Rhodium

Rhodium Prices Higher as ETC and ETF Funds Set to Launch (26 May 2011)

(14 Dec 2011) What have rhodium prices done since the ETF launch?  Well they have gone down.

We are approaching $1400 USD an ounce.  I imagine that industrial users of rhodium are just happy as clams that they can buy raw materials so much cheaper than before.  I had occasionally looked at rhodium prices in relation to other precious metals because I believed that it was not as heavily influenced by massive speculators and hedgers.  But I now doubt that to be true.  I think the the formation of ETF funds linked to commodities simply enables high-frequency traders and algorithms to better latch onto the underlying price discovery system, and once liquidity is achieved it allows them co-opt the price discovery mechanism in their favor.

Federal Debt Ceiling

As we will begin to see over the next few weeks we are watching a slow motion train wreck called the Federal Debt Ceiling.  Here are a few stories that will appear to be psychic (when viewed in retrospect)

1. Treasury Ending issuance of SLGS as of Friday
2. Treasury Auctions will put debt over the debt ceiling by Monday 5/15/2011
3. Heritage Foundation - Says Sell Federal Assets to Balance Budget, like Treasury Gold in Fort Knox? 5/16/2011
4. America's Deepening Default Chasm (5/22/2011 - FT - complete via google jump)
5. Policy Fatigue.  Accidents can happen?  Do you want these politicians driving the US economy? (6/9/2011)
6. US Treasury Secretly Weighs Options to Avert Default (7/7/2011) A small team of U.S. Treasury officials is discussing options to stave off default if Congress fails to raise the debt limit by the Aug. 2 deadline
7. A Trillion is a Big Number (9/5/2012) We just broke through $16tn debt.  Rick Santelli summarizes, in words and tables that any 6 year old girl could comprehend, why "a trillion is a big number"

USA Already Defaulted?

Has the unthinkable already happened?  If so, why haven't we noticed yet?  What am I talking about?  Why, the greatest financial debt default in history. 

Of course what so many people fail to realize is that seldom do we see an outright single event where a company, state or sovereign government decides to stop paying all its debt all at once.  Instead these things happen very slowly.

My claim is the United States has already started to "default" on its "debt" in various ways. Let me just mention a couple of them, and see if you agree.

• The bond-holders of GM and Chrysler.  They should have been first in line.  But instead the US courts violated all kinds of contract law when they decided to put the unions and pensions ahead of the bond-holders.  Its a default, pure and simple.  Why didn't anyone make a fuss?
• Freddie Mac and Fannie Mae.  Two government "sponsored" enterprises who for years operated with lower interest rates on their paper and benefited from higher bond ratings because of an implicit government guarantee.  FRE (now FMCC) stock used to trade at $60.  Today it closed at $0.25.   FNM (now FNMA) stock traded for years at a price of more than $80/share.  Today it trades on the pink sheets for $0.30. How low do these government institutions have to go before someone considers it a "default"? 
• For 2010, the US Social Security Administration announced there would be no increase in the Monthly Social Security and Supplemental Security Income (SSI) benefits payments due to "no increase in the Consumer Price Index (CPI-W) from the third quarter of 2008 to the third quarter of 2009."  Then why did SSA increase the Minimum Quarterly Earnings needed to earn one Social Security credit from $1,090 (2009) to $1,120 (2010)?  That seems like a 3% increase to me. Who really believes the CPI-W anyway?

We will continue to see big and small examples of "fee increases" and "benefit reductions" until the situation gets really out of hand.  As in Greece, people here in the USA will be rioting in the streets.  Then maybe the meaning of the word default will be understood in all it shapes and disguises.

Joanne Scholldorf: Instead of your description: Try using the meaning of the word forum to describe what your blog is about: A collection of articles, etc. why not enhance the description. Joanne Scholldorf: The public square or marketplace of an ancient Roman city that was the assembly place for judicial activity and public business.b. A public meeting place for open discussion.c. A medium of open discussion or voicing of ideas, such as a newspaper or a radio or television program.2. A public meeting or presentation involving a discussion usually among experts and often including audience participation

Produce the Note - Fighting Foreclosure

A recent posting on InvestorCentric Blog describes a way to stall foreclosure if you should be in such a desperate situation as that. It also features a YouTube video interview of Chris Hoyer that aired today on Good Morning America:

The FOX Orlando TV Station also spread the word on “Produce the Note”

For more information on tactics to forestall foreclosure see the Consumer Information Network

People Beginning to Realize Gold is Money

Of course, gold has always been money. It is just that governments and central bankers around the world have tried to convince people that their paper debt certificates are even "better than gold" because they pay interest on their debt.

I've spent the last 3 years studying economics, gold, precious metals investments and a great variety of ideas around the preservation of weath. I cannot say I have it all figured out, but I'm more knowledgable than I was three years ago. It makes sense to me that much of what some of the gold bugs have been screaming about for years is starting to come true. Namely:

• Gold and Silver was once the basis of money in the United States and Britian. It is no longer, having been replaced by fiat currencies.
• Most countries in the world are on a similar fiat currency system, with fractional reserve banking being the whole basis for currency distribution and management.
• Gradually, as a country moves government surplus to government deficit spending, the debts of that government become increasingly unsustainable. That is, governments begin to require ever increasing amounts of new debt in order to pay interest and principle on the prior debts. Once that process begins it is very hard to stop.
• Money in the form of fiat currency begins to behave in unusual ways. Where paper money (or Federal Reserve Notes - FRNs - to be more technically accurate) was once thought to be an asset it can increasingly be viewed as more of a liability - that is, as someone else's obligation to pay, namely the government/central bank in question.
• Physical gold having been trusted for more than 5,000 years as money, as a store of wealth, and as nobody's obligation to pay becomes the final form of money.

In this blog, I'm going to write about my thoughts on money, precious metals investing and other topics. I hope you will enjoy it!