.com

When Will Silver Hit $50 Poll

• Thank you for all that voted in the When Will Silver Hit $50.
• 61% of the voters thought silver would reach $50 in 2011. 18% thought it would not be reached until 2012.
• Reality check. 75% of the voters suggested that stocks would end lower in 2010. Less than 1/5 of the resondents properly voted that stocks would finish higher. The minority was right. The Stocks Will Finish 2010 Poll was taken in early 2010. Perhaps some of these readers participated in the silver poll.