We're back in civilization... Wait...you call this civilization? Looks more like Bubble Land again!

Gold is headed towards $1,100...

Bonds are soft...so is the dollar...

Speaking of old friends, Marc Faber says he's long the dollar. Faber thinks the buck is over-sold. It could rise 10% in this last quarter.

But the Fed says it will keep interest rates low for an "extended period." So there is still no sign of the kind of policy turnaround that might send the greenback back up.

Instead, we'll have to wait until the bubble pops!

Oil is over $80...

Republicans are winning elections...

Hey, party like it was 2006...

The Dow is moving back up, too...and so are all the world's markets...led by Asian stocks. China is booming...with its stocks up 4 days in a row...

The rise in gold comes as India's central bank does the smart thing. Central banks need reserves. And historically, the only reserve a central bank can trust is gold. Putting US dollars in your vault - instead of gold - is a little like laying in a supply of lettuce to tide you over in a bad harvest year. Imagine what would have happened if pharaoh had stocked up on radicchio instead of grain? Those 7 lean years would have been a lot leaner than they were.

The Chinese have seen what happens when you rely on dollars for a reserve. You're stuck. Because your reserves can wilt fast.

The Indians have a better idea - they're buying gold.

The metal has outperformed stocks and bonds this year as it heads for the ninth straight annual gain. The Standard & Poor's 500 Index has risen 15 percent in 2009 through yesterday while returns on the benchmark 10-year US Treasury note are down 5.7 percent.

Gold may average $1,125 in 2010, "with strong investment demand anchored by a negative real-interest-rate environment and probable central bank purchases," analysts at Toronto-based Desjardins Securities Inc. said in a report.

And here's another interesting item we found when we got back to an Internet connection: "Companies that become too big, complicated and debt-ridden should be allowed to 'creatively destruct,'" says our friend Nassim Taleb, author of The Black Swan.

Taleb likens the process to natural selection. "Why is it that there are no land animals bigger than an elephant?" he asks. "Because nature doesn't permit it. Bigger animals die off. Likewise, the market system disposes of companies that are 'too big to fail.' It gets rid of them."

Unfortunately, says Taleb, the US government is impeding this natural process. The government is preventing the bankruptcies of large corporations that would clear the way for a new generation of healthier, more nimble, corporate organisms. Furthermore, these trillion-dollar bailouts are polluting the financial ecosystem with toxic piles of debt.

"We're not destroying debt," Taleb complains. "When you move it into the government, it stays in the government and that's a problem."

Bill Bonner
for The Daily Reckoning Australia

• Naturally the Feds Want to Raise as Much Money as They Can
• Life Goes On
• There is More to Wealth than Money
• Global Credit Shortage is Over According to European Central Bank
• Central Banks’ New Money is Piling Up

Something more than meets the eye is going on here. The IMF sale was part of a plan to unload 403.3 tonnes of gold. It's halfway there, and will use the proceeds to fund itself and loans to the developing world (or perhaps Britain and America when they go broke). But what else is going on?

In the past, larges sales of gold - mostly by European central banks - swamped the gold price and kept it in check. The European CBs either felt like they had too much gold doing too little work on the balance sheet. Or, they were manipulating the price of gold down by increasing the supply to the market whenever the gold price began rendering its verdict on global fiscal and monetary policy.

India's central bank is now the proud owner of 557 tonnes of gold. That gives it the tenth largest gold holdings among central banks. But it probably isn't finished. Gold makes up just six percent of India's foreign exchange reserves. There's plenty of room for that to grow.

But don't forget China. China has $2.3 trillion in foreign exchange reserves. But 70% of those - or $1.6 trillion - are in U.S. dollars. It owns over just a 1,000 tonnes of gold. That makes up less than 2% of China's reserves and makes China the seventh largest holder of above ground gold. In fact the gold exchange traded fund (NYSE:GLD) owns more gold than China. France, Italy, the IMF, Germany, and the United States round out top five (from fifth to first).

What this tells you is that China could double (and then double again) its gold reserves and gold would still make up less than 10% of its total forex reserves. Compare that to 66% in Italy, 69% in Germany, 70% in France, and 77% in the U.S., according to official numbers. So what's the big deal?

There will always be a threat that European Central Banks release gold supply on to the market. In fact, European central banks just renewed a five-year agreement (including the IMF) to sell down a maximum of 400 tonnes of gold per year from their holdings. They've agreed to this to disgorge their gold in an orderly fashion.

But it would not surprise us to see the Europeans fail to sell the gold they're allowed to sell under the agreement. Our old desk mate in London, Adrian Ash (now with Bullion Vault) is at the London Bullion Market Association's annual meeting in Edinburgh. Word from UBS analyst John Reade, also at the meeting, is that European Central Bank official Paul Mercier reckons that official holders of gold will, "no longer be net sellers of gold."

As we predicted earlier this year, the European central banks would rather hoard their gold than sell it in a rising market. There may be a price at which they do sell it, in order to pay down sovereign debts. But psychologically, the fact that central banks want to own gold and not sell it is pretty important.

Also, it shows you how the balance of economic power in the world has shifted East. True, the European banks can still dump gold on to the market to drown the price. But between the ETFs, central bank buyers in India and China, and the average man on the street in Beijing, Mumbai, and elsewhere, there are more buyers of gold now than sellers.

And if we were right yesterday that the GFC is slowly morphing into a sovereign debt crisis, then the case for gold is that much stronger. This explains why gold futures were up by nearly 3% overnight and old yeller hit a new high at US$1,084.90.

The only worry? So many hedge fund managers and pundits are singing the same tune: long gold and short U.S. Treasuries. As we mentioned yesterday, the bond bubble could go on much longer than anyone expects. And when so many people agree on something, none of them are usually right. As a contrarian, you'd be worried about becoming a victim right about now.

But yes, in the long term, the end of the Super Cycle in fiat money results in the remonetisation of gold. That is what you're seeing now. And it's probably what you'll see for a few more years. It also ought to benefit other precious metals, and of course, precious metals shares.

Dan Denning
for The Daily Reckoning Australia

• IMF Deems Gold An Idle Asset
• Gold: The Ultimate Unlevered Hard Asset
• IMF Gold to be Used
• Unlike China, India is Not Willing to Learn from its Mistakes
• Buying Gold, Gossip & Russia’s Tu-160 Bombers

In markets, one of the most watched and ongoing match races is the one
between Emerging (or developing) Markets and Developed Markets. The
former include China, India, Brazil and others. The latter include the
US, the EU and Japan. Which one do we bet on and when?

It's a particularly good question now, as we pick through the
smoldering ashes of the 2008 bust. Emerging markets have had a hot 10-
year run, even if you include the crackup in 2008. In fact, even if you
had invested in the MSCI Emerging Markets ETF (NYSE:EEM) on Jan. 1,
2008, you would be sitting on a profit today. By contrast, the S&P 500
Index has delivered a double-digit loss over the same timeframe.

The emerging markets have snapped back surprisingly quickly. As
Jonathan Anderson, a UBS strategist put it, "Not even the worst
economic crisis in the postwar era has been able to derail [them]." In
financial markets, ideas, like thoroughbreds, run hot and cold. Past
performance doesn't necessarily decide the issue any more than it does
in horse racing. But it turns out there is a pretty reliable way to
handicap the race between Emerging and Developed Markets.

The "handicapper" in this case is the aforementioned Mr. Anderson, who
wrote about his findings in the Far Eastern Economic Review. His title,
"Emerging Markets Poised to Perform," hints at his conclusion.

It all comes down to those old financial constructs called balance
sheets. In essence, a balance sheet shows you what you own versus what
you owe. These are snapshots in time, a measure of financial health,
like an EKG of one's heart rate. You can often spot trouble here before
it becomes fatal.

In my investment services, I always seek out companies with strong
balance sheets - the sorts of companies that own much, but owe little.
Enterprises like theses have the ability to withstand adversity better
than those with weak balance sheets. A strong balance sheet also means
that a company can fund its growth independently and more securely,
without having to rely on fickle lenders.

As investing star, Martin Whitman, wrote in his most recent shareholder
letter: "Don't invest in the common stocks of companies which need
relatively continual access to capital markets, especially credit
markets... Even the strongest, best-quality issuers can be brought
down, or almost brought down, if they continually have to refinance."
Unfortunately, many investors learned this lesson the hard way during
last year's severe credit crisis.

As it turns out, balance sheet strength is also very important for
entire nations. But that's hardly a surprise. Countries that owe a lot
of money tend not to grow as much or as reliably as those with healthy
balance sheets. Anderson created a "stress index" to measure the
financial health of entire nations. A country with high debt levels and
deficits earns a high stress index score. He then plotted this index
(inverted) against a rolling average of GDP growth, a rough measure of
economic growth.

Guess what? There's a close connection between the two.

So one way to explain the growth of emerging markets is to consider the
strength of their balance sheets. When they have healthy balance
sheets, they grow faster than when they have weak balance sheets.

You can see that the last time the emerging markets had a long stretch
in the sun was in the 1960s and 1970s. Emerging markets grew 5% or
better. As Anderson notes, not a single emerging market - not Africa,
not even the Soviet Bloc - failed to post 5% annual growth during this
time. And you'll also note that the balance sheets were healthy.

As a result, emerging markets sailed through the first global oil shock
in 1973-75 without much trouble. The developed world, by contrast,
suffered the pain of a deep recession. Investors who stuck with their
emerging market stocks throughout this period reaped big rewards.

According to Anderson, "Between 1965-1980 the dollar-adjusted return on
nascent equity markets in Mexico, Hong Kong, Taiwan, Brazil, South
Africa and other lower-income nations ran into the hundreds of percent
- while indexes in the US and Europe were essentially flat over the
same 15-year period."

Of course, as I say, these things run hot and cold. The emerging
markets "imploded" after the 1980-82 recession. A dozen different
countries reported inflation rates north of 100%. As Anderson points
out, 20 currencies lost 50% of their value each year. From 1980-99,
emerging markets struggled mightily and barely grew. And as you see
from the chart, their balance sheets went south as well.

Emerging Market returns during this period were poor overall. A dollar
invested in emerging markets in 1990 was still worth only about a
dollar 10 years later. In 2000, though, the game changed again.
Emerging markets opened up. They cleaned up their debts. And the
emerging markets went on a tear that continues today.

In general, emerging markets still have healthy balance sheets today.
In fact, they are as strong as they've been in 50 years. At some point,
that will swing the other way, as these things always do. At some
point, there will be too much debt and too much leverage. But for now,
that condition seems a ways off.

As Anderson concludes, "All the preconditions are in place for a
protracted period of strong economic growth." He guesses 5-6%, which
would crush the Developed World's growth rates. In fact, the superior
(and diverging) growth rates of the Emerging economies are already very
visible.

First up, take a look this graph, from The Economist, which shows the
industrial production of emerging Asia compared to the United States.

Looks like Asia is recovering pretty well. The chart above clearly
illustrates the "decoupling" that became such a hot topic of discussion
last year. The idea was that the Emerging markets would not necessarily
follow lockstep with the Western countries.

The Developed World suffers through what Richard Koo, the chief
economist at Nomura Research in Tokyo, calls a "balance sheet
recession." The Western world suffers from too much debt. That fact
shifts the focus from making profits to repaying debt, according to
Koo. Debt repayment will continue until the West repairs its balance
sheets, a process that takes years to correct, as Japan's long
recession shows.

So the same dynamics that make emerging markets look good, work in
reverse for the Developed World. According to Anderson's model, the
stressed balance sheets of the Developed World predict slow growth.

As investors, then, we'll have to continue to look to the emerging
markets for growth. The market never ladles out its rewards evenly,
though. To drill down further, the big winner is really Asia and its
big markets of China, India and Indonesia.

Anderson estimates that these regions could grow 7% or more annually,
well above the tepid rates of developed markets and better than most
emerging markets. "This is a very hefty gap," he writes, "and one that
is very likely to continue to reward investors who take advantage of
the opportunity."

Chris Mayer

for The Daily Reckoning Australia

• The Century of the Emerging Markets
• Investors Sold Japan Along with the Emerging Markets
• There Are Two Ways of Studying Economic Theory
• Government Could Succeed in Reflating the Bubble
• Dr. Woody Bock’s Essay: The Future Evolution of the Debt-to-GDP Ratio

What strikes me first is demographics. Dubai's indigenous culture is small and practically invisible to the casual tourist. In Dubai, the ambient noise you hear is construction equipment. Almost no smells stand out. Everything is modern, new and arid.

In India, there are people everywhere...living everywhere...sidewalks, riverbanks, parks, monuments. There are shanties built on any available spot. You hear the sound of people...the murmur of voices, bicycles, car horns. Even today, when the weather is a beautiful 30 or so and the breeze steady, the air is tropical, dank and full of all manner of indescribable odors.

Soon after we arrived at the Taj, a sarapi-wrapped young lady delivered Chris and I personalized letters. Each informed us that due to state elections being held, it would be illegal for the hotel to serve us alcohol of any kind beginning at 5 PM on that day, ending 48 hours later. We found out later too that if our partners here in India were to keep the office open for work on Election Day, they risked being arrested, fined and possibly put in jail.

"Can a democracy be a dictatorship at the same time?" an op-ed asked in this morning's Times Of India in response to the draconian efforts the Maharashtra state had taken to boost voter turnout. The idea simply: if people weren't allowed to work and didn't have the option to spend the day drinking... they might turn out and vote. Right.

In Mumbai, voter turn out was just over 40% - respectable by some US standards - but down a bit from the last election in 2004. "Worth 2 days without the hooch?" might have been our op ed title, had we been asked to submit one.

When we asked one of our colleagues here if he voted or not, he said 'no' and laughed. "Maybe if there were a category that gave me the option to choose 'none of the above', I would do so. But there isn't."

Bureaucracy and corruption, are the two words we've heard most this week when asking what's holding India back. In one example, a national auction for oil and drilling rights held on Monday closed with only half of the contracts even receiving bids. A conflict between the Oil and Energy Minister and his brother have left many would be suitors for the rights contracts unsure who's calling the shots. This week, no one wants to put their own money down in fear of losing it unceremoniously.

Upon entering one of the security firms we visited we faced a door, but no walls. It looked every bit as if an architect had gotten carried away with "form" and completely forgotten "function"... Or a cubicle concept plan for "open space" office design gone horribly awry. Later we learned they'd planned to install glass walls several years ago during a renovation, but had never received permits to erect walls higher than 7 feet in their own office space. Huh?

"If we were willing to bribe the local building authority," our host suggested, "the walls could go up this afternoon."

Bribes, corruption and bureaucracy are part of the culture. But it's also part of what makes Mumbai work. "This is a 'make do' city," our travel compatriot Chris Mayer observed while we were driving around the city shooting video for a documentary short we hope to produce on the opportunities in the Indian market. We'd stopped in front of the state Police Headquarters for Maharashtra. It's a formidable colonial era building. But apparently they don't like you taking pictures... or stopping at all... in front of the building. An angry police officer began yelling at our driver in Hindi. Several officers carrying impressive weapons were standing behind him.

"Uh, maybe they don't like us shooting here?"

The driver got out and disappeared around the corner behind a truck followed by two of the police officers. One stood watching us in the back of the car. A few minutes later the driver returned.

"It's okay," he said and we carried on about our business.

Later we learned a quick 100-rupee note had saved us from a trip inside the police headquarters, rather than just gawking at its façade.

With 16 million residents here, many whom live below the poverty line, the roles defined over the millennia help ensure every mouth gets fed. The only part of the city that gets consistent electricity and water is Southern Bombay. The other parts of the city, and everywhere else in the country, go through regular interruptions in basic power.

Traffic is really a sight. Harsh, a twenty-two year old graduate of Northwestern in Chicago, explained that the population has been trained by years of scarcity to try to push their way to the front of the line. It used to be because they didn't have rice, bread or food; but now, they've been doing it for so long, it's a cultural thing. So, for example, when a train pulls up to the station everyone tries to get on at once. That's the way they drive, too.

"Harsh represents the future of India," his father Jayesh told us proudly. Jayesh and his family have been stockbrokers since 1954 when his grandfather founded KC equities "For years Indians have felt like second class citizens of the world. But not these guys. They grew up with the Internet. They're highly educated, motivated, confident. Rather than striving to stay in the United States after university, they're coming back to India to participate in the development of the economy, the markets here."

Having been to Dubai and meeting Moe, we were struck that a trend seems to be underway. In 1976, Richard Dawkins authored a book called The Selfish Gene, in which he identified a cultural unit - called a meme - that evolves and transforms as it gets passed from one human being to another.

Today, the "capitalist meme" is still actively cultivated here in the US. But because of access and speed of modern communications ... coupled with the crisis in markets and entitlement programs in the West... that meme is being carried by young, intelligent, educated, active and motivated youth to the far corners of the earth. Indeed, in today's Wall Street Journal's op ed pages, Susan Hockfield, the president of MIT, laments that the current immigration policy in the US is actively aiding and abetting the return of science and engineering students to their home countries.

But more so, opportunities in Dubai, Mumbai... Shanghai... are inviting students back home in droves as well. At dinner one night, Jayesh made this suggestion to his son: make a list of all the things you take for granted in the US and start businesses to provide them to the Indian market. Refrigeration, for example, or electricity and roads. India is the world's second largest producer of fruits and vegetables, but it loses 30-40% of them because lack of refrigeration.

Indeed, the small cap companies we looked at while working with our partners at Equitymaster.com included:

• India's largest financier of trucks and construction equipment
• The company leading the introduction of RFID and AIDC technology into retail purveyors
• The leading LED displays and light bulb maker in India
• The world's second largest steelmaker
• Largest producer of roses in the world

Foreign direct investment into the Indian stock market is still restricted and won't be available until the rupee and dollar become fully convertible. And that won't likely happen for several years. India is a net importer of grains etc. If the rupee were to float openly on the world's forex exchanges speculation alone could cause major disruptions in India's ability to feed itself.

For now, there are several companies available on the NYSE via ADR. And People of Indian Origin (PIOs) can invest in special accounts directly in the Indians markets. Likewise, Indians are now able to invest $250,000 a year outside the US. But progress in opening the flow of capital between India and the West remains a question for the future.

Bureaucracy, corruption and regulation are indeed impediments to short term growth. And reforms in a democratic society may come slowly... but the long-term opportunities are abundant. We intend to be there when they break.

Regards,

Addison Wiggin
for The Daily Reckoning Australia

P.S. We left the Taj at 2 AM to catch a flight at 5 AM. Our flight passed through Doha, Qtar and reached New York by 3 in the afternoon.

"We will know we're really making progress," our friend Ajit quipped as we enjoyed a final glass of wine on Friday evening, "when we can set the flight times of our own airlines heading to the West."

• Arab Wealth Pours Back into Dubai
• Qatar Relies on Natural Gas Reserves While Dubai Leans on Trade and Finance
• Unlike China, India is Not Willing to Learn from its Mistakes
• The Inflation Rate in India is Running About 12%
• India Has 36 Billionaires

But then came the huge deleveraging of risk assets beginning in July of 2008. There's an old saying that when established currencies that are widely traded and very liquid, get grounded, the emerging market currencies (like the BRICs) get sent to the woodshed. And so, we had the BRIC currencies lose major ground to the dollar during this period of time.

However, in March of this year, the non-dollar currencies began to rebound versus the dollar once more. This rebound in the established currencies like, euro, francs, yen, and Aussie dollars, has led to an even stronger rebound in the emerging market currencies, including the BRICs.

So... I thought it best to take a step back, and look at the fundamentals of each of the BRIC countries, and see if the stage if set for yet another strong run on the dollar.

Before we start though, I wanted to tell you the two reasons I originally put these countries together to form EverBank's BRIC MarketSafe CD.

In the spring of 2009, China was making noise about the need for a new reserve currency to replace the dollar. The other BRIC nations joined in and at the next G-7 meeting, all four nations stood up and wanted to be counted as countries that want a new reserve currency, for they had see enough deficit spending in the US to convince them the dollar had no other avenue to follow but down.

The "markets" sort of shrugged off the BRIC nations call for a new reserve currency to replace the dollar. But I looked at it differently. I saw nations that had HUGE Treasure chests of dollar reserves, and nations that currently have a very large portion of the globe's population. I believed then as I do now, that these countries would need to be reckoned with, and eventually their cries for a new reserve currency to replace the dollar would be heard, loud and clear.

Since we announced the creation of the BRIC MarketSafe CD, where an owner of the CD receives the positive gains in the currencies over 3 years, but does not experience any currency risk, as the CD has 100% principal protection, the BRIC nations are receiving more notice!

At the last G-20 meeting, of which the BRIC nations are a part of, it was announced that the watchdog duties for the global economies were being taken over by G-20 (from G-8). And a week later, the G-7 Finance Ministers suggested that G-20 take over the currency watchdog duties!

Now G-20 has both global economies and currencies under their watch and care, and the BRIC nations are right there to offer their suggestions...

So... Now that we've gone through the background, let's take a look at the current fundamentals of these four nations, to see if the prospect of further potential currency appreciation is warranted.

First up... Brazil!

Brazil was the first Latin American country and first in the Americas to see its economy grind out of its recession. Brazilian GDP for 2009 overall will probably be just a nick over flat, while the forecasts for 2010 GDP show that economic growth will expand by 3.8%, as firmer domestic demand leads the economy.

For instance, Brazil's recent Industrial Production output grew 1.2% in August, which was the eighth consecutive month of growth.

Brazil currently enjoys a Trade Surplus of 1.5% of GDP, with forecasts for the Surplus to also grow to 3.1% of GDP by 2011.

Overall, Brazil's Current Account Balance is a narrowing 1.1% of GDP Deficit... as the economy gets back on track; the Current Account Deficit is expected to grow to 1.5% of GDP.

These are "manageable" deficit figures, and ones that would be welcomed in many countries of the world.

Inflation as always been a problem in Brazil, but assuming no economic shocks, and a strong currency (the real), it is expected that inflation could fall to 4.1% by year-end 2009, and remain stable throughout 2010- 2011.

Brazil is one of the world's largest democracies and emerging markets, which leads one to believe that their influence on the international stage will only continue to grow. Recently, China has moved past the US as Brazil's top trading partner. It is believed that Brazil and China will sign a currency swap agreement that would remove the dollar in trade settlements. I'll talk more about this in the "China segment".

The prospects for the real are good. However, one must always remember, that even with strong economic fundamentals, any mass sell off of risk assets, would be magnified for an emerging currency like the real.

Next, we have Russia...

When we announced the BRIC MarketSafe CD, I received a lot of responses to the announcement with wishes that we had not included Russia in the CD. Well, it wouldn't be a BRIC without Russia!

I told people that in essence, the only way I would buy Russian rubles is in a MarketSafe CD, and that the only way to look at Russia was as an "oil play"...

Who among us believes that oil prices will continue to remain in the $70 a barrel range?

OK... now that we've played that game... Let's get to the data!

Russia went against the flow in September, by cutting their base interest rate, when it was believed that a good number of countries around the world were preparing to begin rate hike cycles.

Russia's economy is still mired in a deep recession, as witnessed by the 10.5% fall in GDP from a year earlier, and industrial activity contracted by 12.6% in August!

Russia's economy had seen two consecutive months of growth before this step backwards in August, and thus the rate cut in September. There are only mixed signs that the recession in Russia has bottomed out. But that means the Russian ruble is much cheaper than a year ago, and will probably remain weak as long as 1. The price of oil remains in the $70 range, and 2. The Russian economy remains mired in a deep recession.

Growth for 2010 is forecast to be 3.5%, which would mean that Russia's recession will have ended late in 2009. An end of the recession and economic growth are very dependent on the persisting problems of the bad assets on the books of Russian Banks.

So... the rebound in the ruble may take some time to come to fruition. The good thing about that is that the ruble will remain cheap for new buyers.

Next... India...

India has maintained strong economic growth through the global financial meltdown, and will post a very impressive growth of 5.5% this year. This does represent a sharp deceleration from the 10% growth rates during the go-go years before the global financial meltdown. So, while 5.5% growth is lower than previous growth rates, it remains one of the best rates of economic growth in Asia!

Economic growth in India is forecast to grow 6.3% in 2010 as private consumption, investment and trade growth all show renewed strength.

Inflation in India, at present is not a problem coming in at 1.3% in 2009. However, as domestic growth takes hold, inflation is expected to rise to 5.1% in 2010.

The Indian Central Bank will continue to fight inflation, probably raising rates as we go along in 2010. The higher interest rates will go a long way toward additional currency strength.

India does not have a problematic current account deficit, like many emerging market countries. With rising exports at a 9.6% rate, the current account deficit will be the equivalent of 0.5% of GDP... Future growth in India will present itself as a problem as far as the Current Account Deficit is concerned. But it will remain manageable, and again, not the stuff that some countries experience.

The prospects for the rupee remain strong going forward.

And, last on the roster, but number one in the hearts of the fans....

China...

This is the proverbial 200 lb gorilla in the room! China has long been on my mind as the most undervalued currency on the planet, and as long as the Chinese government has their hands on the purse strings of the renminbi, it will remain that way.

However, there are signs that the Chinese government is looking to widen the use of the renminbi, which would eventually lead to more of a free float or at least a wider band of currency movement allowed.

The IMF recently wrote that the renminbi remains the most undervalued currency at probably a level of 40% undervalued versus the dollar. As long as the renminbi's daily movement is controlled so strictly by the Chinese government the renminbi will not be allowed to cut into that 40% figure by very much. However, with the signs of a wider use of the currency, it is thought that the renminbi could be allowed to float more in the future.

What is this "wider use" I'm talking about? Well... you see, the renminbi is not a transactional currency, it is not liquid, and is traded on what's called a "non-deliverable forward". Which simply means it cannot be converted to physical form, or deliverable form.

It is my belief that China is taking baby steps to one day, have their currency take over the title of reserve currency of the world replacing the dollar. And to do this, the Chinese must begin to obtain a wider use of their currency.

They began this process by signing currency swap agreements with most of the Asian countries, and then moved on to Argentina. As I said earlier, it is believed that China will soon sign another of these currency swap agreements with Brazil.

The currency swap agreement between two countries eliminates the dollar from any transaction between the two countries, and only uses the currencies of the two respective countries. This is the "first step" toward gaining a wider use.

The "second step" came in September when China issued renminbi denominated bonds in Hong Kong. These were the first renminbi denominated bonds issued by China.

A wider use, in my mind, is equal to a stronger renminbi versus the dollar going forward.

Now for some data!

China's GDP is expected to grow 8% in 2009, and 8.6% in 2010. China's economic recovery this year has been fueled by government stimulus. But Hey! China has a treasure chest of reserves and surpluses... So, if any country was going to spend some money to boost their economy, China would be the one, for they have the money to do so!

And... with China being a Communist country, they were able to dictate where and to whom the money was being directed to, and how it was to be spent. This has gone a long way toward seeing the results of China's stimulus.

Inflation remains a problem in China, and the sooner the Chinese realize that a strong currency can go a long way toward fighting inflation, the better!

So... For now, the renminbi remains pegged to a basket of currencies, and controlled by the Chinese Government, through the Chinese central bank. However, there are signs that this arrangement for the currency is changing, and a wider use of the renminbi is the objective... If that's the case, then the prospects for a potentially stronger renminbi versus the dollar are very good.

And that's how I see the BRIC currencies/ countries...

Regards,

Chuck Butler
for The Daily Reckoning Australia

• BRIC – Brazil, Russia, India and China Suffer High Rates of Inflation
• The Greenback Dollar Decline
• Brazil is a Good Place to Become Rich
• US Dollar Declining as China’s Currency Rises
• Emerging Markets in the New World Disorder

Indeed, Prime Minister Winston Churchill who had led his nation into an impressive military victory in World War II, confident that the defeat of Nazi Germany would help save the British Empire, failed to recognize that the enormous military and economic costs of the war had actually created the conditions for the liquidation of the empire, starting with the withdrawal from Palestine and the "loss" of India after the war.

But while the sun was setting on the British Empire, members of its political elite continued to live under the illusion that their nation had remained a paramount global power. If you traveled in a time machine to London 1949 and attended a debate in the British Parliament, browsed through the pages of the Times or listened to a BBC news program you would come across numerous references to Britain as a Great or "superpower,"; a term that was applied to the United States and the Soviet Union after World War II. And if you encountered diplomats in His and (after 1953) Her Majesty's Diplomatic Service and bankers in the City of London, you wouldn't be surprised if they continued to behave as though the world was still their domain to rule.

It was the humiliating abandonment of the Anglo-French invasion of Suez in collusion with Israel in 1956 that proved to be the turning point in Britain's retreat from empire and ensured that London would never again attempt global military action without first securing the acquiescence of Washington. The time lag between the effective end of the British Empire and the recognition that indeed it was all over, proved to be quite lengthy.

The concept of "recognition lag" is familiar to economists. It refers to the time lag between when an actual economic shock, such as a sudden boom or bust, occurs and when it is recognized by economists, central bankers and the government, like when officials signal a recession in the economy several months after it has actually begun.

And just like changes in economic conditions, changes in the global status and power of nations, are not always immediately apparent, especially to the politicians and the generals who yield that power and to the journalists who cover them. That the elites continue to share such misconceptions about their nation's ability to exert global influence has less to do with the power of inertia and more with the vested interests they have in maintaining the status-quo that could be threatened by challenges at home and abroad.

While no one is comparing the global political, economic and military status of the United States to that of Great Britain after World War II, there is an eerie resemblance between the resistance of officials, lawmakers and pundits in London 1949 and that of their contemporary counterparts in Washington 2009 to adjust their nation's foreign policies to the changing global balance of power. That may explain why so many members of the US foreign policy establishment seem to be so depressed in face of the Obama Administration's current difficulties in dictating global developments, ranging from the military quagmires in Iraq and Afghanistan, Iran's nuclear aspirations and the deadlocked Israel/Palestine peace process to the stalled negotiations on global trade liberalization (the Doha Round), the efforts to reach an international agreement on climate change and the global financial imbalances between the US and China. Where is US leadership on this or that global policy issue? Why can't the Obama Administration "do something" to resolve this or that international crisis?

As expected, neoconservative critics depict President Barack Obama as an idealistic peacenik, if not a 1930's-style appeaser. They blame the perceived erosion in US' ability to call the shots around the world on Obama's alleged failure to stand-up to Russia (by abandoning the missile shield program in Eastern Europe), to Iran (by trying to engage it), to Venezuela (by shaking hands with Hugo Chavez) and to Al Qaeda (by overturning torture practices), and on his supposed betrayal of allies (Israel, Georgia, Poland, the Czech Republic). Not to mention Obama's refusal to launch new crusades against Islamofascism, to promote the Freedom Agenda in the Greater Middle East and to annoy the commies in Beijing on a regular basis.

That's rich coming from the guys at the Weekly Standard and the American Enterprise Institute (AEI). After all, it was the mess that the Bush administration, guided by these neoconservatives, had made in the Greater Middle East - where US military power was overstretched to the maximum, and where American policies helped strengthen Iran and its surrogates in Iraq, Lebanon and Palestine - coupled with the dramatic loss of American financial resources, that has produced a long-term transformation in the balance of power in the Middle East and worldwide, and has significantly eroded Washington's geo-strategic and geo-economic clout. In fact, the increasing wariness of the American public regarding new US military interventions, as a consequence of the wars in Iraq and Afghanistan, and the expanding US deficits would have made it difficult even for a President John McCain to promote an aggressive US policy in the Middle East and elsewhere.

That Obama finds it so difficult to press Israel's Benjamin Netanyahu, Iran's Mahmoud Ahmadinejad and Afghanistan's Hamid Karzai to change their policies may have to do with the fact that unlike many of the elites in Washington, the above and other foreign leaders have succeeded in deconstructing the current geo-strategic reality and recognized that the global balance of power has been shifting and that US ability to exert its diplomatic and military leverage over them has been constrained. Let's hope that these changes will also be recognized in Washington as soon as possible, and that unlike the leaders of the British Empire, those in charge of Pax Americana will have enough time to readjust to the new global reality.

Regards,

Leon T. Hadar
for The Daily Reckoning Australia

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The gold price has risen in 16 of the 20 Septembers since 1989, by far the best success ratio of any month of the year.

What accounts for this predictable trend?

September kicks off several of the planet's most potent gold-demand drivers:

• The post-monsoon wedding season in India and Diwali, one of the country's most important festivals;
• Restocking by jewelry makers in advance of the Christmas shopping season in the United States;
• The holy month of Ramadan in the Muslim world, whose end in late September is marked by a period of celebration and gift-giving;
• And in China, the week-long National Day celebration starting October 1 and the run-up to the Chinese New Year in early 2010.

This could be a challenging September in India, the world's largest gold consumer. The economic slowdown and gold prices near record highs drove jewelry demand down 31 percent in the second quarter compared to the same period in 2008.

On the other hand, the World Gold Council says India's bank deposits saw 22 percent year-over-year growth in the second quarter of 2009, so cash is available to be spent if the rupee price for gold weakens even slightly. The WGC also expects the wedding and Diwali season to "underpin a seasonal improvement over the remainder of 2009."

China, the world's #2 gold market, actually saw a year-over-year gold demand increase of 6 percent in the latest quarter, with buyers favoring 24-carat gold jewelry for its quality and as a store of value. The WGC says that trend toward the purer form of gold should continue, though the third quarter is usually the low season for this segment of the market.

While September is a good month for gold, it is historically a great month for gold stocks as measured by the NYSE Arca Gold Miners Index (ticker GDM), as seen in the chart above. The GDM index comprises a broader collection of gold miners - including more smaller-cap companies - than either the NYSE Arca Gold Bugs Index (HUI) or the Philadelphia Stock Exchange Gold and Silver Index (XAU).

After the typically soft months of June and July, the gold miners start to bounce back with a 2 percent bump in August before shooting up another 8 percent in September. Since 1993, when it was created, the GDM has been up 11 times in September and down just five times.

In September 1998, the GDM had by far its best-ever month (up 54.3 percent) when the bullion was bouncing off a two-decade low price of less than $275 per ounce. A decade later in September 2008, however, amid the severe credit squeeze triggered by the global financial crisis, the GDM fell 10.2 percent.

The strong correlation between the gold price and the value of gold- mining stocks explains much of the average September jump for gold stocks. But the relationship is not lock-step - gold stocks (particularly for companies that do not hedge their production) have historically offered leverage to the gold price. In up markets, earnings growth has tended to exceed the increase in gold price. Of course, the leverage also works in the opposite direction - gold stocks also tend to decline more when the price of bullion is falling.

One of the most consistent correlations for gold is its inverse relationship with the US dollar - when gold is up, the dollar tends to be down, and vice versa. Looking at weekly data going back 20 years, this relationship occurs nearly 70 percent of the time.

The seasonality chart above shows that September is only second to December in terms of dollar weakness, the average result for the US Trade Weighted Dollar Index (DXY) being a 0.66 percent decline from August. Looking at the 39 Septembers going back to 1970, the dollar has seen negative performance 26 times, more than any other month of the year.

The Federal Reserve's massive stimulus spending and the expectation that the current low-interest-rate environment will continue for many more months are additional headwinds for the dollar, and thus tend to be positive for gold.

In our June commentary "Why the Time Could Be Right for Gold Stocks," we pointed out that gold stocks tend to outperform the overall stock market when the federal government is engaged in deficit spending. This year's federal deficit is expected to be a record $1.6 trillion, and the White House projected this week that the deficit will grow another $9 trillion between 2010 and 2019. These huge deficits will fan inflation fears and keep downward pressure on the dollar.

Based on the long-term record, this may represent a good time for investors who want to establish or add to a gold or gold-stock position in advance of seasonal demand growth. The guidance provided by historical patterns may improve the chances for investment success, but of course, there are no guarantees that this September will follow the well-established trend.

Regards,

Frank Holmes
for The Daily Reckoning Australia

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To set the table, water rates in China have been so far below the global average it's ridiculous. Especially when you consider the severe water problems in China. The graphic below is from The Wall Street Journal ("China Cities Raise Water Price in Bid to Conserve" by Andrew Batson):

The Chinese are water-poor. They are sucking their aquifers dry. It is particularly bad in the north of China. The groundwater under the North China Plains is draining away quickly. By some estimates, China will exhaust this water supply in the next ten years.

You probably know that the city of Venice is sinking a fraction of an inch per year. But that's nothing compared to what is going on in Beijing. Parts of Beijing are sinking 8 inches a year! According to Andrew Lees (The Right Game), it is the world's largest cone of depression (an underground hole created by a depleted water table) at over 15,000 square miles. The second largest cone of depression is around Shanghai.

So finally, many cities are raising the price of water. The WSJ points out several places where water prices could rise 25-48%. Shanghai, for instance, raised water rates 25% in June and plans another 22% increase next year.

The second event that caught my eye was the collaboration between China and India to monitor the health of Himalayan glaciers. This area is very important to both countries. They fought a war over it in 1962. So, the fact that they are getting together on the Himalayan glaciers is meaningful.

Here is why it is so important: Seven of the world's largest rivers, including the Ganges and the Yangtze, are fed by the glaciers of the Himalayas. They supply water to about 40 per cent of the world's population.

Well, those glaciers are shrinking. The Indian Space Research Organization, using satellite images, has studied the changes in 466 glaciers. It found they had lost more than 20% of their size between 1962 and 2001.

This melting increases the water flow at first, but eventually slows dramatically as the glaciers either melt completely or reform. These observations have given rise to a kind of "Peak Himalaya" where people wonder if we have not seen the maximum water flow from the mountains.

We know the current run rate on demand is already well above what is sustainable given annual rainfall and river flows. That's why you have those depressions. That explains the depleted aquifers and the rivers that don't reach the sea. Now throw into that ugly brew a decline in water supply from the Himalayas. The situation is worse than it seems, if that is possible, because much of the existing fresh water in both countries is so polluted it is unfit for human consumption.

As if all of that weren't bad enough, the demand for water is still rising rapidly in China and India. The water use per capita in China and India are still well below global averages. As these countries industrialize, they'll consume exponentially more water. It takes water to make just about everything. For example, to make a 1 tonne passenger car takes more than 100,000 gallons of water. Just to make a cotton shirt takes over 1,000 gallons of water. And most of our water goes into making our food.

So, population growth by itself guarantees increased water demand. (Globally, water consumption increases at more than twice the rate of population growth.) These two countries already have big populations and both will get bigger. When you look at demographic trends, China and India alone will add close 600 million people over the next 30 years. That's two present-day United States.

Fresh water, like oil, is getting a lot harder to find for 40% of the world's population. It will get worse before it gets better. The days when we think of water as a cheap resource are coming to a close. That's especially true for China and India.

Bottom line: We need to create more fresh water. You do that by finding new sources either through new supplies (drilling deeper, desalination, etc.) or by using existing supplies more efficiently (irrigation and other efficiency gains).

All of that takes time and energy. Desalination is energy intensive. Drilling deeper for water or going to more distant source requires energy to pump and move the water. Replacing older, less efficient plants and equipment takes time and energy again. (Detect a theme here?)

Countries, companies and people will find ways to make this transition. The companies that can solve these problems will do well.

Regards,

Chris Mayer
for The Daily Reckoning Australia

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The silent crew parades the aisles, examine your eyes and flash a beam on your forehead to check your temperature. They are looking for symptoms of swine flu.

Only after every passenger has been checked and approved, they allow the pilot to move the plane to the parking gate and offload the passengers.

You land in India and are back to Indian-ness: passengers coming down two escalators and one flight of stairs quickly fill a makeshift queuing system. Within minutes, the continuous stream of people coming down the escalators can no longer get off - the space ahead of them is a stationary wall of people. A lady on crutches falls - the escalator blades disappear from under her feet and she has nowhere to stand.

There is chaos. The airport staff looked on - and did nothing.

I alert them. "We will tell the management," they respond.

Once you get to the people behind the desk with your medical form, they stamp it - without even looking up. You then proceed to immigration and you are cleared to officially enter India.

If you had swine flu, the Chinese would catch you. In India, the swine flu would catch you.

China, said a friend, has learned from its mistakes.

He was referring to the SARS epidemic that reached frenzy in March 2003. When the medical team from the World Health Organization landed in China to inspect the patients, the hospital administrators bundled all the affected SARS patients in ambulances and made them circle the city.

The WHO inspectors found nothing in the hospitals.

China got a clean chit.

But the Chinese ended up living through the horror of SARS.

Do you think, my friend continued, it is a coincidence that WHO is the only international body that is now run by a Chinese person? China really wanted its nominee as head of WHO - Dr. Margaret Chan. And, within China, there are only two ministries that are run by people who are not from the Communist Party: the Ministry of Health and the Ministry of Science & Technology.

Having made a mistake, the Chinese gulp a bit - and then go on to ensure it does not happen. So going forward China will have fewer cases of swine flu, I guess.

India will have more cases of people's clothes, shoes, and limbs stuck in escalators as they queue up to go through the motions of a useless medical "examination".

But no, this is not about swine flu - but about investors that flew out of the Indian stock markets in the year 2008.

The Participatory Note, or "P-Note" investors - the sub-set of foreign institutional investors (FIIs) who have caused havoc in the Indian stock markets on the way up in the year 2006 and 2007 - and on the way down in the year 2008.

These flows (Table 1 above) represent the total net foreign money entering the stock market. On average, the foreign money flows are 4 times those of the money flows from the domestic mutual funds.

However, we don't know what percentage of this foreign money flow belongs to P-Notes. The P-Notes are a strange animal in the Indian capital markets.

As an Indian, if you want to buy shares, the government wants to know everything about you. As an Indian, if you wish to buy a mutual fund, the government wants to know everything about you.

If you are a U.S., European, or Japanese pension fund, university endowment, or charitable foundation, then the government also wants to know a lot about you.

But if you are a P-Note holder, heck no one cares at all about who you are!

Foreign investors who have a long term interest in investing in India - and by "long term," I mean a minimum 5 year time horizon (if not twenty and thirty year time horizon) have not yet come into the Indian stock markets in a big way.

I know this because some of them are my clients.

And I meet many of these long-term investors many times in a year. The "genuine foreign institutional investors" (long term pools of capital) painstakingly fill in the foreign institutional investors application forms and sit on the plane as the Indian authorities thoroughly check them out, to ensure they are sound people.

On the other hand, the P-Note pool of money - hot, short-term money - that gets India exposure via Participatory Notes does not even have to fill in that health examination form. Their broker fills it out and confirms they are good people!

Imagine an airline crew in Shanghai airport vouching that the passengers are not affected by swine flu - and signing the form on their behalf. The Chinese would take the crew out of the plane and shoot them or send them off to the hinterland.

In India, we worship these unknown pools of capital - and shoot ourselves in the foot.

Finance Ministers of this country have, time and again, made trips to Tokyo, Hong Kong, Singapore, London, and New York to pay homage to these great hedge fund and P-Note owners.

Rather than being suspicious of short-term money, India welcomes it. We don't seem to understand that we need pension fund money to build India's economy over the long term.

Our Indian ministers have probably never visited many of the pension funds. They generally don't sit in exciting cities. And the brokers don't really want those pension fund folks investing in India. Because they buy shares and hold them for 5 years or more, the brokerage commissions will collapse and the brokers will be out of jobs.

Unlike China, India is not willing to learn from its mistakes.

When questions are asked about P-Notes, the treatment is similar to that of the ambulance incident with the SARS affected patients.

We will ooh, and aah, and steer the discussion towards thoughts on building a world-class and open capital market.

Our intellectuals mislead us and get caught in their own web.

After the election of the Congress-led coalition, many commentators and representatives of the intellectual community came on TV and said, "We hope this new government will allow higher foreign equity ownership in insurance companies".

Why? Pray tell, why?

Because, they said solemnly, India needs long-term capital to sustain its development.

I was laughing - and crying.

It is true that India needs long-term capital.

But then - this same set of people - go about saying that banning P- Notes is a bad idea.

On the one hand, they say India must have long-term capital and yet - with a very straight face - they want the Indian stock markets to be reliant on short-term capital via unknown pools of P-Notes.

Having seen the Indian election results, the P-Note owners are now ready to head back to India to ride the gravy train - and add their own flavor to it by sloshing around playfully with their gambling money.

"P-Notes need to be banned." The Reserve Bank of India wrote in December, 2003.

And, they were finally, thankfully, in a limited ban and phase out by October 2007.

But by October 2008, P-Notes were back in action.

We are back to the future, and looking at an ugly past

India should only accept long-term foreign capital via "genuine" foreign institutional investors. This is not about making the markets a more "perfect" place and advocating "price discovery".

Speculation and price discovery is not an end in itself. Markets are not gods to be worshipped. They are created to help an economy reach its goal.

But, in India, we will continue debating and discussing and throwing intellectually stimulating arguments to explain why what we did in the years 2006 and 2007 was not wrong - and therefore there is no need to learn from the past.

Because the past mistake was not a "mistake", it was just an event in time that occurred and had to do what it had to do.

I stand by what I said in October 2008 - and reiterated again after May 15th - one can make a case for the Bombay Stock Exchange's BSE-30 Index to head back to a new peak of 21,000 by June 2010.

A better economy, better company results - and higher foreign institutional investors flows are all positives for the market. It could happen.

But if P-Notes are a part of that rise - god help us. Because some event in the United States will frighten the owners of short-term capital and then we will see how pigs can flap their wings.

Swine flu or swine flew - I don't know which one is more frightening. But India is vulnerable - and could be attacked on two fronts.

Regards,

Ajit Dayal
for The Daily Reckoning Australia

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Let's start with the news in China. The central bank there cut one-year interest rates by over one percent to 5.58%. The rate cut is on top of the US$586 spending plan unveiled earlier in the month. Chinese factories, especially in Guangdong province, are being shuttered by owners in the face of much slower demand for consumer goods from America. Workers are idle, and not happy.

Now the problems get thorny for China's central planners. GDP is still forecast to grow at 5.5% in 2009. But remember China is in the midst of one of the great population migrations in human history. Millions of farmers have left the countryside for work in the cities. China's economy must crank out new jobs at the rate of 7% a year for those relocated people, or face the unpleasant side effects.

What are those side effects? Well, unemployment is the obvious one. But it's really the social instability generated from millions of unemployed with no viable economic options. No jobs in the city? Too bad. No jobs in the country? Too bad.

It makes you wonder whether the project of concentrating large populations in urban areas promotes instability, or whether it makes people easier to control. For the stability and legitimacy of national governments, it's an important question. Can they effectively govern AND deliver basic services to large cities?

On the one hand, getting food and water and energy to mega cities is a massive logistics challenge. Then there is the matter of policing those areas. Throw in some protests by the unemployed and you see how fragile urban economies/living spaces might actually be in the future, and how sensitive to numerous disruptions (violent and non-violent alike).

On the other hand, with big arterial roads that can be closed down and road blocks set up at key nodes in road networks, cities become more like vast outdoor prisons in times of crisis. Nobody gets in and nobody gets out without the proper papers.

Sadly, we believe events like those in Mumbai today accelerate us toward a global future where urban travel is permission-based, monitored by electronic surveillance (i.e. the GPS in your car also becomes a visa/passport which can be switched on and off by the authorities).

But that is all down the road. What's around the corner for China's economy and what does it mean for Australia? It means 2009 is shaping up to be a year in which governments pull out all the stops to keep the wheels of commerce greased and rolling.

"China's Chinalco hints at Rio Tinto buy," reports today's Australian. This comes after Rio's biggest fall on the Aussie share-market in 21 years. You'd think at these low prices Rio would be a screaming buy. But there's that little matter of debt.

No discussion of debt is complete without a check up on the United States of America, where consumer spending fell by 1% October, durable goods orders fell, and new home sales fell 5.3% for the month and 40% year-over-year, while prices are down 7% in the last twelve months.

That is the bad economic news. The stock market ignored all that and charged ahead. The S&P has had its biggest four-day run since 1933. It's now up 18% since November 20th. How about that for a bounceback?

The local market is weighed down by the worst-performing sector of 2008, basic materials. But that has not stopped it from opening up by almost three percent. Kevin Rudd's admission that a "temporary" fiscal deficit might be necessary could be contributing to the rally. Here's a hint though we doubt it will be temporary. And the conditions that have prompted it, though unique in their own way, have the same fundamental causes as previous crack up busts.

In fact, it's tempting to say that no one has ever seen a world crisis quite like this. Massive government bailouts...falling house prices...huge debt-to-GDP ratios...the inability of States to prevent terrorism within their own borders...an interconnected world-wide financial and economic crisis. Is it all new?

No. That part of it, the interconnected part, IS new. But the basic tension in today's world is not new. It's good old fashioned human nature and power politics. You could even say we are entering a new feudal period in world history. Whether it's a New Middle Ages or a New Dark Age is something time will have to sort out.

What's clear to us is that the politically powerful are using their influence to arrange government interference on their behalf. The financially weak are paying the price. Bankruptcies in the financial sector are prevented, partly so that rather than liquidating the mal-investment of the phony boom, debtors can be left on the hook and creditors (who get Federal money) will still receive interest payments from consumers.

Western capitalism, as Michael Hudson suggests, has been hijacked Wall Street-Washington oligarchs. Financial institutions are insulated from the free-market consequences of their credit orgy (failure and bankruptcy) by government bailouts. The Fed and the Treasury have stepped into keep Wall Street's asset values high, and transfer the liabilities to the public balance sheet, income-earning taxpayers will pay the bill for the next fifty years (if it's ever repaid at all).

Class-warfare...the 80-20 rule...human nature...it can go by many names. It's not new. And the world has always been interconnected. It's just today, the speed with which information is transmitted (and with which capital responds to the new information) is much greater than before.

It's a 24/7 great economic race to sort out the important stories from the noise, figure out what it means, and then, what to do (if anything). What it seems to be producing, however, is record confusion. For investors, that means a preference for cash and gold...while the smoke clears to see how the global financial landscape will really change.

Dan Denning
for The Daily Reckoning Australia

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