The Mess That Greenspan Made - Part 415

Economists and Their Models

Spotted in this item at Naked Capitalism earlier today was the video below of economists defending their models, those same models that seem to have failed spectacularly at providing any useful predictive information about the world in recent years.

When listening to these guys, you get the sense most of them are so detached from reality and insular in their thinking that even if they did venture close to a New York trading floor, they’d be more concerned about getting a wedgie than learning anything useful about what really drives financial markets, at least over the short-term.

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Back Up the Truck for Silver

Normally, I’m not a big believer in conspiracy theories, but recent events really have me scratching my head.

Last week, equity markets sold off and, as has often been the case in recent years, futures traders sold winning positions in precious metals to cover margin calls as a result of losses elsewhere.

There’s nothing new about that.

But, on Friday, with the plummeting gold price already down more than $200 from its early-September high and with the price of silver in a virtual free fall as traders suddenly realize that, at times like this, it’s much more of an industrial metal than a monetary one, CME Group decided announce a new round of margin rate hikes – some 21 percent for gold and 16 percent for silver.

This was followed by a similar move by the Shanghai metals exchange on Monday morning amid word that officials are about to quadruple the capacity of the EFSF (European Financial Stability Fund) from about 440 billion euros to over 2 trillion euros.

Now, maybe it’s just me, but it’s easy to think that the timing of those margin rate hikes was more than just a coincidence.

Read the rest of this article at Seeking Alpha.

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Pondering the Gold Price Decline

Barron’s economics editor Gene Epstein talks about the recent sell-off in both gold and silver and wonders about what might lie ahead for the metals.

For someone who has been somewhat dismissive of the commodities boom in recent years (see Who’s Behind the Commodities Boom? from early-2008), this is a rather bullish outlook.

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Monday Morning Links

MUST READS
Eurozone rescue plan ‘emerging’ – BBC
Europe Stews on Greece, Markets Sweat It Out – NY Times
Greece vows commitment to euro, meeting budget targets – Washington Post
Geithner Plan for Europe is last chance to avoid global catastrophe – Telegraph
As Sides Dig In, Panel on Deficit Has an Uphill Fight – NY Times
Will The IMF Save The World? – Baseline Scenario
A U.S. Economy Weakened By a Golden Decade – Forbes
Marc Faber Says Gold Could Fall to $1,100 -$1200 – CNBC
Fed Plans To Identify “Key Bloggers” And Monitor Conversations – ECB
Occupy Wall Street – Day 9 – Update – Goldman Sachs 666
The euro once again – China Financial Markets
Not Over by a Longshot – Hussman Funds

MARKETS/INVESTING
Oil above $80 as Europe moves awaited – AP
Gold pares losses, hurt by dash for cash – Reuters
A Gold Rush Wanes as Hedge Funds Sell – NY Times
A brief economic explanation of Peak Oil – The Oil Drum
U.S. gasoline prices slide; more to come-survey – Reuters
Gold: Too fast too soon but fundamentals still very positive – Mineweb
Shanghai Gold Exchange Hikes Silver Margin By 20% – Zero Hedge
Unintended consequeces of operation smash – SilverGoldSilver
Gold to Bottom Out This Week: Experts – CNBC
2008 or 1979 all over again? – Profit Times

ECONOMY/WORLD/HOUSING/BANKING
A Quick Note On Inflation – Krugman, NY Times
Consumer buying may take long time to heat up – USA Today
Economists Shut Out Of Debt-Ceiling Debate – Media Matters
China top banker says fighting inflation priority – AP
German business sentiment falls further, Ifo says – BBC
Greek potest resumes as gov’t rejects default reports – xinhuanet
Vietnam 2011 Inflation of 19% to 20% Is ‘Realistic’, Thanh Says – Bloomberg
Just 22% Support Government-Assisted Mortgage Payments – Rasmussen
Banks Increase Holdings in Derivatives – DealBook
Housing market is terrific, if you are rich – USA Today
Betting on Bernanke Returns 28% for Treasuries – Bloomberg
Ben Bernanke and “The Costanza Effect” – Jeff Matthews

 
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