The first week of November was a huge one for news hounds, with exciting new developments in mining, money and politics in Canada and around the world.
• In the U.S., voters meted out a devastating defeat for Democratic candidates at the national, state and local levels, in the biggest surge for the Republican Party since 1948. In a stinging rebuke to the policies of President Barack Obama, voters returned Republicans to dominance in the U.S. House of Representatives and narrowed Democratic Party control over the Senate, eliminating the Dems’ supermajority.
With dozens of high-profile Tea Party candidates winning seats in the House and Senate, the national debt crisis has moved into a central position in U.S. political debate, and Tea Party favourite Sarah Palin solidified her position as a leading candidate for the Republican presidential nomination in 2012.
On the Democratic side, Obama’s weak performance as president and failure to adequately support Democratic candidates in these elections are paving the way for a challenge from Hillary Clinton for Democratic presidential nominee in 2012. The knives are already coming out, especially from the many who have already left the administration so early in its term.
Still, the re-election of so many candidates who were clearly responsible for America’s current economic crisis means that not enough Americans are serious about turning the country around, and the malaise will continue for at least a couple more years. That translates into more ballooning deficits, continued high unemployment rates, a weaker greenback and higher-priced commodities in U.S. dollars.
• With the U.S. public focused on the elections, the U.S. Federal Reserve used the moment to introduce a second mind-bogglingly large round of quantitative easing, dubbed “QE2” (or, in the vernacular, “printing money”).
In a nation-state version of paying off your Visa credit card with your MasterCard, the Fed announced on Nov. 3 that it “intends to purchase a further US$600 billion of longer-term Treasury securities by the end of the second quarter of 2011, a pace of about US$75 billion per month.”
In an October speech to the Federal Reserve Board, Fed chairman Ben Bernanke said the U.S. unemployment rate was too high, and reiterated that the mandate of the Fed was to foster maximum employment and price stability — i.e. not to maintain the value of the dollar.
In another sign of the mainstreaming of Fed criticism in American political life, Palin called for Bernanke to “cease and desist” from the bond-buying program, adding that “we don’t want temporary, artificial economic growth bought at the expense of permanently higher inflation which will erode the value of our incomes and our savings.”
The QE2 announcement had the predictable salutary effect on precious metals prices, with spot gold prices carried above the US$1,400-per-oz. mark for a few days, silver surging well above US$25 per oz., platinum rising above US$1,700 per oz. and even palladium sitting at a lofty US$730 per oz. at presstime.
QE2 equally caused a rally in U.S. stock markets, though this was more related to people wanting to unload their dollars than any positive signs of U. S economic recovery.
• The Nov. 7 edition of the Financial Times carried a landmark commentary from Robert Zoellick, president of the World Bank, and it’s one that every gold bug needs to read in full (go to this link: www.tinyurl.com/38yx7mc .)
In it, Zoellick argues that the G20 nations should complement their growth recovery program with a “plan to build a co-operative monetary system” that is likely to involve the U.S. dollar, euro, yen, pound and a renminbi that “moves towards internationalization and then an open-capital account.”
His clincher was his suggestion that this system “should also consider employing gold as an international reference point of market expectations about inflation, deflation and future currency values. Although textbooks may view gold as the old money, markets are using gold as an alternative monetary asset today.”
• In Canada, we had the federal government at the centre of two momentous decisions for the domestic mining industry, with Industry Canada’s much-discussed decision to nix BHP Billiton’s proposed hostile bid for Potash Corp. of Saskatchewan, and the federal Environment Ministry blocking Taseko Mines’ proposed development of its Prosperity copper-gold mine in central B.C.
The latter decision, which is reported on in detail in this issue, once again shows that a mining project can no longer go forward in Canada if local First Nations are vehemently against it.
Be the first to comment on "QE2 powers gold"