Category Archives: Economy

Is There No End To Gold’s High?

Economy, ,

With the Dow plunging 6.66% yesterday and with its continuing travails in negative territory today, the only safe haven (outside of the Franc and Australian Dollar) seems to be gold.  The price of gold keeps climbing and is nearing 1750.  As long as the economy keeps worsening and sovereign debt and currency issues are not taken care of, gold will continue to climb.

The Only Real Currency

Many analysts see gold as the only real “currency.” It is the only thing with value. With increased skepticism growing about the strength of the US Dollar and the world has begun to murmur the possibility of dropping the greenback as the world’s reserve currency.  Russia and China have suggested a basket of currencies replace the dollar.  This writer suggests backing it with…gold.

The U.S. Downgrade Is A Deserved Wakeup Call

Economy, , , , , ,

The S&P downgraded the United States credit rating from AAA to AA+ on Friday with a warning of potential future downgrades. The downgrade was unprecedented but certainly necessary. America has over the years built up its 14 trillion dollar debt and cannot repay it. America has simply printed money in order to maintain its cash flow, without investing in new development.

The S&P credit rating is supposed to reflect America’s ability to pay its debts. China, Japan and other countries are heavily invested In America and suddenly the value of their investment has dropped. Why is this important to the American economy? Because the economy is based on borrowing money and other nations will stop lending because it is a poor credit risk. Indeed, US debtors are likely to call in their debts rather than to wait and watch the value of the American currency deflate and loose its value.

The economy is slowing down and entering a recession. The usual treatment for recession is government stimulus spending. However, government spending is not stimulating the economy. America’s unemployment rate is officially over 9 % and the GDP is under 2% and in reality is probably much worse than those figures. The government has provided no stimulus measures such as jobs programs or stimulus to business. All it has done is agreed to raise the debt ceiling and print more money. Currently, America pays $250 billion interest per year on its debt.

The weakening of America’s economy is something that people with financial and economic backgrounds could have seen coming if they were willing to face it. Now it is becoming clear to everyone that America will be forced to make difficult concessions to repay its debts and to repair its economy.

US Job Creation Remains Elusive

Economy, , , ,

Although there are many analysts touting the new job numbers as some sort of cushion keeping the market from a crash on Monday, one should think again.  The true numbers behind the government numbers factor in discouraged workers.  These are workers that have stopped looking for jobs and collecting benefits.  This pushes the true unemployment rate to 16.1 percent.

Now that is still a little bit lower than previous (yet still depression like), but one must take into count average duration of unemployment.  This number rose for the third month in a row.  The number is now at a record 40.4 weeks. This is about 10 months and has doubled from where it was when President Obama took office in January 2009. Making the news even more stark is the fact that the total number of unemployed for more than half a year is now 6.18 million, which is 130 percent higher than when Obama was sworn in.

QE3 To Make it Worse?

There are rumors that the Fed may actually start QE3, yet many analysts are wary of continued weakening of the US Dollar and now that the S&P has downgraded US sovereign debt, QE3 could have unknown negative consequences for the US bond market, interest rated and of course the already abysmal housing situation.

The Only Way Is Up…for Music

Economy, , , ,

And that’s what has been happening.  Finally.  It sure has taken a long time.  But figures now show an increase of 8.5 percent year-over-year for the first six months of 2011.  According to a report in AdAge, this puts the industry “on track to become the first full year of positive music sales since 2004.”

Dramatic Digital Sales

According to Nielsen SoundScan, it seems like it is the digital sales that are the force behind this escalation.  Digital album sales increased almost 20 percent and digital track sales, 11 percent.  But Nielsen Entertainment’s Senior VP-Analytics was somewhat surprised by this.  David Bakula told Ad Age that “sales figures were starting to plateau heading into fourth-quarter 2010.”

So what is the reason for this increase?  There have been many events that have stimulated this: for the first time, the Beatles catalog is now available for digital download; Limewire (an illegal downloading site) was shuttered; and stores such as Circuit City and some Borders locations have closed down.  It seems that these events have “given digital music sales more momentum.”  As well, in general, the public is feeling more comfortable with digital too.

Album Sale Increase

There have been substantial gains with actual album sales too: from every three albums purchased, two are CDs.  Looking at all sales (actual and digital) there has been an increase of 3.6 percent in the first half of 2011.

Some Bad News

But while this is of course great  news, there is unfortunately still some problems within the music industry.  There is still a way to go on the recovery chart.  The music industry has been enduring losses for the last seven years – with an especially tough year last year when sales dropped 2.4 percent.

However, now that there has been this substantial increase, Bakula believes “the upward trend in digital single sales…coupled with a promising fourth-quarter release slate and aggressive music-catalog promotions from shows like ‘Glee’ should even things out.”