patrick.net

Forget about what he says. Because he can only say things he is allowed to say.

It boils down to what choices one has. US is extremely leveraged as a nation. You have to raise interest to at least above 8% (the true neutral rate) to stop gold's ascend, but that will send lots of people, and consequently US consumer economy into recession. Or, he can sit back and let USD tank, and inflation run wild a bit. The better part of it is, Fed is, or has lost control of how things can unfold. We are giving Bernanke too much credit, most of USD are not sitting in America, they are hoarded by the Arabs, Chinese, Japanese, Koreans, all countries that have a trade surplus with us. What they do with USD not only depends on economic benefits, but also how much they like us. Human emotions is definitely a part of international politics.

In the end, if he is not afraid of high unemployment which may cause social instability amongst all this illegal immigration backlashes, outsourcing fears, etc. Kudos to him. We will see.

O.O., how did you get this 8% number?

go to shadow government statistics site.

I don't trust official CPI any more, we all know it is cooked.

tsusiat,

do you have historical CAD exchange rate dating back further than the 1990? Thanks.

I know CPI is cooked. But 8% sounds too high to me. I believe 5-6% is a more reasonable number.

I understand that many have complained about the government fudging of statistics. But, conspiracy theories are just conspiracy theories. Someone raised a good point: Most beauracrats at BLS were appointed during the Clinton Adminstration; they don't have a strong incentive to help the Bush & Co, especially by doing so they would expose themselves to future prosecution.

OO & Tsusiat
I still think CDs in euros are a stong, conservative approach for my HAHAs. If oil moves to euros, they will rise against the USD.
Now I've never looked deeply into these markets. Perhaps theres something I missing in my thinking.
Since I sold my house, I don't want to gamble with my cash...but I don't want it devalued over the next few years either. At some point I will invest in real estate again....for that is where my interest lies. Until then...euros?
I've put a call into Everbank.

SQT, I emphatically agree. I expect to make money from speculation in these bubbles, on both the long and the short sides, for now I suddenly found a few good causes to make money.

GC,

all we are saying is just personal assessment. We can check back in a few months or a few years to see how right or wrong we are, and why. I'd like to do that.

O.O., that is fair.

Linda,

do whatever you feel comfortable, after all, you need to sleep tight at night, that is what counts.

He’s going to keep raising the rates and bust gold.

It all depends whether people believe in gold psychologically.

* If he pauses dollar will fall and people will rush to gold.

* If he continues to hike people will see that as a sign of higher inflation risk and they will rush to gold.

See, it is all psychological.

NOT INVESTMENT ADVICE

I sense that quite a few people on this board are on the long side of Au. Correct?

I'm not going long on gold, but I do see the possibility of a tremendous run up and going in now will have relatively little downside.

I won't be so optimistic. But then again, I espouse strange theories.

GC,

Alas, we're social creatures. Fortunately or unfortunately, what we say can be held against us.

OO--

Stats Canada are annoying as all get out, they want to SELL all their stats. It is a lot easier to get info on the US economy, but I will see what I can find...

I’m not going long on gold, but I do see the possibility of a tremendous run up and going in now will have relatively little downside.

Downside is limited because it cannot fall below $0. :)

Gold can be very risky. One can still lose money going long in a major bull market if the timing is bad.

NOT INVESTMENT ADVICE

That's why I said I wouldn't be so optimistic.

Owneroccupier,

I'll see what I can dig up via my school account.

In the end, it is all about wealth transfer. I missed on boat. I won't miss the new ones coming ashore.

In real dollars, gold is still pretty low priced. It is merely getting expensive relative to the dollar, because the dollar has devalued so much.

Of course, gold could fall to $20/oz, but I highly doubt that because of the psychological support for gold. It'll take a big bubble to burst that perception.

OO--

This site will let you do daily rates for Bank of Canada all the way back to 1996:

http://www.bankofcanada.ca/en/rates/exchform.html

Here's a good summary of the situation vis a vis the dollars from the CBC:

http://www.cbc.ca/news/background/dollar_cdn/

OO--

this site will let you retrieve the historical exchange rates back to 1971:

http://fx.sauder.ubc.ca/data.html

And cool enough, it is at UBC in Vancouver...

stupid world bank! seems to have every asinine stat except for exchange rate

Interesting, the loony was basically at parity during the last energy crisis.

Thanks astrid, tsusiat,

here is a brief graph on wiki (gees, they have everything).
http://en.wikipedia.org/wiki/Canadian_dollar

Disregard anything prior to 1970 because it was not floated. So throughout the 1970-1976, it was a more valuable currency than USD, then fell in 1976 against USD. However, oil, the prime index of commodity, didn't start it meteoric rise until late 1970s and peaked in 1980.

We are already at 0.9 right now, how much more can CAD rise against USD?

let me know if you guys want any country facts OTHER than exchange rates :)

astrid,

if you can still get access to your school library, what will really interesting to find is the historical rate of "synthetic Euros". Since Euro came into being in 1999, so prior rates were computed by the economists as a derivative of a basket of primarily DM, FF, and even a bit of Sterling prior to 1992. It is also called XEU.

Going bcak to the last commodity run of around 1970-1980 may also give us some kind of idea how Euro will likely do in this commodity bull period.

I originally wanted to use AUD as an proxy, since Australia is the world's largest quarry and soon-to-be largest gold mine. Unfortunately, their currency was not floated until 1983, which happened to be past the prime.

http://en.wikipedia.org/wiki/XEU

It looks like I won't be able to find the XEU for the period, but I'll see what I can dig up individually. I'll search the academic papers first and see if someone's done work in this area.

http://www.eia.doe.gov/oiaf/ieo/pdf/tbl8.pdf

Russia and Iran has the top two shares of the world's reserve of natural gas, accounting for 27.8% and 15.6% respectively. US has only 3.1%.

Owner Occupier -

the commodities are running again, but the difference this time is not just the US, Europe and Japan are buying. Since the american economy is in a shambles if you consider the trade deficit and 8 trillion dollar debt, things might be considered much worse comparative to anything that was happening back in the 70s 80s.

Regardles of what investment bankers are pulling down as compensation these days ;>

Look for commodities to weaken as the US dollar takes a hit

tsusiat,

I agree with you on all your points, but, as far as CAD is concerned, US accounts for 85% of Canadian trade. Now how much of that is inelastic demand (like oil sands), and how much of that is elastic demand (like Blackberry) I don't know. But I do expect all trading parties of the US to be adversely affected to a certain extent if the American consumers go on strike.

So I am not sure if I can expect a 2x return on CAD if one gets in now. But I think the worst thing is of course staying in USD, just my opinion.

astrid,

just in case that you ever need to call your grandmothers telling them to buy gold, don't buy in the gold stores in Shanghai, you pay through your nose for the craftsmanship which doesn't keep its value. You can get gold bullion or small gold bars at Bank of China in Hong Kong for a smaller markup than we pay here. It is about HKD 150-200 ($20-30) per bullion or gold bar.

O.O., that is incorrect. In 2004, I asked a friend to check out coin prices in Shanghai when he went back to visit. According to him, there was almost zero markup when one bought official gold coins (Panda) from the banks. I was thinking of opening an on-line coin store. Then I found better things to do.

GC,

the markup is in the price itself already. Why do you think so many Chinese go to Hong Kong for shopping, especially at the jewlery stores?

The gold bars at Bank of China in Hong Kong is sold at spot price * ounce + HKD 150 (or 200, I can't remember) processing fee.

Also, at that time there was a limit as to how many coins an individual could buy. But you could get around the system, of course. I gave up because the insurance and shipping cost from Shanghai to my US customers will be high enough to eat up 1/2-3/4 of my margin.

Real coin dealers get their coins way below spot prices. Many got their coins from widows who, under grievance, unwittingly sold the deceased men's boxes of coins for obscenely low-ball prices. Someone once commented that the coin dealers are in the undertaker's business.

This european central bank paper isn't on quite point, but it might be interesting for you hardcore econ guys

http://www.ecb.int/pub/pdf/scpwps/ecbwp365.pdf

This ECB paper may be on point

http://www.ecb.int/pub/pdf/scpwps/ecbwp452.pdf

Here's CEPR's dataset page. I'm not educated enough to know if there's anything useful. The CEPR appears to have produced several quite on point papers, but they're not free.

"The Euro and the International Financial System" is quite promising based on description.

http://www.cepr.org/Data/

Here's another one, named "China and the Relationship Between the Oil Price and the Dollar"

http://www.cepii.fr/anglaisgraph/workpap/summaries/2005/wp05-16.htm

I'm still digging.

One of my simple joys in life is to go back and read the posts from the previous day that are way past my bed time. People are off work, at home and relaxed and are free to get "out of character". As I reviewed (and snickered) I thought this was indicative of "last call". Then I noticed it started right after my last post at 3:04PM! Damn! Whahappen? Me no know!