The Daily Nugget: August 8, 2012

The markets were once again quiet yesterday as they were waiting for news from the ECB of further intervention in the eurozone crisis. Gold was also waiting in anticipation as it traded sideways for most of the day but maintained gains made from Monday’s session.

The markets have stayed relatively calm since both Draghi and Bernanke said they were prepared to take future action in the market place. The problem is what Draghi needs to do for these markets he hasn’t got the tools for yet. And what the markets want he needs infinite amounts of.

Further grim news is expected from Turkey, Germany and Spain today as more industrial output figures are released. This will follow from yesterday’s data release when we saw the output figures from Hungary, the Netherlands, Italy, Norway and the United Kingdom all dramatically down for both MoM and YoY.

Also today the BoE will release their Inflation Report – we expect to see some significant revisions to earlier growth and inflation projections given certain data which has been reported in the last month or so.

A small boost to the US Dollar may be seen as the Bureau of Labour Statistics releases its non-farm labour productivity and labour unit costs for last month, both are expected to have risen slightly.

News yesterday that investors terrified by Draghi’s comments at the end of July bought more gold funds in the first week of August than in the 12 months previous, shows that words are no longer enough to put faith in the euro – we can see right through them and we’re choosing to buy gold as a result.

China knows what it’s doing – a store unveiled a $11m "golden walkway" this week a perfect example of their love for gold and their firm conviction to invest in gold thanks to the state of the global economy and their government’s ability to also manipulate the monetary system.

Gold standard and stability
"…financially capable consumers ultimately contribute to a stable economic and financial system as well as improve their own financial situations," Was part of Bernanke’s concluding remarks yesterday as he gave yet another "educational" speech in a Teacher Town Hall Meeting.

Surely individuals can only be at their most capable when they have the tools to do so? Bernanke believes we need to be financially capable so as to create a "stable" monetary system. But how can we do this when we are not able to choose the tools which we use?

History shows that a gold based monetary system is a stable one, and research today shows it is possible for a modern version of the gold standard to work effectively in this globalised economy, yet Bernanke is wholly against us using gold as money, trading internationally with gold and fully against us returning to a sound monetary system.

When will they see that stability can’t happen until individuals have the freedom to choose which currency they should put their faith in? The sooner they realise this, and scrap restrictive legal tender laws, the sooner the stability can return.