The Mess That Greenspan Made - Part 414

Prepare to Pay More When You Visit Canada

Apparently I’m not the only one to have noticed the sometimes shockingly higher prices for consumer goods when you cross the border from the U.S. into Canada as finance minister Jim Flaherty has also seen the disparity as detailed in this story at Reuters.

Canada’s finance minister says he is irritated that retail prices are higher in Canada than in the United States despite the country’s strong currency, and wants a parliamentary committee to investigate the matter.

In a letter sent on Tuesday to the Canadian Senate Committee on National Finance, Finance Minister Jim Flaherty suggested he would repeat a 2007 drive in which he publicly pressured retailers to lower their prices in light of a sharp Canadian currency appreciation that he said should have eliminated the price gap.

“Canadians are rightly irritated when they see large price discrepancies on the exact same products being sold on different sides of the border,” Flaherty wrote in the letter, obtained by Reuters on Wednesday.

Flaherty’s bid to stop the flow of shoppers to malls just south of the border is aimed at boosting consumer spending after the Canadian economy contracted in the second quarter.

Consumer spending has been relatively healthy in Canada, even during the recession, but economists predict it will be more subdued in the rest of this year as confidence slips.

What was interesting about our recent trip is that the first stop we made after we crossed into Alberta was at the Calgary Costco where many of the same items sold at our local store were also available there. With only a few exceptions, prices were sharply higher.

You expect that high-tax items like gasoline and alcohol would be much dearer north of the border, but it seemed like just about everything was 10, 20 percent higher or more. Of course, it took me a little while to figure out that ribeyes were $22 per kilogram, not per pound, so it wasn’t quite as bad as it first seemed.

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Just Another Day at the Office for Gold

There’s been lots of gold news already this morning, not the least of which was the $70 plunge in price that the mainstream media says is due to profit taking, a rotation back into equities, and the looming margin rate hike by the Shanghai metals exchange that many think will be followed by a similar move at CME Group here in the U.S.

Of course, the Swiss pegging their currency to the euro (or, more properly, putting a limit on how high it will be allowed to rise versus the euro by printing up however much local currency is necessary to buy euros) has complicated matters for investors as one reliable safe have has now been removed from the market.

You’d think this might buoy the gold price, but apparently not.

The Chinese are probably eying the the developing correction as are Indian festival buyers, confident that buying opportunities have been short and shallow, that is, since the world’s paper money began what, increasingly, appears to be a death spiral a few years ago.

But, the most interesting gold news today comes from Kazakhstan, where, according to this Reuters report via Mineweb, the government just announced it will buy all domestic gold production for at least the next three or four years.

Kazakhstan’s central bank said on Wednesday it would be buying up the Central Asian nation’s entire gold bullion output until at least 2014-15 to ease its exposure to the sagging dollar.

The bank decided last month that it would start buying up the entire gold bullion output from domestic producers on Jan. 1, 2012 to augment its gold reserves.

“In the next two or three years we will certainly be buying up the entire (gold output) volume,” National Bank Governor Grigory Marchenko told a news conference.

The gold assets of Kazakhstan’s central bank have grown by 29.5 percent since the end of last year to stand at $4.0 billion as of August 31, amounting to 11.1 percent of the country’s net gold and foreign currency reserves.

Kazakhstan, Central Asia’s largest economy and oil producer, produced 21.4 tonnes of gold, including 9.7 tonnes of refined gold, in January-July of this year. It plans to boost gold output to 33 tonnes this year from 20 tonnes in 2010.

Given the dim prospects for policymakers to extricate the world from its current financial difficulties, many of which are rooted in the excess creation of money and credit for about the last 30 years, it’s hard to view the current correction in the gold price as anything other than a buying opportunity, even at these currently loft prices.

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The Euro Crisis, JPMorgan, and Legos

Via this item from Felix Salmon at Reuters comes a JP Morgan description(.pdf) of the  European sovereign debt crisis as seen by a nine-year old,  in Lego terms.

Here’s the legend:

[1] Spain, Italy and the rest of the Euro Periphery__ [7] The European Central Bank
[2] The CDU, CSU and FDP ______________________[8] Poland
[3] Finland ____________________________________[9] France
[4] The Social Democrats and Greens___________ [10] EU taxpayers in Core countries
[5] The Bundesbank __________________________[11] EU Commission and Finance Ministers
[6] The IMF__________________________________ [12] EU bondholders

As for what they’re doing to each other and why, see either of the links above.

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Wednesday Morning Links

Obama Said to Plan $300B Jobs Package – Bloomberg
Obama and Jobs: Why I Don’t Believe Him Anymore – Taibblog
Stocks Soar as Italy and Greece Act on Austerity – CNBC
Court curbs German ability to act fast on debt crisis – Reuters
New York prosecutors widen Goldman probe – Economic Times
Swiss Open Fresh Round in Currency War Ignited by Global Slowdown – Bloomberg
Swiss abandon floating exchange rate in dramatic ‘currency war’ twist – Telegraph
Beijing embassy cables show China sees gold as central in currency war – GATA
Occupy Wall Street will lay siege to U.S. greed – MarketWatch
No chief for the consumer bureau any time soon – CNN/Money
Treasuries, TIPS, and Gold (Wonkish) – Krubman, NY Times

Oil rises to near $87 as Obama speech awaited – AP
Gold drops further from record as stocks rally – Reuters
Hedge Funds Increase Bets on Bear Market This Fall – CNBC
Kazakh central bank to buy local output until 2014/15 – Reuters
Swiss move sparks search for safe-haven currencies – MarketWatch
Analyst sees inflation risk for gold mining stocks – AP
The Swiss Peg: Super QE, or beggar-thy-neighbour – Economist
How much is China looking to add to its gold reserves? – Mineweb
Swiss franc peg may unleash gold rally to $2,000/oz – Reuters
Where’s our oil price collapse? – The Burning Platform

Are we doomed to suffer another Depression? – Telegraph
The Beautiful Minds That Created Modern Economics – Bloomberg
Brazil’s 12-month inflation rate reaches six-year high – xinhuanet
Swiss Central Bank Move ‘Huge Mistake’: Jim Rogers – CNBC
In Euro Zone, Banking Fear Feeds on Itself – NY Times
Ten Questions on the FHFA Mortgage Lawsuits – WSJ
No consensus on fixing housing woes – Politico
A Dangerous War Against U.S. Banks – RCM
Fed urges coordinated mortgage, unemployment aid – Housing Wire
‘Helicopter Ben’ risks destroying credit creation ($) – Financial Times
Fed considers buying more long-term Treasury bonds – Washington Post

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