A Mixed Bag Of News - And They Are All Important For YOU

Friday, January 27, 2006

Being confident that fellow bloggers in my Blogroll will deliver fascinating comments on the weaker than expected US GDP figures and the higher than expected GDP deflator I take the liberty to sum up several important pieces of news that have been overlooked in most other media or have not been reported anywhere else than in this blog. Read the whole post for a disturbing potpourri.
EU Moves To Control Individual Gold Transactions
EU members are silently preparing laws that will introduce a surveillance of individual gold transactions. Having been at a bank today to pick up another gold coin I was told that Austria prepares a law that will require people to identify themselves when buying or selling gold. The new law will also include sales of other precious items like expensive watches, jewellery etc.
I cannot verify that this move in Austria will be enacted in other countries in the EU as well, but experience tells me that big brother in Brussels might stand behind this new piece of legislation.
Once these news spread around it is likely we see a run on gold in Europe. After all it is the only currency that has kept its purchasing power over the last 6,000 years. I would be most grateful if European readers have some additional input on this issue. Please post it in comments.
On a sidenote: The ECB's member central banks have not sold any gold in the week up to January 20. This is the first time that gold sales have come to a complete halt and another indication that Europe's central bankers begin to realize that selling off their hardest asset might not have been such a good idea after all. Return to this blog for this week's sales figures on coming Tuesday.
US Homeland Security Prepares Restricted Access To Safety Deposit Boxes
Internet forums like Democratic Underground carry plausible reports that the US Homeland Security is silently preparing to control access of citizen's safety deposit boxes at banks.
From one of these reports:
A family member from Irvine, CA (who's a branch manager at Bank of America) told us two weeks ago that her bank held a "workshop" where the last two days were dedicated to discussing their bank's new security measures. During these last two days, the workshop included members from the Homeland Security Office who instructed them on how to field calls from customers and what they are to tell them in the event of a national disaster. She said they were told how only agents from Homeland Security (during such an event) would be in charge of opening safe deposit boxes and determining what items would be given to bank customers.
At this point they were told that no weapons, cash, gold, or silver will be allowed to leave the bank - only various paperwork will be given to its owners. After discussing the matter with them at length, she and the other employees were then told not to discuss the subject with anyone.
It has to be noted that Diebold has introduced new access systems for cutomer's bank vaults that require electronic fingerprint identification. Diebold also supplies voting machines... So don't be surprised if your fingerprint will not work exactly at the moment you will need the contents of your safety deposit box most.
US Public Debt Surpasses The Debt Ceiling - No More Updates Since
US public debt stood at $8,185 million millions - you can also call it $8.185 trillion - on January 24. The debt ceiling at $8.184 trillion would require Congress to enact a raise. I have not come across such news. Of note is also that the Treasury's webpage, called "The Debt To The Penny", has not been updated since. Usually they provide this information with a delay of one day.
Weak Results At The Treasury Auction
Bloomberg reported on January 25 that treasury bond prices were falling as a reaction to the weak demand at a $22 billion government auction.
From the report:
U.S. Treasuries fell as the government's sale of $22 billion in two-year notes drew the weakest demand since April. The declines pushed yields to the highest in more than a month.
The sale came less than a week before the Federal Reserve is likely to lift its target rate a quarter percentage point to 4.5 percent, according all 39 economists surveyed by Bloomberg News. The securities drew a yield of 4.427 percent, above the 4.416 percent pre-auction average estimate of four bond-trading firms surveyed by Bloomberg.
"You can't call it a good one,'' said Ray Remy, head of fixed income at Daiwa Securities USA Inc. in New York. The firm is one of the 22 primary dealers of U.S. government securities that are obligated to bid at the auctions.
Are foreigners suddenly realizing that there is no way the USA could ever repay the biggest mountain of debt ever accumulated on earth in history?
Pensions? Only For Board Members
The Wall Street Journal, not exactly known for its progressive role in the class struggle, had a report (by Michael Schroeder) on deferred compensation plans for board members.
From the report:
Rankled by the rich retirement payouts many troubled companies make to executives, Congress is moving to block such companies from funding the lavish packages.
The provision, tucked into legislation that would shore up the federal agency that provides a safety net for private-sector pensions, would keep financially troubled companies from setting aside any special pension benefits for top executives if their pension plans for rank-and-file employees weren't adequately funded.

Pensions? Only For The Top Brass
GRAPH: At the same time when most companies are looking to get rid of their pension plans for Joe Average they are upping the plans for their board members. Most plans for the board are designed in such a way that members will also receive a pension in the event of a bankruptcy. Graph courtesy of The Wall Street Journal.
To continue from the report:
"We've heard too many stories of top executives of bankrupt companies sticking workers with unfunded pensions while running off with millions of dollars of so-called nonqualified pension benefits," says Senate Finance Committee Chairman Charles Grassley, an Iowa Republican...
The House plans to press for language in the measure that would block payment of new benefits to every manager covered by a troubled company's executive retirement plan. The Senate and the Bush administration, according to House and Senate staff members, believe the new rule should apply only to the company's highest-ranking executives. If a troubled company were to go ahead and fund its executive plans anyway, it would face stiff tax penalties...
Over time, the plans added generous benefits and covered a greater number of salaried employees. Now, more than 90% of the largest companies offer nonqualified deferred executive compensation plans, according to a new survey of the 1,000 largest companies by Clark Consulting, a Chicago benefits consulting firm. Most companies have expanded the programs to include all managers with annual salary and bonus exceeding $150,000, benefits experts say...
I have always been critical about the lavish levels of personal security managers have been awarding to themseves because they always argue that their generous pay packages were a compensation for the higher risk exposure they face. Now I ask: Where is the risk when they drive a company against the wall and will still be rewarded with more money for their failure?
Why Is The EU/ECB So Confident About An Economic Upturn?
In Europe politicians have recently shown more optimism that the EU will continue on an upward economic path. Looking at the figures in the ECB's statistical handbook (pdf) I wonder about their confidence.
Industrial production came in at an annual growth rate of 0.2% in October (September: 1.2%) but nominal turnover was reported 1.4% (September: 4.8%) higher.
I read from this: Sluggish activity burdened with higher prices, i.e. INFLATION.
ECB: M3 Growth Slowed A Bit in December, M1 Is Up Again
The ECB today published the latest money supply growth figures. According to the press release, M3 growth slowed to 7.3% (November 7.6%), but M1 growth accelerated again to 11.3% (November: 10.4%) or the highest rate ever recorded for the common currency. M3 grew again on the back of increased government and consumer borrowing.
The growth of M1, which consists of cash and deposits on checking accounts, is particularly puzzling. Is this a sign that drug traders are increasingly demanding Euros in their transactions? As the biggest Euro bill has a 500 mark printed on it, it is far more convenient for large cash transactions than the $100 bills, one of which is worth only some 82 Euros today. I recently read somewhere that the most 500 Euro notes circulate in Spain. This country is the major landing point for smugglers coming from Morocco and Latin America.
Does The US Prepare An Airstrike Against Iran?
I finish this list of news with the notion of unconfirmed reports that the US army has already moved 70 attack aircraft to the Iraq/Iran border. That is pretty much for an attack on Iran's nuclear facilities.
For all this I sign off with my perma-message to accumulate more gold as the odds for statistical tail events are definitely much higher this year than they were in 2005. In times of growing uncertainty gold has always proven to be the ultimate safe heaven.


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