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Optimism/Pessimim Abound in the U.S.

On May 24, 2013, in Economy, Our Culture, by Tim

A plethora of mostly interesting data points about how people all over the world see their national economy can be found in this Pew survey released yesterday.

While emerging market nations are far more optimistic about the future with a stunning 80 percent of Chinese saying that conditions will improve over the next year, we ‘Mericans seem to be sharply divided in how we see things as shown to the right.

It’s no surprise that we lead all advanced economies in optimism since, we are a pretty sanguine bunch for the most part. Only Japan and South Korea come close to the 44 percent of Americans who see a better economy ahead.

But, it is the U.S. pessimists that make us standout as a full one-third of us think things will get worse.

This leaves only 22 percent in the middle, roughly corresponding (and not coincidentally, I’m guessing) to the share of independent voters in the country.

Only Greece has fewer people thinking that things will stay the same and, given their current condition, there probably isn’t much difference between no change and worse, the latter response registering 64 percent.

This chart likely says more about our politics than our economy.

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Gold and Silver Prices Plunge

On February 29, 2012, in Commodities, by Tim

I guess I’d be a little concerned if the gold price wasn’t still up almost 10 percent for the year and if silver wasn’t still up more than double that amount. Nonetheless, profit taking apparently snowballed after Fed Chief Ben Bernanke failed to even mention the idea that the central bank was prepared to print more money for the greater good if the need arose.

Now, clearly, if you were looking to buy precious metals over the last six months or so, the first of the year was the time to do so, but, there seemed to be plenty of buyers stepping in there at the end of the day as the gold price is now back up to $1,705 an ounce. The GLD ETF added 10 tonnes to its holdings this afternoon and China’s central bankers were surely pleased to see today’s developments, probably adding to their stash of gold bars once again when Western traders pushed prices lower.

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China Cuts Reserve Requirements

On February 20, 2012, in Asia, Banks, by Tim

China’s central bank cutting bank reserve ratios on Saturday in order to spur lending and boost economic growth was one of the weekend’s major stories, that is, along with more Middle East geopolitical turmoil and surging oil prices … perhaps they’re all connected.

Reserve requirements will be reduced from 21.0 percent to 20.5 percent for large banks, leaving China with what are still some of the highest bank reserve ratios in the world. Wikipedia provides a good discussion of this subject that includes the following caveat to the official reserve ratio of 10 percent here in the U.S.:

Effective December 27, 1990, a liquidity ratio of zero has applied to CDs, savings deposits, and time deposits, owned by entities other than households, and the Eurocurrency liabilities of depository institutions. Deposits owned by foreign corporations or governments are currently not subject to reserve requirements.

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China: The Gold Market Elephant in the Room

On February 13, 2012, in Asia, Commodities, by Tim

[Following are excerpts from the current issue of the Weekend Update at Iacono Research.]

Despite CME Group (Chicago Mercantile Exchange) lowering margin rates for futures accounts, a stronger trade-weighted dollar spurred by safe haven buying due to Greece’s latest sovereign debt troubles sent precious metals prices sharply lower on Friday.

Before the late-week sell-off, the gold price had tested the previous week’s multi-month high while silver reached a fresh three-month high as China continues to be the most important story for precious metals markets in 2012, speculation growing about how much gold their central bank is buying and how high retail gold and silver sales will rise this year.

For the week, the gold price fell almost four dollars, from $1,725.90 an ounce to $1,722.10, as the silver price dropped eight cents– from $33.67 an ounce to $33.59. The yellow metal is now up 9.9 percent for the year, but down 10.4 percent from its 2011 high, and silver has risen 20.6 percent in 2012, down 32.1 percent from its peak last spring.

Despite its “safe haven” reputation, over the short-term, gold continues to move with other risk assets when investors become skittish and seek safety in the U.S. dollar and U.S. Treasuries, almost exclusively. Such was the case on Friday, as elected officials in Greece resigned their posts in protest of austerity measures that they thought went too far, imperiling the next $170 billion in bailout money needed to avoid a debt default next month that would plunge the area into chaos.

[To continue reading this story, please visit Seeking Alpha.]

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Inflation Rebounds in China

On February 9, 2012, in Asia, Economy, by Tim

Overshadowed by other news today – the Greek debt deal, the U.S. housing foreclosure deal, and the Bank of England deal to print up another 50 billion pounds or so for the greater good – comes word of a surprise increase in the inflation rate in China as detailed in this Reuters report and as depicted below.

Of course, you never know what to believe in the economic data from China, but, if the government says inflation is 4.5 percent, you can bet that it’s at least that high. There too, food prices are rising at an uncomfortable pace and one possible solution that policymakers should look into is to encourage the populace to buy more iPads and less pork.

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Growth Slows in China – to 9.2 Percent

On January 17, 2012, in Asia, Europe, by Tim

Along with another European credit downgrade by Standard & Poor’s and Greece once again edging closer to default (they’ve been edging closer to default for years now), slower growth in China is making headlines this morning, though, most nations would give their eye-teeth for an economy that is still expanding at a nine percent clip.

Retail sales were up 17 percent from year ago levels while year-over-year growth rates slowed during all four quarters of 2011 as the government tightened lending and found other ways to rein in soaring home prices and cool inflation.

So far, it looks like they’re succeeding. Hopefully, they won’t be too successful.

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