US Economist Kenneth Rogoff - 'Germany Has Been the Winner in the Globalization Process'

In an interview with SPIEGEL, Harvard economist Kenneth Rogoff, 58, says it was a mistake to bring all the southern European countries into the common currency. He also argues that Greece should be granted a "sabbatical" from the euro and that a United States of Europe may take shape far sooner than many believe.

SPIEGEL: Mr. Rogoff, the eurozone finance ministers are likely to soon provide Greece with new loans totalling €130 billion ($171 billion), with the aim of stabilizing the country for the next few years. Will that save the euro?

Rogoff: It is hardly the final word, even for Greece. The mountain of debt in Greece is simply too big and the country is not competitive. Indeed, it's going to be very difficult to keep Greece in the euro zone.

SPIEGEL: But the government has announced tough austerity measures. Pensions are being cut, wages frozen. Those kinds of measures are almost unheard of in Europe.

Rogoff: But they're still not enough. To make Greece competitive, wages would have to be halved. That is impossible to implement politically, but without a steep wage cut, the economy will continue to stagnate. Greece urgently needs the prospect of growth. It is currently experiencing its fifth consecutive year of recession. This is a failure of historic dimensions.

SPIEGEL: But surely it can't get any worse? Many economists are saying that the crisis in Greece has bottomed out and the worst is over.

Rogoff: I would be more cautious. The problem in Greece is not an ordinary recession but a full-blown financial crisis, something which countries usually take a lot longer to recover from. This kind of economic collapse goes much deeper than a normal slowdown. The longer the economy continues to shrink, the more restless the trade unions get, and the more pressure builds up on politicians to put an end to the misery.

SPIEGEL: What cure would you prescribe?

Rogoff: The government in Athens should be granted a kind of sabbatical from the euro, while otherwise remaining a full member of the European Union. The country would leave the monetary union and reintroduce the drachma, for example. The drachma would immediately trade at deep discount to the euro, making Greece's export and tourism sectors competitive again. Once the country had achieved a higher level of social, political and economic development, it could return to the euro zone.

SPIEGEL: What advice would you give Merkel and her counterparts? Should they tear the euro zone apart?

Rogoff: No, certainly not. We are talking about bending not breaking, with one or more periphery countries allowed to leave temporarily in order to enjoy greater flexibility. There is currently no simple solution for this unparalleled crisis. The big mistakes were made in the 1990s.

SPIEGEL: Does that mean the whole idea of the euro was a mistake?

Rogoff: No, a common currency for countries like Germany and France was a reasonable risk, given the political dividends. But it was a grave mistake to bring all the south European states into the euro zone purely for reasons of political union. Most of them were not ready for it economically.

SPIEGEL: That may well be, but the fact is that now they are part of the monetary union, and that can't simply be unravelled.

Rogoff: Which is why there is only one alternative: Either the euro completely collapses -- with all the catastrophic consequences that would entail -- or the core members of the currency union manage to turn the euro zone into a genuine political union.

S&P 500 Cheapest to Bonds on Zero Fed Rates

The Standard & Poor's 500 Index is approaching the cheapest level ever compared with bonds as Federal Reserve Chairman Ben S. Bernanke's zero-percent interest rates drive investors and companies from cash. The U.S. government and the Fed lent, spent or guaranteed as much as $12.8 trillion to end the worst recession since the 1930s. That and Bernanke's three-year effort to drive down interest rates are paying off with rising consumer confidence and expanding factory output. The S&P 500 is off to its best annual start since 1997 as riskier assets lure money from savings accounts offering some of the lowest yields on record. "The real target for the low rates is indeed businesses," John Canally, who helps oversee about $330 billion as an economist and investment strategist at LPL Financial Corp. in Boston, said in a Feb. 14 phone interview. "They want to push money out on the risk spectrum. They want that to be put to use buying a new piece of equipment or expanding a plant or adding a third assembly line."

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Record investment demand boosts global gold demand to an all time high in 2011

Global demand for gold in 2011 rose to 4,067.1 tonnes (t) worth an estimated US$205.5 billion - the first time that global demand has exceeded US$200billion and the highest tonnage level since 1997, according to the World Gold Council’s Gold Demand Trends. The main driver for this increase was the investment sector where annual demand was 1,640.7t up 5% on the previous record set in 2010 and with a value of US$82.9 billion. The pre-eminent markets for investment demand in 2011 were India, China and Europe.

China and India remain the cultural heartlands of gold, generating 55% of global jewellery demand and 49% of global demand:

India remains the largest country for demand with 933.4t, which is notable considering the volatility of the gold price and the weakness of the Indian rupee against the US dollar during the second half of the year. Gold jewellery accounted for over 500t and the investment market demand reached 366.0t. Indian demand accounted for 25% of total bar and coin demand worldwide.

In China, annual demand of 769.8t was up 20% year-on-year as a result of increases in both jewellery and investment. The largest rise was in investment, where demand of 258.9t with the value of RMB84.5billion leaped 69%. China jewellery demand increased every quarter of last year and was the largest single jewellery market worldwide for the second half of 2011.

There was also a surge in demand in Europe with the region posting its seventh consecutive annual gain to 374.8t. Germany and Switzerland were the main drivers of growth in the region as the eurozone remains in turmoil and the need for asset protection continues to be a priority.

On the supply side, gold mine production reached a new annual record of 2,809.5t, 4% up on 2010. Recycling was down 2% year on year to 1,611.9t, which when average price rises of 28% are taken into account, indicates that near-market supplies are drying up and that consumers may be holding on to their gold in the expectation of higher prices.

Gold used in electronics was up 1.1% to 330.4t worth a record US$16.7billion, which is unexpected considering the increase in cost. Annual demand for technology as a whole was steady at 463.5t due to growth primarily in the Chinese market. The value of this tonnage increased dramatically by 28% to a record US$23.4billion.

The value of jewellery demand in 2011 reached a new annual record of US$99.2billion. India and China continue to believe in both the intrinsic and emotional value of gold jewellery which explains why overall global jewellery demand was resilient despite high gold prices, difficult economic conditions, volatility and currency weakness against the US dollar. Annual demand was 1,962.9t down 3% from 2010.

One major element of fourth quarter investment relates to the significant increase of inflow into gold ETFs to 86.8t in Q4 2011 compared to just 22.3t in Q4 2010. The annual comparison is much weaker as inflows of 154.0t for 2011 are significantly lower than 367.7t for 2010, although this should be seen in the context of 2010 being an exceptional year.

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China Seen Surpassing India as Biggest Gold Market This Year

China, the largest producer of gold, may overtake India as the biggest market on an annual basis this year as demand grows for jewelry and a store of wealth. Demand for bullion in China jumped 20 percent to 769.8 metric tons in 2011, while consumption in India declined 7 percent to 933.4 tons, according to a report from the World Gold Council, a producer-funded organization. Jewelry demand in China increased every quarter in 2011 and was the biggest such market worldwide in the second half, it said. “It is likely that China will emerge as the largest gold market in the world for the first time in 2012,” Marcus Grubb, managing director of investment, said in a statement. On a quarterly basis, China was already the biggest consumer in the three months to Dec. 31, with demand at 190.9 tons compared with India’s 173 tons, the council said. “There’s a lot of pent-up demand,” said Jeremy Friesen, Hong Kong-based commodity strategist at Societe Generale SA. “India and China have grown both in population and in wealth.” Chinese investors bought 258.9 tons of gold bars and coins last year, 38 percent more than a year earlier, the council said. Gold jewelry demand gained 13 percent to 510.9 tons, it said.

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Fed Should Heed Lessons of 1920 Recession Response, Grant Says: Tom Keene

The U.S. has been “overmedicated” by public policy and should consider the government’s 1920’s response to recession, said James Grant, editor of Grant’s Interest Rate Observer. Responding to a severe economic downturn from 1920 to 1921, theFederal Reserve increased interest rates and the national budget was balanced, moves that kept the painful recession short, New York-based Grant said. In contrast, he said U.S. policy makers are prolonging the pain of the so-called Great Recession by intervening in markets and running unprecedented federal budget deficits.

“The Fed is not content to let interest rates find their levels, they must repress them, and they are not content to let housing prices find their levels, they seek to intervene to prop them up,” Grant said in a radio interview on “Bloomberg Surveillance” with Ken Prewitt and Tom Keene. “The results of all this intervention is not to cure what ails us, but prolongs the symptoms of what distresses us.” “What is discouraging about the Great Recession is that it seems not to end,” Grant said. “The historical comparison is useful to invite us all to consider the present day orthodoxy and if it is possible that it is wrong. I think that it might be wrong.” The U.S. Treasury should begin to issue longer-dated bonds backed by gold and investors should also buy gold as it is “something substantial,” Grant said. The bond bull market of the past 30 years has made investors complacent to the risk of owning bonds, he said.

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BOJ Adds to Monetary Easing After Contraction

The Bank of Japan added to monetary easing after exports tumbled and the economy contracted by more than forecast in the fourth quarter. Governor Masaaki Shirakawa’s board unexpectedly expanded an asset-purchase program to 65 trillion yen ($835 billion) from 55 trillion yen, including a credit loan facility, and set a price stability goal of 1 percent inflation. The central bank maintained the overnight lending rate at between zero and 0.1 percent. Drags on growth span deflation, a yen close to post World War II highs against the dollar, and power-plant shutdowns after last year’s earthquake, tsunami and nuclear crisis. Besides the easing measures, the economy may get a boost this quarter from reconstruction work and a rebound in manufacturing as disruptions from floods in Thailand fade. “Japan’s economy will gradually recover as reconstruction demand takes hold and overseas economies pick up,” Kiichi Murashima, chief economist at Citigroup Global Markets Japan Inc., said before today’s announcement. The BOJ “is expected to implement further easing if the yen rises sharply,” he said. Boosting an asset-purchase fund to 30 trillion yen will allow more government bond buying, the central bank said. It left a credit-lending program unchanged at 35 trillion yen.

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Britain's extreme QE is dangerously counter-productive

Members of the Monetary Policy Committee agreed to expand the UK’s “quantitative easing” program by another £50bn, taking the cumulative total to £325bn. Back in March 2009, when QE began, the UK’s base money supply was equal to 7pc of annual national income. The increase since then has been absolutely enormous - an additional 15pc of yearly GDP. British monetary policy, to say the least, is in uncharted waters. And yet there are many who advocate that the Bank should do at least £500bn of QE. This column has criticized QE since the policy was launched. My original objection was the sophistry of the Bank’s claim that the UK faced “an impending deflationary spiral”, unless it took the extremely radical step of creating virtual credits ex nihilo, then using them to buy-up government debt. This is true even though QE is suppressing official borrowing costs, by keeping demand strong. Yet very little of that demand is coming from genuine buyers exercising their independent judgment.

Since early 2009, the Bank of England has bought more than half the £475bn of IOUs sold by the UK government. Another £100bn or so were bought by high street banks either owned by the government, and/or forced to buy more in the name of “macro-prudential regulation”. UK pension funds, run by professional investors acting largely as they wish, have reduced their gilt holdings over the last three years. So QE is designed to pump money into badly-run banks above and beyond the headline “bail-out” numbers. It also means the government can keep borrowing at historically high levels while not immediately feel the impact in terms of more punitive borrowing costs. The Bank of England, meanwhile, continues to maintain the fiction that this latest dose of QE, just like all the others, is part and parcel of its on-going and unshakeable mission to steer CPI inflation towards its target. “Without further monetary stimulus,” the Bank said last week, “it is more likely than not that inflation will undershoot the 2pc target in the medium term”. Really? Over the coming months, with the VAT rise of January 2011 dropping out of the numbers, inflation may come down a bit. Or it would, if the price of oil and other commodities wasn’t set to remain firm. Even the International Monetary Fund predicts crude averaging $100 a barrel during 2012, with many commercial forecasters seeing prices much higher than that.

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The Silver Singularity Is Near

Seeking Alpha has published an article on silver and the supply and demand factors that effect it. Click on the link to read the full story:

For the past decades, governments have been selling their silver stockpiles into the markets, thus adding to supply. These stockpiles are basically depleted and governments are likely to become net buyers of silver.

Photographic demand, which has been decreasing for the past decade is becoming a less significant part of demand and will soon cease to be a driver of silver demand trends. Also, as most photographic silver is recycled, photographic use approaching zero means less recycling supply moving forward.

Similarly, A steady decline in silverware demand is also reaching its lower bounds and at some point will cease to be a negative driver of silver demand trends.

According to the Silver Institute, during silver's bull market from 2001 to 2010, mine supply increased by an average of 2.2% per year, from 606 to 736 million ounces. However, demand from industrial uses (from which the majority of silver cannot be recycled at anywhere near today's price) increased 3.7% per year from 350 to 487 million ounces.

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BOE Adds 50 Billion Pounds to Stimulus on Euro ‘Concerns’

Bank of England officials pumped another 50 billion pounds ($79 billion) into the U.K. economy to protect a nascent recovery from the threat posed by Europe’s debt crisis. The nine-member Monetary Policy Committee raised the target forbond purchases to 325 billion pounds, more than a quarter of current outstanding gilts, according to a statement in London today. The increase was forecast by 34 of 50 economists in a Bloomberg News survey. Fifteen economists forecast a 75 billion- pound increase and one no change. The MPC also held its benchmark interest rate at a record-low 0.5 percent. The stimulus expansion suggests policy makers remain concerned that Europe’s failure to stem its debt turmoil poses a risk to Britain and may pull inflation below their 2 percent goal. While they noted an improvement in some business surveys last month, they said the growth outlook remains weak and that they had “concerns” about debt in some euro-area nations.

“They’re worried about risks to growth and they remain confident that inflation will fall below their target,” said Philip Rush, an economist at Nomura International Plc in London. “They need to explain why they’re still easing when the general environment seems to have improved so much.” “Some recent business surveys have painted a more positive picture and asset prices have risen,” the central bank said. “But the pace of expansion in the U.K.’s main export markets has also slowed and concerns remain about the indebtedness and competitiveness of some euro-area countries.” “We could be nearing the end in terms of quantitative easing,” Peter Dixon, an economist at Commerzbank AG in London, said in a telephone interview. “Markets, at least for the moment, are stabilizing, and if the uncertainty which prevailed in the fourth quarter continues to lift, then I think the case for additional QE becomes more difficult. But to a large extent, it all hinges on theeuro zone.”

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Gullsolv.no starter salget av 2012 Year of the Dragon gull og sølvmynter

Gullsolv.no starter salget av de australske 2012 Year of the Dragon myntene i gull og sølv som er meget eftertraktet blant kjøpere både av bullion og samlermynter. Gradvis blir stadig fler av myntene i serien tilgjengelig, og vi kan tilby disse i størrelser fra 1oz til og med 10 kilo i både gull og sølv. Ta kontakt med oss via vår nettbutikk, eller direkte via email rettet til salg @ gullsolv.no. Myntene er meget pene å se på og har et særlig artig motiv i år hentet fra den kinesiske zodiak kalenderen som består av 12 dyr. Av disse er dragen det eneste mytologiske dyret. Den kinesiske zodiak kalenderen består av følgende dyr i kronologisk rekkefølge: Rotten, Oksen, Tigeren, Haren, Dragen, Slangen, Hesten, Geiten, Apen, Hanen, Hunden og Grisen. På forespørsel kan vi skaffe tidligere mynter i denne serien fra det australske myntverket, men det er viktig å være oppmerksom på at mange samler på disse, og jo eldre myntene er dess høyere premie over spot må man regne med å betale. Mange som først og fremst er ute efter å skaffe seg en eksponering i gull og/eller sølv vil derfor være vel så fornøyd med å kjøpe årets produkter - eller også noen av våre andre mynter eller barrer i gull, sølv, platinum og palladium. Vår nettbutikk er oversiktlig og lett manøvrerbar og særlig våre gull og sølv produkter er populære blant våre kunder. Ta en titt!

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Bernanke: 8.3% Unemployment Understates Job Market Weakness

Federal Reserve Chairman Ben S. Bernanke said the 8.3 percent rate of unemployment in January understates weakness in the U.S. labor market. “It is very important to look not just at the unemployment rate, which reflects only people who are actively seeking work,” Bernanke said today in response to questions at a hearing before the Senate Budget Committee in Washington. “There are also a lot of people who are either out of the labor force because they don’t think they can find work” or in part- time jobs. The jobless rate unexpectedly fell to 8.3 percent in January, a government report showed on Feb. 3. Bernanke’s remarks indicate that his view that the labor market is a “long way” from returning to normal hasn’t changed since he used the same phrase when he testified to the House Budget Committee on Feb. 2.

“The 8.3 percent no doubt understates the weakness of the labor market in some broad sense,” Bernanke said today, while noting that some job indicators are improving. Bernanke said the Fed’s forecast suggests the economy will grow fast enough to absorb new entrants into the workforce while “not making sharp improvements on the unemployment rate.” “We still have a long way to go before the labor market can be said to be operating normally,” Bernanke said earlier in prepared testimony that was identical to his Feb. 2 remarks. “Particularly troubling is the unusually high level of long- term unemployment.” Bernanke repeated his call on lawmakers to reduce budget deficits. “To achieve economic and financial stability, U.S. fiscal policy must be placed on a sustainable path that ensures that debt relative to national income is at least stable or, preferably, declining over time,” Bernanke said.

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Skagenfondene ser større gjeldsproblemer i USA og Japan enn Italia og Spania

Mens rentene på tiårige statsobligasjoner i Italia, Spania og Frankrike igår var henholdsvis 5,63 prosent, 4,98 prosent og 2,87 prosent, lå tilsvarende renter i Japan, Storbritannia og USA på 0,96 prosent, 2,14 prosent og 1,92 prosent, skriver Finansavisen. Forvalter Torgeir Høien i Skagen-fondene peker imidlertid på flere økonomiske problemer, som underskudd på statsbudsjettene og nettogjeld i forhold til BNP, som er større i Japan, Storbritannia og USA enn i Italia, Spania og Frankrike.  Hvis markedet skulle miste troen på at politikerne i Japan, Storbritannia og USA får orden på statsfinansene, får man ifølge Høien raskt stigende inflasjon og kraftig oppgang i de lange rentene. Skagen-forvalteren sier til Finansavisen at et skifte i forventninger kan komme raskt når det først kommer, og anbefaler investorer å forberede seg på dette. - Man kan få høyere lange renter og høyere inflasjon ut av det blå, omtrent som da statsgjeldskrisen i eurosonen raskt spredte seg til Italia, sier Høien til avisen. Høien mener skiftet i forventninger kan trigges av motvilje mot økte skatter og manglende politisk støtte til kutt i offentlige utgifter.

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Banks to take a hit on US home loans

Investors in US home mortgage securities will be forced to write down a “substantial” amount of principal – up to $40bn – for distressed borrowers as part of a national settlement against leading US banks to resolve allegations of widespread foreclosure abuses, the Obama administration has said. The housing secretary’s remarks signal an escalation on the part of the Obama administration to secure lower monthly payments for troubled borrowers and reduced loan balances from banks accused of wrongdoing and investors in the mortgages those banks service – even if the investors are not the targets of government investigations. Investors in the $1.1tn market have long feared such an outcome. “The use of mortgage trust money [from pensions funds, unions and charities] to settle the investigation is tantamount to a bank bail-out,” said Chris Katopis, executive director of the Association of Mortgage Investors.

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Negative bulkrater impliserer sterkt negative tendenser i verdensøkonomien

Rederiet Global Maritime har inngått et charter med kunden Glencore om frakt av korn for negativ dagrate på 2.000 US$ - dvs kunden får penger for å få varene sine fraktet. Baltic Dry Index som viser bulkrater blir ofte referert til som "Canary in the Coalmine" ifht sin rolle som ledende indikator i verdensøkonomien - og negative rater er så langt fra positivt som det går an å komme. 

Glencore International Plc (GLEN) hired a commodity ship with the operator of the vessel earning nothing and contributing to some of the fuel costs after freight rates for hauling raw materials had their worst-ever start to a year. Glencore chartered the vessel, operated by Global Maritime Investments Ltd., a Cyprus-based company with offices in London, at minus $2,000 a day for the first 60 days of the charter, Steve Rodley, GMI’s U.K. managing director, said by phone today. The shipment is Australian grains to Europe and it will put the ship in a better position for its next cargo, he said. “Our other option was to stay in the Pacific and earn poor revenues or ballast to the Atlantic and pay the fuel ourselves,” Rodley said. Ballasting refers to sailing without a cargo.

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Kyle Bass Urges Texas Fund to Hold Gold Hedge

Kyle Bass, the Dallas hedge-fund manager, urged overseers of Texas (STOTX1)’s state university endowment, the second-largest U.S. college fund, to stick with a $1 billion investment in gold bullion even as the fund’s assets decline. “I’m against selling any of the gold,” Bass said today at a meeting of fund directors in Austin, citing the need for a hedge against mounting risks driven by government deficits in the U.S. and Europe. “As every day goes by, I see deflation in the things you own and inflation in the things you need.”

The $19.1 billion in endowment funds overseen by the University of Texas Investment Management Co., or Utimco, lost almost 3.8 percent on invested assets in the four months through December, preliminary figures distributed today show. The Standard & Poor’s 500 Index of shares gained almost 4 percent over the same period, including reinvested dividends. In 2011, the Texas fund’s allocations rose in real estate, natural resources and hedges to protect against slumping equities. Kyle Bass, a managing partner at Hayman Capital Management LP and a Utimco trustee who isn’t related to Lee Bass, faulted the world’s biggest central banks for expanding the money supply by what he said was $15 trillion during the past five years. In April, he advised the fund on holding gold bars rather than futures contracts.

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U.S. officials concerned by Israel statements on Iran threat, possible strike

Israeli leaders on Thursday delivered one of the bluntest warnings to date of possible airstrikes against Iranian nuclear sites, adding to the anxiety in Western capitals that a surprise attack by Israel could spark a broader military conflict in the Middle East. Defense Minister Ehud Barak, speaking at a security forum attended by some of Israel’s top intelligence and military leaders, declared that time was running out for stopping Iran’s nuclear advance, as the country’s uranium facilities disappear into newly constructed mountain bunkers. “Whoever says ‘later’ may find that later is too late,” Barak said. He switched from Hebrew to English for the last phrase: “later is too late.” The language reflected a deepening rift between Israeli and U.S. officials over the urgency of stopping Iran’s nuclear program, which Western intelligence officials and nuclear experts say could soon put nuclear weapons within the reach of Iran’s rulers.

Although accepting the gravity of the Iranian threat, U.S. officials fear being blindsided by an Israeli strike that could have widespread economic and security implications and might only delay, not end, Iran’s nuclear pursuits. In a series of private meetings with Israeli counterparts in recent weeks, Western officials have counseled patience, saying recent economic sanctions and a new European oil embargo are pummeling Iran’s economy and could soon force the country’s leaders to abandon the nuclear program. Yet Israelis are increasingly signaling that they may act unilaterally if there is no breakthrough in the coming months, according to current and former administration and intelligence officials. “The Obama administration is concerned that Israel could attack Iranian nuclear facilities this year, having given Washington little or no warning,” said Cliff Kupchan, a former State Department official who specialized in Iran policy during the Clinton administration and recently returned from meetings with Israeli officials. He said Israel “has refused to assure Washington that prior notice would be provided.”

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China enhances position as world No. 1 gold producer - but where's it all going?

As had been expected, China, already the world No. 1 gold producer, saw its output rise again this year.  The country produced a record 360.96 tonnes  of the yellow metal in 2011, a 5.9% increase, making it the world's top gold producer for a fifth consecutive year, according to  the China Gold Association. Meanwhile, the country has been importing record amounts of gold as well with the volumes coming in through Hong Kong, which are officially reported figures, climbing to over 100 tonnes in November - and by all accounts gold purchasing in China has been booming since then, so imports are likely to have remained at this kind of level in December and January as well.  Estimates have suggested that China's total gold imports for 2011 will have been some 490 tonnes - double that of 2010, but this may well be an under-estimate, possibly a substantial one.

But because Chinese total figures on imports and demand are actually obscured nobody really knows the true situation, except perhaps the Chinese government.  Export of gold is not allowed so total Chinese production (as noted above at around 361 tonnes) is going somewhere.  The question is, is it going into Chinese industrial, investment and jewellery demand, or is all this being catered for by the imports?  There is thus a strong suggestion that Chinese gold production is, in fact, all going into the country's gold reserves which are only reported sporadically, and the last official pronouncement on this was that reserves totalled 1054 tonnes - back in 2008 - and this was nearly double the amount previously reported five years earlier at 600 tonnes.  If China is indeed putting all its domestic production into its reserves then these could now well be at 2,000 tonnes or more - but even this is still a small fraction of China's total monetary reserves and there certainly has been internal discussion in China that the proportion of gold in its reserves should be much higher.

Of course, to add to the speculation is a proportion of the huge imports we have been seeing recently also going into official reserves?    Ross Norman of Sharps Pixley in London  is quoted as saying "Anecdotally we see that gold is repeatedly well supported on any dip and it is clear there is a large buyer in the market. It is difficult to ascribe a name and location to that buyer but we would not be surprised to hear that the Chinese have indeed been good buyers of gold by stealth once again." This would support internal comments in China.  Forbes of the U.S. recently noted  that the People's Bank of China, the central bank, has been hinting that it is purchasing. "No asset is safe now," said the PBOC's Zhang Jianhua at the end of last month. "The only choice to hedge risks is to hold hard currency - gold." He also said it was smart strategy to buy on market dips. Analysts naturally jumped on his comment as proof that China, the world's fifth-largest holder of the metal, is in the market for more.

Getting back to the gold standard

The legendary Wall Street writer, publisher of Grant’s Interest Rate Observer, has been mentioned by two of the rivals for the Republican presidential nomination. Newt Gingrich said if elected president, he’d name Grant to help run a commission looking at a possible return to the gold standard. And Ron Paul said, if elected president, he’d go all-in and name Grant — one of Wall Street’s best-known gold bugs — as the new chairman of the Federal Reserve. As Paul wants to abolish the Fed, it would doubtless be a temporary post. But Grant says he found the offer — which came out of the blue — very flattering. Alas, both men are trailing in the race to front-runner Mitt Romney. “Unfortunately, I haven’t heard from Mr. Romney yet,” joked Grant when I called on him in his offices down on Wall Street. “I’m sitting by the phone, I’m ready.” Jim Grant’s ideas about the economy are attracting presidential hopefuls. He may have to wait some time. Romney, a conventional Wall Street figure, is unlikely to tap him anytime soon. Jim Grant is a paradox: A legendary, well-established figure on Wall Street who is not part of the Wall Street “establishment.” He is a raging contrarian. A writer from a more elegant age, Grant is also a scathing critic of “too big to fail” banks and the whole Wall Street racket — with its privatized profits and socialized losses.

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Israel sees narrowing window for attack on Iran

Officials are quietly conceding that new international sanctions targeting Iran's suspect nuclear program, while welcome, are further constraining Israel's ability to take military action - just as a window of opportunity is closing because Tehran is moving more of its installations underground. The officials say that Israel must act by the summer if it wants to effectively attack Iran's program. A key question in the debate is how much damage Israel, or anyone else, can inflict, and whether it would be worth the risk of a possible counterstrike. Israel has been a leading voice in the international calls to curb Iran's nuclear program. Like the West, it believes the Iranians are moving toward nuclear weapons capability - a charge Tehran denies.

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BlackRock’s Doll Says QE3 Unlikely in Contrast to Gross

BlackRock Inc., the world’s biggest asset manager, says the Federal Reserve will refrain from conducting a third round of debt purchases as the economy grows. “QE3 will be seen only if the U.S. economy flags,” Bob Doll, chief equity strategist at BlackRock, which oversees $3.51 trillion, said today on Bloomberg Television’s “First Up” with Susan Li. “Ben Bernanke will use it if we have a rainy day and only then,” said Doll, who is based in Princeton, New Jersey. “As long as the U.S. economy’s growing 2 1/2, 3 percent and unemployment in the U.S. is falling, that’s not an emergency,” Doll said. “QE is saved for emergencies.”

The outlook contrasts with that of Bill Gross, who runs the world’s largest bond fund at Pacific Investment Management Co. and says the Fed may buy several more times. The central bank has purchased $2.3 trillion of debt in two rounds of quantitative easing known as QE1 and QE2 as it seeks to support the world’s biggest economy. Chairman Ben S. Bernanke said Jan. 25 that he’s considering another program of purchases. Gross wrote that a third, fourth and fifth round of easing “lie ahead,” in a Twitter post last week.

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