Spot gold fell to three week lows below $1370 an ounce Tuesday, as stocks and commodities also fell amid ongoing speculation over when the US Federal Reserve might begin reducing the size of its quantitative easing program.
I believe that in the past two to three years there has been a significant and welcome shift in Beijing’s attitude towards maintaining growth, and that this shift implicitly represents a shift from the capital frontier model of optimal investment levels to the social capital model.
Three factors – volcanic debris, more variable polar jet streams and increased human habitation in high-risk areas – are creating extreme weather and high insurance payouts. Some of these are temporary while other factors will last for decades.
Back in 2002 Warren Buffet famously proclaimed that derivatives were ‘financial weapons of mass destruction’ (FWMDs). Time has proven this view to be correct. It is difficult to imagine that the US housing and general global credit bubble of 2004-07 could have formed without the widespread use of collateralized debt obligations (CDOs) and various other products of early 21st century financial engineering.