Obama: job losses 'sobering,' urges innovation ... Investors add 43% to gold holdings

TheDailyBell - Issue 336 • Friday, July 03, 2009

"No advance in wealth, no softening of manners, no reform or revolution has ever brought human equality a millimeter nearer." Obama calls jobs losses 'sobering,' urges innovation


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President Barack Obama praised innovative energy companies for creating jobs on a day of "sobering news" that employers shed 467,000 jobs in the U.S. in June. "It took years for us to get into this mess, and it's going to take us more than a few months to turn it around," Obama said in a Rose Garden appearance after meeting with energy business leaders. "These are folks whose companies are helping to lead the transformation towards a clean-energy future," Obama said. "Energy is one of the pillars" of a new foundation for the U.S. economy, he said. ... Obama said the U.S. will have to "change how we use energy." He also said Energy Secretary Steven Chu will seek ways to improve energy efficiency, including the use of solar panels, at the White House. - Bloomberg

Dominant Social Theme: The leader is concerned, albeit in a Rose Garden.

Free-Market Analysis: So more American jobs have been lost. And we have read elsewhere that mainstream economists are starting to fear a jobless recovery. Our readers are not surprised by either outcome. They are aware that in order for a recovery to take root that will include employment, the larger economy must be allowed to purge mal-investments. Almost everything American and European leaders have done in the past year has focused on propping up businesses that should fail.

These ruined businesses - many of them very large corporations - are draining capital that would otherwise be used for new, creative and successful efforts. That is why the rebound, such as it is, is going to be jobless, in our opinion. New businesses cannot get a foothold because the old, failed ones are in the way.

Of course we can hardly blame those who are authoring the current policies. Their options were limited. The invisible hand explained to the monetary elite over six months ago that the current system was finished. It was bankrupt and ruined. That's the entire system - in full. You know, a fiat-money, debt-based system does not work very well in the best of times. Since it is actually a system of price control (central banks fix the price of money) sooner or later it will fail. Economies cannot be run on a price-fixed basis. Eventually, too much money will be printed and the economic distortions will build up until the system implodes. This happened recently.

If the monetary elite had been willing to let the system deflate, all would have been well, or better anyway. But this was not tolerable. Something in the area of US$10-$15 trillion was printed in America and Europe and shoved into the needy mouths of foundering banks and industrial firms. Such additional funds allowed for a "soft landing." Soft for the system anyway. Soft for those firms that had made bad investments and still have plenty to write off, however. So the correction, which would have taken a few months or a year, may stretch out to five years or longer. We've even seen estimates of ten years, the proverbial "lost" decade. (Japan had one in similar circumstances.)

And during all that time, however long it is, the real economy will likely have difficulty generating jobs. The downturn, absent interference, would have been short and sharp. The upturn, on its heels, would have brought a burst of new companies, pouring into unoccupied market niches to take the place of the old. Instead, the old corporate guard lingers, gradually shedding jobs and retaining debt. The economy is frozen, transfixed in a kind of economic amber. And into the space where entrepreneurs would have ventured we find only American and European bureaucrats mandating green industries to be implemented via five-year-plans.

It is really the worst of all possible recipes. The government under the watchful eye of the monetary elite fixes the price of money. Once the bubble has blown up, the powers-that-be print more money and prop up the rotten boroughs that should rightfully have foundered and failed for good. Finally, in this latest and grimmest cycle, both European and American governments step in and suggest new business models - not models that the marketplace demands but models that the monetary elite wishes to encourage.
One must be very doubtful of a recovery based on such a tenuous foundation. The mal-investments have never been purged. New and vital companies have not been able to find the funding they would otherwise get. Jobs have not been created, capital has not been made available. Finally, the new endeavors that are becoming more prominent are ones that government wants to emphasize. We don't believe there will be much of a recovery based on this scenario.

Conclusion: Of course those in power may not care. It is very possibly to the advantage of the monetary elite to have a weak recovery - or even an L-shaped recovery - because scared and desperate people are often more malleable than satisfied and confident ones. We guess it all depends on the motive, doesn't it? If one wants to create new currencies, industries and even nations, or to stitch together a new sort of global community -- a dumbed-down, indebted and miserable population is indeed likely preferable. Of course, even within this sort of speculative framework, not everything will be controllable. Gold and silver will go their own way - as they do historically during such episodes. That direction, we anticipate, will continue to be up.


Gold investors add 43% to holdings of bullion


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Gold investors increased their holdings of bullion at a major dealer by more than 40% in the first six months of the year. BullionVault, which says it looks after more gold than many of the world's central banks, reported 43% growth in its clients' physical holdings of the metal in the first half to more than 18 tonnes or $553m worth. The addition of almost 5.5 tonnes, or $166m worth, was almost twice the growth in BullionVault's clients' holdings in the same period last year and was equivalent to 70% of the growth seen over the whole of 2008. Adrian Ash of BullionVault said: "While politicians argue over 'green shoots' in the economy, the number of private individuals buying physical gold continues to grow. - Telegraph

Dominant Social Theme: An uptick but not a trend?

Free-Market Analysis: This is why gold bugs are so suspicious of the larger marts. Gold has been moving up and down in a mostly constrained trading range for 2009, and even before. At the same time, there have been plenty of scattered reports of significant scarcity of gold and silver -- even at government mints. And there have been plenty of reports of concentrated gold and silver buying, not just in the West but in India and in the East as well.

And now comes this report by a major bullion dealer saying that physical holdings of gold have grown by half in the past six months. Now it could be that BullionVault is experiencing unprecedented growth, but why should BullionVault's customers be so much more aggressive than the rest of the gold-buying public? In fact, BullionVault's experience sees to jibe with other apocryphal statements about gold and silver buying. We checked in with a familiar bullion expert to Daily Bell readers, Pat Gorman, based in Arizona, and he confirmed the same sort of statistics. The public is buying lots of precious metals - and has no intention, seemingly, of dumping them.

Contrast this to the mainstream media statements about gold and silver. Central banks are constantly threatening to sell gold for a variety of reasons - sometimes almost any reason will seemingly do. The International Monetary Fund recently expressed its determination to sell 400 tons of gold so that it would be better able to hand out more paper money. (We bet the countries in question would happily take the hard stuff.)

It does seem from time to time that the prices of money metals are being suppressed by a financial establishment that is determined to maintain a money-printing franchise. No different in many ways, at least in our humble opinion, from the determination of others in the business who wish to keep their games alive. Madoff comes to mind. There is in fact a good deal of direct evidence that this is so, thanks to such organizations as GATA -- which has painstakingly put together a fairly expansive documentation of the flim-flammery and how it occurs.

Our position, however, has more to do with practicality (though we know where the fingers point.) Our idea is that markets cannot be contravened. Over time, the market will get to where it is going because, contrary to efforts that assume the opposite, the human race is not THAT malleable. The invisible hand is not something with which you want to arm wrestle. It always wins, though the timeline is unpredictable.

Conclusion: We have read in the past few months literally thousands of articles about the global stock market renaissance, one we think is vastly overstated. At the same time, we have read relatively few articles about the continued demand for money metals as the "correction" and the "recovery" grind their way forward. It is almost enough to put one off reading the mainstream media. One might, in fact, wish to found a publication that will help act as a corrective. Call it The Daily Bell - live from Galt's Gulch.