Commodities and platinum prices enjoyed a rebound last week that could be a sign of what is ahead for us in 2009. Many of the metals, including platinum, enjoyed price increases as the U.S. dollar fluctuates, and confidence in the greenback continues to fall.
Many investors are looking at platinum as a potentially great investment for 2009, as the price ratio to gold makes many think platinum is ready for a strong upward move.
What this means is two different indicators are being looked at to determine where things will go over the short and long term for platinum.
The first indicator is the demand side of the equation for platinum, the obvious industry being the auto sector, which isn't looking too good at this time in spite of the government bailouts used to shore them up.
It isn't known whether demand for platinum will be the determining factor in the price rising, even though it is very low.
One smaller but significant factor in the ratio between gold and platinum, is the rarity issue. There is about three times as much gold as platinum in the world, and that could determine some of the pricing for platinum in 2009 in relationship to gold.
Another player in the field is the strength of the U.S. dollar, which will definitely be under downward pressure for some time ahead, including 2009. All of the money promised by the variety of government bailouts ensure inflation is just a short step away, as the Federal Reserve ramps up its printing presses.
The reason this will happen is Sovereign Wealth funds and other funds are starting to move away from the dollar, as it is increasingly being looked at as an inferior currency. Foreign governments are no longer thinking of it as a place of refuge, certainty and safety.
China is already experimenting with using its currency internally as the way to exchange goods in certain wealthier provinces.
So for the long term the greenback looks bad and gold and platinum are looking pretty good. Gold will advance this year for sure, and platinum, if it moves in lock step with it, could bring solid returns for investors, whether it's moved by demand or the ratio of it to gold.
If it begins to move in the way it has historically, platinum could surge to high prices in 2009, making it a potentially great investment.
There has been a temporary lull in the commodities bull market, but that will only be for a short season of time, as demand for natural resources inevitably starts again. Platinum will mirror that move, and gold will continue to be a haven for investors looking for a place their money can be safe, as well as grow.
We need to continually monitor platinum futures and prices, now, and in the next couple of years, as it has the potential to surprise on the upside, and long term platinum should have a lot of upward movement, as the global economy eventually rebounds and demand skyrockets. Platinum has a lot of potential going forward.
Showing posts with label Printing Money. Show all posts
Showing posts with label Printing Money. Show all posts
Saturday, January 24, 2009
Thursday, December 11, 2008
Commodities: Focus on Cause of Financial Bubbles
Financial bubbles have significant impact on commodity demand, prices and performance
Ron Paul talks on the causes of financial bubbles, and how we need to sever the root rather them simply focusing on the fruit of the problem.
The impact of financial bubbles on all the economy, including commodities, continues to be a major contributor to booms and busts in the American, and global economies.
Ron Paul talks on the causes of financial bubbles, and how we need to sever the root rather them simply focusing on the fruit of the problem.
The impact of financial bubbles on all the economy, including commodities, continues to be a major contributor to booms and busts in the American, and global economies.
Wednesday, November 12, 2008
Commodties: Recessions are Healthy
Recession wouldn't hurt commodities that much if governments didn't interfere in free market
Most Americans and people around the world need to get a better grasp of basic economics, as the ongoing boom/bust cycle which has lasted for decades is in motion again.
Much of this is happen because of the government attempting to "save" people from the pain of these times of adjustments and make it worse by their interference. This same old story is happening again in this period of time, and it always prolongs the pain and suffering, rather than help it.
Recessions can be likened to a human body that doesn't receive much nutritional input at all, and the body reacts by failing in some way that is painful. The body is speaking to us that there is excess somewhere, and we're doing something wrong.
To pour on more excess in order to temporarily take away the pain only prolongs the suffering. Yet that's what the government does when politicians try to buy votes by continually throwing money at problems.
Recessions are an event which tells the economy there are excesses going on, and that we need to change what we're feeding it if we want to retain a healthy economy.
In other words, a lot of people, businesses and banks have made mistakes when things were going good, and as a result a recession has occurred. Now that it's a reality, consumers and businesspeople need to make the types of adjustments that will make the economic body healthy again.
Things like building up their savings while cutting back on spending. Businesses will respond by cutting prices in order to spur spending; that makes things affordable for people buying not using debt (credit cards or home refinancing).
When things are forced to be liquidated, money is set free from poor investment decisions and put to work in more productive activities. Work production increases because people are concerned about losing their jobs. Businesses streamline operations and costs, and work hard to retain and grow their customer base by improving their products and services. If they don't, the company would go out of business, along with their jobs.
Government interference is an attempt to create an artificial economic surge, which ends up causing more damage than good, as the problems which caused the recession in the first place aren't dealt with and will extend the recession. This is what happened in the Great Depression in the U.S., which would have lasted only a couple years if the economy hadn't been tampered with.
In our current economic crisis, we are experiencing an unprecedented interference by governments around the world, and it looks like many more are ready to join the bandwagon. It's bizarre in that bad debt has been the main cause of the problem, and now more bad debt is being thrown at it.
What inevitably will happen is more money will be printed to pay off that debt, and inflation will spiral out of control. How long will it take to pay off the trillions being printed out of thin air? Nobody knows. The amount being put into the global marketplace is unprecedented.
That and the illusion things are getting better by businesses and consumers causes the same underlying problems to go on uncorrected.
So things will continue to go on in this cycle history repeats itself over and over again because the problems which caused the economic disease in the first place are doomed to happen again and again.
All of this happens because the government is attempting to keep people from experiencing pain. But like doctors will tell you: pain is necessary. If we don't have pain, we wouldn't know something was wrong with a particular part of our body.
Think of individuals who have bodies that don't feel pain, and when they're children they break their bones and injure themselves in extremely unhealthy ways because the body doens't send a signal of pain to communicate something excessive is going on.
That's what happens every time the government interferes and gives the economy the pain-free drug of more money. It keeps the pain from being felt or lessoned so people and businesses can keep on going without having to adjust their behavior.
We're doomed to see this type of economic response happen again and again until we learn and decide not to allow this to happen.
As for commodities, they'll participate in the decline in response to the misguided efforts of government interference.
Most Americans and people around the world need to get a better grasp of basic economics, as the ongoing boom/bust cycle which has lasted for decades is in motion again.
Much of this is happen because of the government attempting to "save" people from the pain of these times of adjustments and make it worse by their interference. This same old story is happening again in this period of time, and it always prolongs the pain and suffering, rather than help it.
Recessions can be likened to a human body that doesn't receive much nutritional input at all, and the body reacts by failing in some way that is painful. The body is speaking to us that there is excess somewhere, and we're doing something wrong.
To pour on more excess in order to temporarily take away the pain only prolongs the suffering. Yet that's what the government does when politicians try to buy votes by continually throwing money at problems.
Recessions are an event which tells the economy there are excesses going on, and that we need to change what we're feeding it if we want to retain a healthy economy.
In other words, a lot of people, businesses and banks have made mistakes when things were going good, and as a result a recession has occurred. Now that it's a reality, consumers and businesspeople need to make the types of adjustments that will make the economic body healthy again.
Things like building up their savings while cutting back on spending. Businesses will respond by cutting prices in order to spur spending; that makes things affordable for people buying not using debt (credit cards or home refinancing).
When things are forced to be liquidated, money is set free from poor investment decisions and put to work in more productive activities. Work production increases because people are concerned about losing their jobs. Businesses streamline operations and costs, and work hard to retain and grow their customer base by improving their products and services. If they don't, the company would go out of business, along with their jobs.
Government interference is an attempt to create an artificial economic surge, which ends up causing more damage than good, as the problems which caused the recession in the first place aren't dealt with and will extend the recession. This is what happened in the Great Depression in the U.S., which would have lasted only a couple years if the economy hadn't been tampered with.
In our current economic crisis, we are experiencing an unprecedented interference by governments around the world, and it looks like many more are ready to join the bandwagon. It's bizarre in that bad debt has been the main cause of the problem, and now more bad debt is being thrown at it.
What inevitably will happen is more money will be printed to pay off that debt, and inflation will spiral out of control. How long will it take to pay off the trillions being printed out of thin air? Nobody knows. The amount being put into the global marketplace is unprecedented.
That and the illusion things are getting better by businesses and consumers causes the same underlying problems to go on uncorrected.
So things will continue to go on in this cycle history repeats itself over and over again because the problems which caused the economic disease in the first place are doomed to happen again and again.
All of this happens because the government is attempting to keep people from experiencing pain. But like doctors will tell you: pain is necessary. If we don't have pain, we wouldn't know something was wrong with a particular part of our body.
Think of individuals who have bodies that don't feel pain, and when they're children they break their bones and injure themselves in extremely unhealthy ways because the body doens't send a signal of pain to communicate something excessive is going on.
That's what happens every time the government interferes and gives the economy the pain-free drug of more money. It keeps the pain from being felt or lessoned so people and businesses can keep on going without having to adjust their behavior.
We're doomed to see this type of economic response happen again and again until we learn and decide not to allow this to happen.
As for commodities, they'll participate in the decline in response to the misguided efforts of government interference.
Wednesday, October 29, 2008
Federal Reserve Overnight Rate Cut to 1 percent
Still trying to jumpstart the economy, the Federal Reserve cut its key interest rate by half a percentage point to 1 percent. The federal funds rate cut is on overnight loans and what banks charge one another.
This is the second time in a month the fed has cut rates by half a percentage, as the month started off at 2 percent overnight lending rates, which was cut to 1.5 percent on October 8.
Commercial banks are expected to follow suit and cut their prime lending rates by half a point as well.
According to the Fed, they are willing to cut rates this low because economic conditions seem to indicate inflation will be contained. That assumption is probably unwarranted, yet the pressure to cut rates is why this event happened, not because it's good for the long term health of the economy.
Some are asserting it's the weakness in the market which is causing the fall in commodity prices, so this cut in rates is not risky. But that's only a small part of the picture. The reality is commodity prices have plunged because of the lack of credit, and large funds having to sell their positions in order to access cash.
That, more than anything else, is the reason for the drop in commodity prices, not the underlying fundamentals.
Remember that when inflation rears its ugly head again in response to government printing more money and lowering lending rates.
This is why the commodity bull market will extend longer than thought, as this temporary credit squeeze will eventually run its course and the demand from emerging countries for commodities continue to grow.
This is the second time in a month the fed has cut rates by half a percentage, as the month started off at 2 percent overnight lending rates, which was cut to 1.5 percent on October 8.
Commercial banks are expected to follow suit and cut their prime lending rates by half a point as well.
According to the Fed, they are willing to cut rates this low because economic conditions seem to indicate inflation will be contained. That assumption is probably unwarranted, yet the pressure to cut rates is why this event happened, not because it's good for the long term health of the economy.
Some are asserting it's the weakness in the market which is causing the fall in commodity prices, so this cut in rates is not risky. But that's only a small part of the picture. The reality is commodity prices have plunged because of the lack of credit, and large funds having to sell their positions in order to access cash.
That, more than anything else, is the reason for the drop in commodity prices, not the underlying fundamentals.
Remember that when inflation rears its ugly head again in response to government printing more money and lowering lending rates.
This is why the commodity bull market will extend longer than thought, as this temporary credit squeeze will eventually run its course and the demand from emerging countries for commodities continue to grow.
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