New Slate Article, Reports on Inflation, and Bill Gross on How the U.S. Will Default

My new Slate article, I can admit, is not my best work.  I also shouldn't say new, it's just the newest one uploaded online.  Keep in mind that this was written before Libya and Japan:

Making Political Sense: The Importance of Economics

By: James Miller

Published 03/22/2011

The official unemployment rate in the U.S. stands at about 9 percent. When accounting for those who are under-employed and desiring full-time work, the rate is more like 16 percent.

We are in the midst of the longest-lasting fiscal downturn since the Great Depression. Our federal government’s debt accounts for approximately $15 trillion. If accounting for future liabilities that include entitlement programs such as Social Security, Medicare and Medicaid, the total debt comes to $111 trillion.

State governments across the country have underfunded pension liabilities that account to nearly $3.5 trillion. Municipal bond ratings are decreasing every month. The grand vision of uniting Europe under one currency is beginning to fade as one country after another is beginning to realize the size of their public sector is fiscally unsustainable.

Greece and Ireland needed bailouts while Portugal, Italy and Spain are next. Meanwhile, the largest transition from poverty to a better living standard is occurring in China.

What do all these factors that have a tremendous impact on our daily lives have in common? The answer comes down to one word: economics.

Anyone who has taken an undergraduate economics course learns the basic premise of economics are supply and demand. But it is much simpler than that. Economics is based on the mutual transaction of one good for another by two people.

Whenever you go to the grocery store and purchase a gallon of milk, the mechanism of a market economy is engaged. And it does not stop there.

The money you paid for the milk increases the profit of said store and management allocates the money to pay its employees, purchase more goods to sell or expand the business.

Either way, the money you choose to exchange for milk works its way across the whole of the economy as it is continually spent and invested for the sake of purchasing and consuming more and more goods.
 
This process is precisely what leads to improvements in technology and efficiency, which increases output. Competition between companies breeds lower prices as consumers patronize those businesses that provide the cheapest products with the highest quality.

The money saved by consumers who spend less on a television at Wal-Mart than Best Buy is then spent on another good or is used to supplement their savings account. When people choose to put off current consumption and opt for saving, they choose future consumption.

Banks that house savings accounts lend out the funds to inspiring entrepreneurs who seek profit in fulfilling the desires of consumers.

This is how an economic system, and capitalism, works as a natural process.

Through a number of regulations, interventions and an overall belief that pain can be avoided because the good times will never stop, we have been led to this point.

While a number of solutions have been offered, a clear path out of our economic trouble has no been taken.

This is especially true when human nature strives to avoid hardship at almost any cost. Unfortunately, it looks like pain caused by a complete clearing of bad market investments through deflation is the only way out of the current downturn.

The choice is whether to brave the storm now or push it off to the future. Though pessimism is at an all time high, the study of economics provides one with the ability to understand the kind of dilemma we are in and propose a solution.

At its core, one economic transaction is just a blip in the radar of the global marketplace we all compete in. While the world may seem like a place much too large and complex to facilitate efficient market operations, the “invisible hand” Adam Smith theorized over 200 years ago embodies itself into every purchase we engage in.

So here is to you economics: your process of providing a system for the exchanging of goods has increased our quality of life ten-fold.

And may your self-sustainability and outcomes based people’s continued desire for the best “deal” continue to trump the policies of those who wish to interfere with your operation.

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There was a letter to the editor in this issue about me which I responded to.  Once I confirm that it made it into the opinion section, I will publish it.  It was not uploaded on the Slate webpage.  Now for real news.

Inflation, as expected, is popping up everywhere.  Check out the latest crude oil prices:

Wal-Mart CEO Bill Simon is calling for inflation in an interview with USA Today:

Still, inflation is "going to be serious," Wal-Mart U.S. CEO Bill Simon said during a meeting with USA TODAY's editorial board. "We're seeing cost increases starting to come through at a pretty rapid rate."

The Chicago PMI (Purchasing Managers Index, a measure of manufacturing profits) came in ahead of expectations today:

Chicago PMI was released, printing  at 70.6 on expectations of 69.9 and a decline from the prior 71.2.

Some survey responses:

"1. It seems like it's time for everybody to jump on the "price increase" bandwagon, justified or not. 2. Disasters in Japan will cause inventory to blip upward as contingency plans are placed into effect. 3. Challenges remain for offsetting any price increases incurred during 2011."

And the European CPI came in above expectations as well today:

"Inflation in the 17-nation euro region quickened to 2.6 percent from 2.4 percent in February, the European Union’s statistics office in Luxembourg said today in an initial estimate. That’s the fastest since October 2008 and exceeds the ECB’s 2 percent limit for a fourth month.

Precious metals are reacting nicely, check out June future gold contracts today:

The June gold futures contract on Thursday ended up $13.00 to close at $1,438, a record high.

So here we have all the makings of stagflation.  High energy prices, inflation on commodities, and a stagnating housing recovery with high unemployment.  Robert Reich is even admitting we are heading for a double dip recession.  Of course if unions and bargaining were more abundant, we would be in a better place according to him, but that's beside the point.

Ireland's bank stress test results came out today:

• IRISH REGULATOR SAYS FOUR BANKS NEED EU24 BLN MORE CAPITAL
• BANK OF IRELAND NEEDS TO RAISE 5.2B EUROS OF NEW CAPITAL
• IRISH LIFE NEEDS TO RAISE 4 BILLION EUROS, CENTRAL BANK SAYS
• EBS NEEDS TO RAISE EU1.5 BLN IN CAPITAL, REGULATOR SAYS
• ALLIED IRISH BANKS NEEDS TO RAISE EU13.3 BLN IN CAPITAL

Good news?  Check out the2-year bond yield reaction:

Someone isn't happy.
The most important news release today is that of the Supreme Court ordered Fed document dump. Here is the link to the 25,000 pages of documents.  It will take a while to decipher.  I wish I had the time or bandwidth to do so.

On elaboration of his announcement on a possible U.S. government default yesterday, Bill Gross lists how a default would really occur today:

the only way out of the dilemma, absent very large entitlement cuts, is to default in one (or a combination) of four ways: 1) outright via contractual abrogation – surely unthinkable, 2) surreptitiously via accelerating and unexpectedly higher inflation – likely but not significant in its impact, 3) deceptively via a declining dollar– currently taking place right in front of our noses, and 4) stealthily via policy rates and Treasury yields far below historical levels – paying savers less on their money and hoping they won’t complain. 

I predict the stealthy, less revealing, methods.

I will end with an interesting chart from Mark Perry on pay for high school principles:

Principals in private and public elementary and secondary schools.

Average Salaries, 2007-2008
Age	Public	Private	Public Premium
Under 40	$80,600	$47,300	70.40%
40 to 44	$84,900	$54,800	54.93%
45 to 49	$86,000	$55,000	56.36%
50 to 54	$88,100	$59,500	48.07%
55 or over	$91,500	$63,700	43.64%
Average	$86,900	$58,300	49.06%

Public school principals getting paid more than private school principles?  Who would have thought?

U.S. Passes Debt Ceiling, Obama's Secret Order, Another Government Quiting, and Greenspan the Anti-Free Market

According to Zerohedge, the U.S. has passed the debt ceiling today:

Now bear with us for a second: the most recently disclosed total debt was 14,211,567,662,931.23 as of March 28. This excludes the settlement of all of this week's auctions which amount to $35 + $35 + $29 billion (including today) or $99 billion. Adding the two amounts to $14,310,567,662,931.23. As a reminder the debt ceiling is $14,294,000,000,000.00. In other words, the total US debt just passed the debt limit - break out the Champagne! Granted there is a buffer of $52.2 billion between the total debt and the debt actually subject to the ceiling, meaning that America is not in default, yet. Therefore, the total debt subject to the limit assuming full settlement right now is $14,258,341,662,931. Which means the US is now $35.7 billion away from a bona fide breach of the debt ceiling.

Pop the champagne indeed.  With a government shutdown imminent and the debt ceiling slowly closing in, I predict we will see a round of bi-partisanship not seen for years to continue our debt-accumulating race to the bottom.  Hell, Jamie Dimon of JP Morgan pulled a Meredith Whitney today in a speech to the U.S. Chamber of Commerce:

“I wouldn’t panic about what I’m about to say,” Dimon, 55, said today at a U.S. Chamber of Commerce event in Washington. “You’re going to see some municipalities not make it. I don’t think it’s going to shatter America, I just think it’s a part of the credit cycle.”

At least Federal Reserve Bank of Kansas City President Thomas Hoening, the only Fed Prez that can be labeled a "hawk," has acknowledged what those "in the know" already know.  At a speech to the London School of Economics:

"Agricultural land prices, for example, are increasing at double-digit rates," Hoenig said. "High-yield securities in financial markets are demanding price premiums beyond what some would judge reasonable relative to risk." As for rising food and energy prices, "some of the increase may reflect global supply and demand conditions," Hoenig said. But at the same time, "at least some of the increase is driven by highly accommodative monetary policies in the United States and other economies."
"Central bankers must look to the long run. If current policy remains in place, we almost certainly will stimulate the growth of asset values and inflation. This may temporarily increase GDP and employment, but in the long run, we risk instability, damaging inflation and lost jobs, which is a dear price for middle and lower income citizens to pay."

Of course the path we are on looks good for precious metals.  Compared to last semester, it is getting tougher to buy silver one ounce at a time.  Obviously demand is up, but this isn't going to make things any better:

"A week-old strike at Bolivia's San Cristobal mine has totally paralyzed production and exports of silver, zinc and lead, a union leader said on Wednesday. San Cristobal is the world's third-largest producer of silver and the sixth-largest producer of zinc, according to Japan's Sumitomo Corp, which owns the mine."

Union strike? No surprise there.  No surprise in this either:

(Reuters) - President Barack Obama has signed a secret order authorizing covert U.S. government support for rebel forces seeking to oust Libyan leader Muammar Gaddafi, government officials told Reuters on Wednesday.

So after telling us that the U.S.'s only objective in Libya is to establish a no fly zone, Obama changes his mind.  Where oh where is the anti-war left!?
Thomas Friedman has a stroke of genius once in while and today is one of the days.  In his NYTimes column today he lays out how our Middle East policy:

In Libya, we have to figure out whether to help rebels we do not know topple a terrible dictator we do not like, while at the same time we turn a blind eye to a monarch whom we do like in Bahrain, who has violently suppressed people we also like — Bahraini democrats — because these people we like have in their ranks people we don’t like: pro-Iranian Shiite hard-liners. All the while in Saudi Arabia, leaders we like are telling us we never should have let go of the leader who was so disliked by his own people — Hosni Mubarak — and, while we would like to tell the Saudi leaders to take a hike on this subject, we can’t because they have so much oil and money that we like. And this is a lot like our dilemma in Syria where a regime we don’t like — and which probably killed the prime minister of Lebanon whom it disliked — could be toppled by people who say what we like, but we’re not sure they all really believe what we like because among them could be Sunni fundamentalists, who, if they seize power, could suppress all those minorities in Syria whom they don’t like.

You might have to read it a few times to understand it completely.  I know I did.  Strife in the MENA region doesn't look like it is stopping anytime soon. From Reuters:

Kuwait's cabinet is expected to resign on Thursday after lawmakers asked to question three ministers, parliamentary sources said on Wednesday.

Another day, another warning of a government shutdown.

While Hoening may understand what easy credit policies can lead to, Alan Greenspan has major balls acting like he knows what the economy needs now.  The self proclaimed Ayn Rand enthusiast complains in the Financial Times today that Dodd-Frank doesn't go far enough in regulating.  So much for endorsing the free market.  What idiot looks to Greenspan for financial advise after the housing bubble anyway?  In the article, he mentions the effect of unintended consequences, but claims that they are difficult to anticipate.  How does a former Fed chairman not recognize that requiring credit issuers that aren't banks to obtain a credit rating would cause entities such as Ford Motor Credit to withdraw that service?  Why wouldn't making credit-rating agencies legally liable for their ratings on risk cut down on the number of credit ratings issued? MarketWatch has another great example of an unintended consequence of Dodd-Frank today.  In regard to allowing the Fed to limit fees debit card operators can charge retailers:

Banks, however, will take immediate action, as debit fees account for roughly a fifth of checking account revenue. Already, a few lenders including J.P. Morgan Chase  have started to trial increased fees, and others like Wells Fargo have started to phase out debit-card perks they have offered. And lower-income households that have only entered the banking system over the last decade will quickly find themselves bounced out because they’re not profitable enough.

“The rise of free checking wasn’t charity, it was that they were profitable,” said Schmalensee. “Now they are less attractive.”

If you want to listen to an expert on the Fed, look no further than Caroline Baum.  In regards to rational expectation theory and inflation expectation from her Bloomberg column today:

The theory is a central tenet underlying the debate about government intervention in the economy. Opponents of fiscal stimulus claim that the public’s expectation of higher taxes will offset any temporary benefit from government spending.
That’s because human beings behave rationally. Never mind that we just lived through the mother of all housing bubbles, with folks buying homes they couldn’t afford with loans they couldn’t repay. Human beings are rational. Quod erat demonstrandum.
If businesses expect raw materials prices to rise, they will buy more today and stockpile them for the future.
The notion of inflation expectations affecting behavior has been extended to consumers, erroneously in most cases. If households expect gasoline prices to rise, they don’t go out and purchase a 1,000-gallon storage tank for the front lawn. At best, most of us keep two gallons in a gas can to fill the lawn mower.

Human beings are rational?  It's always nice seeing someone as smart as Ms. Baum taking a page from Mises.
If you wanna see a great article on the fiction and facts of the Community Reinvestment Act, check this out from Investor's Business Daily today.  Just a sample:

FICTION: Because the CRA was passed in 1977, long before the subprime crisis, it couldn't have caused the recent explosion in bad loans.

FACT: The toothless 1977 regulations fully expired in July 1997, when President Clinton rewrote them to toughen CRA enforcement as part of a crusade to close the "mortgage gap" between blacks and whites.
For the first time, banks were required to show results. One of the five performance criteria in the "lending test" — the most heavily weighted component of the CRA exam — was adopting "flexible lending practices" to address the credit needs of poor borrowers in "predominantly minority neighborhoods." Banks that didn't bend their underwriting rules risked flunking the exam.

I will end with reporting that Ohio passed a bill eliminating public employees "privilege" to bargain for benefits.  If only pay and working conditions were included.
Here is Rand Paul on Neil Cavuto on overpaid public employees and the government shutdown:

Oh and big news!  Ron Paul is going to appear on the Colbert Report and the View on April 25th!  All together, he will appear on 6 shows that day!

Update- Bill Gross, owner of the world's largest mutual fund and PIMCO, is convinced that the U.S. may default unless either party addresses entitlements (fat chance!):

"Unless entitlements are substantially reformed, I am confident that this country will default on its debt; not in conventional ways, but by picking the pocket of savers via a combination of less observable, yet historically verifiable policies – inflation, currency devaluation and low to negative real interest rates."

The New York Fed has just denied AIG's offer to purchase back the toxic Maiden Lane II residential mortgage backed securities:

The Federal Reserve today announced that it has declined American International Group’s (AIG) offer to purchase all of the assets in Maiden Lane II LLC (MLII).
After careful review, the Federal Reserve Bank of New York (New York Fed) and the Board of Governors of the Federal Reserve System (Board) judged that the public interest in maximizing returns from any sale and promoting financial stability would be better served by an alternative approach to realizing value that is also more consistent with normal market practice.

The Federal Reserve believes that this will maximize sale proceeds while also reducing the likelihood that any one institution ends up with concentrated exposure to these assets.

I will believe it when I see it.  Macro Economic Advisers LLC has just released a chart on which Fed members affect the market the most.  Guess who's number 1?

World Turmoil, More Examples of Government Helping/Hurting Business, and New Housing Data

The whole world seems to falling apart today.  Standard & Poor's has downgraded Portugal to triple B-minus and Greece to double B-Minus today.  No surprise there.  The Syrian government has resigned amid massive protests.  That was inevitable, yet our president who claims to have invaded Libya for the sake of saving innocent lives has yet to mention the atrocities going on there.  And now China is experiencing a shortage of raw gold.  What does this tell you?  China's rating agency Dagong has an idea:

"The second round quantitative easing policy ongoing in the United States can not change its weak domestic demand in the short term. In fact, it can only lower the interest rate of US Treasuries so as to maintain stable interest rate in the capital market in the long term, playing the indirect role of clearing some obstacles for a stable recovery. However, the plan of purchasing 600 billion US dollar Treasury bonds can not realize its predicted goal; and therefore, the United States will hardly change its predetermined monetary policy in 2011." What does this mean for China and the rest of the world: "The continuous implementation of such unconventional monetary policy in the United States will lead to the escalation of world credit war and inflict greater losses for related parties in the world credit system."

The United States, as the biggest country involved in sovereign debt crisis around the world, will continue its  quantitative easing policy when the country is in danger, and the world credit war will be escalated due to the overflow of US dollars

And now the NYTimes reports that TEPCO (the owners of the Fukushima reactor) may not have to pay for damages caused by the radiation leak:

Mr. Scalise said that under Japanese law governing compensation for nuclear damage, companies were liable for the cost of all nuclear accidents resulting from reactor operations except when the accidents were provoked by a “grave natural disaster of an exceptional nature or by an insurrection.” The company might plausibly seek to avoid liability altogether within that definition, he said.

Wow, nothing says "built a nuclear reactor here without worry of outside interferences" like a law such as that.  In the name of promoting nuclear energy and private business, the government of Japan may have allowed TEPCO to get off scott-free.

Speaking of laws that promote business (at the taxpayers expense of course) check out this provision in Dodd-Frank from MarketWatch:

The long-awaited proposal is due to be publicly released by the Federal Deposit Insurance Corp. Tuesday, and the proposal was obtained ahead of that by MarketWatch. At issue is a provision in the Dodd-Frank Act that requires banks to have “skin in the game” — namely, by retaining 5% of the risk of loans they package and sell.

According to the proposal obtained by MarketWatch, loans sold to mortgage-refinance giants Fannie Mae and Freddie Mac would carry no risk-retention requirement as long as the mortgage giants remained in government conservatorship. Fannie and Freddie were both taken under conservatorship in September 2008, at the height of the financial crisis.

Mish sums it up perfectly:

90% of loans are sold to Fannie and Freddie . Thus, 90% of loans will be exempt from the new rule.

There you have it folks, mortgage lenders and big banks ring up the profits while we absorb the risks and losses.  Nothing new here, move along.  And yet the regulators, even after helping their well-connected friends, will still try to stop someone from making a decent profit.  From Securities Docket:

SEC Enforcement is now focusing on hedge funds that outperform “market indexes by 3% and [are] doing it on a steady basis.” Khuzami referred to such performance as “aberrational,” and stated that Enforcement is “canvassing all hedge funds” for such “aberrational performance.”

Punishing success?  If you need a reminder on why insider trading should not be a crime, Robert Wenzel has the refresher. Nothing like government promoting and inhibiting business at the same time.  This is like a repeat from the New Deal era.  Jim Powell, author of FDR's Folly explains:

It didn't bother [Roosevelt] that New Deal policies contradicted one another. When an adviser gave FDR two different drafts of a speech, one defending high tariffs and the other urging low tariffs, FDR told the adviser: "Weave the two together." The Agricultural Adjustment Act forced food prices above market levels, in an effort to help farmers, but higher food prices hurt everybody who wasn't a farmer. The National Recovery Administration forced up prices of manufactured goods, hurting farmers who had to buy farm tools and equipment. Agricultural allotment policies cut cultivated acreage, while the Bureau of Reclamation increased cultivated acreage. Relief spending helped the unemployed, while corporate income taxes, undistributed profits taxes, Social Security taxes, minimum wage laws, and compulsory unionism led to higher unemployment rates. New Deal spending was supposed to stimulate the economy, but New Deal taxing depressed the economy.

New housing data is in today from the S&P's Case Shiller Index and, you guessed it, things aren't looking good.  Stagflation anyone?

Mish has outlined a few good graphs on mortgages from the LPS report for March:
Delinquencies remain about twice the 1995-2005 average, foreclosure inventories are 7.8 times historical “norms”.

30% of loans in foreclosure have not made a payment in over 2 years.

Here are the conclusions from the report:

February Month-End Data: Conclusions

• Delinquency rates resumed their decline after an increase in January and foreclosure inventories remain stable, slightly below historic highs.
• Delinquencies continue to improve as new problem loan rates decline and cure rates increase.
• Foreclosure start declines and foreclosure suspensions are reducing the upward pressure on inventories caused by foreclosure sale moratoria.
• An enormous backlog of foreclosures still exists with overhang at every level:
• There are three times the number of loans deteriorating greater than 90+ days delinquent as compared to foreclosure starts.
• There are also three times the number foreclosure starts vs. foreclosure sales.
• Foreclosure inventory levels are over 30 times monthly foreclosure sale volume.

Here is the Huffington Post's list of cities with the biggest lost in housing prices in the past year:

Eleven of the twenty cities posted their lowest average home prices since 2006-07 peaks. Here they are along with their percent decrease in the last year:

• Atlanta, 7.0%
• Charlotte, 4.8%
• Chicago, 7.5%
• Detroit, 8.1%
• Las Vegas, 4.4%
• Miami, 4.7%
• New York, 3.0%
• Phoenix, 9.1%
• Portland (OR), 7.8%
• Seattle, 6.7%
• Tampa, 7.0%

I will end with a few videos.  One is initial reactions of Atlast Shrugged Part One and the other is Rand Paul on Freedom Watch:

Oh, and the Fed is supposed to release the Bloomberg requested documents Thursday.  Keep a look out.

How to Avoid the NYTimes New PayWall, Mid-East Learns from Fed, Graph on New Euro Bank Stress Test, and Pepsi Goes Green

Today begins a new era as the New York Times starts limiting IP addresses to 20 articles a month unless you become a paying subscriber.  I foresee this move being disastrous for a paper that is already losing viewership and influence.  You can't expect people who have received something free for so long to begin paying.  Though the NYT will still maintain its reputation as a premier news outlet, competitors such as the Wall Street Journal and New York Post stand to make huge gains in market share.  Though it's disappointing, the only things I really read on NYT are Krugman's column and blog.  I sometimes read Thomas Friedman, Bob Herbert, and Maureen Dowd for the occasional laugh (Friedman and Herbert for their ignorance, but Dowd for her humor).

Never fear though, here is the link to seven ways to avoid the paywall from Business Insider.  Don't expect all of these solutions to last long before they are fixed though.

One of the most absurd things in the history of central banking occurred last week.  Apparently Libyan rebels have formed their own central bank headquartered in Benghazi along with their own national oil company.  From Bloomberg:

The Transitional National Council released a statement announcing the decision made at a March 19 meeting to establish the “Libyan Oil Company as supervisory authority on oil production and policies in the country, based temporarily in Benghazi, and the appointment of an interim director general” of the company.
The Council also said it “designated the Central Bank of Benghazi as a monetary authority competent in monetary policies in Libya and the appointment of a governor to the Central Bank of Libya, with a temporary headquarters in Benghazi.”

Yearning for freedom?  More like replacing the machine gun with another printing press. Maybe they should look to Afghanistan to see how "real" central banking is done.  From the NYT:

When a brother and nephew of an Afghan vice president wanted to build up their fuel transport business, they took out a $19 million loan from Kabul Bank. When a brother of the president wanted to invest in a cement factory, he took out a $2.9 million loan; he also took out $6 million for a town house in Dubai. When the bank’s chief executive wanted to invest in newly built apartments in Kabul, he took almost $18 million. 

The terms were hard to beat: no collateral, little or no interest. And no repayment due date.

Those are just a few of the loans detailed in a damning internal report by Afghanistan’s own Central Bank, which depicts the Afghan political elite as using Kabul Bank, the country’s biggest financial institution, as their private piggy bank.

This is what Libyan rebels want? The national oil company is not a new concept unfortunately.  Apparently Gaddafi suggested it in a speech to Georgetown University students in 2009.  From EPJ:

On Wednesday Libya's President Muammar Gaddafi made a bad week for ConocoPhillips even worse. Talking with Georgetown University students via satellite, he said, according to Reuters, that oil prices ($43/barrel Wednesday) were "unbearable" and that Libyan oil "maybe should be owned by national companies or the public sector at this point, in order to control the oil prices, the oil production or maybe to stop it."

You would think with all indicators pointing to a collapse in central banking, it would be the last thing Libyan rebels would want.  Here is just another indicator from a survey respondent in food manufacturing on the Dallas Fed's new diffusion index:

"Prices are high, which makes for lower volume. The supply of cattle is limited. The cost of grain for livestock is unusually high because of high corn prices, partly attributable  to ethanol subsidies. All of our raw material costs are at record highs. The cost of diesel also hurts us. A weak dollar is not good for us."

The pain is starting to be felt.  Just look at how inflation expectations are leading to rise in consumer spending and a decline in the savings rate.  From Reuters:

U.S. consumer spending rose slightly more than expected in February for the eighth straight month of gains as households tapped their savings, government data showed on Monday, while inflation accelerated at its fastest pace since June 2009.  

The Commerce Department said spending rose 0.7 percent after an upwardly revised 0.3 percent gain in January.

From Zerohedge:

Personal saving as a percentage of disposable personal income was 5.8 percent in February, compared with 6.1 percent in January.

Seth Lipsky, founding editor of the New York Sun, does a fantastic job pointing out the fallacies of a floating dollar (a dollar not tied to anything like gold) in a speech he gave to Hillsdale College back in February in a rather comical way:

Or let us consider a compromise. Let’s go to a fiat kilogram—that is, permit the kilogram to float—but apply the new urgency to fixing the dollar at a specified number of grains of gold. To those who say it would be ridiculous to fix the dollar but let the butcher hand you whatever amount of hamburger he wants when you ask for a kilogram, I say, what’s the difference as to whether it’s the measure of money or of weight that floats?
For that matter, one could go all the way and fix the value of both the kilogram and the dollar but float the value of time. You say you want to be paid $100 an hour. That’s fine by your boss. But he—or Chairman Bernanke—gets to decide how many minutes in the hour. Or how long the minute is. You know you’ll get a kilogram of meat for the price a kilogram of meat costs. But you won’t know how long you have to work to earn the money.

This speech was based on this great editorial from a few weeks ago.  Still, there is no need for a gold backed dollar with those all-seeing regulators at the helm to control the supposed excesses of capitalism, right?  It's time for another dog-and-pony show of a banking stress test by the European Banking Authority.  This test is infamous for its conclusion that Ireland banks were solvent four months before their collapse and subsequent bailout.  Here is a pretty good chart from Zerohedge showing the 2010 failed results:

I will end with another great example of how free market capitalism is capable of producing green technology without government encouragement.  From SlashFood:

New Pepsi Bottle Is 100 Percent Plant-Based

Earth Day may not be for another month, but the folks at PepsiCo are celebrating early. The company has just announced that it has developed the world's first 100-percent plant-based PET bottle.

PepsiCo's new bottle uses no petroleum but instead a medley of "bio-based raw materials," such as switch grass, pine bark and corn husks. The company says that it expects to incorporate agricultural byproducts from its other operations in the production of the bottles, such as orange peels from all that Tropicana OJ PepsiCo squeezes each year.

Funny how consumer demand works huh?  

 

Organization of Fed Chart, Christian Democrats Ousted in Key German State, and Caterpillar CEO Threatens to Leave Illinois

Understanding the Federal Reserve system is difficult, even I don't fully get it at this point.  Some of this confusion is cleared up thanks to this handy chart from Jack H. Barnes:

Yeah, it's a bit hard to read, but you can kind of get the idea.

It has just been reported that the Christian Democrats, Chancellor Angela Merkel's party, just lost power in the state of Baden-Wuerttemberg.  What makes this important is that the Christian Democrats, a rather conservative political party, have been in power in Baden-Wuerttemberg since 1953.  The Green Party won the majority with 24% of the vote and is likely to form a coalition with the Social Democrats who got 23% of the vote.  It is speculated that the Greens' anti-nuclear stance helped them achieve victory after the disaster in Japan.  I have a feeling that many voters are going to regret this move, but still, the vote it demonstrative of the kind of animosity some may be having for Merkel who has in favor of increasing the EU bailout fund.  It will be interesting to see what Germans opt to exchange nuclear power for.

I will end with another example of the kind of effect high taxes and regulations have on business.  In a letter to Illinois Gov. Pat Quinn, CEO of Caterpillar Doug Oberhelman warns of leaving the state due to the recent income tax increase:

The chairman and CEO of Peoria-based Caterpillar Inc. is raising the specter of moving the heavy equipment maker out of Illinois. In a letter sent March 21 to Gov. Pat Quinn, Caterpillar chief executive officer Doug Oberhelman said officials in at least four other states have approached the company about relocating since Illinois raised its income tax in January.
"I want to stay here. But as the leader of this business, I have to do what's right for Caterpillar when making decisions about where to invest," Oberhelman wrote in the letter obtained Friday by the Lee Enterprises Springfield bureau. "The direction that this state is headed in is not favorable to business and I'd like to work with you to change that."

Kudos to Texas Governor Rick Perry, South Dakota Secretary of the Governor's Economic Development Office J. Pat Costello, and other states for trying to court Caterpillar to leave Illinois.  Soon enough, Quinn and like-minded Democrats will be voted out of office for increasing taxes to the point of driving away business.

And just one more sign of the growing real-estate bubble in China: China Construction Bank's 2010 Profit Rises 26% as Interest Margins Widen.

Update- Just one more example of the kind of unforeseen effect of government regulation: 
Wells Fargo Stops Enrollment in Debit Rewards

Another bank is ending its debit rewards program. Wells Fargo says it will stop enrolling new customers in its debit card rewards program as of April 15. The San Francisco-based bank says customers who are already enrolled in the program will continue to earn rewards for now.

Background

Wells Fargo says the change is the result of a pending new regulation that is expected to dramatically limit the fees banks can collect from merchants whenever customers swipe their cards.

The cap on fees was mandated last year under the financial overhaul known as the Dodd-Frank Act. The current proposal would cap fees at 12 cents per transaction, versus the current 1 percent to 2 percent of the transaction amount.

The banking industry says the change could slash its debit swipe fee revenue by as much as 90 percent.

A final rule is expected from the Federal Reserve by April 21, unless Congress delays the deadline.

Thank God for the infinite wisdom of Barney Frank and Chris Dodd.

Glenn Beck Tackles the Fed and FDIC Readies Socialism-Lite

Here is the link to Glenn Beck's show on if we need the Fed.  I have yet to watch it, but I doubt I will learn very much.  It's still nice to see it being criticized in the mainstream.  Gary North has a great article out today on the coming market correction for what he calls the "Keynesian Tiger."  Some highlights:

First they inflate. Then there is a boom. Then there is price inflation. Then they stop inflating. Then there is a recession. To keep it from becoming a depression, they inflate. Year after year, decade after decade, generation after generation, this is what central bankers do.
This time, the tiger is really, truly dangerous. The central bankers have lured the world's highly leveraged speculators and their multinational bankers into wildly speculative ventures that can keep them growing richer only by threatening them with bankruptcy if the central bankers ever attempt to climb off the tiger's back.

There is no question that the People's Bank of China has inflated in the range of 20% per annum for years. The Chinese central bank is the world's leader in monetary inflation. It has financed the boom in China by a policy of goosing the economy with low interest rates.
If we believe the Austrian theory of the business cycle, we should expect an economic crash in China when the central bank finally ceases to inflate because prices are rising. The central bank says that it has been raising interest rates by fractional percentages over the last 12 months, but the yuan's exchange rate with the dollar has not changed much. China's central bankers have climbed on the back of the tiger, and they have persuaded the businessmen of the nation to join them. They cannot get off without a crash. The only question is when it will occur.

Let me review. Big, nice Japan is the Japan of the carry trade, the friend of Western currency speculators and the large banks that lend them money to engage in the carry trade. Big, nice Japan has made Western speculators rich. But they started to get less rich as a result of a steadily rising yen. The earthquake and repatriation caused them to start getting poorer, fast.
In contrast is big, bad China. China's yuan in not an openly traded currency. So, it could not become a part of the carry trade. Western speculators could not borrow money at near zero percent from the People's Bank of China to buy Western bonds. The PBOC lent its money directly to Western governments, not Western private speculators. It cut out the middlemen.

A perfect storm seems to be brewing as a devastated Japan will continue to attempt to drive down the price of the yen as strife in the MENA region rages on and Bernanke keeps the printing press running high.  Remember this?:

North was kind of enough to provide the link to the Fed's balance sheet at the time of the financial crisis (when the Fed doubled the monetary base).  It's definitely worth taking a look.  And now according to Lauren Tara LaCapra's Twitter account, Tom Hoening, practically the only Fed president who votes against further inflation, is resigning.  Lucky us, his replacement search committee will be headed by Terry Moore, President of the Omaha Federation of Labor AFL-CIO.  Chances are, the Kansas City Fed will no longer be headed by an inflation hawk.

Since I mentioned the MENA region, I should point this Bloomberg article out:
  
Assad's Promise Fails to Halt Syria Unrest as Scores Die During Protests

Syrian President Bashar Al-Assad’s security forces clashed with protesters in several cities after his promises of freedoms and pay increases failed to prevent dissent from spreading across the country.
The protests that started earlier this month in the southern province of Daraa may have resulted in the deaths of 55 people, London-based Amnesty International said in a statement on its website yesterday. Security forces opened fire on protesters in the town of al-Sanamein in Daraa and carried out arrests in the capital, Damascus, it said.

We are in Libya just to stop the government from killing its own people huh?  What about Syria, Bahrain, and Yemen?  Oh that's right, not enough oil there...

I will end with another great example of creeping socialism.  From the Financial Times

US Banks in 'Cash for Keys' Foreclosure Talks

The five biggest US mortgage servicers were told this week at a private meeting with regulators to consider paying delinquent borrowers up to $21,000 each as part of a broader settlement of the foreclosure crisis.

People who attended the meeting, chaired by the Federal Deposit Insurance Corporation on Monday, said the industry-wide “cash for keys” program would involve the biggest servicers, led by Bank of America, paying borrowers as an incentive to leave their homes.

Banks would pay borrowers who are more than 90 days behind on mortgage payments up to $1,000 to seek independent financial advice and up to $20,000 in cash as a “fresh start” payment towards living costs in a new home. They would have to vacate their properties quickly and leave them in good condition.

How the hell did they come up with the arbitrary number of $20,000?  And where do regulators get the authority to employ such a tactic? Though the foreclosure process needs to be sped up to clear the market, it can't be done without checking for fraud which can take a long time.  It is a tough situation, but I doubt giving people $20,000 is going to help in a significant way.  Then again, according to the Fed none of the big banks did anything wrong when processing foreclosures with robo-signing...

Krugman's Ignorance Strikes Again, Canada No Confidence, GE Pays No Taxes, and Detroit Population Hits New Low

I almost spit coffee all over my computer monitor this morning after reading the first two paragraphs of Paul Krugman's NYT column today:

Portugal’s government has just fallen in a dispute over austerity proposals. Irish bond yields have topped 10 percent for the first time. And the British government has just marked its economic forecast down and its deficit forecast up.

What do these events have in common? They’re all evidence that slashing spending in the face of high unemployment is a mistake. Austerity advocates predicted that spending cuts would bring quick dividends in the form of rising confidence, and that there would be few, if any, adverse effects on growth and jobs; but they were wrong.

Unbelievable.  Simply unbelievable. Krugman ignores the possibility that massive and unsustainable spending caused Europe's problems to begin with.  Instead of letting the party go on forever, many governments are opting for austerity measures to try and save themselves from default (which would actually be my preferred option) and Krugman disagrees with this?  Well of course cutting spending to a system reliant on the large accumulation of government debt is going to cause problems, it doesn't take a Nobel Prize winner in economics to figure that out.  Sunflowers aren't gonna instantly spring from the ground as confidence skyrockets once spending is cut significantly.  It took Europe many years to dig itself into this hole, its going to take longer to get out.  The correct, and fast, solution would be outright default.  The pain would be great but brief and no country would have to go through the humiliation of taking orders from the ECB and IMF.  Every time I think Krugman has sunk to a new low in idiocy, he surprises me again.

Since I am on the topic of Europe, Standards and Poor's downgraded Portugal two notches to BBB status today while Bloomberg estimates it may need $99 billion to be bailed out.  $99 billion looks like nothing compared to what Spain may need.  The Wall Street Journal reports:

The cost of saving Spain, a €1.1 trillion ($1.56 trillion) economy, would dwarf previous bailouts and could test the financial strength of Europe as a whole.

But if Spain can continue to repair investors' trust, as in recent weeks, then Europe stands a chance of containing the debt crisis to three countries, Greece, Ireland and Portugal, whose combined economies are half the size of Spain's.

I guess spending cuts caused this according to Krugman.

First Portugal, and now Canada:

(AP) – Canadian opposition parties toppled Prime Minister Stephen Harper's government in a no-confidence vote today, triggering the country's fourth election in seven years. The opposition parties held the Conservative government in contempt of Parliament in a 156-145 vote for failing to disclose the full financial details of his crime legislation, corporate tax cuts, and plans to purchase stealth fighter jets.

A combination of Japan, MENA, Europe, and now Canada.  Escalating inflation is only going to make things worse.  Even when Fed criticism is starting to go more mainstream,  Fed economists are starting to question the status quo:

From Dow Jones: "An inflation-only mandate would be more appropriate for the U.S. Federal Reserve than its current dual goal of managing price stability and facilitating job creation, U.S. Federal Reserve Bank of Dallas President Richard Fisher said Friday. "I do believe that the full employment mandate puts us on a slippery political slope," Fisher said in a panel discussion in Brussels. "Personally, I would prefer to have a single mandate."

The New York Times has a great article on General Electric's favorable position within the federal government:

The company reported worldwide profits of $14.2 billion, and said $5.1 billion of the total came from its operations in the United States.

Its American tax bill? None. In fact, G.E. claimed a tax benefit of $3.2 billion.

G.E.’s giant tax department, led by a bow-tied former Treasury official named John Samuels, is often referred to as the world’s best tax law firm. Indeed, the company’s slogan “Imagination at Work” fits this department well. The team includes former officials not just from the Treasury, but also from the I.R.S. and virtually all the tax-writing committees in Congress.

President Obama has said he is considering an overhaul of the corporate tax system, with an eye to lowering the top rate, ending some tax subsidies and loopholes and generating the same amount of revenue. He has designated G.E.’s chief executive, Jeffrey R. Immelt, as his liaison to the business community and as the chairman of the President’s Council on Jobs and Competitiveness, and it is expected to discuss corporate taxes.

And the revolving door continues.  Timothy Carney lays it out pretty well in the Washington Examiner today:

Except for maybe Google, no company has been closer and more in synch with the Obama administration than General Electric.

First, there’s the policy overlap: Obama wants cap-and-trade, GE wants cap-and-trade. Obama subsidizes embryonic stem-cell research, GE launches an embryonic stem-cell business. Obama calls for rail subsidies, GE hires Linda Daschle as a rail lobbyist. Obama gives a speeech, GE employee Chris Matthews feels a thrill up his leg. I could go on.

Then there’s the personal connections: CEO Jeff Immelt sits on the President’s Economic Recovery Advisory board and was asked by Obama’s Export-Import Bank to the opening act for the President at the most recent Ex-Im conference.

Since clueless politicians never seem to get the fact the over burdensome taxes drive people away, Mark Perry has a great graph illustrating that Detroit's population has reached a low not seen in 80 years:

I will end with one more example of a stupid politician.  I present to you, Harry Reid on the importance of federal government monetary support for cowboy poetry:

Silver Hits $38, China Ghost Cities (Again), and Radiation Levels Chart

As the fiscal chaos in Europe continues (Fitch downgraded Portugal's bond rating to A- today) silver hit a fresh new high of $38 today before the CME hiked margins pushing it back down to $37.

Before:

After:

Zerohedge on CME:

In tried and true fashion, just as Silver was about to viciously destabilize the global capital markets as it surged to new 31 year highs, the CME stepped in and did its usual 3-6 half life intervention by hiking initial and maintenance margins on silver futures from $11,138 and $8,250 to $11,745 and $8,700 respectively. This is merely the latest margin hike in what appears to be a neverneding series designed to reduce speculative "fervor" courtesy of endless liquidity. What it will do is merely provide a better entry point for those who by now realize that silver's next stop in the fiat endgame is $40, then $50, and so forth.

I bet Ben and the boys are seeing this.  Robert Wenzel is right when he talks about criticism of the Fed getting more mainstream attention.  In what will most assuredly be a dog-and-pony show of trying to mask any real financial calamity from the public, it has just been announced that the Bernak himself will give four "media speeches" a year.  EPJ reports:

The Fed has announced that its Chairman Ben Bernanke will hold media briefings four times a year. 

Bernanke will hold the previously unheard of question-and-answer sessions with reporters following Fed quarterly economic forecast and policy meetings.

This of course follows the recent Supreme Court rejection in which the nine justices denied to hear the Fed's case against public disclosure.  Jonathan Weil sums it up perfectly in his Bloomberg column today:

Here’s a little secret the Federal Reserve Board doesn’t want you to know. On Sept. 24, 2008, while financial markets were collapsing, Morgan Stanley borrowed $3.5 billion through the Fed’s oldest lending program, the 98-year- old discount window.

 The discount window functions as a lifesaver through which qualifying borrowers can secure emergency liquidity during times of severe stress. Historically the Fed had kept the names of borrowers confidential on the grounds that disclosure could stigmatize them in the public’s eyes, even though it was the public’s money the Fed was lending.

 Under Dodd- Frank, the Fed will be required to publish details of its discount-window loans, including borrowers’ identities, after two years. That’s why the Obama administration stepped in last year and urged the high court not to take up the case, saying the new disclosure rules made an appeal by the Fed unnecessary.

This whole sorry exercise by the Fed has shown the central bank at its worst. The Fed lost on the merits. Yet it succeeded in serving notice that anyone who challenges its judgments must be prepared to spend absurd amounts of time and money on litigation as the price for busting its wall of secrecy and holding its leaders accountable.

R.I.P. to Mark Pittman of Bloomberg who originally filed the lawsuit.  Suspicion of the Fed is sure to ramp up with the on-coming inflation.  For all those Krugmanites out there who still need proof, look no further than to one of the leading suppliers of goods to the U.S. from China, Li & Fung:

Li & Fung, which supplies products for companies like Walmart and Gap in the US and Debenhams in the UK, said “a new era in sourcing with higher prices” has begun as manufacturers pass on the rising costs of raw materials and Chinese labour to customers.

Bruce Rockowitz, president of Li & Fung Trading, said: “The biggest topic on the minds of everyone in this business is that higher prices are really here to stay. At this point, retailers are not sure what they can pass on to consumers and what they cannot."

As bad as that sounds, a new report on "China Ghost Cities" is out today from SBS Dateline:

Vast new cities of apartments and shops are being built across China at a rate of ten a year, but they remain almost completely uninhabited ghost towns.

It’s all part of the government’s efforts to keep the economy booming, and there are many people who would love to move in, but it’s simply too expensive for most.

Video journalist Adrian Brown wanders through malls of vacant shops, and roads lined with empty apartment buildings… 64 million apartments are said to be empty across the country and one of the few shop owners says he once didn’t sell anything for four or five days.

You would think Keynesians would be all for this.  I mean, who needs desired wealth creation when the government can just pay people to dig holes (in this case it's houses and apartments)?

Gary North is out with another great article today warning of the coming rise in interest rates.  In regards to The General Theory:

In 1948, the first edition Paul Samuelson's Economics textbook appeared. It became the dominant textbook in the West. It was called neo-Keynesian. That is, it was only partially incoherent, unlike Keynes' General Theory, which is totally incoherent. (Skeptics who think I am exaggerating have either never read The General Theory or have spent years reading textbooks to prepare them to believe they understand The General Theory when they read it after they have received their Ph.Ds in economics.)

I have yet to read The General Theory but I would like to someday.  I anticipate it will be a difficult read, but why not give it a try?

I will end with posting a chart on radiation levels, their effect, and why there is no need to worry about the disaster in Japan now.

Update-Zerohedge just reported the newly adjusted monetary base and Treasury debt may reach $12.4 trillion by next Friday.   This graph is simply unbelievable:

Portugal Government Collapses, Egypt Stock Market Failure, and Ezra Klein Endorses Crony Capitalism

It's official, Portugal's Parliament rejected Prime Minister's Jose Socrates deficit-cutting measure and, as promised, Socrates has turned in his resignation.  Bloomberg reports:

Portuguese Prime Minister Jose Socrates said he presented his resignation to President Anibal Cavaco Silva after parliament rejected the government’s deficit- cutting plan, raising the chance of an international bailout.
Socrates made the announcement tonight in an address to the nation after meeting with Cavaco Silva at the president’s residence in Lisbon. “This crisis occurs in the worst possible moment for Portugal,” Socrates said.

Check out Portugal's 10-Year now:

The big bad wolf of fiscal sustainability is blowing at the PIIG'S door.  Ireland's 10-Year just broke 10%, a new record high:

The PIIGS aren't the only ones suffering in Europe right now, the U.K.'s Consumer Price Index came in at a 4.4% annualized rate for February.  The Bank of England's target was 2%.  Will Bernanke, who is shooting for 2%-3%, fair any better at hitting this goal?  Fat chance judging by General Mills' latest profit:

Minneapolis-based General Mills did warn input costs will go up in its fiscal 2012 that starts in June, keeping a lid on gross profit-margin growth. Commodity costs are expected to go up 4% to 5% this fiscal year.

Enough with the fiscal calamity in the Eurozone, how's the MENA (Middle East North Africa) region doing?  Wasn't Egypty's stock market supposed to reopen today in a glorious demonstration of a return to financial stability?  Zerohedge reports:

Egypt’s finance minister was on hand as men dumped confetti on the trading floor to mark the resumption of trading. But within seconds of the opening, trading was once again halted as an intense sell-off drove shares below pre-set limits put in place to slow any sharp declines. The market reopened half an hour later. The benchmark EGX 30 index was trading down 9 percent at 5,137 points by early afternoon, recovering slightly from a drop of nearly 10 percent earlier. Finance Minister Samir Radwan called on investors not to panic."

Don't panic?

At least our wonderful President is being praised for his heroic military intervention (remember, we are establishing a no-fly zone by bombing Gaddafi's compound, this isn't a military invasion...) efforts in Libya.  From the Daily Caller:

Texas Republican Rep. Ron Paul will be co-sponsoring an amendment announced Tuesday by Ohio Democratic Rep. Dennis Kucinich that would defund the American military intervention in Libya.

Kucinich suggested during a Saturday conference call with anti-war Democrats that he thought impeachment could also be considered for Obama’s “unconstitutional” actions in Libya.

Paul’s spokeswoman Rachel Mills confirmed to The Daily Caller via email that Paul shares Kucinich’s point of view on the severity of the constitutional breach. “Yes, he thinks it is an impeachable offense,” Mills wrote.

Paul/Kucinich 2012?  A man can dream can't he?  Speaking of a Paul running for president, Sen. Rand Paul has addressed the issue:

While in South Carolina promoting his book "The Tea Party Goes to Washington" on Monday, Rand Paul was asked about a possible presidential run.
The U.S. Senator from Kentucky played it close to the vest.
"The only decision I've made is I won't run against my dad," Paul told the Post and Courier newspaper.

Though Kucinich is awful on economics (except auditing the Fed), him and the Paul father-and-son team are a few of the only remaining congressmen that actually believe in what they say.

I will end with some great passages on crony capitalism. First is from Ezra Klein writing on the benefits of Obamacare in the Washington Post today:

These transactions will happen on the new “exchanges” — a place that will, in effect, be a Web site where people can compare plans and choose the one that will serve them best. But behind the pleasing exterior (you can see it at HealthCare.gov), the exchanges offer another layer of consumer protection: Just as Amazon.com would stop carrying a toaster that routinely exploded when customers plugged it in, if an insurer repeatedly misbehaves, regulators can kick it out of the exchange.

So whenever a health insurance company, after being licensed and authorized to sell insurance by the government, doesn't abide precisely by overseeing bureaucrat's wishes, they are basically cut off from the market?  Well of course people can't be trusted to buy insurance from a company not deemed politically appropriate.  What consumer protection advocates continue to misunderstand is that consumers are empowered the most when they are given CHOICES, not when they have a few government approved suppliers to choose from. I wonder how much in campaign donations, and kickbacks, it will cost to keep start up competitors out of these exchanges.  In other words, which health insurance company will be the next GE?

And now Steve Malanga from his RealClearMarkets column on tax subsidized college sports:

The endowments that athletic departments build up through these contributions provide the linchpin for even more fiscal maneuvering in the form of what the CBO calls higher education's "indirect" tax arbitrage. Here's how it works. Our universities and colleges are eligible to use tax-exempt debt to finance many of their capital projects, including building sports facilities. As the CBO noted in a 2010 study about arbitrage on campus, universities engaged in these construction projects often have big endowments but still prefer to use tax-free debt to finance building. The advantage is obvious: Muni bonds carry a lower interest rate than comparable taxable bonds, so our institutions of higher learning gather donations, invest them in taxable securities that produce a higher rate of return than the interest the schools must pay out on their muni borrowing, and then they bank the difference. While it's illegal to use to proceeds from low-cost muni debt to invest directly in higher yielding taxable securities, building a university field house becomes an opportunity to skim off a few extra dollars in so-called indirect arbitrage, courtesy of the taxpayer.

I supposed I should watch Villanova and Pitt more considering I pay for them.

Update- Silver ended at $37.28 today.  If you check on Ebay today, buying single troy ounces is getting tougher as auctions are spread more apart than they were a few months ago.  Reason? Demand to hold silver is obviously increasing.  Get it while you can.

I am watching John Stephenson on Bloomberg TV right now, he is predicting silver will reach $50 this year and gold will reach $1700.  Copper is up 3% today as well.