Financial Sense Blog

I have never been a fan of Stephen Harper. But recently his increasing focus on end-running democracy and selling out Canadian resources to the communist Chinese government without debate or due process, have truly taken a turn for the sinister.

In a misguided attempt to maintain an unsustainable Status Quo, the Federal government is borrowing unprecedented amounts of money that then must be serviced.

Gold turned defensive in recent weeks, weighed by global growth concerns, persistent economic uncertainty in the eurozone and the United Sates, along with a rising lack of clarity about the likely outcome of next week's U.S. Presidential election.

The Bureau Of Economic Analysis reported that Personal Incomes in September advanced 0.4 percent from August which had increased by only 0.1 percent. More importantly, wages & salaries gained 0.3 percent tacking onto the 0.1 percent increase in August.

The spot market gold price traded just below $1715 an ounce during Tuesday morning's London session, little changed from last week's close, while European stock markets recovered their losses from a day earlier and UK and German government bond prices fell.

Sandy is classified as a Hurricane 1 status, a low-grade hurricane. However, don't let that fool you in terms of impact. It's not the absolute magnitude of the hurricane, but rather the magnitude vs. what the infrastructure can handle that matters.

The abundance or scarcity of energy is only one factor in its price. As the cost of extraction, transport, refining, and taxes rise, so does the “cost basis” or the total cost of production from the field to the pump.

Chiwoong Lee at Goldman Sachs has a new report out (“China vs. 1970s Japan”, September 25, 2012) in which he predicts that China’s long-term growth rate will drop to 7.5-8.5%. I disagree very strongly with his forecast, of course, and expect China’s growth rate over the next decade to average less than half that number, but the point of bringing up his report is not to disagree with the details of his analysis.

French businessman and economist Jean-Baptiste Say is credited with identifying the fundamental economic principle that aggregate demand for goods in an economy will equal the aggregate supply of goods when markets are permitted to operate. Or in Say’s words, “products are paid for with products.”

At its most fundamental level, economic activity is no more than an exchange between strangers. It depends, therefore, on a degree of trust between strangers. Since money is the agent of exchange, it is the agent of trust. Debasing money therefore debases trust.