A Melman Minute — October 14, 2011
| By | Leonard Melman |
|---|---|
| Date | October 14, 2011 |
What started as a minor curiosity and then grew next in a rapidly-expanding intrusion into our daily consciousness has now burgeoned into a full-blown phenomenon. Of course, we are referring to the “Occupy Wall Street” movement. Some of the figures relating to its international growth are remarkable, to put things mildly.
What began less than one month ago in a small New York City park adjacent to Wall Street has now quickly spread to an estimated 1,000 cities and towns in the USA alone, but that is hardly the complete story. Saturday, October 15 has now been agreed upon as the day for worldwide protests and these are predicted to take place across Canada, in European nations such as England, Netherlands and Germany and even into Asia where a major demonstration is planned for Seoul, South Korea. Actions are planned as far away as New Zealand.
In my home province of British Columbia, demonstrators are gathering in both Vancouver and Victoria. Victoria’s major newspaper, the “Times-Colonist”, carried a banner front-page headline declaring “Worldwide Protest Comes to Victoria” and informed its readers, “...A University of Victoria professor believes this global protest, to take place in hundreds of locations in 70 countries, could surpass in number the largest political demonstration in history.” The professor (social sciences professor William Carroll) also predicted it, “...likely won’t be a flash in the pan.”
Our concern in relation to gold, silver and even the general tone of regulations surrounding the entire mining world relates to personal suspicions that the movement is directed and strongly influenced by the political left. If that is the case, then it is likely that should they succeed in influencing the direction of political activity, we are likely to see more government interventions and more government regulations, particularly those which might relate to the general category of ‘environmentalism’. If that is so, there could be an array of new difficulties placed into the path of mining exploration and development.
There are several strong bases for our suspicions relating to the strong involvement of the political left. We happen to note the strong recommendation for the movement’s goals by the guru of Canadian environmentalism, David Suzuki. In an opinion piece published this morning in several Canadian newspapers, Suzuki offered the opinion that, “...I’m not the only one unhappy with economic systems based on constant growth and endlessly increasing exploitation of finite resources...” and then offered a list of environmental goals sure to be raised by the demonstrators including why there is not more ecological and social responsibility, why we are destroying precious natural systems, what is our place on the planet – and he also asked why society permitted “...cars and their fuels to keep the cycle of profits and wealth concentration...” Such questions suggest a rather pronounced Leftist bias.
There is also strong speculation that an important source of financial support is coming from noted financier George Soros, long a supporter of the political left in general and the Democratic Party in particular. One of Soros’ foundations, known as “Open Society” gave grants to the “Tides Center” in San Francisco which, in turn gave $211,000 to the Vancouver firm “Adbusters” and it has been Adbusters that initiated the concept of “Occupy Wall Street”, patterned after the “Arab Spring” uprisings of earlier this year.
And, although it hardly constitutes court-ready testimony, while listening to a Vancouver talk-radio show this morning, I head the comment from an unidentified caller which had a ring of truth about it when he declared, “This is the political left’s answer to the “Tea Party” movement of the political right.
It is the astonishingly rapid growth of this movement, perhaps taking strong advantage of “social networking”, that gives us cause to think this entire development could indeed become important, particularly in view of next year’s vital Presidential election. It bears continued attention.
One of our favourite ‘games’ is to take two interesting articles and compare one against the other. This morning provides us with an excellent example of contradictions which might occur as we learn simultaneously that Personal Income in America is in decline and yet, “Retail sales rose strongly in September” as reported by the Associated Press.
The obvious question would be “How can people who are earning less afford to buy more?”, and our answer is by taking on more debt. While this may please an array of retail merchants and government leaders looking for additional economic stimulation, we believe that it opens the doors to even greater problems in the future, particularly those which will predictably occur if interest rates rise (as we expect them to do over time) and individuals find themselves buried under even greater mountains of debt.
While financial markets continue to rally (see below), there is no shortage of news which is capable of raising new concerns regarding the fact that the present burst of optimism may be quite unjustified. Among the items we note this morning are:
Great Britain just announced that their unemployment rate has hit a new seventeen-year high at 2.57 million, the highest such number since 1994. In a situation similar to Spain, their youth unemployment continued to surge, reaching 21.3%.
Spain’s debt has just been downgraded yet another time by Standard & Poor’s and the government in Madrid reported it will miss yet another target for reducing the scope of its budgetary deficits. When the European Central Bank agreed to help Spain, it did so on the basis of Spain’s prediction that it would lower its national budgetary deficit down to 6% of GDP and then to the European Community’s stated goal of 3%. Instead, Madrid just revised their reported 2010 deficit to just over 9% and it appears that their forecasts for 2011 will also miss the mark on the wrong side.
We have been warning for some time that troubles could begin to break out in America’s municipal and state governments and, sure enough, we just received word that the capital city of Pennsylvania, Harrisburg, filed municipal bankruptcy papers yesterday. The state government quickly announced it would create a rescue program for the City of Harrisburg which is somewhat ironic since the state itself is now dependent on support from the federal government.
The ring is gradually closing and growing tighter as the monetary excesses of the past keep coming home to roost.
We cannot help but note that the recovery in silver continues to be somewhat uninspiring recently when compared to the swiftness of the preceding decline. One look at the chart shows that something of a more robust nature might be desired.
As of 10:30 AM PDT, financial markets continue their recent recovery with both the Dow Industrials and TSX Index ahead by about 100 points. Precious metals have rebounded from yesterday’s selling with gold trading near $1,680 and silver again above $32.00. Base metals are moving higher with copper and nickel leading the way while mining share indexes are ahead by about two percent.
In other markets, crude oil is sharply higher near the $87 per barrel mark, long term interest rates continue to rebound and the US Dollar is once again showing some weakness with the DX Index falling below the 97 level earlier this morning.