May 17, 2012
By Kevin Michael Grace
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Gold was down (at press time) $20.50 (-1.3%) for the week to $1,574.40, and silver was down $1.04 (-3.6%) to $28.06. Gold gained $38.40 Thursday; the Financial Times attributed this to “heightening expectations of further US monetary stimulus, as weak manufacturing data in the Philadelphia region…took investors by surprise.”
GoldCore reported Thursday that “Gold fought back [Wednesday] after touching its lowest level since December 29, as concerns about Greece’s political instability and possible departure from the Euro prompted investors to buy back into bullion.” Our favourite wire service continues to maintain the exact opposite, of course.
But wait! Pedro da Costa of Reuters writes Thursday, “On again, off again. That’s been the story with prospects for another round of monetary stimulus from the Federal Reserve. Expectations for a third installment of quantitative easing, the much-debated QE3, had ebbed with improving economic data in the first quarter—but are now flowing anew. Following a weak employment report for last month, the latest hint that more bond buys could be in the offing came from minutes of the central bank’s April meeting.”
Da Costa is taken with the analysis of Millan Mulraine of TD Securities: “The line in the sand for action [by the Ben Bernanke] may be the need to mitigate the contagion risks from Europe and may no longer require the realization of the downside risk as a trigger for action. That is, the Fed may be willing to take further action to insulate the economy from the risks, if the probability of a disorderly outcome in Europe increases sufficiently.”
Disorderly, eh? Europe has come to resemble a Gerard Manley Hopkins poem: “How to kéep—is there ány any, is there none such, nowhere known some, bow or/brooch or braid or brace, láce, latch or catch or key to keep/[the Euro]…from vanishing away?/…No there’s none, there’s none, O no there’s none/…So be beginning, be beginning to despair.”
Despair, eh? How about panic? David Cameron has come to resemble the proverbial chicken recently decapitated. Britain isn’t a member of the Eurozone, of course, but this won’t obviate the need for it to pony up when Greece leaves or is kicked out.
How much is yet to be determined, but the final reckoning will be shocking. Doug McWilliams of the Centre for Economic and Business Research told the Guardian a “disorderly” Greek exit “would result in a 5% drop in output”: one trillion dollars.
Eight months ago, this space asked the question, How did “Greece, a country with a piffling GDP of $318 billion, [come] to threaten the economies of Australia (GDP $1.24 trillion), Canada (GDP $1.57 trillion), the European Union (GDP $16.28 trillion) and the United States ($14.78 trillion)”? Eight months later, we have learned that the failure of this piffling country will cost all and sundry more than three times its GDP. And so we have an answer to our question—the economic minds that direct world affairs aren’t fit to run a carnival ring toss.
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