In a recent speech in Arlington, Virginia, Fed Vice Chairman Donald Kohn urged financial institutions to have “sound practices” to deal with the risks they could face from an eventual increase in interest rates, since this could affect their profits and the cost of borrowing and lending activities.
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A report in Business Week notes that the Commodities Futures Trading Commission is expected to propose caps regulating how much a single investor can hold in a given commodity future, largely in response to the price swings that characterized the oil market in 2008.

The magazine quoted Bart Chilton, a CFTC commissioner, as saying that the proposal would aim to prevent any individual or company from “controlling too much of a given market,” while discouraging these markets from becoming “a private jungle gym for speculators.”

More…The article noted that there will be a public comment period before the proposal is implemented, although it could be in place as early as springtime.

While the new year is still in its earliest days, there have been growing signs of investor interest so far in commodities like gold and silver, as well as other precious metals. This is due to factors like a shaky dollar and concern about the prospects for an economic recovery in the long term.

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With that in mind, a report on the India Times’ Economic Times website gives silver and gold dealers, as well as commodity traders in general, a reason for optimism about the coming year.

The article cites statistics predicting that commodities such as gold and palladium could rise as much as 17 percent in the coming year, with one estimate from Goldman Sachs reportedly predicting a 17.5 percent average gain across 24 different commodities that could outpace expected gains in the Standard and Poor’s 500 Index.

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The Mega Commodity Move: Why it’s Happening

Courtesy of www.adenforecast.com

The precious metals have been soaring. Gold, silver, platinum, palladium… you name it. If it’s a metal, it’s been booming. The same is true of other commodities too.

So are commodities the new bubble? Have they replaced the real estate bubble, which replaced the tech stock bubble, as investors move from one bubble to another? It sure looks like it. But the big difference is that this metals and commodities bubble has a lot further to go. Why?

THE PERFECT STORM

Basically, the perfect storm has been gathering and it’s going to fuel a mega rise that will likely last for years to come. We’ve often discussed the most important reasons why but since these markets have been picking up steam, we’ll review these basics again.

Most important is China and other growing nations, which are keeping demand and prices super strong. But also important are spending, soaring global money creation, inflation, the falling U.S. dollar and international tensions. But let’s take China first…

China power

China’s growth has been astounding at over 9% each year for more than 25 years. During that time, China has lifted 300 million people out of poverty and it’s quadrupled the average income.

This is the fastest economic growth in recorded world history. Many felt it couldn’t last, but year after year it has, and it’s going to continue.

Since wages are higher in urban areas, 500 million rural Chinese are expected to move to the cities over the next couple of decades in search of the good life that former migrants have already found. This growing middle class is proudly spending money on homes, cars and other consumer goods.

Retail sales, for instance, recently soared 20% and China has become the world’s second largest oil consumer. This huge demand for all things, from food, to oil, gasoline, metals and other commodities has been one of the main factors driving these markets higher.

The Chinese government’s top priority is to close the gap between rich and poor. And they want to make a big splash on the world stage as a major power during this year’s Olympics. But something more important is also happening.

As Time magazine points out, comparing China to the U.S., China is cramming two important eras into one. The post World War II prosperity that fueled the flight to the suburbs is coinciding with the 19th century Industrial Revolution that lured people from the farms to the cities. (more…)

by Krassimir Petrov, Ph.D.

Austrian Macro Economist/Investment Strategist

Commissioned by: J. Douglas Bowey and Associates

Abstract

The American Empire depends on the U.S. dollar. The proposed Iranian Oil Bourse

will accelerate the fall of the U.S. dollar and hence the fall of the American Empire.

I. Economics of Empires

A nation-state taxes its own citizens, while an empire taxes other nation-states. The history of empires, from Greek and Roman, to Ottoman and British, teaches that the economic foundation of every single empire is the taxation of other nations or of their subjects. The imperial ability to tax has always rested on a better and stronger economy, and as a consequence, a better and stronger military that peacefully or militarily enforced the tax. One part of those taxes went to improve the living standards of the empire and the other part went to reinforce the military dominance necessary to enforce those taxes.

Historically, taxing the subject state has been in various forms, usually gold and silver, where those were considered money, but also slaves, soldiers, crops, cattle, or other agricultural and natural resources, whatever economic goods the empire demanded and the subject-state could deliver. Historically, the taxation has always been direct: the subject state handed over the money (gold/silver) or the economic goods directly to the empire.

For the first time in history, in the twentieth century, America was able to tax the world indirectly—not by enforcing the direct payment of taxes like all of its predecessor empires did, but by distributing its own currency, the U.S. Dollar, to other nations in exchange for goods with the intended consequence of devaluing over time those dollars and paying back later each dollar with less economic goods. The difference between the value of the dollar during the initial purchase and the devalued dollar during the repayment was the U.S. imperial tax. Here is how this happened.

Early in the 20th century, the U.S. economy began to dominate the world economy. At the time the U.S. dollar was tied to gold, so that the dollar neither increased, nor decreased its value, but was always convertible into the same amount of gold. The Great Depression with its the preceding inflation from 1921 to 1929 substantially increased the amount of paper money in circulation without the correspondent increase in gold. This rendered the effective backing of the U.S. dollar by gold impossible. As a consequence, President Franklin Delano Roosevelt decoupled the dollar from gold in 1932. Up to this point, the U.S. may have well dominated the world economy, but from an economic point of view, it was not technically an empire. The fixed value of the dollar for gold did not allow the Americans to extract economic benefits from other countries by supplying them with gold-backed dollars.

Economically, the American Empire was born with the establishment of the Bretton Woods system in 1945. The dollar was made only partially convertible to gold—convertibility to gold was available to foreign governments only, but not to private institutions. At this time the US dollar was established as the international reserve currency. This was possible, because during WWII, the United States had supplied its allies with food and military provisions, accepting gold as payment, thus accumulating significant portion of the world’s gold. (more…)

U.S. central banks may have less than half the gold they claim to possess in their vaults, charges a watchdog group in an ad scheduled for publication in the Wall Street Journal this week.

As WND reported, the Gold Anti-Trust Action Committee, or GATA, claims the Federal Reserve and the U.S. Treasury are surreptitiously manipulating the country’s gold reserves by participating in undisclosed leases, according to an advance copy WND obtained of the ad running in Thursday’s edition of the Journal.

GATA believes much of the borrowed gold out on lease will never be returned to the central banks.

“With the demand for gold so strong worldwide, it has become impossible to return much of the leased gold without driving the price to the moon,” said GATA’s chairman, William J. Murphy III.

“Most observers calculate central bank reserves are supposed to have about 30,000 tons of gold worldwide in their vaults, but we believe the amount of gold actually there may be more like 15,000 tons,” Murphy said. “The rest of the gold is gone.”

The U.S. Treasury denies the claim, insisting the stock is accounted for regularly.

(Story continues below)

“We want to expose and stop the manipulation of the gold market by the United States Treasury and Federal Reserve right now,” Murphy said.

“The purpose of this ad is to wake people up in the investment world as to what is going on behind the scenes in the U.S. gold and financial markets,” Murphy told WND.

He explained GATA has decided to pay the Wall Street Journal $264,000 for a one-time placement of the full page ad in the national edition because the financial press has not covered the story.

“We have had two major international conferences since 2001; the mainstream financial press has blackballed our message,” Murphy explained.

“Anybody Seen Our Gold?” the ad is titled, charging U.S. gold reserves held at depositories such as Fort Knox or West Point may have been seriously depleted as they are shipped overseas to settle complex transactions utilized by the Federal Reserve and the U.S. Treasury to suppress prices.

GATA further charges the U.S. government strategy to manipulate the price of gold has begun to fail. (more…)