Saturday, June 27, 2009

China Gold and Brokedown Budgets

While gold has fallen off of its recent high of almost $1K, it did rebound almost $30 in the last few trading days of the week. Perhaps it had something to do with this:

"Li Lianzhong, who is head of economics at the party's policy research office, said the U.S. dollar is poised for a fall, making gold and land better investments for China's $1.95 trillion in foreign exchange reserves, the report said. It quoted Li as saying Beijing should also focus on buying up energy and natural resources."

While the report was made by Marketwatch, The Economic Populist adds, "Now Mr. Liangzhong isn't just your average aparatchik in the Communist Party apparatus. He's the head of the party's economic think tank, and according to many like Jim Rogers, he has a lot of clout."

Foreign fears over our impending inflation and currency devaluation are certainly growing. The hard part is figuring out how and when a treasury dump will occur, spurring even more inflation.

Continuing on a theme from the most recent blog, most state budgets are up for vote next week for the impending fiscal year. Problem. Most states have a serious shortfall. Bigger problem. States can't run budget deficits. Huge problem. California already played its one-trick pony of no income tax refunds. CNN Money reports:

"In some states, the leaders aren't even talking. Pennsylvania's governor and Senate Republicans, who have to close a $3.2 billion gap for the current year, are not negotiating on their budgets. The governor's $28.4 billion budget seeks to raise the personal income tax rate by half-a-percentage point and draining the commonwealth's $750 million rainy day fund. Senate Republicans' $27.3 billion plan looks to cut spending on areas such as education and community revitalization."

So what does a state do when it's out of money? The choices aren't great. "Sometimes, however, the government faces a shutdown. When Tennessee officials failed to pass a budget on time in 2002, classes stopped at public universities, drivers licenses were not issued and road construction ceased. Pennsylvania's Rendell has already said state workers would have to stay on the job without being paid if the budget isn't approved. Services will start to be affected if the budget standoff continues beyond its typical week's delay."

And California? Ugggh. "Next Wednesday we start a fiscal year with a massively unbalanced spending plan and a cash shortfall not seen since the Great Depression," Controller John Chiang said. "The state's $2.8 billion cash shortage in July grows to $6.5 billion in September, and after that we see a double-digit freefall."

Here in Florida, we have a unique summertime opportunity for the entire state to crash. As my Dad was kind enough to point out, the CAT, or catastrophe fund, is underfunded by $19 billion. Let's all hope for a mild hurricane season.


Anonymous said...


Welcome back. Great point you made regarding metals and energy plays.

I am looking forward to the future in the new USSA. Control is the name of the game and the "Nanny State" is heating up and here is just a sample of things in store. First, we have govt bailouts to companies/industries they decide need it and hook up unions in the process. Oh, and kill contract law as well.
Second, We have govt get directly involved (in what I think is just the start)with tobacco companies. Next will be sugar, than soda, than whatever else they feel is inappropriate or a "sin".
Third, Cap and Trade!!(If passed by Senate)Yes, just at a time when we can't afford to hit everyone in the pocket especially with an energy tax, that is exactly what we do. People are not spending as is, now this. A few things the govt does not say 1. CBO is usually always wrong with its estimates 2. how many people in congress stand to make a fortune with their "green" investments?? We all know the media would be all over it if a (R)was in office and this had to do with oil. (Halliburton comes to mind)
Fourth, Do not get me started on Health care. Trillions $$$ (I still cannot believe no one even considers tort reform)

Anyway, now that the control game is out in the open, how do we make money off of it? Commodities because of the inflation issue but what about Cap and Trade?? What Solar or Green play do you rec. I might for the first time like GE. WOW!! One thing is clear we need to vote all of these idiots out both (D) and (R)!! And make money from their decisions.


Tiger Coach said...

WE have been flirting with the metals play off and on since last year. If it weren't for massive releases of AU fromt he IMF we would already have $1250 prices. Instead, we have ben left holding the bag as G8 and G12 meetings seem only to reaffirm the dollar.

On a different note, let's consider some... just some of the changes coming down the pike for healthcare. Could there be a day and age when specialist surgigical degrees are given as opposed 9in lieu of )specialist training after a MD license?

Massive massive fraud of Medicaid, Medicare, and health insurance companies are another sensitive topic.

There has to be a few breaking points in any type of medical "change"... What are some of the ideas you have heard?

I hope all is well!!!

AX said...

Rolling Stone has a great article this week on how GS is ruling our country from the Pres. on down. Also, regulators testified this week that GS and MS are able to control the entire market and that the Fed is just their extension and should have no oversight ability. Hope this comes to a head.