1.9.13

Mish's Global Economic Trend Analysis

Mish's Global Economic Trend Analysis


India in Serious Trouble (and Gold at the Heart of It)

Posted: 01 Sep 2013 11:09 PM PDT

Last week India's trade minister, Anand Sharma, came out with a laughable suggestion: RBI should consider monetizing gold.
India's central bank should look into the possibility of monetizing gold holdings, trade minister Anand Sharma said on Thursday, in the latest proposal aimed at combating a yawning current account deficit that has hammered the rupee.

It was not immediately clear whether Sharma was referring to the 557.7 tonnes of gold the Reserve Bank of India (RBI) holds in its own reserves, or gold in private hands. He did not give more details of how the proposal would work.

India has the world's third largest current account deficit (CAD), which is approaching nearly $90 billion, driven in large part by a huge appetite for gold imports. The deficit has helped undermine the rupee, the worst performing major currency since May.

Any talk of using the country's gold to help meet India's international obligations revives memories of a 1991 balance of payments crisis—when India flew 47 tonnes of gold to Europe as collateral to avoid a sovereign debt default.

In comments published by The Hindu newspaper last week, David Gornall, chairman of the London Bullion Market Association, said India could raise $23 billion by swapping gold for a payable currency for a period of its choice, while remaining the long-term holder of the gold.
Free Money?

I am not sure which is sillier 1) proposing selling gold or 2) Proposing India could get $23 billion in free money by swapping gold while retaining ownership.

India Might Buy Gold From Citizens to Ease Rupee Crisis

Reuters picked up on this story in an equally convoluted report India Might Buy Gold From Citizens to Ease Rupee Crisis
India is considering a radical plan to direct commercial banks to buy gold from ordinary citizens and divert it to precious metal refiners in an attempt to curb imports and take some heat off the plunging currency.

A pilot project will be launched soon, a source familiar with the Reserve Bank of India's (RBI) plan told Reuters, although the idea was met with some scepticism.

India has the world's third-largest current account deficit, which is approaching nearly $90 billion, driven in a large part by appetite for gold imports in the world's biggest consumer of the metal. That has played a major role in driving the rupee to a record low.

"We will start a pilot project among some banks where we will allow them to buy back gold from individual households," the source, an official familiar with the central bank's plan, said. "This will start soon, we have discussed (it) with banks."
Radical Plan With Scant Details

Somehow India wants to buy gold from citizens, and it also wants to sell it (or sell gold bonds supposedly backed by gold). Details are scarce but it safe to conclude that the scheme is preposterous no matter what it is.

Pater Tenebrarum at the Acting Man blog pinged me with this comment "The Indian government is instituting one stop-gap measure after another. Buying gold from its citizens? For rupees? Don't make me laugh...Indians buy gold to get out of the rupee"

Stop-Gap Measures

In his post covering Stop-Gap Measures by India's Government, Tenebrarum stated ...
It also seems likely to us that some traders are worrying that India's government might do something stupid about its gold reserves or the gold held by its citizens. This worry is definitely justified, as India's government has so far done nothing but institute stop-gap measures to halt the slide of the rupee and the deterioration of the country's current account. Not a single step has been taken that would actually be required: bold reform is needed, but it is politically unpopular. And so the government takes one useless emergency measure after another – and it is definitely eying gold as the next vehicle to do something stupid with.
Should India try something with gold, it is perfectly safe to conclude no matter what the plan is, the plan will fail.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

Terrorists Won the War on Terror; 74% of Pakistanis View US as Enemy, 60% Have No Confidence in Obama

Posted: 01 Sep 2013 11:16 AM PDT

Eric Tillberg, writer on Policy Mic says The War On Terror is Over, and the Terrorists Won.
After the first two shots of the War on Terror on September 11, 2001, the first major battle of the war occurred, and was lost, on October 26, 2001. This was the day the PATRIOT Act was signed into law by President Bush.

Terrorists, by killing 3,000 people in a spectacular fashion, goaded the United States into compromising its values and betraying its citizens.

As a followup, the terrorists won another victory with the establishment of the Department of Homeland Security on November 25, 2002. This department gives a much more menacing facade to the federal government and proved to be the moment when American citizens got the idea that they were viewed as the enemy by their own government.

Defeats continued with the establishment of the National Defense Authorization Act (NDAA), representing an increase in funding for an already bloated (and misnamed) Department of Defense. By this point, the American idea was on life support with little hope of reversal. The final blow that rang the bell of defeat for our nation was PRISM. Although PRISM began in 2007, we have only recently learned of its existence thanks to Edward Snowden.

The defeat of America in the War on Terror provides an excellent explanation for the resurgence of libertarian politics at home. It is a natural reaction, when one no longer trusts the government, to demand the right to keep and use arms and to demand that the government extract itself from most if not all aspects of our lives.

We don't only have to look internally to see that the terrorists have won. Al-Qaeda has not gone away and has not been obliterated. In this grand game of whack-a-mole, the moles see our weakening resolve to preserve ourselves and are encouraged by it. The passage of these laws must be seen as propagandistic victories to the terrorists and undoubtedly help in their recruitment. We must rediscover the American idea and begin living by it once again. This would be the best way to turn the tide on the War on Terror.
Pakistan and US Drone Policy

Shortly after 911, the US had support of the vast majority of Pakistani citizens. Polls now show only 55% unfavorable attitude towards Al Qaeda even as support dwindles elsewhere.



74% of Pakistanis View US as an Enemy

A PEW Research survey on Global Attitudes shows 74% of Pakistanis Call America an Enemy.
Roughly three-in-four Pakistanis (74%) consider the U.S. an enemy, up from 69% last year and 64% three years ago. And President Obama is held in exceedingly low regard. Indeed, among the 15 nations surveyed in both 2008 and 2012 by the Pew Global Attitudes Project, Pakistan is the only country where ratings for Obama are no better than the ratings President George W. Bush received during his final year in office.

Moreover, roughly four-in-ten believe that American economic and military aid is actually having a negative impact on their country, while only about one-in-ten think the impact is positive.

Only 17% back American drone strikes against leaders of extremist groups, even if they are conducted in conjunction with the Pakistani government.
Pakistani Views of US, OBama



Unwinnable War

Terror is a method. It is not possible to win a war on a method.

And because US drone policy kills many innocent people as did senseless invasions of Iraq and Afghanistan, more people resent US aggression now, than before 911.

Place yourself in the shoes of the average Pakistani who has lost a friend or family member in drone attacks. Would you think the US was an enemy? Of course you would.

Would you view those drone attacks as an act of terror? Of course you would. The US is making enemies hand over fist with its drone policy (which itself is an act of terror killing innocent civilians along the way).

How can you when a war on method, especially when you use the method yourself?

Is Obama another Bush Clone?

Please also see Is Obama Another Bush Clone? Another Nixon Clone?

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com

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