A Melman Minute — April 2, 2009

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NOTE: In order to complete Mr. Melman's forthcoming book on the essential fundamentals of the developing international financial crisis and its relationship to gold and silver, new "Melman Minutes" will be posted only three times per week, each Monday, Wednesday and Friday until about mid-March 2009. The working title of the book will be 'Just a Melman Minute!"

NOTE: Mr. Melman will be making a panel appearance and presenting a workshop at the upcoming "Calgary Resource Investment Conference" April 4-5. His workshop topic will be "On the Road to Hyperinflation???" updated for this presentation. Information concerning the conference itself can be obtained at www.cambridgehouse.ca.

The world's attention is now squarely focused on London, England where the leaders from twenty of the most industrialized nations on Earth have gathered. Early comments from important leaders such as President Obama and the UK's Gordon Brown are brimming with confidence that this time, it will be different. This time, those leaders will truly resolve many of the world's greatest economic difficulties.

So far this morning, the securities markets are roaring ahead, apparently believing that perhaps all the optimistic talk will, in fact, actually have a sound basis. And, in true contrary fashion, as the financial markets roar ahead, gold and silver are falling.

In our view, there appear to be two vitally important sub-plots underlying many of the discussions in London. First, there is the question of limitless stimulative spending. Countries such as the USA and UK appear to be in favor of such plans, but those nations that have historically suffered through hyperinflations, such as Germany and France, appear to be much more reluctant to adopt such schemes. Second, there is an important underlying question whether the world should abandon any semblance of free markets in favor of limitless government regulation and domination. We believe the presence of two such vital questions gives this international meeting a very special significance.

While readers must be aware that our personal preference is clearly for free markets and limited government, there is no question that powerful forces are present in London and elsewhere pushing hard for solutions in precisely the opposite directions; solutions, we believe, which could be ultimately harmful for the mining industry in the form of onerous and expensive new regulatory requirements. In order to understand the other side's motivation, we are offering the following quotes from a Wall Street Journal Op-Ed piece written by Poul Nyrup Rasmussen, President of the Party of European Socialists. It amazes us how closely Mr. Rasmussen's comments coincide with much of the commentary emanating out of London in recent days.

After describing the array of social services which have developed in Europe since WWII, he goes on to say, "The task facing us is to extend and adapt this unique recipe for prosperity and solidarity to the developing world, where, according to the World Health Organization, between 200,000 and 400,000 additional children will die each year due to the global economic downturn."

How will programs such as these be financed? Rasmussen answers, "...As we go into the G-20 meetings in London, even European conservatives such as Sarcozy and Merkel are calling for a new global architecture, better regulations and a crackdown on tax havens...A global crackdown on tax havens and tax avoidance could provide the funds."

(We have commented previously at The Melman Report on this line of thinking and repeat once again, the need for tax revenues by governments of the world is becoming acute, and we believe that punitive tax measures, including the virtually total destruction of international financial privacy, are a growing likelihood in coming years.)

In answer to the question of how such international action could be coordinated, his preferred solution was loud and clear. "...The previously unimaginable idea of a "Global New Deal" is on many people's lips." On that score, he points out that the G-20 meeting is hardly the be-all and end-all of gatherings to promote world progressive goals (read "socialist").

"That's why, as the G-20 meets in London, an even larger group will meet in Brussels...This is the world conference of the Global Progressive Forum (GPF), which will bring together speakers from five continents to develop a new vision of a globalized world which benefits all. The GPF will take place in the European Parliament and will be opened by Bill Clinton." (our emphases)

Your editor finds it particularly significant that Past President Clinton would so openly associate himself with this group and their stated goals associated with concepts of "One World" government. Our interpretation is that Clinton's presence reflects a growing confidence within the political Left that their hour has come, that with Obama and Gordon Brown now heading two of the world's most important economic nations on this planet, they now have the framework for advancing international socialist goals.

It also concerns us greatly that that advocacy of free market solutions to the world's economic problems, solutions that can be backed up by serious economic studies, are totally unheard in London this week, totally drowned out by the talk of international regulations, further bailouts, forced interest rate reductions (the EU central bank just knocked their rate down by .25% this morning) and Draconian taxation measures.

(I am certain that these topics will be thoroughly discussed at the upcoming Cambridge House gathering in Calgary this weekend and we plan to offer our commentary in next week's Melman Minutes.)

Two notes from this morning's news and market action are worth noting. First, negative economic news continues to hit the newswires including new quarter-century highs in the USA in the number of newly-unemployed and the number of people on continuing Unemployment benefits. However, it now appears that markets are focuses for the most part on what will be coming in the future, rather than the relatively dismal present.

Second, the Dow Jones Industrial Average is at an important technical juncture this morning. It has just crossed back above the 8,000 level which has been an area of resistance for the present rally. If the Dow breaks decisively above this mark, that would imply further developing strength in the financial markets.

As of 10:00 AM PDT, the Dow was at 8,043, up 284 points while Canada's TSX also crossed above a milestone, reaching 9,122, up 180 points on the session. Precious metals were mixed with gold down by $21 and silver off 20 cents, but platinum ahead by $19. Base metals continued their rally, specifically including copper and nickel which were trading at their best levels of late, with copper near $1.86 per pound and nickel back up to $4.70. Mining share indexes were off by about five percent, crude oil was up by over $3.00 per barrel and the U.S. Dollar was sharply lower in currency trading. (All quotes US$.)

DISCLAIMER

The information presented above is based on data which we believe to be from reliable sources, but the accuracy of which cannot be guaranteed. Any opinions or predictions contained herein are those of the editor and are likewise offered also for information purposes only.

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