We have heard of the growing Indian wealth and, therefore, the increasing amount of gold used traditionally. That can only go so far, though, as the Indian population is still fairly limited financially (probably 10 years behind China).

We have all said it and heard it: China is going to do something and therefore it will change the face of the object in question. It recently happened to Rare Earths, as it has happened for many commodities, including copper. Recently the Chinese government started to run ads and to encourage the populous to start buying gold and silver as a safe investment. Could you imagine what would happen if ¼ of China’s people bought 1 ounce of gold each? That would be equivalent to a 250 million ounce demand surge in fairly short order. 250 million ounces of gold is equal to roughly 3500 tons. Just for comparison, last year, total gold demand was 3,804 tons.  So basically it would be a 90% increase in NEW demand. WOW!

Far fetched?  I don’t really think so since the Chinese people are more likely to act on a government decree that almost any other people. Further ¼ of the population of china is closer to 330 million people (which would represent 4500 tons of gold).  Not all people can afford to buy 1 ounce, but there are many people who can afford and will buy 5,10 or even 20 ounces. So on average one ounce per person isn’t such a far-fetched thought. This would be like saying that every man, woman, child and illegal alien in the United States will buy one ounce of gold each. That is a huge number.

Naturally, this won’t have an effect on the price overnight, but over the next year or two, we should see the price of gold appreciate substantially. I am still holding my price target steady for the year end of 1200-1300 dollars. I don’t think that this will transpire overnight, but the possibility of 2000-3000 dollar gold has now developed a tangible manifestation…China.

This move shouldn’t come as a surprise to anybody that hasn’t been living under a rock. Multiple times, China has called for the end of the use of the US currency as the world reserve. They have been concerned for several years about the increased rate of US dollar printing and debasing. The logical move for the Chinese is to stop buying US dollars and to start buying something of value, in this case gold.

There will be a huge windfall effect as a result. Naturally, the price of gold, and thus the ownership of physical gold will be very attractive, but equities in gold will shine brighter than ever. This kind of surge in demand will make gold miners trade at multiples of where they are now. Junior gold companies will also make 10 baggers look meager. Investors will pay heavily for gold discovery as they are a) becoming less frequent and b) have greater competition from the majors to be bought.

Victor Goncalves writes The Equities & Economics Report.

“Optimistically treating European Commission partially funded data, we find that for every renewable energy job that the State manages to finance, Spain’s experience cited by President Obama as a model reveals with high confidence, by two different methods, that the U.S. should expect a loss of at least 2.2 jobs on average, or about 9 jobs lost for every 4 created.”

“Each “green” megawatt installed destroys 5.28 jobs on average elsewhere in the economy: 8.99 by photovoltaics, 4.27 by wind energy, 5.05 by mini- hydro. 11. These costs do not appear to be unique to Spain’s approach but instead are largely inherent in schemes to promote renewable energy sources.”

1. Solar Storm
2. Time marches On: Legacies

1. SOLAR STORM

A vitally important piece of legislation comes to the floor of the House ofRepresentatives today.  It is the Cap and Trade legislation that the administration believes will create new jobs, develop new industries and put the much-maligned US industrial engine back on track.  Meanwhile the New York Times notes that high school graduates in Dayton, Ohio cannot find factory work as have their parents and grandparents.  The graduating class this year will not be seeking jobs at General Motors, Chrysler or Delco.  Dayton’s Wright Pat Air Force base is hiring 1,000 employees. Half of those require PhDs. 

Two elements of the unraveling New Industrial State (see J K Galbraith) are becoming clear. 

First, the competitiveness of US industry is bottoming.  As GM goes so goes the country has been a widely used saying in the Post War US.  The US auto industry, as we have known it, is now gone despite the frantic attempts of both Bush and Obama Administrations to save it. America long ago became a service economy.  Our best high school graduates have tended to gravitate to jobs in the factory (steel, auto, shipbuilding, etc.) or service industries. Part of this problem results from the high quality of life in North America that has been, more or less, a direct result of the decline of the US currency. The US has, for the last 60 years, been the owner of the world’s reserve currency.  This currency privilege migrates every half century, or so, from one country to another, amongst those who establish ownership through proper governance, military strength / victories, industrial or commodity wealth and the ingenuity and innovativeness of their population. This mantel changes with regularity. In the twentieth and twenty first centuries Britain and the US have been guardians of this powerful reserve currency privilege. 

It will persist here in the US, for a few decades, but US reserve currency power is being reined in; make no mistake about that.  The BRIC block is the likely the next guardian of the privilege.  Our ability to maintain the current quality of life through currency depreciation and its global inflation impact is now in doubt.   July 13, 2008 was the high water mark. The high school seniors graduating this week in Dayton are well beginning to realize this. The solution is clear. The US must now re-industrialize. His will require most of the rest of the century if we begin now. 

The second element of this plan is evident in Washington today. The administration seeks to pass Carbon Cap and Trade legislation that the CBO says will tax American families by $100 to $200 per year. We have always said that Washington understands the Cap side of the equation but not the Trade side. Washington understands taxes also. 

… read pages 2,3 and 4 HERE.

President Obama rightly says “sacrifices” must be made if GM is to emerge as a viable company. But there’s one sacrifice he won’t make: his re-election chances, by leaving the fate of the UAW truly up to a bankruptcy judge.

Keep that in mind amid the defenestration of Rick Wagoner, who was not as popular with UAW Chief Ron Gettelfinger as Mr. Wagoner’s replacement, Fritz Henderson. Keep that in mind amid reports the administration favors a “quick and surgical” bankruptcy. It’s a bluff. The same administration that inserted itself into GM’s corporate governance to order the resignation of a CEO is hardly likely to defer to the prescribed legal order for a failing company, namely bankruptcy. Even a “prepackaged” filing runs too much risk of a judge imposing more “sacrifice” on the UAW than the administration is prepared to tolerate.
GM bondholders understand this: They’ve been intransigent precisely because they calculate the UAW is too important to Democratic electoral politics for Mr. Obama to risk losing control of the reorganization process to a bankruptcy judge.

The GM bailout has become a political operation run out of the White House. It will stay that way. Talk of UAW layoffs already disguises the fact that UAW workers are actually offered generous buyouts and early retirement — they aren’t just sent away with a last paycheck. What about Chrysler? A few weeks ago, Fiat was saying it would consider a merger if a loan from Washington was guaranteed. Now Washington is saying a loan will be forthcoming as long as Fiat does a deal. That’s not an ultimatum — that’s a nod and a wink.

Mr. Wagoner did more than any GM executive to deal with the cursed legacy of 75 years of too much government attention. Not for him, though, and not for Team Obama, the real solution to make GM “viable”: Getting rid of its North American business to end its UAW captivity.

That captivity, imposed by the 1935 Wagner Act, is the sole relevant factor distinguishing the Detroit Three from the world’s other auto makers. The result is downright weird: “Our” auto companies operate in a world that’s less “American,” in a sense, than the Japanese and German companies that come here and enjoy a free labor market.

The Wagner world was given a second lease on life by a peculiar feature of Congress’s 1975 fuel economy law. Known as the “two fleets” rule, it effectively forces Detroit to make its cheap small cars in high-wage domestic UAW factories, even if it means losing money on every car. The rule has no fuel-economy function. Its only purpose is to shield the UAW monopoly inside each Detroit auto maker from global labor competition.

You wouldn’t have noticed, but a legislative accident two years ago almost stripped away the two fleets rule. A couple of Republican senators from the South took the lead in crafting the Senate’s new fuel economy bill, and built it to please Nissan, which had railed against two fleets for its own reasons.

In the final bill, to no one’s surprise, two fleets was quietly restored by Rep. John Dingell and Illinois Sen. Obama (among others) as a political favor to the United Auto Workers.

The UAW’s Mr. Gettelfinger had testified, coyly, during Congressional hearings that failing to renew two fleets might cost 17,000 auto workers jobs building small cars. He didn’t say that two fleets is in fact the fulcrum by which, for the past 30 years, the UAW has been able to defeat globalization.

He didn’t say two fleets was the sine qua non for the past generation of the UAW’s power to suck the Big Three dry.

Mr. Obama played the tough guy in getting rid of Mr. Wagoner, but he won’t go after the labor monopoly. In fact, the union will emerge with a stronger grip on Detroit — because it will be a major shareholder in a reorganized GM.

The irony is that Detroit has given plenty of evidence that it can make money, even with UAW overhead. Three of the top seven best-selling vehicles in February were Ford, Chevy and Dodge pickups.

Better than trying to rewrite GM’s business relationships — the job of a bankruptcy judge — Mr. Obama might take up the duties of a president. He might try giving the country a coherent auto policy for a change. He could repeal two fleets so Detroit could build its small cars profitably offshore and tame the UAW monopoly in the process. He could dump CAFE or impose a $5 gasoline tax so at least customers would have a reason to buy the cars Washington is forcing Detroit to build.

None of this will happen. Mr. Obama will be content with incoherent policies that poll well — which means GM, Chrysler and perhaps Ford eventually will need taxpayer subsidies as far as the eye can see — or until a real bankruptcy sometime after November 2012.

….more articles here at the Wall Street Journal Online

From Europe to Turkey, world leaders are coming together this week for a slew of global summits. There is much for these world leaders to discuss: the global financial infrastructure is now up for debate, the jihadist war continues to rage in South Asia, the Russians are locked into intractable negotiations with the Americans over the boundaries of the former Soviet sphere of influence, and the Turks are returning to their great power past.

These summits are not just about photo-ops and handshakes. Taken together, this array of diplomatic meetings constitute the greatest density of decision points in the modern world since the summits that brought about the end of the Cold War. This is a time when the true colors of nation-states come out, as each fights for their political, economic and security interests behind a thin veneer of global cooperation.

With geopolitical boundaries being redrawn across the world, STRATFOR has a responsibility to penetrate the media glitz and read through the lines of diluted joint statements and press conferences to explain to our readers the core issues at stake for each player involved. Through our extensive coverage in this week’s Global Summit series, our intent has been to do just that.

Midway through the bilateral summits, we have yet to see any major surprises deviating from our assessments. In the lead-up to the G-20 summit in London, the Americans and the Germans will be at the core of the debate over how to restructure the global financial system. The Americans, the British and the Japanese believe stimulus is the way to go to put the global economy back on track, while Germany, the economic heavyweight of Europe, prefers instead to export its way out of the recession. This is not a debate that will be resolved by the end of this summit (if at all), leaving G-20 members and the struggling economies watching from the outside with the impression that they have little choice but to fend for themselves in this severe economic environment.

The Americans do not just disagree with the Europeans on economics — in spite of Europe’s enthusiasm for U.S. President Barack Obama, the EU members at the summit made clear their unwillingness to make any meaningful contributions to the U.S. war effort in Afghanistan beyond a few aid packages. With the Western coalition in Afghanistan looking more and more like a one-man show, the Americans are branching out of their post-World War II system of alliance in search of new strategic partners. The United States has found one such partner in Turkey, where Obama will be wrapping up his visit on April 6-7. This will demonstrate to allies and adversaries alike that Washington embraces a greater Turkish role in global affairs that stretch from the Islamic World to the Russian periphery.

The summits thus far have given the Russians plenty to chew on. Russian President Dmitri Medvedev came to the G-20 ready to negotiate with Obama on a slew of issues that revolve around a core Russian imperative of consolidating power in the former Soviet periphery. A look at the joint statement and press conferences from the Obama-Medvedev meetings might leave one with the impression that the Americans and the Russians are ready to cooperate, but in reality, all they could really boast about was a commitment to restart talks on nuclear disarmament, leaving a host of outstanding critical issues in limbo. It is quite apparent that the United States has its hands full, but Obama still let the Russians know that he does not intend sit back and allow Moscow to have its way with Eurasia. The Russians now have a better idea of Obama’s boundaries in these negotiations, but their priorities have not changed; Moscow still has ways of grabbing Washington’s attention.

It has been a roller coaster ride thus far, with still more to come. Before Obama makes his way to Turkey, he still has to touch base with his NATO allies in Prague. With the Russians ready to play hardball and the balance of the Eurasian landmass still in flux, these meetings will be anything but bland. Meanwhile, STRATFOR’s team of expert analysts will be working to provide their members with the analytical context to find significant meaning from these summits. A redefinition of global systems is taking place that will carry well into the future, and STRATFOR is here to provide the historical and analytical record.

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