Swiss Government Bonds Spike

Swiss government bond yields dropped to a record -0.23% on 31 May 2012. There is no reason why 2 Year Swiss government bonds should have such low yields (chart 1), other than the fear that the euro will break up or the Swiss National Bank will de-peg against the euro.

Go HERE to read the full analysis.

Chart 1: Swiss Government Bonds 2 Year

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Gold again at François Hollande highs

I predicted already that the downtrend of gold in function of the euro was very odd. Everyone would assume that the "Hollande" effect would be beneficial to gold.

And today gold hit an all time high again, since François Hollande became president of France, as predicted...

If you're a U.S. citizen, your chance to buy gold is right now, as the euro is in oversold territory. 10 year U.S. government bonds are also overbought, with yields dropping 7% to 1.629%. Looks like a bubble to me.

Chart 1: Gold Price: Period after French Election

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U.S. Dollar Bill Seen As Trash: The Story of John Davis

We all know cash is trash and the U.S. dollar will ultimately be worth nothing. It's ironic how this actually played out in real life.

John Davis, a normal average Joe, tried to help a man in a wheelchair, handing him some spare cash. In doing so, he accidentally dropped a 1 U.S. dollar bill on the ground. Immediately after that, the cops pulled him over for littering in public. He violated Section No: 613.06 of Cleveland’s Municipal Codes and was fined $US 500 for this act.

It reminds me of Ben Bernanke throwing trillions of dollars out of his helicopter, which is completely legal. But throwing a 1 dollar bill on the ground is a crime?

What is even more funny is that the cops see a 1 dollar bill as "trash". Hence: "Cash is Trash". It isn't as funny for Mr. Davis though, as he will have to pay up $US 500. He preferred not to pay it though...

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Agricultural Commodities Break Down, Start of Another Great Depression?

When we take a look at history and go back to the Great Depression, we find that agriculture is a leading indicator for the economy. During the recession in 1930 we saw that agriculture prices declined very rapidly (for example cotton prices dropping 18% in just one week). A few years after that, the Great Depression initiated at full force with bank deposits being frozen. This started the Great Depression of 1932.

Today, the same is happening with agricultural commodities. Cotton dropped 10% in 1 week and is now down 20% in two weeks time. All other agricultural commodities have been very weak since the start of 2012 with the exception of soybeans.  The CRB index has also hit a new 2 year low.

Weakness in agriculture today is the evidence that the Great Depression is now being repeated. The only commodities that went up during the Great Depression were gold and silver, along with the gold/silver mining shares.

I will analyze 8 key agricultural commodities here: Agricultural Commodities Breaking Down, Start of Another Great Depression?

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Platinum Demand Falling

In my previous article about platinum I pointed out it was time to trade gold for platinum. You would think that the time has come again to buy platinum, but I fear that the automobile industry is deteriorating again.

Rhodium prices keep falling and I already said that this means that this indicates that demand for vehicles in the automotive industry is dropping. The correlation between rhodium and the automotive industry was discussed in this article. 

If we look at the platinum to gold ratio (Chart 1) we see that the trend is going down. It is now at a platinum/gold ratio of 0.9. Historically platinum should be more expensive as gold but these days people are fleeing out of industrial commodities and into the safe asset of gold.

Chart 1: Platinum to Gold Ratio

However, during Q1 of 2012 investment demand recovered by 63,000 troy ounces. So a turnaround in platinum is possible.

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Analysis of Deficits to Outlay Spending Ratio

I already talked about how the U.S. budget deficit is skyrocketing in this article. Reason was that outlay spending has outpaced government tax revenues since 2008.

I decided to make another chart of this going to the early 1980's. As James Turk stated, when governments start to borrow more than 40% to fund their outlay spending, then we have come to a hyperinflationary scenario.

To see what this chart means, go to: the full version of this article.

Chart 1: Deficits (+)/Surplus (-) versus Outlay Spending Ratio

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Goldonomic.com: About Hyperinflation

Just found an interesting site that gives information about the correlation between hyperinflation and money velocity.

=> http://www.goldonomic.com/inflation.htm

The key measure to follow is money velocity of the broad measures of money supply M3 or MZM (which resembles M3). When money velocity spikes, hyperinflation has set in as people scramble for tangible assets.

Froom Goldonomic.com:
"Hyperinflation starts when the public is unwilling to hold the money for more than the time it is needed to trade it for something tangible to avoid further loss. A good indicator that Hyperinflation has started will be a sudden increase in the Velocity of Money. [ P = M x V ]. This alone can increase the general level of prices. Even with a falling M3!"


So be warned, when the following graph spikes up, it's time to get into real tangible assets! You can see that in 1980 we had the hyperinflationary crisis where gold spiked into a bubble when everyone feared inflation.

Chart 1: MZM Money Stock

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