Saturday 07-16-11

Better pay attention boys and girls this is a smart man and a good economist.

Return of the Gold Standard as world order unravels

by Ambrose Evans-Pritchard

As the twin pillars of international monetary system threaten to come tumbling down in unison, gold has reclaimed its ancient status as the anchor of stability. The spot price surged to an all-time high of $1,594 an ounce in London, lifting silver to $39 in its train.
On one side of the Atlantic, the eurozone debt crisis has spread to the countries that may be too big to save - Spain and Italy - though RBS thinks a €3.5 trillion rescue fund would ensure survival of Europe's currency union.

On the other side, the recovery has sputtered out and the printing presses are being oiled again. Brinkmanship between the Congress and the White House over the US debt ceiling has compelled Moody's to warn of a "very small but rising risk" that the world's paramount power may default within two weeks. "The unthinkable is now thinkable," said Ross Norman, director of thebulliondesk.com.

Fed chair Ben Bernanke confessed to Congress that growth has failed to gain traction. "Deflationary risks might re-emerge, implying a need for additional policy support," he said.

The bar to QE3 - yet more bond purchases - is even lower than markets had thought. The new intake of hard-money men on the voting committee has not shifted Fed thinking, despite global anger at dollar debasement under QE2.

Fuelling the blaze, the emerging powers of Asia are almost all running uber-loose monetary policies. Most have negative real interest rates that push citizens out of bank accounts and into gold, or property. China is an arch-inflater. Prices are rising at 6.4pc, yet the one-year deposit rate is just 3.5pc. India's central bank is far behind the curve.

"It is very scary: the flight to gold is accelerating at a faster and faster speed," said Peter Hambro, chairman of Britain's biggest pure gold listing Petropavlovsk.

"One of the big US banks texted me today to say that if QE3 actually happens, we could see gold at $5,000 and silver at $1,000. I feel terribly sorry for anybody on fixed incomes tied to a fiat currency because they are not going to be able to buy things with that paper money."

China, Russia, Brazil, India, the Mid-East petro-powers have diversified their $7 trillion reserves into euros over the last decade to limit dollar exposure. As Europe's monetary union itself faces an existential crisis, there is no other safe-haven currency able to absorb the flows. The Swiss franc, Canada's loonie, the Aussie, and Korea's won are too small.

"There is no depth of market in these other currencies, so gold is the obvious play," said Neil Mellor from BNY Mellon. Western central banks (though not the US, Germany, or Italy) sold much of their gold at the depths of the bear market a decade ago. The Bank of England wins the booby prize for selling into the bottom at €254 an ounce on Gordon Brown's orders in 1999. But Russia, China, India, the Gulf states, the Philippines, and Kazakhstan have been buying.

China is coy, revealing purchases with a long delay. It has admitted to doubling its gold reserves to 1,054 tonnes or $54bn. This is just a tiny sliver of its $3.2 trillion reserves. China's Chamber of Commerce said this should be raised eightfold to 8,000 tonnes.

Xia Bin, an adviser to China's central bank, said in June that the country's reserve strategy needs an "urgent" overhaul. Instead of buying paper IOU's from a prostrate West, China should invest in strategic assets and accumulate gold by "buying the dips".

Step by step, the world is edging towards a revived Gold Standard as it becomes clearer that Japan and the West have reached debt saturation. World Bank chief Robert Zoellick said it was time to "consider employing gold as an international reference point." The Swiss parliament is to hold hearings on a parallel "Gold Franc". Utah has recognised gold as legal tender for tax payments.

A new Gold Standard would probably be based on a variant of the 'Bancor' proposed by Keynes in the late 1940s. This was a basket of 30 commodities intended to be less deflationary than pure gold, which had compounded in the Great Depression. The idea was revived by China's central bank chief Zhou Xiaochuan two years ago as a way of curbing the "credit-based" excess.

Mr Bernanke himself was grilled by Congress this week on the role of gold. Why do people by gold? "As protection against of what we call tail risks: really, really bad outcomes," he replied.

Indeed.

http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/8638644/Return-of-the-Gold-Standard-as-world-order-unravels.html

What a bunch, they need to get a clue. Political correctness is ruining the country.

94-year-old upset by TSA pat down

RALEIGH (WTVD) -- A 94-year-old wheelchair-bound Florida woman says a search she went through at Raleigh/Durham International Airport went too far.

Marian Peterson said it happened July 6 as she went through a TSA security checkpoint before boarding a flight home.

Peterson said she was selected for extra screening. First, security officers lifted her out of her wheelchair and helped her stand in a full body scanner. Then, she was given a physical pat down.

"They took me to one side and they patted me down, and they made me stand for, with my arms out, for over 10 minutes," she said. "I was beginning to feel that I wasn't going to be able to continue to stand, I was going to fall down or something."

"I asked, I said why are you doing this, and the woman was very polite and said 'I don't know, maybe the scanner detected something or maybe she moved,'" recalled Peterson's daughter Marian Malone.

Peterson's family said it's not just the length of the search they object to, it's the way it was done.

"She said it would be in-depth. She started the putdown, and at that point, she asked mom to spread her legs. She stood there with her legs spread and she checked every place thoroughly," said Malone.

"They groped her. All of her body. Her crotch, her breasts. And everything else," said son Joe Peterson.

The Petersons said the search seemed unnecessary given Marian's obvious age.

"I didn't think I was much of a threat to anybody," said Marian Peterson.

"My sister had even asked them, you know, what did she do? Why are we doing this? What's going on here," said Joe Peterson.

Contacted by ABC11's Jacksonville, FL sister station, a Transportation Security Administration spokesperson issued the following statement:

"While every person and item must be screened before entering the secure boarding area, TSA works with passengers to resolve security alarms in a respectful and sensitive manner."

But the Petersons say they don't feel the search was handled in a sensitive manner and that while they think security at airports is very important, they should be sensitive to certain passengers.

"I thought it was totally uncalled for. I think if it was absolutely necessary, that they should've taken her in a private area, and I think it was uncalled for," said Malone. "It just was not being thoughtful for an elderly person."

TSA is expected to begin a pilot program this fall that will try more "risk based" screening. It will start with just Delta and American at four U.S. airports. Raleigh is not included.

http://abclocal.go.com/wtvd/story?section=news/local&id=8250625

They are pround it is under 1 percent, but really they have no clue what it is because they are so inept. Listen to this report is almost unbelievable.

http://media.dev-cms.com/wtop/21/2198/219835.mp3